EXHIBIT 10.3
FRANCHISE AGREEMENT
BETWEEN
WCH, INC.
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AND
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Name(s) of FRANCHISEE
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Area Code Telephone
FRANCHISED LOCATION:
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▇▇▇▇ ▇▇▇▇▇ Zip Code
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Area Code Telephone
DATE OF FRANCHISE AGREEMENT:
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WE CARE HAIR(R)
FRANCHISE AGREEMENT
INDEX
ARTICLE TITLE PAGE
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1 FRANCHISED LOCATION; GRANT OF FRANCHISE...............................2
2 TERM; FRANCHISEE'S OPTION TO REACQUIRE FRANCHISE......................3
3 WCH'S RIGHT TO LICENSE 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..9
8 CONFIDENTIAL OPERATIONS MANUAL AND OTHER INFORMATION.................14
9 WCH'S TERMINATION RIGHTS.............................................15
10 FRANCHISEE'S TERMINATION RIGHTS......................................17
11 FRANCHISEE'S OBLIGATIONS UPON TERMINATION OR EXPIRATION..............19
12 FRANCHISEE'S COVENANTS NOT TO COMPETE................................20
13 WCH'S RIGHT OF FIRST REFUSAL TO PURCHASE.............................21
14 TRAINING PROGRAM; PRE-OPENING ASSISTANCE; OPENING ASSISTANCE.........24
15 WCH'S OTHER OBLIGATIONS..............................................25
16 WCH SIGN.............................................................26
17 INSURANCE............................................................26
18 INDEPENDENT CONTRACTORS; INDEMNIFICATION.............................27
19 FINANCIAL STATEMENTS; GROSS REVENUE REPORTS; FORMS AND ACCOUNTING....28
20 ASSIGNMENT...........................................................30
21 SITE SELECTION; STANDARD STORE LAYOUTS AND PLANS.....................32
22 LEASE AS SECURITY; TERMINATION OF LEASE..............................33
23 ARBITRATION..........................................................35
24 ENFORCEMENT..........................................................37
25 NOTICES..............................................................40
26 ACKNOWLEDGMENTS......................................................40
27 DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL...............................41
28 GOVERNING LAW; STATE MODIFICATIONS...................................42
29 DEFINITIONS..........................................................43
PERSONAL GUARANTY
CONFIDENTIALITY AGREEMENT
AUTHORIZATION FOR DIRECT PAYMENT
LANDLORD'S CONSENT TO ASSIGNMENT OF LEASE
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WE CARE HAIR(R)
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (this "Agreement") made, entered into and effective
this _____ day of _______________, ______, by and between WCH, Inc., a Minnesota
corporation ("WCH"), and __________________________________________________ (the
"FRANCHISEE");
WITNESSETH:
WHEREAS, WCH has developed and owns a distinctive business system for operating
hairstyling businesses of a distinctive character with the name "We Care
Hair(R)" (the "Business System" or the "We Care Hair Business System") and has
publicized the name "We Care Hair(R)", and other trademarks, trade names,
service marks and commercial symbols to the public as an organization of
hairstyling businesses operating under the We Care Hair Business System; and
WHEREAS, WCH represents that it has the right and authority to franchise the use
of the names "We Care Hair(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 WCH'S uniformity requirements
and quality standards; and
WHEREAS, the FRANCHISEE desires to operate a We Care Hair hairstyling business
at the location designated in Article 1 of this Agreement which will conform to
the uniformity requirements and quality standards established and promulgated
from time to time by WCH; and
WHEREAS, WCH is willing to provide the FRANCHISEE with marketing, advertising,
technology, operational and other business information, experience and "know
how" about the We Care Hair business that has been developed over time by WCH 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 We Care Hair 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 We Care Hair business subject
to and under the terms and conditions set forth in this Agreement; and
WHEREAS, the FRANCHISEE acknowledges that WCH would not provide the FRANCHISEE
with any business information or "know how" about the We Care Hair Business
System unless the FRANCHISEE agreed to comply with all of the terms and
conditions of this Agreement and to pay the Initial Fee, the Continuing Fees,
and the Advertising Fees specified in this Agreement; and
WHEREAS, the FRANCHISEE has had a full and adequate opportunity to be thoroughly
advised of the terms and conditions of this Agreement by legal counsel or
another adviser, and has had sufficient time to evaluate and investigate the We
Care Hair Business System, the financial investment requirements, and the
business risks associated with owning and operating a We Care Hair business;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
in this Agreement and for other good and valuable consideration, the parties
hereby contract as follows:
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ARTICLE 1
FRANCHISED LOCATION; GRANT OF FRANCHISE
1.1 FRANCHISED LOCATION. WCH grants to the FRANCHISEE a nonexclusive personal
right to operate one We Care Hair business in conformity with the We Care Hair
Business System (the "We Care Hair Business" or the "Business") and further
grants the FRANCHISEE a nonexclusive personal right to operate the Business
using the name We Care Hair(R) at the following single location:
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(the "Franchised Location"). This Agreement does not grant any exclusive
territorial rights to the FRANCHISEE, and WCH will have the right to open and
operate, and to grant to other franchisees the right to open and operate, We
Care Hair 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 We Care Hair Business is to be located will be
described or defined in an exhibit signed by the parties and attached to this
Agreement. At such time as the address of the Franchised Location is determined,
then the address will be inserted into Article 1.1 of this Agreement.
1.3 RELOCATION. Notwithstanding any provisions of this Agreement to the
contrary, the FRANCHISEE may, with the prior written approval of WCH, relocate
the Franchised Location to another location during the term of this Agreement if
the proposed new location does not compete with any We Care Hair business
operated by WCH or WCH'S 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 WCH 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 WCH'S 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 We Care Hair Business. If the
Franchised Location is rebuilt, repaired or restored to tenantable condition by
the owner of the premises, then the FRANCHISEE must resume business operations
within twelve (12) months of the date that the premises are restored to
tenantable condition by the owner. The FRANCHISEE'S failure to resume business
operations within such twelve (12) month period will constitute abandonment of
the Business. If the premises are not restored by the owner, then the FRANCHISEE
must relocate the Franchised Location pursuant to Article 1.3.
1.5 CONDITIONS TO FRANCHISE. The FRANCHISEE undertakes the obligation to operate
a We Care Hair hairstyling Business at the Franchised Location under the We Care
Hair Business System using the name We Care Hair(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 WCH under this
Agreement are applicable only to the Franchised Location, are personal in
nature, and may not be used elsewhere or at any other location by the
FRANCHISEE.
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1.6 PERSONAL LICENSE. The FRANCHISEE will not have the right to franchise,
subfranchise, license or sublicense its rights under this Agreement. The
FRANCHISEE will not assign or transfer its rights under this Agreement, except
as specifically provided for in this Agreement.
ARTICLE 2
TERM; FRANCHISEE'S OPTION TO REACQUIRE FRANCHISE
2.1 TERM. The term of this Agreement will be for fifteen (15) years, commencing
on the date set forth on Page F-1 of this Agreement. This Agreement will not be
considered executed and will not be enforceable until: (A) it has been signed by
WCH and the FRANCHISEE, and, if the FRANCHISEE is a corporation or partnership,
the personal guarantors; and (B) the signed Agreement has been delivered to the
FRANCHISEE.
2.2 RIGHTS UPON EXPIRATION. At the expiration of the term of this Agreement, the
FRANCHISEE will have the option to reacquire the franchise for the Franchised
Location pursuant to Article 2.3 of this Agreement.
2.3 CONDITIONS TO OPTION. At the end of the term of this Agreement, the
FRANCHISEE will have the option to reacquire the franchise for the Franchised
Location provided that the following conditions have been met: (A) the
FRANCHISEE has given WCH 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 WCH'S material operating and
quality standards and procedures; (C) all monetary obligations owed by the
FRANCHISEE to WCH 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 We Care Hair Business so that
the FRANCHISEE'S Business will reflect the image portrayed by WCH'S 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 WCH 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 WCH under WCH'S then-current standard
Franchise Agreement. If the FRANCHISEE exercises its right to reacquire the
franchise for the Franchised Location and executes the then-current standard
Franchise Agreement, the FRANCHISEE will not be required to pay the Initial Fee,
if any, specified in the then-current standard Franchise Agreement. However, the
FRANCHISEE will be required to pay the Continuing Fees, Advertising Fees and any
other fees or charges at the rates specified in the then-current standard
Franchise Agreement, and must comply with all other terms and conditions of
WCH'S then-current standard Franchise Agreement. The FRANCHISEE acknowledges
that the terms, conditions and economics of the then-current standard Franchise
Agreement of WCH may, at that time, vary in substance and form from the terms,
conditions and economics of this Agreement.
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ARTICLE 3
WCH'S RIGHT TO LICENSE MARKS
3.1 LICENSE OF MARKS. WCH warrants that, except as provided for herein, it has
the right to license the name We Care Hair(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 WCH 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 WCH.
3.2 CONDITIONS TO LICENSE OF MARKS. The FRANCHISEE agrees that its nonexclusive
personal right to use the name We Care Hair(R) as the name of the FRANCHISEE'S
Business, and its right to use the Marks and the Business System, apply only to
the We Care Hair 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 WCH
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 WCH.
If, in the judgment of WCH, 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 WCH, immediately modify its use of the Marks and the Business System
in the manner prescribed by WCH in writing. Any and all goodwill associated with
the Marks and the Business System will inure exclusively to WCH'S 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 WCH and if WCH'S 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 WCH, then upon receiving written notice from WCH, the FRANCHISEE will,
at its expense, immediately make all changes and amendments to the Marks as may
be specified by WCH. 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 WCH in writing. The FRANCHISEE will not make any changes or
amendments whatsoever to the Marks or the Business System unless approved or
specified in advance by WCH 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 WCH 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 WCH in any lawsuits or other proceedings involving the
Marks or the Business System. WCH will have the sole and absolute right to
determine whether it will commence or defend any litigation involving the Marks
or the Business System, and the cost and expense of all litigation incurred by
WCH, including attorneys' fees, specifically relating to the Marks or the
Business System will be paid by WCH.
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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, WCH and its
legal counsel will control and conduct all litigation involving the Marks, the
Business System and the rights of WCH. Except as expressly provided for herein,
WCH 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 WCH 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 WCH 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 WCH and WCH will, at its expense, defend the
FRANCHISEE in the action provided that the FRANCHISEE has tendered the defense
of the action to WCH within seven (7) days after receiving service of the
pleadings or Summons and Complaint relating to the action. WCH 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 WCH.
ARTICLE 4
INITIAL FEE; APPROVAL OF FRANCHISEE
4.1 AMOUNT OF INITIAL FEE. The FRANCHISEE will pay WCH an Initial Fee of
__________________________________________________ Dollars ($__________), of
which __________________________________________________ Dollars ($__________)
will be due and payable on the date this Agreement is executed by the
FRANCHISEE, and the remaining balance of the Initial Fee will be due and payable
on the earlier of: (A) ten (10) days prior to the date the FRANCHISEE commences
initial business operations at its We Care Hair Business; or (B) on the date the
FRANCHISEE'S furniture, fixtures and equipment are shipped to the FRANCHISEE.
The Initial Fee payable by the FRANCHISEE is payment to WCH for costs incurred
by WCH 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 WCH'S RIGHT TO REJECT FRANCHISEE. WCH will have the absolute, sole and
unilateral right to reject this Agreement or the FRANCHISEE if WCH determines
that any financial, personal or other information provided by the FRANCHISEE to
WCH is materially false, misleading, incomplete or inaccurate or the FRANCHISEE
(or the FRANCHISEE'S District Manager if one is employed) is not qualified or
competent to properly operate the We Care Hair Business because such person has
not successfully completed WCH'S program or is deemed to be incapable of
successfully completing WCH'S training program.
