EXHIBIT 10.45
CINNABON
FRANCHISE AGREEMENT
BETWEEN
CINNABON, INC.
AND
___________________________________
Unit No.: ______
Dev. Agr. No.: ______
Dated: ___________
CINNABON, INC.
CINNABON
FRANCHISE AGREEMENT
TABLE OF CONTENTS
I. APPOINTMENT........................................................ 1
II. TERM............................................................... 2
III. FEES............................................................... 4
IV. ACCOUNTING AND RECORDS............................................. 6
V. PROPRIETARY MARKS.................................................. 7
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE................. 9
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL............................ 9
VIII. TRAINING........................................................... 10
IX DUTIES OF THE FRANCHISOR........................................... 11
X. DUTIES OF THE FRANCHISEE........................................... 11
XI. INSURANCE.......................................................... 15
XII. CONFIDENTIAL INFORMATION........................................... 17
XII. COVENANTS.......................................................... 18
XIV. TRANSFERABILITY OF INTEREST........................................ 20
XV. TERMINATION........................................................ 22
XVI. EFFECT OF TERMINATION OR EXPIRATION................................ 25
XVII. TAXES, PERMITS, AND INDEBTEDNESS................................... 26
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION......................... 26
XIX. APPROVALS AND WAIVERS.............................................. 28
XX. NOTICES............................................................ 28
XXI. SEVERABILITY AND CONSTRUCTION...................................... 29
XXII. ENTIRE AGREEMENT: SURVIVAL......................................... 30
XXIII. ACKNOWLEDGMENTS.................................................... 30
XXIV. APPLICABLE LAW: VENUE.............................................. 31
XXV. CORPORATE FRANCHISEE............................................... 32
EXHIBIT A -NOTICE OF COMMENCEMENT DATE
EXHIBIT B -SHAREHOLDERS OF FRANCHISEE
CINNABON
FRANCHISE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this _______ day of
_________________, 20___, by and between CINNABON, INC., a Washington
corporation, having its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, ▇.▇.▇. ("Franchisor" or "CINNABON")
and _______________________________________________________________________,
[jointly and severally where more than one], ("Franchisee").
WITNESSETH:
WHEREAS, Franchisor has developed and owns a unique and distinctive system
(the "CINNABON System", or "System") for the development and operation of
retail bakeries featuring proprietary cinnamon rolls, bakery products, specialty
coffee and other menu items developed and owned by Franchisor ("Cinnabon
Bakeries");
WHEREAS, the distinguishing characteristics of the CINNABON System include,
without limitation, the name "CINNABON"; distinctive interior design and
layouts, decor, color schemes, and furnishings; confidential food formulae and
recipes used in the preparation of food products, formulas and specifications
for baking cinnamon rolls and other bakery products; specialized menus;
standards and specifications for equipment, equipment layouts, products,
operating procedures, and management programs, all of which may be changed,
improved, and further developed by Franchisor from time to time;
WHEREAS, Franchisor identifies the CINNABON System by means of certain
trade names, service marks, trademarks, logos, emblems, and other indicia of
origin, including, but not limited to, the marks "CINNABON", "MAKARA" and such
other trade names, service marks, trademarks and trade dress as are now, or may
hereafter, be designated by Franchisor for use in connection with the CINNABON
System (collectively referred to as the "Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of such
Proprietary Marks in order to identify for the public the source of services and
products marketed thereunder in the CINNABON System and to represent the
System's high standards of quality, appearance, and service;
WHEREAS, Franchisee wishes to be assisted, trained, and licensed by
Franchisor as a CINNABON franchisee and licensed to use, in connection
therewith, the CINNABON System and to continuously operate one Cinnabon Bakery
at the location specified in Section 1.01 herein (the "Franchised Location");
WHEREAS, Franchisee understands the importance of the CINNABON System and
CINNABON high and uniform standards of quality, cleanliness, appearance, and
service, and the
necessity of opening and operating CINNABON Bakeries in conformity with the
CINNABON System;
NOW, THEREFORE, the parties hereto agree as follows:
I. APPOINTMENT
1.01. Franchisor grants to Franchisee a franchise to open and operate a
CINNABON Bakery (the "Franchised Bakery", "CINNABON Bakery", "Franchised Unit",
or "Franchised Business") at one location only, such location to be described
as:
Store Number: ______________________________________
Franchised
Location: ______________________________________
______________________________________
______________________________________
______________________________________
upon the terms and conditions herein contained [and subject to the terms and
conditions contained in the development agreement between Franchisor and
Franchisee, dated __________________________, (the "Development Agreement"),
which is incorporated herein by reference]; and a license to use in connection
therewith Franchisor's Proprietary Marks and the CINNABON System. Franchisee
may not operate the Franchised Bakery at any site other than the Franchised
Location.
1.02. Except as otherwise set forth herein, (a) the franchise granted to
Franchisee under this Agreement is non-exclusive, and grants to Franchisee the
rights to establish and operate the Franchised Unit at only the specific
location set forth hereinabove, (b) no exclusive, protected or other territorial
rights in the contiguous area or market of such Franchised Unit or otherwise is
hereby granted or to be inferred and (c) Franchisor and/or its affiliates have
the right to operate and grant as many other franchises for the operation of
CINNABON Bakeries, anywhere in the world, as they shall, in their sole
discretion, elect.
1.03. Franchisee acknowledges that, over time, Franchisor has entered, and
will continue to enter, into franchise agreements with other franchisees that
may contain provisions, conditions and obligations that differ from those
contained in this Agreement, including, without limitation, franchise agreements
for the operation of Cinnabon Bakeries. The existence of different forms of
agreement and the fact that Franchisor and other franchisees may have different
rights and obligations does not affect the parties' duty to comply with the
terms of this Agreement.
II. TERM
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2.01. Except as otherwise provided in this Agreement, the initial term of
this Franchise Agreement (the "Term") shall expire on the tenth (10th)
anniversary of the date of commencement of operation of the Franchised Unit.
For all purposes under this Agreement, the date of commencement of operation of
the Franchised Unit shall be the date verified in writing by Franchisor and
delivered to Franchisee in a form substantially similar to the "Notice" attached
hereto as Exhibit "A". Franchisee agrees and shall be obligated to operate the
Franchised Unit and perform hereunder for the full Term of this Agreement.
2.02. Franchisee may, at its option, renew this franchise for two (2)
additional periods of five (5) years each, provided that, at the time of each
renewal:
A. Franchisee gives Franchisor written notice of such election to
renew not less than six (6) months nor more than twelve (12) months prior
to the end of the then-current term. Failure by Franchisee to timely
provide Franchisor the required notice constitutes a waiver by Franchisee
of its option to remain a franchisee beyond the expiration of the Initial
Term or the first Renewal Term;
B. Franchisee executes Franchisor's then-current standard form of
franchise agreement, which may include, without limitation, a higher
royalty fee and a higher advertising contribution, if any, than that
contained in this Agreement; and the term of which shall be the renewal
term as specified in Section 2.02. hereof, but shall contain no further
renewal rights;
C. Franchisee shall execute a general release and a covenant not
to ▇▇▇, in a form satisfactory to Franchisor, of any and all claims against
Franchisor and its subsidiaries and affiliates, and their respective past
and present officers, directors, shareholders, agents and employees, in
their corporate and individual capacities, including, without limitation,
claims arising under federal, state and local laws, rules and ordinances,
and claims arising out of, or relating to, this Agreement, any other
agreements between Franchisee and Franchisor and Franchisee's operation of
the Franchised Bakery and/or other Cinnabon Bakeries operated by
Franchisee;
D. Franchisee is not in default under this Agreement or any other
agreements between Franchisee and Franchisor (or any parent, subsidiary or
affiliate of Franchisor), and Franchisee has fully and faithfully performed
all of Franchisee's obligations throughout the term of this Agreement;
Franchisee is not in default beyond the applicable cure period under any
real estate lease, equipment lease or financing instrument relating to the
Franchised Bakery; Franchisee is not in default beyond the applicable cure
period with any vendor or supplier to the Franchised Bakery; and,
Franchisee shall not have been in default beyond the applicable cure period
under this Agreement or any other agreements between Franchisor and
Franchisee more than 3 times during the period 12 months before the date of
Franchisee's notice and 12 months before the expiration of the Initial
Term;
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E. Franchisee has paid or otherwise satisfied all monetary
obligations owed by Franchisee to Franchisor and its subsidiaries and
affiliates and any indebtedness of Franchisee which is guaranteed by
Franchisor, and Franchisee has timely paid or otherwise satisfied these
obligations throughout the term of this Agreement;
F. Franchisee agrees, at its sole cost and expense, to reimage,
renovate, refurbish and modernize the Franchised Unit, within the time
frame required by Franchisor, including the design, equipment, signs,
interior and exterior decor items, fixtures, furnishings, trade dress,
color scheme, presentation of trademarks and service marks, supplies and
other products and materials to meet Franchisor's then-current standards,
specifications and design criteria for CINNABON Bakeries, as contained in
the then-current franchise agreement, Confidential Operating Standards
Manual (as defined herein), or otherwise in writing, including, without
limitation, such structural changes, remodeling and redecoration and such
modifications to existing improvement as may be necessary to do so.