4.3 REFUND OF INITIAL FEE. In the event that the FRANCHISEE or this Agreement is
rejected by WCH pursuant to Article 4.2, then the Initial Fee will be refundable
to the FRANCHISEE after deducting all reasonable administrative and
out-of-pocket expenses incurred by WCH 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
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distance telephone calls. The FRANCHISEE will be notified by WCH in writing if
either this Agreement or the FRANCHISEE is rejected by WCH pursuant to Article
4.2. Except as specifically set forth in this Article 4.3, the Initial Fee
payable by the FRANCHISEE pursuant to Article 4.1 will not be refundable to the
FRANCHISEE.
ARTICLE 5
CONTINUING FEES
5.1 APPLICABLE CONTINUING FEES. The FRANCHISEE and WCH acknowledge that as of
the date of this Agreement, and including the Business operating pursuant to
this Agreement, the FRANCHISEE owns and operates __________ We Care Hair
Businesses. Therefore, as of the date of this Agreement (make selection):
___________ Article 5.2 applies or ___________ Article 5.3 applies. It is
understood and agreed that the foregoing selection of whether Articles 5.2 or
5.3 applies is binding only as of the date hereof and reflects the application
of Articles 5.2 or 5.3 to the facts as they exist on the date hereof, and may
change by the application of Articles 5.2 or 5.3 if the number of Businesses
owned and operated by the FRANCHISEE changes after the date hereof.
5.2 AMOUNT OF CONTINUING FEES. In addition to the Initial Fee, the FRANCHISEE
will, for the entire term of this Agreement, pay WCH weekly Continuing Fees
equal to __________ percent (____%) 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 We Care Hair Business. The Continuing Fees paid to WCH
will not be refundable to the FRANCHISEE under any circumstances.
5.3 MULTI-SALON CONTINUING FEES. Notwithstanding any language to the contrary
contained in Article 5.2 above, for so long as, but only so long as, the
FRANCHISEE owns and operates ten (10) or more other (not including the We Care
Hair Business to be operated at the Franchised Location) We Care Hair
businesses, the FRANCHISEE will, commencing on the date the FRANCHISEE commences
business operations pursuant to this Agreement and continuing thereafter for the
remaining term of this Agreement, be obligated to pay to WCH weekly Continuing
Fees equal to four percent (4%) of the FRANCHISEE'S weekly Gross Revenues, as
defined herein, which are received, billed or generated by, as a result of or
from the FRANCHISEE'S We Care Hair Business operated at the Franchised Location.
5.4 FRANCHISEE'S OBLIGATION TO PAY CONTINUING FEES. The Continuing Fees payable
to WCH under this Article will be calculated and paid to WCH 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 WCH will be a material breach of
this Agreement. The FRANCHISEE'S obligation to pay WCH 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 WCH
under this Agreement regardless of any claims or allegations of liability for
damages or other payments that the FRANCHISEE may allege against WCH.
5.5 DATE PAYABLE. The weekly Continuing Fees payable by the FRANCHISEE must be
paid to and received by WCH on or before the close of business on Wednesday of
each week for the preceding week ending on Friday. The weekly Continuing Fees
must be paid and submitted with the FRANCHISEE'S weekly report of Gross Revenues
required under Article 19 of this Agreement.
5.6 INTEREST ON UNPAID CONTINUING FEES. If the FRANCHISEE fails to remit the
weekly Continuing Fees due to WCH by Wednesday of each week for the previous
week, as provided for in this Agreement, then the unpaid weekly Continuing Fees
due to WCH will bear interest at the
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maximum legal rate allowable in the state in which the FRANCHISEE'S We Care Hair
Business is located. In no event, however, will the rate of interest payable by
the FRANCHISEE on the unpaid weekly Continuing Fees due WCH 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 WCH 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 WCH for any and
all costs incurred by WCH in the collection of unpaid and past due Continuing
Fee payments including, but not limited to, WCH'S actual attorneys' fees,
deposition costs, expert witness fees, investigation costs, accounting fees,
filing fees, and travel expenses.
ARTICLE 6
ADVERTISING
6.1 ADVERTISING FEES. The FRANCHISEE will, for the entire term of this
Agreement, pay WCH weekly Advertising Fees equal to four percent (4%) of the
FRANCHISEE'S weekly Gross Revenues for deposit in the Franchisee Advertising
Fund (the "FAF") which will be administered and controlled exclusively by WCH.
The FRANCHISEE'S failure to pay the Advertising Fees will be a material breach
of this Agreement. WCH will have the right to use the FAF monies, in its sole
discretion, to purchase and pay for any services or products relating to
advertising for We Care Hair Franchisees, including the purchase of production
materials, ad slicks, brochures, radio and television commercials, services
provided by advertising agencies, market research and development costs,
advertising and promotion development and production (including all costs
relating to media costs for television, radio, newspaper, direct mail and
point-of-purchase advertising, and all costs of collateral materials required
for such advertising), creative costs, product research costs, all costs and
expenses incurred in administering the FAF (including, but not limited to,
salaries, travel expenses, office supplies, and related general and
administrative expenses), and all other costs relating to the advertising and
promotion of We Care Hair Businesses. The use of the monies in the FAF and the
administration of the FAF will be under the absolute direction and control of
WCH. WCH will have the absolute right to determine, in its sole discretion, the
advertising agencies that will be retained, the type, content and frequency of
the advertising, and all other matters pertaining to the expenditures made by
WCH from the FAF. WCH will have no fiduciary duty to the FRANCHISEE with respect
to collection or expenditure of the Advertising Fees, and any advertising fund,
including but not limited to the FAF, will not be a trust or escrow account. WCH
will not be required to contribute to the FAF; however, all We Care Hair
businesses that are owned and operated by WCH will be required to contribute to
the FAF in accordance with the terms of their respective Franchise Agreements.
The Advertising Fees paid by the FRANCHISEE will not be refundable to the
FRANCHISEE under any circumstances.
6.2 WCH'S USE OF ADVERTISING FEES IN FRANCHISEE'S DMA. Commencing on the first
day of October following the effective date of this Agreement, and continuing
each year (October 1 through September 30) for the remaining term of this
Agreement, WCH will spend for advertising and promotion (including, but not
limited to, advertising agency fees) in the FRANCHISEE'S Designated Market Area
("DMA"), as defined herein, at least fifty percent (50%) of the weekly
Advertising Fees paid into the FAF by the FRANCHISEE.
6.3 DATE PAYABLE; INTEREST ON UNPAID ADVERTISING FEES. The weekly Advertising
Fees must be paid directly to and received by WCH on or before the close of
business on Wednesday of each week for the preceding week ending on Friday. Any
Advertising Fees not paid by the FRANCHISEE as required herein will bear
interest at the maximum legal rate applicable in the state in which the
FRANCHISEE'S We Care Hair Business is located. In no event, however, will the
rate of interest payable by the FRANCHISEE on the unpaid balance due for
Advertising Fees exceed eighteen
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percent (18%) per annum simple interest. If the FRANCHISEE does not submit a
report of Gross Revenues pursuant to Article 19, then WCH will have the right,
in its sole discretion, to estimate the amount of the Advertising Fees payable
by the FRANCHISEE, and the estimated unpaid weekly Advertising Fees will bear
interest at the rate set forth above. The FRANCHISEE will pay WCH for any and
all costs incurred by WCH in the collection of unpaid and past due Advertising
Fee payments, including, but not limited to, WCH'S actual attorneys' fees,
deposition costs, expert witness fees, investigation costs, accounting fees,
filing fees and travel expenses. WCH will have the right to collect unpaid
Advertising Fees in its own name or on behalf of the FAF; however, all
Advertising Fees collected will be deposited in the FAF.
6.4 LOCAL ADVERTISING. In addition to payment of the Advertising Fees required
by Article 6.1 above, each quarter the FRANCHISEE must spend at least one
percent (1%) of its Gross Revenues for approved local media advertising and
promotion. All local media advertising and promotions conducted by the
FRANCHISEE must conform to WCH'S standards for media advertising and promotions.
On or before the tenth (10th) day following the end of each quarter, the
FRANCHISEE will furnish to WCH, in the form prescribed by WCH, an accurate
accounting of the FRANCHISEE'S previous quarter's expenditures for approved
local media advertising and promotion. If the FRANCHISEE has failed to spend at
least one percent (1%) of its Gross Revenues for approved local media
advertising and promotion as required under this Article, then the FRANCHISEE
will be required to deposit with WCH the difference between one percent (1%) of
its Gross Revenues and what it actually spent for such advertising, and this
amount will be spent by WCH in the FRANCHISEE'S area for any type of advertising
or promotion that WCH deems to be in the best interests of the FRANCHISEE'S
Business.
6.5 LOCAL DMA ADVERTISING GROUP. At such time as there are two (2) or more We
Care Hair businesses (including the FRANCHISEE'S We Care Hair Business) in the
FRANCHISEE'S DMA, WCH 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 We Care Hair business in the DMA, including the We
Care Hair businesses owned and operated in the DMA by WCH. The costs for the
media advertising and promotions conducted by the local DMA advertising group
will be allocated among and paid by the members of the local DMA advertising
group, based either on a percentage of Gross Revenues or on a pro rata basis,
the selection of which method to be determined by the majority of the members of
the local DMA advertising group. Payments to the local DMA advertising group by
the FRANCHISEE for media advertising and promotion will be applied to the
quarterly media advertising and promotional expenditures required under Article
6.6 above. However, the FRANCHISEE must contribute its proportionate share of
the costs for the local media advertising and promotions conducted by the local
DMA advertising group, as determined by the majority of its members in
accordance with the method of allocation set forth above, even if this amount
exceeds one percent (1%) of the FRANCHISEE'S Gross Revenues. Notwithstanding the
foregoing, for the first (1st) through the thirty-fourth (34th) weeks of the
FRANCHISEE'S operation of its We Care Hair 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.
6.6 ALTERNATE USE OF ADVERTISING FEES. If a local DMA advertising group is
established for the FRANCHISEE'S DMA, WCH may, as an alternative to the
advertising and promotional expenditures required to be made by WCH in the
FRANCHISEE'S DMA pursuant to Article 6.2 above, contribute this amount to the
local DMA advertising group for the FRANCHISEE'S DMA.
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6.7 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 WCH 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.
6.8 GRAND OPENING ADVERTISING. The FRANCHISEE will be required to spend a
minimum of Five Thousand Dollars ($5,000) to implement and conduct grand opening
advertising, marketing, public relations and promotional programs for its We
Care Hair Business which have been approved by WCH in writing. Expenditures by
the FRANCHISEE for grand opening advertising may be applied to the quarterly
local media advertising and promotional expenditures required pursuant to
Article 6.4 of this Agreement.
6.9 LOCAL DMA RECRUITING GROUP. At such time as there are two (2) or more We
Care Hair businesses (including the FRANCHISEE'S We Care Hair Business) in the
FRANCHISEE'S DMA, WCH will have the right to require that the FRANCHISEE become
a member of, participate in, and contribute to a local DMA stylist recruiting
group that will implement a program for the recruitment of qualified hair
stylists for all We Care Hair 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 6.5
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
WCH will promulgate, from time to time, uniform standards of quality and service
regarding the business operations of the FRANCHISEE'S We Care Hair Business so
as to protect and maintain (for the benefit of all We Care Hair Franchisees and
WCH) the distinction, valuable goodwill and uniformity represented and
symbolized by the Marks and the Business System. Accordingly, to insure that all
We Care Hair franchisees will maintain the uniform requirements and quality
standards for products and services associated with the Marks and the Business
System, the FRANCHISEE agrees to maintain the uniformity and quality standards
required by WCH for all products and services and agrees to comply with the
provisions of this Article to assure the public that all We Care Hair 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 We Care Hair Business. However, the
style and form of the words We Care Hair(R) in any advertising, marketing,
public relations, telemarketing or promotional program must have the prior
written approval of WCH and must conform to WCH'S standards and requirements for
use of the Marks. The FRANCHISEE will use the name We Care Hair(R) and all
graphics commonly associated with the Marks which now or hereafter may form a
part of WCH'S Business System on all paper supplies, furnishings, advertising
materials, signs, stationery, business cards and other articles in the identical
combination and manner prescribed by WCH in writing. The FRANCHISEE will, at its
expense, comply with all notices of registration required by WCH and will, at
its expense, comply with any other trademark, trade name, service ▇▇▇▇,
copyright, patent or other notice marking requirements that are required by WCH
or by applicable law.
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7.2 IDENTIFICATION AS FRANCHISEE. The FRANCHISEE will not use the words "We" or
"Care" or "Hair" in its corporate, partnership or sole proprietorship name. The
FRANCHISEE will hold itself out to the public as an independent contractor
operating its We Care Hair Business pursuant to a franchise from WCH. 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 We Care Hair Franchisee. The FRANCHISEE will
display a sign, to be provided by WCH, 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 We Care Hair
Business as an independent business pursuant to this Agreement.
7.3 SIGNS. The FRANCHISEE will display only the approved We Care Hair Sign (the
"Sign") and will not use or display any other signs of any kind or nature
without the express prior written approval of WCH.
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 WCH prior to using
any other advertising or promotional materials.
7.5 COMPLIANCE WITH STANDARD STORE LAYOUTS AND PLANS. The Franchised Location
and the FRANCHISEE'S business premises must conform to WCH'S 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 WCH'S prior written approval. The FRANCHISEE will be solely
responsible for ascertaining and ensuring that the Franchised Location and the
business premises are constructed or remodeled according to all applicable
local, state and federal laws, ordinances, statutes and building codes,
including without limitation 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 WCH from time to time.
7.6 PERIODIC REMODELING. The FRANCHISEE will be required to periodically make
the reasonable capital expenditures necessary to remodel, modernize and
redecorate the Franchised Location and the FRANCHISEE'S business premises, and
to replace and modernize the FRANCHISEE'S furniture, fixtures, supplies and
equipment so that the Franchised Location and the FRANCHISEE'S business premises
will reflect the then-common image intended to be portrayed by WCH
("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 WCH from time to time and with the prior written
approval of WCH. All replacements for the furniture, fixtures, supplies and
equipment must conform to WCH'S then-current quality standards and must be
approved by WCH in writing. The FRANCHISEE will begin remodeling the Franchised
Location within three (3) months from the date that the FRANCHISEE receives
written notice from WCH specifying the required remodeling and will diligently
complete such remodeling within a reasonable time after its commencement. Except
as provided in Article 7.12 of this Agreement, the FRANCHISEE will not be
required to remodel the Franchised Location or to replace and modernize its
furniture, fixtures, supplies and equipment more than once every five (5) years
during the term of this Agreement. The FRANCHISEE'S failure to comply with the
requirements of this Article 7.6 will be a material breach of this Agreement.
7.7 USE OF MARKS AND BUSINESS SYSTEM. The FRANCHISEE will use the Marks and the
Business System in strict compliance with the quality standards, moral and
ethical standards, operating
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procedures, specifications, requirements and instructions required by WCH, which
may be amended and supplemented by WCH 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 WCH in writing. The
FRANCHISEE will purchase and carry shampoos, conditioners, finishing products
and other hair care products at such minimum levels as may be established by
WCH. The FRANCHISEE acknowledges and agrees that it will either: (A) execute and
deliver to WCH such sales tax exemption certificates or other documents as may
be reasonably required by WCH to establish that the FRANCHISEE'S purchase of
such products from WCH is exempt from any and all sales, use or excise taxes; or
(B) pay WCH the amount of any sales, use or excise taxes applicable to the
FRANCHISEE'S purchase of such products. The FRANCHISEE will conform to all
customer service standards prescribed by WCH 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 WCH IMAGE. The FRANCHISEE acknowledges that the image intended to be
portrayed by WCH is that of a chain of hairstyling businesses that cater to cost
conscious, value-minded customers who are seeking reasonably priced hair care,
tanning and nail care services and products. Consequently, the FRANCHISEE will
sell only those products that comply with the image portrayed by WCH for We Care
Hair businesses and the FRANCHISEE will not offer for sale in its We Care Hair
Business products that are inconsistent with the We Care Hair image and that
have not been approved by WCH in writing.
7.10 OPERATIONS MANUAL. WCH will provide the FRANCHISEE with one copy of WCH'S
confidential Operations Manual (the "Manual"). The FRANCHISEE will conform to
the common image and identity created by the products and services associated
with We Care Hair businesses which are portrayed and described by the Manual,
and the FRANCHISEE will conform to all changes and modifications made to the
Manual by WCH and provided to the FRANCHISEE that are deemed necessary by WCH
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 We Care Hair Business; or
(D) maintain the product and service consistency required by WCH. WCH 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 WCH. 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 We Care Hair Business.
7.11 APPROVED SUPPLIERS. The FRANCHISEE will purchase from suppliers approved in
writing by WCH 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 We Care Hair Business which
WCH 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 WCH'S standards and
specifications. If the FRANCHISEE desires to purchase any goods and services
from other suppliers, then, if requested by WCH, the FRANCHISEE will submit
samples, specifications, and information regarding the manufacturer to WCH for
review to determine whether the goods and services comply with WCH'S standards
and specifications. Any expenses incurred by WCH in evaluating unapproved
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products will be paid by the FRANCHISEE. The written approval of WCH 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 We Care Hair Business.
All such goods and services must be those classified as "professional" goods and
services sold or provided only in professional hair salons.
7.12 REPAIR AND MAINTENANCE. The FRANCHISEE will, at its expense, repair, paint
and keep in a clean and sanitary condition the interior, the exterior and, where
applicable, the grounds of the Franchised Location and the FRANCHISEE'S business
premises, and will replace all floor coverings, wall coverings, light fixtures,
curtains, blinds, shades, furniture, room furnishings, wall hangings, fixtures
and other decor items as such items become worn-out, soiled or are in disrepair.
All equipment will be kept in good working order by the FRANCHISEE at all times
and will meet WCH'S quality standards. All replacement equipment must comply
with WCH'S 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 WCH,
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. WCH will have no liability for these or any other taxes and the
FRANCHISEE will indemnify WCH for any such taxes that may be assessed or levied
against WCH which arise or result from the FRANCHISEE'S We Care Hair 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 We Care Hair Business.
7.16 REIMBURSEMENT OF WCH 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 WCH by any taxing authority, then the FRANCHISEE will reimburse WCH in an
amount equal to the amount of such taxes and related costs imposed upon and paid
by WCH. The FRANCHISEE will be notified in writing when WCH is entitled to
reimbursement for the payment of such taxes and, in that event, the FRANCHISEE
will pay WCH 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 We Care Hair Business will be
open for business on such days and for such hours as WCH 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
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attire or uniforms approved by WCH. 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) We Care Hair Businesses owned and operated by the
FRANCHISEE. Each District Manager will be responsible for the operation and
administration of up to six (6) We Care Hair Businesses under his or her
supervision and control, including supervision of the salon managers and
assistant managers. The District Managers must devote their full time and
attention to administering and overseeing the operations of the FRANCHISEE'S We
Care Hair Businesses. All District Managers must attend and successfully
complete the training program required by WCH, and be certified and approved by
WCH in writing.
7.18 WCH'S INSPECTION RIGHTS. WCH 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 We Care Hair Business, and to
evaluate the quality of the services provided by the FRANCHISEE to its
customers. WCH will have the right to use all photographs and videotapes of the
FRANCHISEE'S We Care Hair Business for such purposes as WCH 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 WCH, its advertising agencies or any other We
Care Hair franchisees for the use of such photographs or videotapes for
advertising, marketing, promotional or litigation purposes.
7.19 SECURITY INTEREST. This Agreement and the franchise granted to the
FRANCHISEE hereunder may not be the subject of a security interest, lien, levy,
attachment or execution by the FRANCHISEE'S creditors or any financial
institution, except with the prior written approval of WCH.
7.20 CREDIT CARDS. The FRANCHISEE will honor all credit cards approved by WCH.
The FRANCHISEE must obtain the written approval of WCH prior to honoring any
previously unapproved credit cards or other credit devices.
7.21 DEFAULT NOTICES. The FRANCHISEE will immediately deliver to WCH 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 We Care Hair 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 We Care Hair Business. Upon
request from WCH, the FRANCHISEE will provide additional information as may be
required by WCH 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 WCH with a copy of the proposed offering circular or
prospectus for its review prior to the time that the offering circular or
prospectus is filed with any state securities commission or the Securities and
Exchange Commission. The shareholders of the FRANCHISEE who owned the capital
stock of the FRANCHISEE prior to the public offering will, at all times, retain
at least a fifty-one percent (51%) ownership of the issued and outstanding
shares of stock of the FRANCHISEE. WCH 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 WCH at least five (5)
business days prior written notice of such meetings. The FRANCHISEE will not
offer its capital stock by use of the name We Care Hair(R) or any name
deceptively similar thereto. The FRANCHISEE will not have the right to sell any
of
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its capital stock to the public or to any other person or entity until the
FRANCHISEE has complied in all respects with all applicable provisions of this
Agreement, including the applicable provisions of Articles 13 and 20.
7.23 OPERATION OF WE CARE HAIR BUSINESS. The FRANCHISEE will be totally and
solely responsible for the operation of its We Care Hair 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. WCH 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 WCH for the We Care Hair
franchise system. In addition, the FRANCHISEE must participate in any
system-wide program developed by WCH to build brand awareness and promote
customer loyalty for the We Care Hair 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 We Care Hair 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 We Care Hair
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. WCH 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
We Care Hair 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
WCH 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 WCH'S confidential Operations Manual
(the "Manual"). The FRANCHISEE acknowledges having received as a loan one copy
of the Manual from WCH.
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 We Care Hair
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.
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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 WCH. WCH may
from time to time revise the Manual and the FRANCHISEE expressly agrees to
operate its We Care Hair Business in accordance with all such revisions. The
FRANCHISEE will at all times keep its copy of the Manual current and up-to-date,
and in the event of any dispute, the terms of the master copy of the Manual
maintained by WCH will be controlling in all respects.
8.4 OTHER CONFIDENTIAL INFORMATION. The FRANCHISEE expressly acknowledges and
agrees that WCH 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 We Care Hair 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 We
Care Hair 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 WCH designates as
confidential or proprietary will be deemed confidential and proprietary for the
purposes of this Agreement.
8.5 CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES. The FRANCHISEE will require all
of the FRANCHISEE'S employees who have access to the Manual or other
confidential information to execute an agreement, in the form attached hereto as
Exhibit "A" or other form satisfactory to WCH, where the employees agree to
maintain the confidentiality, during the course of their employment and
thereafter, of all information designated by WCH as confidential. Copies of all
executed agreements will be submitted to WCH upon request.
8.6 REMEDIES. The FRANCHISEE recognizes that the provisions contained in this
Article are necessary for the protection of WCH and all of the franchisees who
own We Care Hair 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 WCH 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 WCH under common law, in
equity, and pursuant to any federal and state statutes in an action or lawsuit
against the FRANCHISEE.