G. Franchisee shall pay to Franchisor a renewal fee equal to fifty
percent (50%) of Franchisor's standard initial franchise fee in effect at
the date of renewal.
H. Franchisee and its employees at the Franchised Bakery shall be
in compliance with the then-current Cinnabon System training requirements.
I. Franchisee has the right to remain in possession of the
Franchise Location, or other premises acceptable to Franchisor, for the
Renewal Term and all monetary obligations owed to Franchisee's landlord
must be current.
J. As determined by Franchisor in its sole discretion, Franchisee
has operated the Franchised Bakery in accordance with this Agreement and
the Cinnabon System (as set forth in the Manual or otherwise in writing and
as revised from time to time) and has operated all of its other bakeries
that are franchised by Franchisor in accordance with the applicable
franchise agreements.
III. FEES
3.01. In consideration of the franchise granted to Franchisee herein,
Franchisee shall pay to the Franchisor the following:
A. A franchise fee of ________________________ Dollars ($______)
payable upon execution of this Agreement by Franchisee, less __________
Dollars ($________), representing the portion of the Development Fee (as
defined in the Development Agreement), applicable to the Franchise Fee
payable hereunder. Such franchise fee shall be fully earned by Franchisor
upon execution of this Agreement by Franchisee and is in addition to any
development fees paid to Franchisor by Franchisee.
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B. A recurring, non-refundable royalty fee of five percent (5%) of
Gross Sales (as defined herein) during the term of this Agreement, payable
on or before the tenth (10th) day of each of Franchisor's thirteen (13),
four (4) week annual periods (hereinafter, a "Period") on the Gross Sales
of the preceding Period (or on such other basis as may be set forth in the
Confidential Operating Standards Manual (as defined herein) or otherwise
agreed to in writing by Franchisor). Upon thirty (30) days prior written
notice, Franchisor may require Franchisee to authorize Franchisor to make
electronic debits from Franchisee's operating account as a means of paying
the royalty fee.
3.02. In addition to the payments provided for in Section 3.01. hereof,
Franchisee, recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the goodwill and public image of
the System, agrees to pay to the CINNABON national creative and production fund
(the ANCP Fund) a recurring, non-refundable contribution ("NCP Fund
Contribution") in an amount to be determined by Franchisor, in its sole
discretion, not to exceed three percent (3%) of the Gross Sales of the
Franchised Bakery, payable on or before the tenth (10th) day of each Period, for
the preceding Period (or on such other basis as may be set forth in the
Confidential Operating Standards Manual or otherwise agreed to in writing by
Franchisor). Upon thirty (30) days prior written notice, Franchisor may require
Franchisee to authorize Franchisor to make electronic debits from Franchisee's
operating account as a means of paying the Advertising Fund Contribution. The
NCP Fund Contribution shall be expended by the NCP Fund for national, regional,
and/or local advertising and promotional materials and market research for the
CINNABON System, under the following conditions and limitations:
A. The NCP Fund, all contributions thereto, and any earnings
thereon, shall be used exclusively to pay any and all costs of maintaining,
administering, directing, producing and preparing market research,
advertising, marketing materials and/or promotional activities for the
CINNABON System. Franchisee shall pay the NCP Fund Contribution by separate
check made payable to the NCP Fund. All sums paid by the Franchisee to the
NCP Fund shall be maintained in an account separate from other funds of
Franchisor and shall not be used to defray any of Franchisor's expenses
except as provided herein, and as Franchisor may incur in activities
reasonably related to the administration or direction of the NCP Fund and
advertising and marketing programs for franchisees and the CINNABON System.
The NCP Fund and its earnings shall not otherwise inure to the benefit of
Franchisor. Franchisor shall maintain a separate bookkeeping account for
the NCP Fund.
B. The selection of media and locale for media placement shall be
at the sole discretion of the Franchisor.
C. All reasonable costs incurred by Franchisor or charged to
Franchisor by third parties for market research and the production and
dissemination of advertising, marketing and promotional materials may be
charged to the NCP Fund.
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D. Franchisor, upon request, shall provide Franchisee with an
annual accounting of receipts and disbursements of the NCP Fund.
E. It is anticipated that all contributions to and earnings of the
NCP Fund will be expended for market research, costs of creating and
producing advertising materials, marketing and/or promotional purposes and
reimbursement to Franchisor of costs directly related to the management of
the NCP Fund (including personnel costs) during the taxable year in which
contributions and earnings are received. If, however, excess amounts remain
in the NCP Fund at the end of a taxable year, all expenditures in the
following taxable year(s) shall be made first out of accumulated earnings
from previous years, next out of earnings in the current year, and finally
from contributions.
F. The NCP Fund is not, and shall not be, an asset of Franchisor.
Although the NCP Fund is intended to be of perpetual duration, Franchisor
maintains the right to terminate the NCP Fund; provided, however, that the
NCP Fund shall not be terminated until all monies in the NCP Fund have been
expended for the purposes stated herein.
G. Franchisee understands that such advertising and marketing is
intended to maximize the public's awareness of the Franchised Units and the
System, and that Franchisor accordingly undertakes no obligation to insure
that any individual Franchisee benefits directly or on a pro rata basis
from the placement, if any, of such advertising or marketing in its local
market. Franchisee further acknowledges that its failure to derive any such
benefit, whether directly or indirectly, shall not be cause for
Franchisee's nonpayment or reduction of the required contributions to the
NCP Fund.
3.03. If any monetary obligations owed by Franchisee to Franchisor and its
subsidiaries and affiliates are more than seven (7) days overdue, Franchisee
shall, in addition to such obligations, pay to Franchisor a sum equal to one and
one-half percent (12%) of the overdue balance per month, or the highest rate
permitted by law, whichever is less, from the date said payment is due.
3.04. For the purposes of this Agreement, the term "Gross Sales" shall
mean all revenues generated by Franchisee's business conducted upon, from or
with respect to the Franchised Unit, whether such sales are evidenced by cash,
check, credit, charge, account, barter or exchange. Gross Sales shall include,
without limitation, monies or credit received from the sale of food and
merchandise, from tangible property of every kind and nature, promotional or
otherwise, and for services performed from or at the Franchised Unit, including
without limitation such off-premises services as catering and delivery. Gross
Sales shall not include the sale of food or merchandise for which refunds have
been made in good faith to customers, the sale of equipment used in the
operation of the Franchised Unit, nor shall it include sales, meals, use or
excise tax imposed by a governmental authority directly on sales and collected
from customers; provided that the amount for such tax is added to the selling
price or absorbed therein, and is actually paid by Franchisee to such
governmental authority.
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3.05. In addition to the payments provided for in Sections 3.01 and 3.02
hereof, Franchisee shall expend at least Three Thousand and No/100 Dollars
($3,000.00) for grand opening advertising of the Franchised Unit during the
first two (2) months following the opening of the CINNABON Bakery, which
advertising must be approved, in advance, by Franchisor.