ARTICLE 9
WCH'S TERMINATION RIGHTS
9.1 GROUNDS FOR TERMINATION. In addition to the other rights of termination
contained in this Agreement, WCH will have the right and privilege to terminate
this Agreement if: (A) the FRANCHISEE fails to open and commence operations of
its We Care Hair Business within one hundred eighty (180) days of the date of
this Agreement; (B) the FRANCHISEE violates any material provision, term or
condition of this Agreement including, but not limited to, failure to timely pay
the Initial Fee or any Continuing Fees, Advertising Fees, monetary obligations
or other fees to WCH; (C) the FRANCHISEE fails to conform to the Business
System, the standards of uniformity and quality for the goods and services or
the policies and procedures promulgated by WCH in connection with the Business
System, or is involved in any act or conduct which materially impairs the
goodwill associated with the Marks or the Business System; (D) the FRANCHISEE
fails to timely pay any of its uncontested
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obligations or liabilities due and owing to WCH, suppliers, banks, purveyors,
other creditors or any federal, state or municipal government (including, if
applicable, federal and state taxes); (E) the FRANCHISEE is determined to be
insolvent within the meaning of any state or federal law, files for bankruptcy
or is adjudicated a bankrupt under any state or federal law; (F) the FRANCHISEE
makes an assignment for the benefit of creditors or enters into any similar
arrangement for the disposition of its assets for the benefit of creditors; (G)
any check issued by the FRANCHISEE is dishonored because of insufficient funds
(except where the check is dishonored because of a bookkeeping or accounting
error) or closed accounts; (H) the FRANCHISEE fails to finance or purchase and
pay for the leasehold improvements, furniture, fixtures, supplies and equipment
required for its We Care Hair 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 We Care Hair Business or any felony; or (K) the FRANCHISEE
voluntarily or otherwise abandons, as defined herein, the We Care Hair Business.
9.2 NOTICE OF BREACH. Except as provided for in Article 9.5 and Article 9.6 of
this Agreement, WCH 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 WCH 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 WCH 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 WCH 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 WCH 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 WCH in the written notice
given to the FRANCHISEE, then the FRANCHISEE will have thirty (30) days from the
date the Arbitrator issues a written determination on the matter to correct the
specified breach or violation of this Agreement, except where applicable law
requires a longer cure period in which event the cure period specified by
applicable law will apply. If the FRANCHISEE timely corrects the specified
breach of this Agreement, then this Agreement will remain in full force and
effect. For the purposes of this Agreement, any controversy or dispute on the
issue of whether the FRANCHISEE has timely corrected the specified breach of
this Agreement will also be subject to arbitration as provided for herein. The
time limitations set forth in this Article within which the FRANCHISEE may
demand arbitration of a dispute or controversy relating to the right of WCH 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,
WCH may terminate this Agreement as provided for herein.
9.4 NOTICE OF TERMINATION. If WCH 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 WCH
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. WCH will have the absolute right and
privilege, unless prohibited by applicable law, to immediately terminate this
Agreement if: (A) the FRANCHISEE or any of its partners, Directors, officers or
majority stockholders is convicted of, or pleads guilty or no contest to, a
charge of violating any law relating to the FRANCHISEE'S We Care Hair Business,
or any felony; (B) the FRANCHISEE voluntarily or otherwise abandons, as defined
herein, the FRANCHISEE'S We Care Hair Business; (C) the FRANCHISEE is involved
in any act or conduct which materially impairs the goodwill associated with
WCH'S 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 WCH; or
(D) the FRANCHISEE fails or refuses to produce its books and financial records
for audit by WCH in accordance with Article 19.4.
9.6 NOTICE OF IMMEDIATE TERMINATION. If this Agreement is terminated by WCH
pursuant to Article 9.5 above, WCH 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 WCH 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 WCH will be entitled to seek
recovery from the FRANCHISEE for all of the damages that WCH has sustained and
will sustain in the future as a result of the FRANCHISEE'S breach of this
Agreement, which will include damages based upon the Continuing Fees,
Advertising Fees and other fees that would have been payable by the FRANCHISEE
for the remaining term of this Agreement.
9.8 OTHER REMEDIES. Nothing in this Article or this Agreement will preclude WCH
from seeking other damages or remedies under common law, state or federal laws
or this Agreement against the FRANCHISEE including, but not limited to,
attorneys' fees, punitive damages and injunctive relief.
ARTICLE 10
FRANCHISEE'S TERMINATION RIGHTS
10.1 GROUNDS FOR TERMINATION. The FRANCHISEE will have the right and privilege
to terminate this Agreement, as provided for herein, if: (A) WCH violates any
material provision, term or condition of this Agreement; (B) WCH fails to timely
pay any material obligations due and owing to the FRANCHISEE; or (C) WCH 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
WCH 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 WCH by the FRANCHISEE and WCH 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 WCH fails to commence the actions necessary to correct the alleged
breach or violation as provided herein within thirty (30) days after having been
given such written notice, or to correct the alleged breach within one hundred
twenty (120) days after having been given such written notice, then this
Agreement may be terminated by the FRANCHISEE as provided for in this Agreement.
For the purposes of this Agreement, an alleged breach of this Agreement by WCH
will be deemed to be "corrected" if both WCH and the FRANCHISEE agree in writing
that the alleged breach or violation has been corrected.
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10.3 ARBITRATION. If WCH gives notice of arbitration, as provided for in this
Agreement, within thirty (30) days from the date WCH 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 WCH has breached
this Agreement and WCH fails to correct the breach within the time limitation
set forth herein. If the Arbitrator determines that WCH breached this Agreement
as alleged by the FRANCHISEE in the written notice given to WCH, then WCH 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 WCH timely corrects the specified breach of this Agreement, then this
Agreement will remain in full force and effect. If WCH does not correct the
specified breach of this Agreement, then the FRANCHISEE will have the right to
terminate this Agreement by giving WCH 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 WCH. For
the purposes of this Agreement, any controversy or dispute on the issue of
whether WCH has timely corrected the specified breach of this Agreement will
also be subject to arbitration as provided for herein. The time limitation set
forth in this Article within which WCH 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 WCH 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 WCH 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 WCH. If the FRANCHISEE fails to give written
notice to WCH as provided for herein of an alleged breach or violation of this
Agreement within one (1) year from the date that the FRANCHISEE has knowledge
of, determines, is of the opinion that, or becomes aware of facts and
circumstances reasonably indicating that the FRANCHISEE may have a claim under
any state law, federal law or common law because there has been an alleged
breach by WCH, then the alleged breach or violation will be deemed to be
condoned, approved and waived by the FRANCHISEE, the alleged breach or violation
will not be deemed to be a breach or violation of this Agreement by WCH, and the
FRANCHISEE will be barred from commencing any legal or other action against WCH
for that alleged breach or violation.
10.5 INJUNCTIVE RELIEF AVAILABLE TO WCH. Notwithstanding any of the foregoing
provisions, if the FRANCHISEE gives WCH written notice of an alleged breach or
violation of this Agreement, or of any laws that give rise to a claim that the
FRANCHISEE has the right to terminate this Agreement, then WCH 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 WCH 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
WCH has breached this Agreement in the manner alleged by the FRANCHISEE, and
then only if WCH fails to commence the actions necessary to correct the breach
or violation within thirty (30) days after a final decision has been entered
against WCH and all time for appeals by WCH has expired. If WCH commences any
legal action against the FRANCHISEE as contemplated by this provision, which
will include actions for injunctive relief against the FRANCHISEE to enjoin
termination of this Agreement, then unless applicable law provides to the
contrary, WCH will not be required to post any bond or security whatever in such
legal action.
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ARTICLE 11
FRANCHISEE'S OBLIGATIONS UPON TERMINATION OR EXPIRATION
11.1 OBLIGATIONS UPON TERMINATION. In the event this Agreement expires or is
terminated for any reason, then the FRANCHISEE will: (A) within five (5) days
after termination, pay all Continuing Fees, Advertising Fees, and other amounts
due and owing to WCH under this Agreement or any other contract, promissory note
or other obligation payable by the FRANCHISEE to WCH; (B) return to WCH by first
class prepaid United States mail all Manuals, advertising materials and all
other printed materials pertaining to the FRANCHISEE'S We Care Hair Business;
and (C) comply with all other applicable provisions of this Agreement.
11.2 TERMINATION OF RIGHT TO USE MARKS. Upon expiration or termination of this
Agreement for any reason, the FRANCHISEE'S right to use the name We Care
Hair(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 We Care Hair 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 We Care Hair business. At a minimum, such changes and modifications to the
Franchised Location will include: (A) repainting and, where applicable,
recovering both the exterior and interior of the Franchised Location with
totally different colors, including removing any distinctive colors and designs
from the walls; (B) removing all fixtures and other decor items and replacing
them with other decor items not of the general type and appearance customarily
used only in We Care Hair businesses; (C) removing all exterior and interior We
Care Hair 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 We Care Hair businesses.
11.4 TRANSFER OF TELEPHONE DIRECTORY LISTINGS. Upon termination or expiration of
this Agreement, WCH 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 We Care Hair Business or otherwise placed under
the name We Care Hair(R), and to authorize the telephone company and all listing
agencies to transfer to WCH or its assignee all telephone numbers and directory
listings for the FRANCHISEE'S We Care Hair Business. The FRANCHISEE acknowledges
that WCH has the absolute right and interest in and to all telephone numbers and
directory listings associated with the Marks, and the FRANCHISEE hereby
authorizes WCH to direct the telephone company and all listing agencies to
transfer all of the FRANCHISEE'S telephone numbers and directory listings to WCH
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 WCH 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 We Care Hair
Business to WCH, and will constitute a release of the telephone company and
listing agencies by the FRANCHISEE from any and all claims, actions and damages
that the FRANCHISEE may at any time have the right to allege against them in
connection with this Article 11.
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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 WCH pertaining to the Business
System of a We Care Hair business. In consideration for the use and license of
such valuable and confidential information, the FRANCHISEE, the FRANCHISEE'S
shareholders and the Personal Guarantors will comply in all respects with the
provisions of this Article. WCH has advised the FRANCHISEE that this provision
is a material provision of this Agreement, and that WCH will not sell a We Care
Hair 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 We Care
Hair 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
WCH or by any other We Care Hair, City Looks or Cost Cutters(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, ▇▇▇▇▇▇ or
other business that is in any way competitive with or similar to the We Care
Hair businesses operated by WCH or WCH'S franchisees, except with the prior
written consent of WCH.
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 WCH or by any other We Care Hair,
City Looks or Cost Cutters(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, ▇▇▇▇▇▇ or other business that is in any way
competitive with or similar to the We Care Hair businesses conducted by WCH or
WCH'S franchisees, which is located within six (6) miles of either the
Franchised Location or any other We Care Hair businesses operated by WCH or any
of WCH'S franchisees, or which is located within any exclusive area granted by
WCH or any affiliate or area developer of WCH 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 WCH and WCH'S franchisees if this
Agreement expires or is terminated for any reason, and that this covenant not to
compete is necessary to permit WCH the opportunity to resell and/or develop a
new We Care Hair business at or in the area near the Franchised Location.
12.4 INJUNCTIVE RELIEF. The FRANCHISEE, the FRANCHISEE'S shareholders and the
Personal Guarantors agree that the provisions of this Article are necessary to
protect the legitimate business interests of WCH and WCH'S 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 WCH
and WCH'S franchisees, protection of WCH'S trade secrets and the integrity of
WCH'S 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 WCH if
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there is a violation of this Article by the FRANCHISEE and that injunctive
relief against the FRANCHISEE is essential for the protection of WCH and WCH'S
franchisees. The FRANCHISEE, the FRANCHISEE'S shareholders and the Personal
Guarantors agree therefore, that if WCH alleges that the FRANCHISEE, the
FRANCHISEE'S shareholders or the Personal Guarantors have breached or violated
this Article, then WCH will have the right to petition a Court of competent
jurisdiction for injunctive relief against the FRANCHISEE, the FRANCHISEE'S
shareholders or the Personal Guarantors, in addition to all other remedies that
may be available to WCH at law or in equity. Unless provided to the contrary by
applicable law, WCH will not be required to post a bond or other security prior
to obtaining injunctive relief pursuant to this Agreement in any action where
WCH is seeking to enjoin the FRANCHISEE, the FRANCHISEE'S shareholders or the
Personal Guarantors from violating the provisions of this Article. In cases
where WCH 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
WCH'S 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 We Care Hair Business, (B) the Franchised Location,
(C) the building or premises lease for the Franchised Location, (D) the
furniture, fixtures, equipment, inventory or other assets used in the
FRANCHISEE'S We Care Hair 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 We Care
Hair Business to any party without first offering the same to WCH 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 WCH of the FRANCHISEE'S written offer specifying the proposed price
and terms of the proposed sale, WCH 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 WCH
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 WCH and the FRANCHISEE agree in writing
that the negotiations have terminated, whichever comes earlier. If WCH 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 WCH; 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 WCH 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 WCH, then the modified offer
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must be recommunicated or made to WCH by the FRANCHISEE. WCH 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 We Care Hair Business.
13.2 COMPLIANCE WITH AGREEMENT. The FRANCHISEE'S obligations under this
Agreement including, but not limited to, its obligations to pay the Continuing
Fees, the Advertising Fees and to operate as a We Care Hair Business, will in no
way be affected or changed because of WCH'S 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. WCH'S 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 WCH 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 We Care Hair 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 WCH 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 WCH in writing under the same terms and conditions
offered to any third party. In the event the FRANCHISEE'S shareholders desire to
sell, assign, trade, transfer or dispose of their shares of capital stock, the
FRANCHISEE'S shareholders will first offer them to WCH in writing under the same
terms and conditions as being offered to any third party. WCH 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 WCH, provided that each proposed
transferee shareholder who will be involved in the operations or management of
the We Care Hair Business has successfully completed WCH'S training program and
has been certified by WCH and is, in WCH'S reasonable judgment, qualified from a
managerial and financial standpoint to operate the We Care Hair Business in an
economic and businesslike manner. The FRANCHISEE and the FRANCHISEE'S
shareholders must provide WCH 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
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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 WCH, 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 WCH, 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 We Care Hair Business System and the Marks, as well as WCH'S
reputation and image, and are for the protection of WCH, the FRANCHISEE and all
other Franchisees who own and operate We Care Hair businesses. Any assignment or
transfer permitted by Article 13 will not be effective until WCH receives a
completely executed copy of all transfer documents and WCH 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 WCH TO PURCHASE BUSINESS ASSETS. If this Agreement expires or is
terminated by either WCH 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 We Care Hair Business, then WCH 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 WCH
for a standard We Care Hair business and owned by the FRANCHISEE in its We Care
Hair Business (the "Business Assets"). WCH will not purchase any assets from the
FRANCHISEE that are not part of the standard We Care Hair business. The
FRANCHISEE must give WCH 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 We Care Hair Business, or after this Agreement expires or is terminated by
either party, or is wrongfully terminated by the FRANCHISEE.
13.8 DETERMINATION OF FAIR MARKET VALUE. If the FRANCHISEE fails to give WCH
written notice of the asking price of the Business Assets, or if WCH and the
FRANCHISEE cannot agree on the price of the Business Assets, then either party
will have the right to demand that the price of the Business Assets be
determined by arbitration in accordance with the Rules and Regulations of the
American Arbitration Association. The arbitration hearing will be held as soon
as possible, but in no event later than seven (7) business days from the date
arbitration is demanded by either party. The Arbitrator will determine the fair
market value of the Business Assets. The Arbitrator will not consider any value
for goodwill associated with the names We Care Hair(R) or We Care Hair(R) or for
going concern value in determining the fair market value of the Business Assets
since the right of purchase granted to WCH pursuant to this provision applies
only after this Agreement has expired or has been terminated, or the FRANCHISEE
has ceased doing business. Furthermore, the Arbitrator will not consider any
value for the Lease for the Franchised Location if WCH 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). WCH 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
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Arbitrator in writing. Nothing in this Article will prohibit WCH from enforcing
the terms and conditions of this Agreement, including the covenants not to
compete contained in Article 12.
ARTICLE 14
TRAINING PROGRAM; PRE-OPENING ASSISTANCE; OPENING ASSISTANCE
14.1 TRAINING PROGRAM. WCH will provide a training program for the FRANCHISEE
(and the FRANCHISEE'S District Manager if one is employed) in Minneapolis,
Minnesota to educate, familiarize and acquaint them with the operations of a We
Care Hair Business. The training program will include classroom instruction for
not less than three (3) days on orientation to the Business System and basic
operating skills such as daily operational procedures, inventory control,
employee relations, scheduling and other topics selected by WCH. The FRANCHISEE
and the FRANCHISEE'S District Manager must successfully complete the training
program either (a) prior to commencing any business operations or (b) at the
first scheduling of the training program by WCH after the execution of this
Agreement. The training program will be scheduled by WCH in its sole discretion.
In the event the FRANCHISEE or its District Manager fails to successfully
complete WCH'S 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 We Care Hair Business and WCH will have the
right to reject the FRANCHISEE pursuant to Article 4.2 of this Agreement. If the
Franchised Location is the FRANCHISEE'S first We Care Hair Business and there is
not a WCH'S training program scheduled after the FRANCHISEE has executed this
Agreement or a WCH development agreement and prior to the date the Franchised
Location opens for business, then WCH will, at WCH'S expense, provide assistance
at the Franchised Location to manage the FRANCHISEE'S We Care Hair Business
during the time period that the FRANCHISEE and its District Manager attend WCH'S
training program, but only if the FRANCHISEE and its District Manager attend the
first training program offered by WCH immediately following the date the
Franchised Location opens for business.
14.2 HIRING OF NEW DISTRICT MANAGER. In the event the FRANCHISEE hires a
District Manager who has not successfully completed the training program(s)
prescribed by WCH, and if WCH 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 We Care Hair Business, then WCH will require
the individual to successfully complete the prescribed training prior to the
time he or she will be allowed to manage or operate the FRANCHISEE'S We Care
Hair Business, and the FRANCHISEE will be required to pay WCH the then current
training fee charged by WCH.
14.3 PAYMENT OF SALARIES AND EXPENSES DURING TRAINING. The FRANCHISEE will pay
the salaries, fringe benefits, payroll taxes, unemployment compensation,
workers' compensation insurance, lodging, food, automobile rental, travel costs,
and all other expenses for the FRANCHISEE, the FRANCHISEE'S District Manager and
all other persons sent to the training program by the FRANCHISEE, and the
FRANCHISEE will comply with all applicable state and federal laws pertaining to
all employees who attend WCH'S training program.
14.4 PRE-OPENING ASSISTANCE. If the Franchised Location is the FRANCHISEE'S
first We Care Hair Business, then WCH will provide, at its cost, a
representative for not more than five (5) business days at the Franchised
Location, who will provide pre-opening assistance to the FRANCHISEE, which will
include assisting the FRANCHISEE (and its District Manager if one is employed)
in the interviewing and hiring of employees, review of operational procedures
and facilitating the opening of the We Care Hair Business.
14.5 OPENING ASSISTANCE. After the FRANCHISEE and the FRANCHISEE'S District
Manager have successfully completed WCH'S training program, WCH will assist the
FRANCHISEE in
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scheduling the initial opening of the FRANCHISEE'S We Care Hair Business. WCH
will provide, at its cost, a representative for not less than five (5) business
days at the Franchised Location, who will provide opening assistance which will
include training the FRANCHISEE'S We Care Hair staff in daily operational
procedures, customer relations, haircutting techniques, permanent waving,
tanning, nail care, product knowledge and other areas selected by WCH. The
FRANCHISEE will not open and commence initial business operations until WCH has
given the FRANCHISEE written approval to open the FRANCHISEE'S We Care Hair
Business.
ARTICLE 15
WCH'S OTHER OBLIGATIONS
15.1 ADDITIONAL ASSISTANCE. Consistent with WCH'S uniform requirements and
quality standards, WCH 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 We Care Hair 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 WCH deems necessary and render written reports
to the FRANCHISEE as deemed appropriate by WCH; (D) protect, police and, when
appropriate, enforce the Marks and the Business System for the benefit of all We
Care Hair franchisees; (E) render advisory services pertaining to customer
service and the operation of the FRANCHISEE'S We Care Hair Business as
frequently as WCH deems appropriate; (F) provide the FRANCHISEE with WCH'S
standard Operations Manual and all supplements and modifications to the Manual;
and (G) provide the FRANCHISEE with WCH'S approved standard store layouts and
plans for the Franchised Location.
15.2 ANNUAL CONVENTION. WCH will, during the term of this Agreement, conduct an
annual convention for all We Care Hair franchisees at such times and at such
locations as WCH deems appropriate. The FRANCHISEE will attend the annual
convention conducted by WCH for We Care Hair 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 WCH
will be paid for by the FRANCHISEE. WCH 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. WCH may, during the term of this Agreement,
provide optional additional training and instruction to the FRANCHISEE on topics
determined by WCH in its sole discretion. WCH 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 WCH the then-current training fee charged
by WCH for any additional training attended by the FRANCHISEE or its employees.
All expenses incurred by the FRANCHISEE or any employees of the FRANCHISEE in
traveling to and attending optional additional training will be paid for by the
FRANCHISEE.
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ARTICLE 16
WCH SIGN
16.1 INSTALLATION OF SIGN. The FRANCHISEE will, at its expense, purchase the
standard We Care Hair 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 WCH'S standard Sign plans and specifications and must be installed at
the Franchised Location precisely in the place, location and manner specified by
WCH in writing. WCH 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 WCH in writing. WCH 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 WCH, 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 WCH'S redesigned Sign
plans and specifications. The FRANCHISEE will not be required to modify or
replace the Sign more than once every five (5) years during the term of this
Agreement.
16.4 INJUNCTIVE RELIEF. The FRANCHISEE agrees that WCH will be entitled to seek
injunctive relief against the FRANCHISEE to require the FRANCHISEE, at the
FRANCHISEE'S expense, to: (A) exhibit the approved We Care Hair Sign at the
Franchised Location during the term of this Agreement; (B) remove the Sign upon
the termination or expiration of this Agreement; or (C) remove the Sign from the
former franchised location upon the relocation of the Franchised Location.
Unless required by applicable law, WCH 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, WCH, 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 We Care
Hair 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, WCH, and their respective officers, directors and employees from any
and all loss, liability, damage, claim or expense of any kind whatsoever
resulting from the use, operation or maintenance of any automobile or vehicle
used by the FRANCHISEE or any of its employees in connection with the
FRANCHISEE'S We Care Hair Business.
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17.3 COVERAGE LIMITS. Liability coverages for both the general liability
insurance coverage and automobile coverage must have limits of at least Five
Hundred Thousand Dollars ($500,000) for each person and One Million Dollars
($1,000,000) for each occurrence.
17.4 PROPERTY INSURANCE. The FRANCHISEE will maintain in full force and effect,
at its sole cost and expense, "all risks" property insurance coverage for the
equipment, furnishings, fixtures, inventory and signs owned or leased by the
FRANCHISEE and used at the Franchised Location (including fire and extended
coverage) with limits equal to at least "replacement" cost.
17.5 PROFESSIONAL LIABILITY INSURANCE. The FRANCHISEE will maintain in full
force and effect, at its sole cost and expense, professional liability coverage
with coverage limits of a reasonable amount insuring the FRANCHISEE, WCH, 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 We Care Hair 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 We
Care Hair 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 WCH 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 WCH.
17.8 WCH'S RIGHTS. All insurance policies procured and maintained by the
FRANCHISEE pursuant to this Article will name WCH as an additional insured, will
contain endorsements by the insurance companies waiving all rights of
subrogation against WCH, and will stipulate that WCH 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, WCH, and their respective officers, directors and employees.
17.10 NO REPRESENTATIONS; RIGHT TO ADDITIONAL COVERAGE. WCH makes no
representations with respect to the adequacy of the types of insurance coverage
or coverage amounts set forth herein, and the FRANCHISEE will have the absolute
right to maintain additional types of coverage and higher coverage amounts than
those specified herein as minimum requirements.