IV. ACCOUNTING AND RECORDS
4.01. Accurate Books and Records. During the Term of this Agreement,
--------------------------
Franchisee shall maintain and preserve, for at least three (3) years from the
dates of their preparation, full, complete and accurate books, records and
accounts in accordance with generally accepted accounting principles and in the
form and the manner prescribed by Franchisor from time-to-time in the
Confidential Operating Standards Manual or otherwise in writing. These records
shall include, without limitation, cash register sales tape (including non-
resettable readings), meals, sales and other tax returns, duplicate deposit
slips and other evidence of Gross Sales and all other business transactions.
4.02. Royalty Reports. Franchisee shall submit to Franchisor, weekly
---------------
reports on forms prescribed by Franchisor, accurately reflecting all Gross Sales
during the preceding week and such other forms, reports, records, financial
statements or information as Franchisor may reasonably require in the
Confidential Operating Standards Manual, or otherwise in writing.
4.03. Quarterly Statement. Franchisee shall, at its expense, submit to
-------------------
Franchisor quarterly, within thirty (30) days following the end of each quarter
during the Term hereof, an unaudited financial statement with such detail as
Franchisor may reasonably require (hereinafter, "Quarterly Statement") together
with a certificate executed by Franchisee stating that such financial statement
is true and accurate. Upon Franchisor's request, Franchisee shall submit to
Franchisor, with each Quarterly Statement, copies of any state or local sales
tax returns ("Sales Tax Returns") filed by Franchisee for the period included in
the Quarterly Statement. In the event Franchisee prepares financial statements
on the basis of thirteen (13), four (4) week periods ("Periods"), the Quarterly
Statements shall be submitted within thirty (30) days following the end of the
third (3rd), sixth (6th), ninth (9th) and thirteenth (13th) Periods.
4.04. Annual Financial Statements. Franchisee shall, at its expense,
---------------------------
submit to Franchisor within ninety (90) days following the end of each calendar
or fiscal year during the Term of this Agreement, an unaudited financial
statement for the preceding calendar or fiscal year, together with a certificate
executed by Franchisee certifying that such financial statement is true and
accurate (hereinafter, "Annual Financial Statements") and such other information
in such form as Franchisor may reasonably require. Upon written request from
Franchisor, the foregoing Annual Financial Statement shall include both a profit
and loss statement and a balance sheet, and shall be prepared in accordance with
generally accepted accounting principles. In the event Franchisee defaults
under this Agreement, Franchisor may require, upon written notice to Franchisee,
that all Annual Financial Statements submitted thereafter include a "Review
Report" prepared by an independent Certified Public Accountant.
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4.05. Other Reports. Franchisee shall also submit to Franchisor, for
-------------
review or auditing, such other forms, financial statements, reports, records,
information and data as Franchisor may reasonably designate, in the form and at
the times and places reasonably required by Franchisor, upon request and as
specified from time-to-time in the Confidential Operating Standards Manual or
otherwise in writing. If Franchisee has combined or consolidated financial
information relating to the Franchised Unit with that of any other business or
businesses, including a business licensed by Franchisor, Franchisee shall
simultaneously submit to Franchisor, for review or auditing, the forms, reports,
records and financial statements (including, but not limited to the Quarterly
Statements and Annual Financial Statements) which contain the detailed financial
information relating to the Franchised Unit, separate and apart from the
financial information of such other businesses. Franchisee hereby authorizes
all of its suppliers and distributors to release to Franchisor, upon
Franchisor's request, any and all of its books, records, accounts or other
information relating to goods, products and supplies sold to Franchisee and/or
the Franchised Unit.
4.06. Equipment. Franchisee shall record all sales on cash registers or
---------
other point-of-sale equipment approved, in writing, by Franchisor (hereinafter
"POS Equipment"). Franchisee agrees that Franchisor shall have the free and
unfettered right to retrieve any data and information from Franchisee's P.O.S.
Equipment and computers as Franchisor, in its sole discretion, deems
appropriate, with the telephonic cost of the retrieval to be borne by
Franchisor, including electronically polling the daily sales, menu mix and other
data of the Franchised Bakery.
4.07. Franchisor's Right of Audit. Franchisor or its designated agents
---------------------------
or auditors shall have the right at all reasonable times to audit, review and
examine by any means, including electronically through the use of
telecommunications devices or otherwise, at its expense, the books, records,
accounts, and tax returns of Franchisee related to the Franchised Unit. If any
such audit, review or examination reveals that Gross Sales have been understated
in any report to Franchisor, Franchisee shall immediately pay to Franchisor the
royalty fee and NCP Fund Contribution due with respect to the amount understated
upon demand, in addition to interest from the date such amount was due until
paid, at the rate of one and one-half percent (1.5%) per month. If any such
understatement exceeds two percent (2%) of Gross Sales as set forth in the
report, Franchisee shall, in addition, upon demand, reimburse Franchisor for any
and all costs and expenses connected with such audit, review or examination
(including, without limitation, reasonable accounting and attorneys' fees).
The foregoing remedies shall be in addition to any other rights and remedies
Franchisor may have.
V. PROPRIETARY MARKS
5.01. It is understood and agreed that the franchise granted herein to use
Franchisor's Proprietary Marks applies only to use in connection with the
operation of the Franchised Unit franchised in this Agreement at the location
designated in Section I hereof, and includes only such Proprietary Marks as are
now designated or which may hereafter be designated, in the Confidential
Operating Standards Manual or otherwise in writing as a part of the System
(which might or might not be all of the Proprietary Marks pertaining to the
System owned by the
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Franchisor), and does not include any other ▇▇▇▇, name, or indicia of origin of
Franchisor now existing or which may hereafter be adopted or acquired by
Franchisor.
5.02. With respect to Franchisee's use of the Proprietary Marks pursuant
to this Agreement, Franchisee acknowledges and agrees that:
A. Franchisee shall not use the Proprietary Marks as part of
Franchisee's corporate or other business name;
B. Franchisee shall not hold out or otherwise use the Proprietary
Marks to perform any activity or incur any obligation or indebtedness in
such manner as might, in any way, make Franchisor liable therefor, without
Franchisor's prior written consent;
C. Franchisee shall execute any documents and provide such other
assistance deemed necessary by Franchisor or its counsel to obtain
protection for the Proprietary Marks or to maintain the continued validity
of such Proprietary Marks; and
D. Franchisor reserves the right to substitute different
Proprietary Marks for use in identifying the System and the franchised
businesses operating thereunder, and Franchisee agrees to immediately
substitute Proprietary Marks upon receipt of written notice from
Franchisor.
5.03. Franchisee expressly acknowledges Franchisor's exclusive right to
use the ▇▇▇▇ CINNABON for restaurant services, bakery products including
cinnamon rolls and other related food products; the building configuration; and
the other Proprietary Marks of the System. Franchisee agrees not to represent
in any manner that it has any ownership in the Proprietary Marks or the right to
use the Proprietary Marks except as provided in this Agreement. Franchisee
further agrees that its use of the Proprietary Marks shall not create in its
favor any right, title, or interest in or to the Proprietary Marks, and that all
of such use shall inure to the benefit of Franchisor.
5.04. Franchisee acknowledges that the use of the Proprietary Marks
outside the scope of this license, without Franchisor's prior written consent,
is an infringement of Franchisor's exclusive right to use the Proprietary Marks,
and during the term of this Agreement and after the expiration or termination
hereof, Franchisee covenants not to, directly or indirectly, commit an act of
infringement or contest or aid in contesting the validity or ownership of
Franchisor's Proprietary Marks, or take any other action in derogation thereof.