ARTICLE 18
INDEPENDENT CONTRACTORS; INDEMNIFICATION
18.1 INDEPENDENT CONTRACTORS. WCH and the FRANCHISEE are each independent
contractors and, as a consequence, there is no employer-employee or
principal-agent relationship between WCH 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 WCH or represent that their
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relationship is other than that of Franchisor and Franchisee. Neither WCH 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. WCH will not be obligated to any person or entity for
damages arising out of, from, in connection with, or as a result of the
FRANCHISEE'S negligence or the operation of the FRANCHISEE'S We Care Hair
Business. The FRANCHISEE will indemnify and hold WCH harmless against all
claims, lawsuits, damages, obligations, liability, actions and judgments alleged
or obtained by any person or entity against WCH arising out of, from, as a
result of, or in connection with the FRANCHISEE'S negligence, the operation of
the FRANCHISEE'S We Care Hair 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
WCH or any affiliate of WCH. Further, the FRANCHISEE will indemnify and
reimburse WCH for all such obligations and damages for which WCH is held liable
and for all costs reasonably incurred by WCH 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. WCH
will have the absolute right to defend any claim made against it that results
from or arises out of the FRANCHISEE'S We Care Hair Business.
18.3 PAYMENT OF COSTS AND EXPENSES. The FRANCHISEE will pay all costs and
expenses, including attorneys' fees, actually incurred by WCH 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 WCH with a quarterly balance sheet and income statement, and
annual financial statements for the FRANCHISEE'S We Care Hair Business which
will consist of a balance sheet, income statement, statement of cash flows and
explanatory footnotes. All financial statements provided to WCH for the
FRANCHISEE'S We Care Hair Business will be presented in the exact form and
format prescribed by WCH in writing and will be categorized according to the
chart of accounts prescribed by WCH. The FRANCHISEE'S financial statements will
be prepared in accordance with generally accepted accounting principles applied
on a consistent basis. If the FRANCHISEE'S annual financial statements are not
certified by an independent certified public accountant, then the FRANCHISEE'S
annual financial statements must be verified by the FRANCHISEE'S President or
Chief Financial Officer, or if the FRANCHISEE is not a corporation, then by the
FRANCHISEE'S Managing Partner, Chief Operating Officer or Chief Financial
Officer. The FRANCHISEE'S quarterly financial statements will be delivered to
WCH 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.
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19.2 TAX RETURNS. Within ninety (90) days after the FRANCHISEE'S fiscal year
end, the FRANCHISEE will furnish WCH 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 We Care
Hair 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 We Care Hair Business using such forms as WCH may prescribe in
writing. The weekly statement of Gross Revenues will accompany the FRANCHISEE'S
weekly Continuing Fees and Advertising Fees and will be provided to WCH on or
before Wednesday of each week for the preceding week ending on Friday.
19.4 WCH'S AUDIT RIGHTS. Within three (3) days after having been given written
notice from WCH, the FRANCHISEE and its accountants will make all of their
books, ledgers, work papers, accounts, bank statements, tax returns, sales tax
returns, daily cash register tapes and financial records pertaining to the
FRANCHISEE'S Business ("books and financial records") available to WCH during
all business hours for review and audit by WCH 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 WCH for at least the preceding
five (5) years. The FRANCHISEE will provide WCH 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
WCH reveals any deficiencies, then the FRANCHISEE will, within five (5) days
after receipt of an invoice from WCH indicating the amounts owed, pay WCH any
deficiency in Continuing Fees or other amounts owed to WCH, together with
interest as provided for herein. If an audit by WCH results in a determination
that the FRANCHISEE'S Gross Revenues were understated by more than two percent
(2%), or that the FRANCHISEE has underpaid the weekly Continuing Fees by more
than Five Hundred Dollars ($500) in any twelve (12) month period, then the
FRANCHISEE will, in addition to paying any deficiency in Continuing Fees,
Advertising Fees, costs of products purchased from WCH or other amounts due to
WCH, reimburse WCH for all costs and expenses (including salaries of WCH'S
employees, travel costs, room and board, and audit fees) that WCH has incurred
as a result of the audit, including any fees paid to its accountants to conduct
the audit. The FRANCHISEE will reimburse WCH for such costs and expenses within
ten (10) days of receipt of an invoice from WCH 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 WCH 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 WCH.
19.5 WAIVER BY FRANCHISEE. WCH 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 WCH in conjunction with such application; (B) most recent financial
information provided to WCH; and (C) most recent annual financial statements
provided to WCH. WCH will also have the right to obtain credit reports
maintained by credit reporting agencies regarding the FRANCHISEE and the right
to review the books and records maintained by the vendors or suppliers that
supply products, goods or services to the FRANCHISEE regarding the purchase made
by the FRANCHISEE. This Agreement will serve as evidence of WCH'S 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 WCH.
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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 WCH 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 WCH, and to charge to the account of the
FRANCHISEE, on Wednesday of each week, the amount of the Continuing Fees,
Advertising Fees and other sums due and payable by the FRANCHISEE pursuant to
this Agreement in accordance with Article 5 and Article 6 of this Agreement. The
FRANCHISEE'S authorizations will permit WCH to designate the amount to be
debited or drafted from the FRANCHISEE'S account and to adjust such amount from
time to time, to the amount of the Continuing Fees, Advertising Fees and other
sums then payable to WCH 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 WCH will have the right, in its sole discretion, to estimate the
amount of the Continuing Fees, Advertising Fees and other sums due and payable
to WCH, and to designate such estimated amount as the amount to be debited or
drafted from the FRANCHISEE'S account. The FRANCHISEE will, at all times during
the term of this Agreement, maintain a balance in its account at its bank or
financial institution sufficient to allow the appropriate amount to be debited
from the FRANCHISEE'S account for payment of the Continuing Fees, Advertising
Fees and other sums payable by the FRANCHISEE for deposit in the account of WCH.
ARTICLE 20
ASSIGNMENT
20.1 ASSIGNMENT BY WCH. This Agreement may be unilaterally assigned and
transferred by WCH without the FRANCHISEE'S approval or consent, and will inure
to the benefit of WCH'S successors and assigns. WCH will provide the FRANCHISEE
with written notice of any such assignment or transfer, and the assignee will be
required to fulfill WCH'S obligations under this Agreement.
20.2 ASSIGNMENT BY FRANCHISEE TO CORPORATION. If the FRANCHISEE is an individual
or a partnership, this Agreement may be transferred or assigned by the
FRANCHISEE, without first offering it to WCH 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 WCH 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, ▇▇▇▇▇▇ or other business that is in any way
competitive with or similar to a We Care Hair business. The FRANCHISEE will give
WCH 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 WCH 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 WCH 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 WCH has received the properly executed legal documents which its
legal counsel deems necessary to properly and
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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 WCH. WCH 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 WCH 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 WCH 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 WCH assuming and agreeing to
discharge all of the FRANCHISEE'S obligations and covenants under this
Agreement; (E) the transferee Franchisee will have demonstrated to WCH'S
satisfaction that he, she or it meets WCH'S 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
WCH'S then-current standard Franchise Agreement for a term ending on the
expiration date of this Agreement and such other ancillary agreements as WCH may
require for the transfer of the FRANCHISEE'S Business; (G) the transferee
Franchisee will not be required to pay the Initial Fee, however, the transferee
Franchisee will be required to pay the Continuing Fees and the Advertising Fees
to WCH at the rate specified in this Agreement; (H) the transferee Franchisee
has purchased the Franchised Location or has acquired a lease for the Franchised
Location for a reasonable term consistent with the remaining term of this
Agreement; (I) the transferee Franchisee (and its District Manager if one is
employed) must successfully complete the training program(s) prescribed by WCH;
(J) the transferee Franchisee will pay the salaries, fringe benefits, payroll
taxes, unemployment compensation, workers' compensation insurance, hotel costs,
travel costs and other expenses for all persons sent to the training program(s),
and will pay to WCH WCH'S then-current training fee for each person attending
WCH'S training program(s); (K) the FRANCHISEE has paid the transfer fee required
under Article 20.6; (L) the transferee Franchisee has paid the Training Program
Deposit required under Article 20.7; (M) the transferee Franchisee does not own,
operate, franchise, develop, manage or control any hairstyling, ▇▇▇▇▇▇ or other
business that is in any way competitive with or similar to a We Care Hair
business; and (N) if the transferee Franchisee does not meet WCH'S net worth
requirements for operation of the We Care Hair Business, then the FRANCHISEE
and/or its shareholders and the Personal Guarantors will execute a written
agreement in a form satisfactory to WCH agreeing to remain liable to WCH for the
obligations of the We Care Hair 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 We Care Hair Business System and the Marks, as well as WCH'S
reputation and image, and are for the protection of WCH, the FRANCHISEE and all
other franchisees who own and operate We Care Hair businesses. Any assignment or
transfer permitted by this Article 20 will not be effective until WCH receives a
completely executed copy of all transfer documents and WCH consents to the
transfer in writing, and any attempted assignment or transfer made without
complying with the requirements of this Article 20 will be void.
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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 WCH a transfer fee of One Thousand Dollars
($1,000). This fee is to cover the costs incurred by WCH for attorneys' fees,
accountants' fees, compliance with applicable laws, out-of-pocket expenses, long
distance telephone calls, and the time of its employees and officers.
20.7 TRAINING PROGRAM DEPOSIT. If, pursuant to the terms of this Article 20, the
rights granted in this Agreement are assigned, transferred or bequeathed to
another person or entity, or if the FRANCHISEE'S shareholders transfer over
fifty percent (50%) of their capital stock to another person or entity, then, as
a condition (in addition to the other conditions expressed in this Article 20)
to the approval by WCH of such assignment, transfer or bequest, the transferee
Franchisee will pay WCH a training program deposit which will be refunded to the
transferee Franchisee in its entirety upon the transferee Franchisee's
successful completion of WCH'S training program. The amount of the training
program deposit to be paid to WCH is Two Thousand Dollars ($2,000) if the
Franchised Location is located within ninety (90) miles of WCH'S training
facility located in Minneapolis, Minnesota. If the Franchised Location is
located more than ninety (90) miles from WCH'S training facility, then the
amount of the training program deposit to be paid to WCH is Three Thousand
Dollars ($3,000).
ARTICLE 21
SITE SELECTION; STANDARD STORE LAYOUTS AND PLANS
21.1 SITE SELECTION. The FRANCHISEE will be solely responsible for selecting a
site for the Franchised Location and for purchasing, leasing or otherwise
acquiring possession of the site for the Franchised Location. WCH has strongly
recommended that the FRANCHISEE should retain an experienced commercial real
estate broker or salesperson ("real estate broker") who has at least five (5)
years experience in locating and/or leasing retail space to locate, acquire,
purchase or lease a site for the FRANCHISEE'S We Care Hair Business.
Accordingly, no provision of this Agreement may be construed to impose any
obligation or responsibility on WCH to locate or select a site for the
Franchised Location. The FRANCHISEE will not lease, purchase or otherwise
acquire a site for the Franchised Location until the proposed site has been
reviewed in writing by WCH to determine accessibility, visibility, potential
traffic flows and other demographic information. The review of the site
conducted by WCH will not be deemed to be a warranty, representation or guaranty
by WCH that if the FRANCHISEE'S We Care Hair Business is opened and operated at
that site, it will be a financial success. WCH will have the right to require
the FRANCHISEE to obtain, at the FRANCHISEE'S expense, an economic feasibility
and demographics study for the proposed site of the Franchised Location. Any
feasibility and demographics study required by WCH will be completed by a real
estate expert mutually agreed upon by WCH 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 WCH with the following information for the Franchised
Location: (A) a copy of the executed lease (if applicable); (B) the store front
elevation; (C) space documentation (size and lay-out); (D) location of the
plumbing and electrical sources; (E) local signage requirements, laws and
regulations; and (F) all other pertinent information. Based upon the information
provided by the FRANCHISEE, WCH 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 WCH. Any unauthorized variance from the store layouts and plans
prepared by WCH will be a material breach of this Agreement. Providing store
layouts and plans does not constitute a representation, warranty or guaranty by
WCH that the site will be a financially successful location for the FRANCHISEE'S
We Care
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Hair Business, and the FRANCHISEE assumes all business and economic risks
associated with the operation of the We Care Hair Business at this site.