5.05. Franchisee shall promptly notify Franchisor of any suspected
infringement of, or challenge to, the validity of the ownership of, or
Franchisor's right to use, the Proprietary Marks licensed hereunder. Franchisee
acknowledges that Franchisor has the right to control any administrative
proceeding or litigation involving the Proprietary Marks. In the event
Franchisor undertakes the defense or prosecution of any litigation relating to
the Proprietary Marks, Franchisee agrees to execute any and all documents and to
do such acts and things as may, in the
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opinion of counsel for Franchisor, be necessary to carry out such defense or
prosecution. Except to the extent that such litigation is the result of
Franchisee's use of the Proprietary Marks in a manner inconsistent with the
terms of this Agreement, Franchisor agrees to reimburse Franchisee for its out
of pocket costs in doing such acts and things, except that Franchisee shall bear
the salary costs of its employees.
5.06. Franchisee understands and agrees that its license with respect to
the Proprietary Marks is non-exclusive to the extent that Franchisor has and
retains the right under this Agreement:
A. To grant other licenses for the Proprietary Marks, in addition
to those licenses already granted to existing franchisees;
B. To develop and establish other franchise systems for the same,
similar, or different products or services utilizing proprietary marks not
now or hereafter designated as part of the System licensed by this
Agreement, and to grant licenses thereto, without providing Franchisee any
right therein; and
C. To develop and establish other systems for the sale, at
wholesale or retail, of similar or different products utilizing the same or
similar Proprietary Marks, without providing Franchisee any right therein.
5.07. Franchisee acknowledges and expressly agrees that any and all
goodwill associated with the System and identified by the Proprietary Marks used
in connection therewith shall inure directly and exclusively to the benefit of
Franchisor and is the property of Franchisor, and that upon the expiration or
termination of this Agreement or any other agreement, no monetary amount shall
be assigned as attributable to any goodwill associated with any of Franchisee's
activities in the operation of the Franchised Unit granted herein, or
Franchisee's use of the Proprietary Marks.
5.08. Franchisee understands and acknowledges that each and every detail
of the CINNABON System is important to Franchisee, Franchisor, and other
franchisees in order to develop and maintain high and uniform standards of
quality and services, and hence to protect the reputation and goodwill of
CINNABON Bakeries. Accordingly, Franchisee covenants:
A. To operate and advertise the Franchised Unit, at Franchisee's
own expense, under the name "CINNABON," without prefix or suffix;
B. To adopt and use the Proprietary Marks licensed hereunder solely
in the manner prescribed by Franchisor;
C. To observe such reasonable requirements with respect to
trademark registration notices as Franchisor may from time to time direct
in the Confidential Operating Standards Manual or otherwise in writing.
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5.09. In order to preserve the validity and integrity of the Proprietary
Marks licensed herein and to assure that Franchisee is properly employing the
same in the operation of the Franchised Unit, Franchisor or its agents shall at
all reasonable times have the right to inspect Franchisee's operations,
premises, and Franchised Unit and make periodic evaluations of the services
provided and the products sold and used therein. Franchisee shall cooperate
with Franchisor's representatives in such inspections and render such assistance
to the representatives as may reasonably be requested.
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE
6.01. If Franchisee, or any successor to or assignee of Franchisee, is a
corporation, or limited liability company:
A. Franchisee shall furnish to Franchisor, upon execution or any
subsequent transfer of this Agreement, a copy of the Franchisee's Articles
of Incorporation, Certificate of Incorporation, Bylaws and a list of
shareholders showing the percentage interest of each, and shall thereafter
promptly furnish Franchisor with a copy of any and all amendments or
modifications thereto;
B. Franchisee shall promptly furnish Franchisor, on a regular
basis, with certified copies of such corporate records material to the
Franchised Business as Franchisor may require from time to time in the
Confidential Operating Standards Manual or otherwise in writing; and
C. Franchisee shall maintain stop-transfer instructions against the
transfer, on its records, of any securities with voting rights, subject to
the restrictions of this Agreement, and each stock certificate of the
corporate Franchisee representing each share of stock, shall have
conspicuously endorsed upon it the following legend:
"The transfer of this stock is subject to the
terms and conditions of a CINNABON Franchise
Agreement with CINNABON, INC. dated ___________.
Reference is made to the provisions of said
Franchise Agreement and to the Articles and By-
Laws of this corporation."
6.02. If the Franchisee, or any successor to or assignee of Franchisee, is
a partnership, limited partnership or limited liability partnership, Franchisee
shall furnish to Franchisor, upon execution or any subsequent transfer of this
Agreement, a copy of Franchisee's Articles of Partnership, if any, and
Partnership Agreement, and shall thereafter promptly furnish Franchisor with a
copy of any and all amendments or modifications thereto.
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL.
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7.01. In order to protect the reputation and goodwill of Franchisor and
the CINNABON System and to maintain uniform standards of operation under
Franchisor's Proprietary Marks, Franchisee shall conduct the Franchised Business
in accordance with Franchisor's Confidential Operating Standards Manual
(hereinafter, together with any other manuals created or approved for use in the
operation of the Franchised Business granted herein, and all amendments and
updates thereto, the "Manual").
7.02. Franchisee shall at all times treat the Manual, and the information
contained therein, as confidential, and shall use all reasonable efforts to keep
such information secret and confidential. Franchisee shall not, at any time,
without Franchisor's prior written consent, copy, duplicate, record, or
otherwise make the Manual available to any unauthorized person or entity.
7.03. The Manual shall at all times remain the sole property of
Franchisor.
7.04. In order for Franchisee to benefit from new knowledge information,
methods and technology adopted and used by Franchisor in the operation of the
System, Franchisor may from time-to-time revise the Manual and Franchisee agrees
to adhere to and abide by all such revisions.
7.05. Franchisee agrees at all times to keep its copy of the Manual
current and up-to-date, and in the event of any dispute as to the contents of
Franchisee's Manual, the terms of the master copy of the Manual maintained by
Franchisor at Franchisor's home office, shall be controlling.
7.06. The Manual is intended to further the purposes of this Agreement,
and is specifically incorporated, by reference, into this Agreement. Except as
otherwise set forth in this Agreement, in the event of a conflict between the
terms of this Agreement and the terms of the Manual, the terms of this Agreement
shall control.
VIII. TRAINING
8.01. Franchisee, a partner of Franchisee if Franchisee is a partnership,
or a principal shareholder of Franchisee if Franchisee is a corporation, must
complete, to Franchisor's satisfaction, the CINNABON New Franchisee Orientation
Program ("NFOP") prior to opening the first franchised CINNABON Bakery operated
by Franchisee. NFOP shall consist of up to five (5) days of workshops, seminars
and bakery management training conducted at a training facility and CINNABON
Bakery designated by Franchisor.
8.02. In addition to completing the NFOP, Franchisee (or a partner or
principal shareholder of Franchisee), and two (2) designated management
employees of Franchisee, must attend and complete, to Franchisor's satisfaction,
the CINNABON Bakery management training program ("BMT"), prior to opening the
Franchised Unit. BMT shall consist of up to four (4) weeks of in-store Bakery
operations training at a facility designated by Franchisor (a "Certified
Training Facility") and certain self-directed study programs. A management
employee of
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Franchisee that successfully completes BMT, shall be certified by Franchisor as
an "BMT Certified Manager".
8.03. Franchisee shall maintain the number of BMT Certified Managers
designated by the Franchisor in the employ of the Franchised Unit throughout the
term of this Agreement, which in no event shall be less than two (2). In the
event that Franchisee or any BMT Certified Manager ceases active employment at
the Franchised Unit, Franchisee must enroll a qualified replacement in the BMT
program within thirty (30) days of cessation of such individual's employment.
The replacement employee shall attend and complete the next regularly scheduled
BMT program to Franchisor's satisfaction.
8.04. Once Franchisee has opened four (4) Cinnabon Bakeries, Franchisee
shall be responsible for training BMT Certified Managers for all subsequent
Franchised Bakeries developed by Franchisee, at one of Franchisee's CINNABON
Bakeries which has been certified by Franchisor as a certified training center
("Certified Training Center"). Franchisor shall have the right to approve and
certify the person designated by Franchisee to conduct the BMT training at
Franchisee's Certified Training Center (the "Certified Management Trainer). The
Certified Management Trainer shall be required to attend and complete, to
Franchisor's satisfaction, and at Franchisee's cost, an additional three (3) day
training program at a training facility designated by Franchisor.
8.05. The cost of conducting the initial NFOP and BMT programs
(instruction and required materials) shall be borne by Franchisor. All other
expenses during NFOP and BMT, including meals and lodging, wages and travel,
shall be borne by Franchisee.
8.06. Franchisor reserves the right to test any and all BMT Certified
Managers every three (3) years following their most recent certification, and
may require such individuals to attend and complete additional training at a
training facility designated by Franchisor, and at Franchisee's sole cost and
expense, in the event they fail to achieve a satisfactory score on such test.
Additionally, Franchisor may make available to Franchisee or Franchisee's
employees, from time to time, such additional training programs as Franchisor,
in its sole discretion, may choose to conduct. Attendance at said training
programs may be mandatory. The cost of conducting such additional training
programs (instruction and required materials) shall be borne by Franchisor. All
other expenses during the training period, including meals and lodging, wages
and travel, shall be borne by the Franchisee.
IX. DUTIES OF THE FRANCHISOR
9.01. Franchisor will make available to Franchisee standard plans and
specifications to be utilized only in the construction of the Franchised Unit.
No modification to or deviations from the standard plans and specifications may
be made without the written consent of Franchisor. Franchisee shall obtain, at
its expense, further qualified architectural and engineering services to prepare
surveys, site and foundation plans, and to adapt the standard plans and
13
specifications to applicable local or state laws, regulations or ordinances.
Franchisee shall bear the cost of preparing plans containing deviations or
modifications from the standard plans.
9.02. Franchisor shall provide consultation and advice to Franchisee as
Franchisor deems appropriate with regard to construction or renovation and
operation of the Franchised Bakery, building layout, furnishings, fixtures and
equipment plans and specifications, employee selection and training, purchasing
and inventory control and those other matters as Franchisor deems appropriate.
9.03. Franchisor will make available to Franchisee such continuing
advisory assistance in the operation of the Franchised Business, in person or by
electronic or written bulletins made available from time to time, as Franchisor
may deem appropriate.
9.04. Franchisor, in its sole discretion, may provide opening assistance
to Franchisee at the Franchised Unit.
9.05. Franchisor will loan one (1) copy of the Manual to Franchisee for
the duration of this Agreement, which the Manual contains the standards,
specifications, procedures and techniques of the CINNABON System.
9.06. Franchisor will continue its efforts to maintain high and uniform
standards of quality, cleanliness, appearance and service at all CINNABON
Bakeries, to protect and enhance the reputation of the CINNABON System and the
demand for the products and services of the System. Franchisor will establish
uniform criteria for approving suppliers; make every reasonable effort to
disseminate its standards and specifications to prospective suppliers of the
Franchisee upon the written request of the Franchisee, provided that Franchisor
may elect not to make available to prospective suppliers the standards and
specifications for such food formulae or equipment designs deemed by Franchisor
in its sole discretion to be confidential; and may conduct periodic inspections
of the premises and evaluations of the products used and sold at the Franchised
Unit and in all other CINNABON Bakeries.
9.07. Franchisor will provide training to Franchisee as set forth in
Article VIII hereof.
X. DUTIES OF THE FRANCHISEE
Franchisee understands and acknowledges that every detail of the System is
important to Franchisor, Franchisee and other franchisees in order to develop
and maintain high and uniform operating standards, to increase the demand for
CINNABON products and services, and to protect the reputation and goodwill of
Franchisor. Accordingly, Franchisee agrees that:
10.01. Franchisee shall maintain, at all times during the term of this
Agreement, at Franchisee's expense, the premises of the Franchised Unit and all
fixtures, furnishings, signs, systems and equipment (hereinafter "improvements")
thereon or therein, in conformity with Franchisor's high standards and public
image and to make such additions, alterations, repairs, and
14
replacements thereto (but no others, without Franchisor's prior written consent)
as may be required by Franchisor, including but not limited to the following:
A. To keep the Franchised Unit in the highest degree of sanitation and
repair, including, without limitation, such periodic repainting, repairs or
replacement of impaired equipment, and replacement of obsolete signs, as
Franchisor may reasonably direct;
B. To meet and maintain the highest governmental standards and ratings
applicable to the operation of the Franchised Business;
C. At its sole cost and expense, to complete a full reimaging,
renovation, refurbishment and modernization of the Franchised Unit, within
the time frame required by Franchisor, including the Bakery design,
equipment, signs, interior and exterior decor items, fixtures, furnishings,
trade dress, color scheme, presentation of trademarks and service marks,
supplies and other products and materials, to meet Franchisor's then-
current standards, specifications and design criteria for CINNABON
Bakeries, including without limitation, such structural changes, remodeling
and redecoration and such modifications to existing improvements as may be
necessary to do so (hereinafter, a "Franchised Unit Renovation").
Franchisee shall not be required to perform a Franchised Unit Renovation if
there are less than three (3) years remaining on the term of this Agreement
and/or the lease for the premises occupied by the Franchised Unit. Nothing
herein shall be deemed to limit Franchisee's other obligations, during the
term of this Agreement, to operate the Franchised Unit in accordance with
Franchisor's standards and specifications for the CINNABON System,
including, but not limited to, the obligations set forth in this Section X.
10.02. Franchisee shall operate the Franchised Unit in conformity with such
uniform methods, standards, and specifications as Franchisor may from time to
time prescribe in the Manual or otherwise in writing, to insure that the highest
degree of quality, service and cleanliness is uniformly maintained and to
refrain from any deviation therefrom and from otherwise operating in any manner
which reflects adversely on Franchisor's name and goodwill or on the Proprietary
Marks, and in connection therewith:
A. To maintain in sufficient supply, and use at all times, only such
ingredients, products, materials, supplies, and paper goods as conform to
Franchisor's standards and specifications, and to refrain from deviating
therefrom by using non-conforming items, without Franchisor's prior written
consent;
B. To sell or offer for sale only such products and menu items that
have been expressly approved for sale in writing by Franchisor, meet
Franchisor's uniform standards of quality and quantity and as have been
prepared in accordance with Franchisor's methods and techniques for product
preparation; to sell or offer for sale the minimum menu items specified in
the Manual or otherwise in writing; to refrain from any deviation from
Franchisor's standards and specifications for serving or selling the menu
items,
15
without Franchisor's prior written consent; upon thirty (30) days written
notice from Franchisor, to sell or offer for sale only such beverages
produced by Franchisor's Designated Beverage Supplier (as defined in
Section 10.03 below); and to discontinue selling or offering for sale such
items as Franchisor may, in its discretion, disapprove in writing at any
time;
C. To use the premises of the Franchised Unit solely for the purpose
of conducting the business franchised hereunder, and to conduct no other
business or activity thereon, whether for profit or otherwise, without
Franchisor's prior written consent;
D. To keep the Franchised Unit open and in normal operation during
such business hours as Franchisor may prescribe in the Manual or otherwise
in writing;
E. To permit Franchisor or its agents, at any time during ordinary
business hours, to remove from the Franchised Unit samples of any
ingredients, products, materials, supplies, and paper goods used in the
operation of the Franchised Unit, without payment therefor, in amounts
reasonably necessary for testing by Franchisor or an independent
laboratory, to determine whether such samples meet Franchisor's then-
current standards and specifications. In addition to any other remedies it
may have under this Agreement, Franchisor may require Franchisee to bear
the cost of such testing if any such ingredient, products, materials,
supplier or paper goods have been obtained from a supplier not approved by
Franchisor, or if the sample fails to conform to Franchisor's
specifications;
F. To purchase, install and construct, at Franchisee's expense, all
improvements furnishings, signs and equipment specified in the approved
standard plans and specifications, and such other furnishings, signs or
equipment as Franchisor may reasonably direct from time to time in the
Manual or otherwise in writing; and to refrain from installing or
permitting to be installed on or about the premises of the Franchised Unit,
without Franchisor's written consent, any improvements, furnishings, signs
or equipment not first approved in writing as meeting Franchisor's
standards and specifications;
G. To comply with all applicable federal, state and local laws,
regulations and ordinances pertaining to the operation of the Franchised
Business; and
H. Franchisee shall grant Franchisor and its agents the right to enter
upon the premises of the Franchised Unit at any time during ordinary
business hours for the purpose of conducting inspections; cooperate with
Franchisor's representatives in such inspections by rendering such
assistance as they may reasonably request; and, upon notice from Franchisor
or its agents, and without limiting Franchisor's other rights under this
Agreement, take such steps as may be necessary immediately to correct the
deficiencies detected during any such inspection, including, without
limitation, immediately desisting
16
from the further use of any equipment, promotional materials, products, or
supplies that do not conform with Franchisor's then-current specifications,
standards, or requirements.