21.3 INCORRECT INFORMATION. In the event any of the information provided to WCH
by the FRANCHISEE pursuant to this Article is incorrect, inaccurate or
incomplete, then the FRANCHISEE will pay for all costs and expenses incurred by
WCH in revising the store layouts and plans prepared by WCH for the Franchised
Location.
21.4 FRANCHISEE RESPONSIBLE FOR CONSTRUCTION OR REMODELING. The FRANCHISEE will
be solely responsible for ascertaining and ensuring that the Franchised Location
is constructed or remodeled according to the store layouts and plans provided by
WCH and is in compliance with all applicable local, state and federal laws,
ordinances, statutes and building codes, including without limitation 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 WCH'S OPTION TO VIEW FRANCHISED LOCATION. WCH 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. WCH'S viewing of the Franchised Location during construction
or remodeling will not be for the purpose of determining that the Franchised
Location is being constructed or remodeled in a workmanlike manner or in
compliance with any applicable laws or ordinances. Accordingly, WCH 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 WCH'S REVIEW OF LEASE. The lease for the Franchised Location (the "Lease")
will be submitted to WCH by the FRANCHISEE for WCH'S review prior to execution
of the Lease by the FRANCHISEE. The Lease must, at a minimum, be conditional
upon WCH'S approval of the FRANCHISEE and give WCH 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 WCH or
the FRANCHISEE for any reason prior to the expiration of the Lease. WCH'S 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, WCH will
have no responsibility to the FRANCHISEE with regard to the economics, legality
or enforceability of the Lease.
22.2 FRANCHISEE'S ASSIGNMENT OF LEASE. The FRANCHISEE hereby assigns and
transfers all of its right, title and interest in and to the Lease (which is
incorporated herein by reference) to WCH as security for the FRANCHISEE'S
performance of the terms and conditions of this Agreement. If this Agreement is
terminated by either WCH 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 We Care Hair Business, or if this
Agreement expires and the FRANCHISEE does not reacquire the franchise (an "Event
of Default"), then WCH 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
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Statement and such other documents as may be reasonably required by WCH'S
attorneys to perfect and record WCH'S security interest in the Lease.
22.3 PERFECTED ASSIGNMENT; NOTICE. This assignment will constitute a perfected,
absolute and present assignment of the Lease; however, WCH 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, WCH 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 WCH is taking and
assuming the Lease from the FRANCHISEE; (B) the date that WCH will take physical
possession of the Franchised Location; and (C) that WCH agrees to be bound by
the terms and conditions of the Lease being assumed. WCH 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 WCH. 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 WCH'S prior written
consent.
22.5 ENFORCEMENT OF FRANCHISEE'S RIGHTS. The FRANCHISEE hereby irrevocably
constitutes and appoints WCH 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 WCH, in
the name of WCH, with the same force and effect as the FRANCHISEE could do if
this assignment had not been made.
22.6 WCH'S RIGHTS AND REMEDIES. Upon taking physical possession of the
Franchised Location, WCH 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, WCH will have and possess,
without limitation, any and all rights and remedies of a secured party under the
Uniform Commercial Code, as enacted in the jurisdiction in which enforcement is
sought or as provided by law.
22.7 PRORATION OF RENTS AND EXPENSES. At the time WCH takes physical possession
of the Franchised Location, all charges, real estate taxes, utilities and
rentals will be prorated between WCH and the FRANCHISEE. WCH 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 WCH AND FRANCHISEE. WCH 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
WCH 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 WCH takes physical
possession of the Franchised Location. With the specific and limited exception
of rental payments and other obligations to the Landlord arising from WCH'S use
of the Franchised Location after taking physical possession of
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the premises, the FRANCHISEE will indemnify and hold WCH harmless from and
against any and all claims, demands, liabilities, losses, lawsuits, judgments,
costs and expenses, including attorneys' fees, to which WCH may become exposed,
or which WCH 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 WCH. WCH 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, WCH 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 WCH'S 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 We Care Hair
Business will be resolved and determined exclusively by arbitration in
accordance with the Commercial Rules and Regulations of the American Arbitration
Association.
23.2 NOTICE OF DISPUTE. The party alleging the breach, claim, dispute or
controversy ("dispute") must give the other party written notice setting forth
the alleged dispute in detail. The party who is given such written notice
alleging the dispute will have thirty (30) days after having been given such
written notice from the complaining party to correct or resolve the dispute
specified in the written notice.
23.3 DEMAND FOR ARBITRATION. If the dispute alleged by either party has not been
corrected, settled or compromised within the time period provided for in this
Agreement, then either party may notice arbitration by giving the other party
written notice demanding arbitration. Within ten (10) days after a written
demand for arbitration has been given by the party demanding arbitration, either
party will have the right to request the 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.
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23.4 VENUE AND JURISDICTION. All arbitration hearings will take place
exclusively in Minneapolis, Minnesota. WCH 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 WCH 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 WCH
or the FRANCHISEE or their officers, Directors, shareholders or partners and
Personal Guarantors, and WCH 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
WCH and the FRANCHISEE, except as provided for in Article 23.8. The written
decision of the Arbitrator will be deemed to be an order, judgment and decree
and may be entered as such in any Court of competent jurisdiction by either
party.
23.6 NO COLLATERAL ESTOPPEL OR CLASS ACTIONS. Except as provided herein, all
arbitration findings, conclusions, orders and awards made by the Arbitrator will
be final and binding on WCH 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 WCH, the
FRANCHISEE, and their officers, Directors, shareholders or partners, and
Personal Guarantors will have the right to join in any arbitration proceeding
arising under this Agreement, and, therefore, the Arbitrator will not be
authorized to permit or approve class actions or to permit any person or entity
that is not a party to this Agreement to be involved in or to participate in any
arbitration hearings conducted pursuant to this Agreement.
23.7 DISPUTES NOT SUBJECT TO ARBITRATION. The disputes and controversies between
WCH and the FRANCHISEE which are set forth in Article 24.1 and the following
disputes and controversies between WCH and the FRANCHISEE will not be subject to
arbitration: (A) any dispute involving the Marks or which arises under or as a
result of Article 3 of this Agreement; (B) any dispute involving immediate
termination of this Agreement pursuant to Article 9.5 and 9.6 of this Agreement;
(C) any dispute involving enforcement of the confidentiality provisions set
forth in Article 8 of this Agreement; and (D) any dispute involving enforcement
of the covenants not to compete set forth in Article 12 of this Agreement.
23.8 DE NOVO HEARING ON MERITS. If the Arbitrator awards either WCH or the
FRANCHISEE damages (including actual damages, costs and attorneys' fees) in
excess of One Hundred
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Thousand Dollars ($100,000) in any arbitration proceeding commenced pursuant to
this Agreement, then the party who has been held liable by the Arbitrator will
have the right to a de novo hearing on the merits by commencing an action in a
court of competent jurisdiction in accordance with the provisions of this
Agreement. If the party held liable by the Arbitrator commences a court action
as provided for herein, then neither party will have the right to introduce the
Arbitrator's decision or findings in any such court action and the Arbitrator's
decision and findings will be of no force and effect and will not be final or
binding on either WCH or the FRANCHISEE. If the party who has been held liable
by the Arbitrator for over One Hundred Thousand Dollars ($100,000) in damages
fails to commence a court action within thirty (30) days after the Arbitrator
issues his or her award in writing, then the Arbitrator's findings, judgments,
decisions and awards will be final and binding on WCH and the FRANCHISEE.
23.9 CONFIDENTIALITY. All evidence, testimony, records, documents, findings,
decisions, judgments and awards pertaining to any arbitration hearing between
WCH and the FRANCHISEE will be secret and confidential in all respects. WCH and
the FRANCHISEE will not disclose the decision or award of the Arbitrator and
will not disclose any evidence, testimony, records, documents, findings, orders,
or other matters from the arbitration hearing to any person or entity except as
required by law.
23.10 SEVERABILITY. It is the desire and intent of the parties to this Agreement
that the provisions of this Article be enforced to the fullest extent
permissible under the laws and public policy applied in each jurisdiction in
which enforcement is sought. Accordingly, if any part of this Article is
adjudicated to be invalid or unenforceable, then this Article will be deemed
amended to delete that portion thus adjudicated to be invalid or unenforceable
to the extent required to make this Article valid and enforceable. Any such
deletion will be effective only in the jurisdiction in which the adjudication is
made. Further, to the extent any provision of this Article is deemed
unenforceable by virtue of its scope, the parties to this Agreement agree that
the same will, nevertheless, be enforceable to the fullest extent permissible
under the laws and public policies applied in such jurisdiction where
enforcement is sought, and the scope in such a case will be determined by
arbitration as provided herein.
ARTICLE 24
ENFORCEMENT
24.1 INJUNCTIVE RELIEF. In addition to the provisions of Article 23.7, WCH will
have the right to petition a Court of competent jurisdiction for the entry of
temporary and permanent injunctions and orders of specific performance enforcing
the provisions of this Agreement relating to: (A) the FRANCHISEE'S improper or
unauthorized use of the Marks and the Business System; (B) the obligations of
the FRANCHISEE upon termination or expiration of this Agreement; (C) the
transfer or assignment of this Agreement, the franchised Business or
substantially all of the assets employed in the franchised Business, or the
ownership interests of the FRANCHISEE; (D) the FRANCHISEE'S violation of the
provisions of this Agreement relating to confidentiality and covenants not to
compete; and (E) any act or omission by the FRANCHISEE or the FRANCHISEE'S
employees that, (1) constitutes a violation of any applicable law, ordinance or
regulation, (2) is dishonest or misleading to customers of the FRANCHISEE'S We
Care Hair Business or other We Care Hair businesses, (3) constitutes a danger to
the employees, public or customers of the FRANCHISEE'S We Care Hair Business, or
(4) may impair the goodwill associated with the Marks and the Business System.
In any action brought under this provision where WCH prevails against the
FRANCHISEE, the FRANCHISEE will indemnify WCH 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 WCH. Unless provided to the
contrary by applicable law, WCH will be entitled to obtain injunctive relief
without the posting of any bond or security.
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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
WCH 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. WCH and the FRANCHISEE may, by written instrument signed by WCH and
the FRANCHISEE, waive any obligation of or restriction upon the other under this
Agreement. Acceptance by WCH of any payment by the FRANCHISEE and the failure,
refusal or neglect of WCH 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 WCH of any provision of
this Agreement. WCH 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, WCH will have the right to negotiate terms and conditions,
grant concessions and waive obligations for other franchisees of WCH 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 WCH of any of its obligations under this Agreement, any other
contract between WCH and the FRANCHISEE, or for any other reason, withhold
payment of any Continuing Fees, Advertising Fees or any other fees or payments
due WCH under this Agreement or any other contract, promissory note or other
obligation payable by the FRANCHISEE to WCH. The FRANCHISEE will not have the
right to "offset" or withhold any liquidated or unliquidated amounts allegedly
due to the FRANCHISEE from WCH against the Continuing Fees, the Advertising Fees
or any other payments due to WCH under this Agreement or any other contract,
promissory note or other obligation payable by the FRANCHISEE to WCH.
24.5 WCH'S RIGHTS CUMULATIVE. The rights of WCH hereunder are cumulative and no
exercise or enforcement by WCH of any right or remedy hereunder will preclude
the exercise or enforcement by WCH of any other right or remedy hereunder or
which WCH 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 We Care Hair Business; and (C) do hereby
agree and stipulate that any arbitration hearings, litigation, court hearings
and other hearings
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will be venued and held exclusively in Hennepin County, Minnesota, and waive any
rights to contest such venue and jurisdiction and any claims that such venue and
jurisdiction are invalid.