10.03. Franchisee shall (i) purchase all ingredients, products, materials,
supplies, and other items required in the operation of the Franchised Business
which are or incorporate trade-secrets of Franchisor, as designated by
Franchisor ("Trade-Secret Products") only from Franchisor or suppliers
designated by Franchisor; and (ii) upon thirty (30) days prior written notice
that Franchisor has designated an exclusive beverage supplier for any or all
beverage products sold within the CINNABON System ("Designated Beverage
Products"), Franchisee shall purchase all such Designated Beverage Products only
from Franchisor's designated beverage supplier ("Designated Beverage Supplier").
10.04. Franchisee shall purchase all ingredients, products, materials,
supplies, paper goods, and other items required for the operation of the
Franchised Business, except Trade-Secret Products and Designated Beverage
Products, solely from suppliers who demonstrate, to the continuing reasonable
satisfaction of Franchisor, the ability to meet Franchisor's reasonable
standards and specifications for such items; who possess adequate quality
controls and capacity to supply Franchisee's needs promptly and reliably; and
who have been approved in writing by Franchisor and such approval has not
thereafter been revoked. If Franchisee desires to purchase any such items from
an unapproved supplier, Franchisee shall submit to Franchisor a written request
for approval, or shall request the supplier itself to seek approval. Franchisor
shall have the right to require, as a condition of its approval, that its
representatives be permitted to inspect the supplier's facilities, and that
samples from the supplier be delivered, at Franchisor's option, either to
Franchisor or to an independent laboratory designated by Franchisor for testing
prior to granting approval. A charge not to exceed Franchisor's reasonable cost
of inspection and the actual cost of testing shall be paid by the supplier or
Franchisee. Franchisor reserves the right, at its option, to reinspect the
facilities and products of any such approved supplier from time to time and to
revoke its approval upon failure of such supplier to continue to meet any of the
foregoing criteria.
10.05. Franchisor disclaims all express or implied warranties concerning
any approved products or services, including, without limitation, any warranties
as to merchantability, fitness for a particular purpose, availability, quality,
pricing or profitability. Franchisee acknowledges that Franchisor may, under
appropriate circumstances, receive fees, commissions, field-of-use license
royalties, or other consideration from approved suppliers based on sales to
franchisees, and that Franchisor may charge non-approved suppliers reasonable
testing or inspection fees.
10.06. All local advertising by Franchisee shall be in such media, and of
such type and format as Franchisor may approve; shall be conducted in a
dignified manner; and shall conform to such standards and requirements as
Franchisor may specify. Franchisee shall not use any advertising or promotional
plans or materials unless and until Franchisee has received written approval
from Franchisor, pursuant to the procedures and terms set forth in Section 10.07
hereof.
17
10.07. All advertising and promotional plans proposed to be used by
Franchisee or the Cooperative, where applicable, except such plans and materials
that have been previously approved by Franchisor shall be submitted to
Franchisor for Franchisor's written approval (except with respect to prices to
be charged) prior to any use thereof. Franchisor shall use its best efforts to
complete its review of Franchisee's proposed advertising and promotional plans
within fifteen (15) days after Franchisor receives such plans. If written
approval is not received by Franchisee or the Cooperative from Franchisor within
fifteen (15) days after receipt by Franchisor of such plans, Franchisor shall be
deemed to have disapproved such plans.
10.08. Franchisee shall, at Franchisor's request, require all of its
supervisory employees, as a condition of their employment, to execute an
agreement prohibiting them, during the term of their employment or thereafter,
from communicating, divulging, or using for the benefit of any person, persons,
partnership, association, corporation or other entity any confidential
information, trade secrets, knowledge, or know-how concerning the CINNABON
System or methods of operation of the Franchised Unit which may be acquired as a
result of their employment with Franchisee or other franchisees. A duplicate
original of each such agreement shall be provided by Franchisee to Franchisor
immediately upon execution.
10.09. If Franchisee operates more than eight (8) Franchised Bakeries,
Franchisee shall have a supervisor, which may be Franchisee, to supervise and
coordinate the operation of the Franchised Bakeries (hereinafter, a
"Supervisor"). In addition to the foregoing, Franchisee shall employ an
additional Supervisor upon the opening of Franchisee's ninth (9th) Franchised
Bakery and upon the opening of each successive eighth (8th) Franchised Bakery
thereafter. Each Supervisor shall attend and successfully complete the BMT
program set forth in Section 8.02 hereof prior to assuming any supervisory
responsibilities and shall meet such other standards as Franchisor may
reasonably impose
10.10. If at any time the Franchised Unit is proposed to be operated by an
entity or individual other than the Franchisee, Franchisor reserves the right to
review and approve the operating entity or individual and to require and approve
an operating agreement prior to such party's assumption of operations.
Franchisor may, in its sole discretion, reject either the operating entity, the
individual operator or the operating agreement. If approved by Franchisor, the
operating entity and/or individual shall agree in writing to comply with all of
Franchisee's obligations under the Franchise Agreement as though such party were
the franchisee designated therein, on such form as may be designated by
Franchisor. The operation of the Franchised Unit by any party other than
Franchisee, without Franchisor's prior written consent, shall be deemed a
material default of this Agreement for which Franchisee may terminate this
Agreement pursuant to the provisions of Section 15.02 hereof.
10.11. Franchisee shall become a member of any purchasing cooperative
established by Franchisor for the CINNABON System and shall remain a member in
good standing thereof throughout the term of this Agreement and shall pay all
reasonable membership fees assessed by such purchasing association. Franchisee
shall, prior to opening the Franchised Unit, become a member of the Churchs
Operators Purchasing Association (hereinafter "COPA"), or any
18
successor thereto, shall remain a member in good standing of COPA throughout the
term of this Agreement (or until a separate Purchasing Cooperative is
established by Franchisor for the CINNABON System), and shall pay all reasonable
membership fees assessed by COPA.
10.12. Franchisee shall, within thirty (30) days from receipt of written
notice from Franchisor, at its sole cost and expense, purchase and install at
the Franchised Unit and/or at Franchisee's principal business office such
computer hardware and software equipment, required dedicated telephone and power
lines, modems, printers and other computer related accessory and peripheral
equipment as Franchisor specifies in the Manual or otherwise in writing (the
"Required Computer Equipment"). The Required Computer Equipment shall include
telecommunications devices and may include a single software program or set of
programs, all of which must be obtained in accordance with the Franchisor's
standards and specifications. The Required Computer Equipment shall permit 24
hour per day electronic communications between Franchisor and Franchisee
including access to the internet and Franchisor's current intranet, or any
successor thereto. Franchisee shall only be required to purchase and install the
Required Computer Equipment at one, central location, which shall satisfy the
conditions of this section 10.02 (or its equivalent) for all Franchised Units
operated by Franchisee, provided information for all Franchise Units is
maintained at such location.
XI. INSURANCE
11.01. Insurance Program. Franchisee shall procure, prior to commencement
of construction of the Franchised Unit, and shall maintain in full force and
effect during the Term of this Agreement at Franchisee's expense, an insurance
policy or policies protecting Franchisee and Franchisor, and their officers,
directors, agents and employees, against any loss, liability, or expense
whatsoever from personal injury, death or property damage or casualty,
including, fire, lightning, theft, vandalism, malicious mischief, and other
perils normally included in an extended coverage endorsement arising from,
occurring upon or in connection with the construction, operation or occupancy of
the Franchised Unit, as Franchisor may reasonably require for its own and
Franchisee's protection.
11.02. Insurance Requirements. Such policy or policies shall be written by
an insurance company satisfactory to Franchisor, and shall include, at a minimum
the following coverage:
A. Workers' Compensation Insurance, with statutory limits as
-------------------------------
required by the laws and regulations applicable to the employees of
Franchisee who are engaged in the performance of their duties relating to
the Franchised Unit, including any pre-opening training programs, as well
as such other insurance as may be required by statute or regulation of the
state in which the Franchised Unit is located.
B. Employer's Liability Insurance, for employee bodily injuries
------------------------------
and deaths, with a limit of $500,000 each accident.
C. Comprehensive or Commercial General Liability Insurance,
-------------------------------------------------------
covering
19
claims for bodily injury, death and property damage, including Premises and
Operations, Independent Contractors, Products and Completed Operations,
Personal Injury, Contractual, and Broadform Property Damage liability
coverages, with limits as follows:
Occurrence/Aggregate Limit of $1,000,000 for bodily injury, death
and property damage each occurrence and $2,000,000 for general
aggregate or Split liability limits of:
$1,000,000 for bodily injury per person
$1,000,000 for bodily injury per occurrence
$ 500,000 for property damage
D. Comprehensive Automobile Liability Insurance, if applicable,
--------------------------------------------
covering owned, non-owned and hired vehicles, with limits as follows:
Combined Single Limit of $500,000 for bodily injury, death and
property damage per occurrence or Split liability limits of:
$ 500,000 for bodily injury per person
$ 500,000 for bodily injury per occurrence
$ 250,000 for property damage
E. All Risk Property Insurance, on a replacement cost basis, with
---------------------------
limits as appropriate, covering the real property of Franchisee and any
real property which the Franchisee may be obligated to insure by contract.
Such real property may including building, machinery, equipment, furniture,
fixtures and inventory.
11.03. All such policies of insurance shall provide that the same shall not
be canceled, modified or changed without first giving thirty (30) days prior
written notice thereof to Franchisor. No such cancellation, modification or
change shall affect Franchisee's obligation to maintain the insurance coverages
required by this Agreement. Except for Workers' Compensation Insurance,
Franchisor shall be named as an Additional Insured on all such required
policies. All liability insurance policies shall be written on an "occurrence"
policy form. Franchisee shall be responsible for payment of any and all
deductibles from insured claims under its policies of insurance. Franchisee
shall not satisfy the requirements of this Article XI unless and until
certificates of such insurance, including renewals thereof, have been delivered
to and approved by Franchisor. Franchisee shall not self-insure any of the
insurance coverages required by this Agreement, or non-subscribe to any State's
applicable workmen's compensation laws without the prior written consent of
Franchisor. Franchisor shall have the right, at any time during the term of this
Agreement to increase the minimum limits of insurance coverage or otherwise
modify the insurance requirements of this Agreement upon written notice in the
Manual or as otherwise prescribed by Franchisor in writing. If Franchisee shall
fail to comply with any of the insurance requirements herein, upon written
notice to Franchisee by Franchisor, Franchisor may, without any obligation to do
so, procure such insurance and Franchisee shall pay
20
Franchisor, upon demand, the cost thereof plus interest at the maximum rate
permitted by law, and a reasonable administrative fee designated by Franchisor.
11.04. Insurance Obtained by Franchisee Shall Be Primary to Franchisor's
-----------------------------------------------------------------
Own Insurance. Franchisee agrees that all insurance policies obtained by
-------------
Franchisee pursuant to Sections 11.01 and 11.02 shall be primary coverage, the
applicable limits of which shall be exhausted before any benefits (defense or
indemnity) may be obtained under any other insurance (including self-insurance)
providing coverage to Franchisor. In the event payments are required to be made
under Franchisor's own insurance policies or self-insurance (whether for defense
or indemnity) before the applicable coverage limits for the insurance policies
obtained by Franchisee are exhausted, then Franchisee hereby agrees to
reimburse, hold harmless and indemnify the Franchisor and its insurers for such
payments. Franchisee shall notify its insurers of this Agreement and shall use
best efforts to obtain an endorsement on each policy it obtains pursuant to
Sections 11.01 and 11.02 stating as follows:
The applicable limits of this policy shall be applied and exhausted
before any benefits may be obtained (whether for defense or indemnity)
under any other insurance (including self-insurance) that may provide
coverage to Franchisor. All insurance coverage obtained by Franchisor
shall be considered excess insurance with respect to this policy, the
benefits of which excess insurance shall not be available until the
applicable limits of this policy are exhausted.
11.05. No Limitation on Coverage. Franchisee's obligation to obtain and
-------------------------
maintain the foregoing policy or policies of insurance in the amounts specified
shall not be limited in any way by reason of any insurance which may be
maintained by Franchisor, nor shall Franchisee's performance of that obligation
relieve it of liability under the indemnity provisions set forth in Section
XVIII of this Agreement.
11.06. Issuance of Insurance. Franchisee must obtain the insurance
---------------------
required by this Agreement no later than fifteen (15) days before the date on
which any construction is commenced. The Franchised Unit shall not be opened
for business prior to Franchisor's receipt of satisfactory evidence that all
insurance required by this Agreement is in effect. Upon obtaining such
insurance, and on each policy renewal date thereafter, Franchisee shall promptly
submit evidence of satisfactory insurance and proof of payment therefor to
Franchisor, together with, upon request, copies of all policies and policy
amendments. The evidence of insurance shall include a statement by the insurer
that the policy or policies will not be canceled or materially altered without
at least thirty (30) days prior written notice to Franchisor.
XII. CONFIDENTIAL INFORMATION
12.01. Franchisee shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, corporation or other entity, any confidential
information, knowledge or know-how
21
concerning the construction and methods of operation of the Franchised Business
which may be communicated to Franchisee, or of which Franchisee may be apprised,
by virtue of Franchisee's operation under the terms of this Agreement.
Franchisee shall divulge such confidential information only to such employees of
Franchisee as must have access to it in order to exercise the franchise rights
granted hereunder and to establish and operate the Franchised Unit pursuant
hereto and as Franchisee may be required by law, provided Franchisee shall give
Franchisor prior written notice of any such required disclosure immediately upon
receipt of notice by Franchisee in order for Franchisor to have the opportunity
to seek a protective order or take such other actions as it deems appropriate
under the circumstances.
12.02. Any and all information, knowledge, and know-how, including, without
limitation, drawings, materials, equipment, recipes, prepared mixtures or blends
of spices or other food products, and other data, which Franchisor designates as
confidential, and any information, knowledge, or know-how which may be derived
by analysis thereof, shall be deemed confidential for purposes of this
Agreement, except information which Franchisee can demonstrate came to
Franchisee's attention prior to disclosure thereof by Franchisor; or which, at
the time of disclosure thereof by Franchisor to Franchisee, had become a part of
the public domain, through publication or communication by others; or which,
after disclosure to Franchisee by Franchisor, becomes a part of the public
domain, through publication or communication by others.
XIII. COVENANTS
13.01. Franchisee covenants that, during the term of the Agreement, except
as otherwise approved in writing by Franchisor, Franchisee or, alternatively,
one designated management employee if that employee assumes primary
responsibility for the operation of the Franchised Unit, shall devote full time,
energy and best efforts to the management and operation of the Franchised
Business.
13.02. Franchisee acknowledges that, pursuant to this Agreement, Franchisee
will receive valuable specialized training and confidential information,
including without limitation, information regarding the operational, sales,
promotional, and marketing methods, procedures and techniques of Franchisor and
the System.