24.7 AGREEMENT BINDING ON HEIRS AND ASSIGNS. This Agreement is binding upon the
parties hereto and their respective executors, administrators, heirs, assigns
and successors in interest.
24.8 JOINT AND SEVERAL LIABILITY. If the FRANCHISEE consists of more than one
person, their liability under this Agreement will be deemed to be joint and
several.
24.9 ENTIRE AGREEMENT. This FRANCHISE AGREEMENT supersedes and terminates all
prior agreements relating to the operation of a We Care Hair 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 WCH 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 We Care Hair 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 WCH 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 WCH. WCH and the FRANCHISEE
will not have the right to amend or modify this Agreement orally or verbally,
and any attempt to do so will be void in all respects.
24.12 EFFECT OF WRONGFUL TERMINATION. If either WCH or the FRANCHISEE takes any
action to terminate this Agreement or to convert the FRANCHISEE'S We Care Hair
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.
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ARTICLE 25
NOTICES
All notices to WCH will be in writing and will be made by personal service upon
an officer or Director of WCH or sent by prepaid registered or certified United
States mail addressed to WCH at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇, Plant, ▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A., 3400 City Center, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. 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 We Care Hair 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. WCH 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 We Care Hair Business, except as expressly set forth in writing in
WCH'S Uniform Franchise Offering Circular, receipt of which is acknowledged by
the FRANCHISEE.
26.2 NO INCOME OR REFUND WARRANTIES. The FRANCHISEE acknowledges that WCH does
not warrant or guarantee to the FRANCHISEE that the FRANCHISEE will derive
income or profit from the FRANCHISEE'S We Care Hair Business or that WCH will
refund all or part of the Initial Fee or the price paid for the FRANCHISEE'S We
Care Hair Business or repurchase any of the products, merchandise, furniture,
fixtures, equipment, supplies or chattels supplied by WCH or an approved
supplier if the FRANCHISEE is unsatisfied with its We Care Hair Business.
26.3 TERMS OF OTHER FRANCHISES MAY DIFFER. The FRANCHISEE acknowledges that
other Franchisees of WCH have or will be granted franchises at different times
and in different situations, and further acknowledges that the terms and
conditions of such franchises and the resulting Franchise Agreements may vary
substantially in economics, form and in substance from those contained in this
Agreement.
26.4 RECEIPT OF UNIFORM FRANCHISE OFFERING CIRCULAR. The FRANCHISEE acknowledges
that it received a copy of this Agreement with all material blanks fully
completed at least five (5) business days prior to the date that this Agreement
was executed. The FRANCHISEE further acknowledges that it received a We Care
Hair Uniform Franchise Offering Circular at least ten (10) business days prior
to the date on which this Agreement was executed.
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26.5 CITY LOOKS(R) AND HAIR PERFORMERS(R) BUSINESSES. The FRANCHISEE agrees and
acknowledges that the "City Looks(R)," "City Looks Salons International(R)" and
"The Barbers(R)" businesses ("City Looks(R) businesses") which are operated and
franchised by The Barbers, Hairstyling For Men & Women, Inc. ("The Barbers") and
the "Hair Performers(R)" business serviced by The Barbers, are full service hair
salons that address different markets and, thus, are not competitive with We
Care Hair businesses. Further, the FRANCHISEE acknowledges and agrees that The
Barbers will have the absolute right to develop, own, manage, license or
franchise City Looks(R) and Hair Performers(R) businesses at any location in the
world, and the FRANCHISEE hereby waives any and all rights that it may have or
allege against WCH or any affiliate of WCH resulting from the opening of any
City Looks(R) or Hair Performers(R) business, including those City Looks(R) or
Hair Performers(R) business that may be near, adjacent or contiguous to the
FRANCHISEE'S We Care Hair Business.
26.6 COST CUTTERS(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 and the Family Haircut(R) business serviced by The
Barbers ("Cost Cutters(R) and Family Haircut(R) businesses") are hair salons
that address similar markets and, thus, may be competitive with We Care Hair
businesses. Further, the FRANCHISEE acknowledges and agrees that The Barbers
will have the absolute right to develop, own, manage, license or franchise Cost
Cutters(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 WCH or any affiliate of WCH resulting from the opening of any Cost
Cutters(R) and Family Haircut(R) businesses, including those Cost Cutters(R) or
Family Haircut(R) business that may be near, adjacent or contiguous to the
FRANCHISEE'S We Care Hair Business.
26.7 OTHER HAIR CARE BUSINESSES. The FRANCHISEE acknowledges and agrees that
WCH, The Barbers and any affiliate of either organization will have the absolute
right to develop, own, manage, license or franchise hair care or product
businesses under any trademark, service ▇▇▇▇ or trade name at any location or
through any channel of distribution anywhere in the world, and the FRANCHISEE
hereby waives any and all rights that it may have or allege against WCH, The
Barbers or any affiliate of either organization resulting from the opening of
any such hair care or product businesses, including those hair care or product
businesses that may be near, adjacent or contiguous to the FRANCHISEE'S We Care
Hair Business.
ARTICLE 27
DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL
27.1 DISCLAIMER BY WCH. WCH expressly disclaims the making of any express or
implied representations or warranties regarding the sales, earnings, income,
profits, Gross Revenues, business or financial success, or value of the
FRANCHISEE'S Business, except those expressly set forth in Item 19 of the We
Care Hair 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 We Care Hair
Business from WCH or any of WCH'S 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 WCH'S Uniform Franchise Offering Circular, it would
not have executed this Agreement, and the FRANCHISEE would have: (A) promptly
notified the President of WCH in writing of the person or persons making such
representations or warranties; and (B) provided to WCH a specific written
statement detailing the
F-41
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 WCH to consult an
attorney or other advisor prior to the execution of this Agreement to review
WCH'S Uniform Franchise Offering Circular and this Agreement in detail, to
review the economics, operations and other business aspects of the We Care Hair
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 We
Care Hair 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 (▇▇▇▇▇▇ Act, 15 U.S.C. ss.1051 et seq.), this Agreement and the
relationship between WCH 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 WCH.
28.2 STATE MODIFICATIONS. The following states have statutes which may supersede
the provisions of this Agreement in the FRANCHISEE'S relationship with WCH
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 WCH 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 WCH
or its designated advertising agency.
29.3 BUSINESS SYSTEM. "Business System" will mean the distinctive services and
products which are associated with WCH'S 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 WCH.
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 WCH.
29.5 GROSS REVENUES. "Gross Revenues" will mean the gross total dollar income of
the FRANCHISEE'S We Care Hair 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 We Care
Hair 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, WCH, the FRANCHISEE and the shareholders of the FRANCHISEE
have respectively signed this Agreement effective as of the day and year first
above written.
In the Presence of: "WCH"
WCH, INC.
-----------------------------------
By
-------------------------------------
Its
-----------------------------------
In the Presence of: "FRANCHISEE"
----------------------------------- ----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
The undersigned individual shareholders of the FRANCHISEE hereby agree to be
bound by the terms and conditions of this Agreement.
Percentage of
In the Presence of: SHAREHOLDERS Ownership
%
------------------------------ --------------------------- -----------------
%
------------------------------ --------------------------- -----------------
%
------------------------------ --------------------------- -----------------
%
------------------------------ --------------------------- -----------------
The undersigned spouse(s) of the individual FRANCHISEE(S) hereby agree to be
bound by the terms and conditions of this Agreement regarding confidentiality of
information and covenants not to compete.
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
Print Name Print Name
F-44
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 WCH, 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 WCH all monies due and payable
to WCH 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 WCH or any subsidiary or affiliate of WCH, whether for
merchandise, products, supplies, furniture, fixtures, equipment, rent or other
goods purchased by the FRANCHISEE from WCH or any subsidiary or affiliate of WCH
or for any other indebtedness of the FRANCHISEE to WCH or any subsidiary or
affiliate of WCH, 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 WCH or any subsidiary or affiliate
of WCH.
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 WCH. 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.
F-45
PERSONAL GUARANTORS
------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
------------------------------------- ---------------------------------------
Address Address
------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
------------------------------------- ---------------------------------------
Telephone Telephone
------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
------------------------------------- ---------------------------------------
Address Address
------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
------------------------------------- ---------------------------------------
Telephone Telephone
------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
------------------------------------- ---------------------------------------
Address Address
------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
------------------------------------- ---------------------------------------
Telephone Telephone
F-46
EXHIBIT A
CONFIDENTIALITY AGREEMENT
Effective this _____ day of _______________, _____, in consideration of
employment with ___________________________________________ (the "Employer"), a
franchisee of WCH, Inc. ("WCH"), it is hereby agreed that the undersigned
employee (the "Employee") will, at all times during the term of his or her
employment and thereafter, treat the Operations Manual and any other materials
(including, but not limited to, supplier and vendor lists, customer lists,
videotapes, films, drawings, diagrams and computer programs) created for or
approved for use in the operation of the We Care Hair Business, and the
information contained therein, as secret and confidential and as the sole and
absolute property of WCH, and will use all reasonable means to keep them secret
and confidential. The Employee will not:
(a) Communicate, divulge or use for the benefit of himself/herself personally or
any other person or entity, any information contained in the Operations Manual
or other materials deemed confidential by WCH.
(b) Copy, duplicate, videotape, photograph, record or otherwise reproduce the
Manual or any other materials, in whole or in part. Neither the Manual nor other
materials created for or used in the We Care Hair Business will be borrowed or
removed from the We Care Hair location or business premises without the express
written approval of the Employer. The Employee will not make any We Care Hair
materials available to any unauthorized person or entity, or allow them access
to the Manual or other materials.
(c) Use any We Care Hair 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 We Care Hair 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 WCH is a
third-party beneficiary of the rights and obligations set forth in this
Agreement; (2) that WCH will suffer irreparable harm in the event of any breach
or violation of this Agreement; (3) that WCH 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
WCH 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 WCH.
The undersigned Employer and Employee understand and accept the obligations set
forth herein and agree to be bound by them.
Dated: , EMPLOYEE:
------------------- -----
-----------------------------------------
EMPLOYER:
-----------------------------------------
By
-------------------------------------
Its
-----------------------------------
EXHIBIT B
AUTHORIZATION FOR DIRECT PAYMENT
I hereby authorize WCH, 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.
-----------------------------------------
Name of Franchisee (please print)
-----------------------------------------
Cost Cutters store location & number*
-----------------------------------------
Signature of Franchisee
---------------------------
Date
--------------------------------------------------------------------------------
Name of Financial Institution
--------------------------------------------------------------------------------
Street Address
--------------------------------------------------------------------------------
City/State/Zip Code
Account Number: Checking Savings
---------------------------- ----- -----
STAPLE VOIDED CHECK HERE:
* please submit one form per store. Make additional
copies of this form if necessary.
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 _______________, _____, between
the Landlord and the Franchisee, (the Premises Lease), to WCH, Inc. (WCH),
pursuant to a franchise agreement between WCH and the Franchisee dated
_______________, _____, (the Franchise Agreement), and as an inducement to WCH
to enter into the Franchise Agreement with the Franchisee, agrees with WCH as
follows:
In the event of default by the Franchisee under the Franchise
Agreement, WCH 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 WCH'S (or its designee's)
performance in lieu of performance by the Franchisee in satisfaction of the
FRANCHISEE'S future obligations under the Premises Lease.
The Landlord will not terminate the Premises Lease on account of any
default of the Franchisee thereunder without written notice to WCH and first
providing to WCH 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 WCH so
elects to exercise its rights under the Assignment, the Landlord agrees not to
terminate the Premises Lease so long as WCH or its designee agrees, within
thirty (30) days from the date WCH 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 WCH 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 WCH 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"
------------------- ----
-----------------------------------------
By
-------------------------------------
Its
--------------------------------