Franchisee covenants that, during the term of this Agreement, Franchisee
(who, unless otherwise specified, shall include, for purposes of this Section
XIII, collectively and individually, all officers, directors and holders of a
beneficial interest of five percent (5%) or more of the securities with voting
rights of Franchisee and of any corporation, directly or indirectly controlling
Franchisee, if Franchisee is a corporation, and the general partner and any
limited partners, including any corporation, and the officers, directors and
holders of a beneficial interest of five percent (5%) or more of securities with
voting rights of a corporation which controls, directly or indirectly, any
general or limited partner, if Franchisee is a partnership) shall not, either
directly or indirectly, for itself or on behalf of, or in conjunction with, any
person, persons, partnership, association or corporation or other entity:
22
A. Divert or attempt to divert any business or customer of the
business franchised hereunder to any competitor by direct or indirect
inducements or otherwise, or to do or perform, directly or indirectly, any
other act injurious or prejudicial to the goodwill associated with
Franchisor's Proprietary Marks and the System;
B. Employ or seek to employ any person who is, at that time,
employed by Franchisor or by any other CINNABON franchisee, or otherwise,
directly or indirectly, induce such person to leave his or her employment
therewith; or
C. Own, maintain, operate, engage in, or have any interest in any
fast food (either takeout, on premises consumption, or a combination
thereof) restaurant that specializes in the preparation and/or sale of
cinnamon rolls, bakery products, specialty coffee and coffee products and
other food products substantially similar to those sold within the CINNABON
System (a "Bakery"); provided, however, that the term "Bakery" shall not
apply to any business operated by Franchisee under a franchise agreement
with Franchisor or an affiliate of Franchisor. During the term of this
Agreement, there is no geographical limitation on this restriction.
13.03. Franchisee covenants that Franchisee shall not, regardless of the
cause for termination, either directly or indirectly, for itself, or through, on
behalf of, or in conjunction with any person, persons, partnership, association,
corporation or other entity:
A. For a period of two (2) years following the termination or
expiration of this Agreement, own, maintain, engage in, or have any
interest in any Bakery which is located within a radius of ten (10) miles
of the location specified in Section I hereof, or the location of any other
CINNABON Bakery under the System, whether owned by Franchisor or any other
CINNABON franchisee, which is in existence as of the date of expiration or
termination of this Agreement; or
B. For a period of one (1) year following the termination or
expiration of this Agreement, employ or seek to employ any person who is,
at the time, employed by Franchisor or by any other CINNABON franchisee, or
otherwise, directly or indirectly, induce such person to leave his or her
employment therewith.
13.04. At Franchisor's request, Franchisee shall require and obtain
execution of covenants similar to those set forth in this Section XIII
(including covenants applicable upon the termination of a person's relationship
with Franchisee) in a form satisfactory to Franchisor, including, without
limitation, specific identification of Franchisor as a third party beneficiary
of such covenants with the independent right to enforce them, from any or all of
the following persons:
A. All multi-unit managers of Franchisee who have received or will
receive training from Franchisor;
23
B. All officers, directors, and holders of a direct or indirect
beneficial ownership interest of five percent (5%) or more in Franchisee.
The failure of Franchisee to obtain execution of a covenant required by
this Section 13.04 shall constitute a material breach of this Agreement. A
duplicate original of each such covenant shall be provided by Franchisee to
Franchisor immediately upon execution.
13.05. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section XIII, is held unreasonable
or unenforceable by a court or agency having jurisdiction in a final decision,
Franchisee expressly agrees to be bound by any lesser covenant subsumed within
the terms of such covenant that imposes the maximum duty permitted by law, as if
the resulting covenant was separately stated in and made a part of this Section
XIII.
A. Right to Reduce Covenants. Franchisee understands and
-------------------------
acknowledges that Franchisor shall have the right, in its sole discretion,
to reduce the scope of any covenant set forth in Sections 13.02. and 13.03.
of this Agreement, or any portion thereof, without Franchisee's consent,
effective immediately upon receipt by Franchisee of written notice thereof,
and Franchisee agrees that it shall comply with any covenant as so
modified, which shall be fully enforceable notwithstanding the provisions
of Section XXII hereof.
B. Injunctive Relief. The parties acknowledge that it will be
-----------------
difficult to ascertain with any degree of certainty the amount of damages
resulting from a breach by Franchisee of any of the covenants contained in
this Section XIII. It is further agreed and acknowledged that any violation
by Franchisee of any of said covenants will cause irreparable harm to
Franchisor. Accordingly, Franchisee agrees that upon proof of the existence
of a violation of any of said covenants, Franchisor will be entitled to
injunctive relief against Franchisee in any court of competent jurisdiction
having authority to grant such relief, together with all costs and
reasonable attorney's fees incurred by Franchisor in bringing such action.
XIV. TRANSFERABILITY OF INTEREST
14.01. Transfer by Franchisor. This Agreement shall inure to the benefit
----------------------
of the successors and assigns of Franchisor. Franchisor shall have the right to
transfer or assign its interest in this Agreement to any person, persons,
partnership, association, corporation, or other entity. If Franchisor's
assignee assumes all the obligations of Franchisor hereunder and sends
Franchisee written notice of the assignment so attesting, Franchisee agrees
promptly to execute a general release of Franchisor, and any affiliates of
Franchisor, from claims or liabilities of Franchisor under this Agreement.
14.02. Transfer by Franchisee. Franchisee understands and acknowledges
----------------------
that the rights and duties set forth in this Agreement are personal to
Franchisee, and that Franchisor has granted this
24
Agreement in reliance on Franchisee's business skill and financial capacity.
Accordingly, neither (i) Franchisee, nor (ii) any immediate or remote successor
to Franchisee, nor (iii) any individual, partnership, corporation or other legal
entity which directly or indirectly owns any interest in the Franchisee or in
this Franchise Agreement, shall sell, assign, transfer, convey, donate, pledge,
mortgage, or otherwise encumber any direct or indirect interest in this
Agreement or in any legal entity which owns the Franchised Business without the
prior written consent of Franchisor. Acceptance by Franchisor of any royalty
fee, advertising fee or any other amount accruing hereunder from any third
party, including, but not limited to any proposed transferee, shall not
constitute Franchisor's approval of such party as a transferee or the transfer
of this Franchise Agreement to such party. Any purported assignment or transfer,
by operation of law or otherwise, not having the written consent of Franchisor,
shall be null and void, and shall constitute a material breach of this
Agreement, for which Franchisor may then terminate without opportunity to cure
pursuant to Section 15.02.E. of this Agreement.
14.03. Conditions for Consent. Franchisor shall not unreasonably withhold
----------------------
its consent to any transfer referred to in Section 14.02., when requested;
provided, however, that prior to the time of transfer;
A. All of Franchisee's accrued monetary obligations to Franchisor
and its subsidiaries and affiliates shall have been satisfied;
B. Franchisee shall have agreed to remain obligated under the
covenants contained in Section XIII hereof as if this Agreement had been
terminated on the date of the transfer;
C. The transferee must be of good moral character and reputation,
in the reasonable judgment of the Franchisor;
D. The Franchisor shall have determined, to its satisfaction, that
the transferee's qualifications meet the Franchisor's then current criteria
for new franchisees;
E. Franchisee and transferee shall execute a written assignment,
in a form satisfactory to Franchisor, pursuant to which the transferee
shall assume all of the obligations of Franchisee under this Agreement and
Franchisee shall unconditionally release any and all claims Franchisee
might have against Franchisor as of the date of the assignment;
F. The transferee shall execute the then-current form of Franchise
Agreement and such other then-current ancillary agreements as Franchisor
may reasonably require. The then-current form of Franchise Agreement may
have significantly different provisions including, without limitation, a
higher royalty fee and advertising contribution than that contained in this
Agreement. The then-current form of Franchise Agreement will expire on the
expiration date of this Agreement and will contain the same renewal rights,
if any, as are available to Franchisee herein;
G. The transferee shall agree at its sole cost and expense, to (i)
complete a Franchised
25
Unit Renovation, within the time frame required by Franchisor, unless a
Franchised Unit Renovation was completed within three (3) years prior to
the date of the transfer and (ii) perform such other scope of work as may
be determined by Franchisor.
H. The transferee and such other individuals as may be designated
by Franchisor in the Manual or otherwise in writing, must have successfully
completed the training course then in effect for new franchisees. If the
Franchised Unit is the transferee's first CINNABON Bakery, the transferee
shall pay to Franchisor the then-standard Training Fee;
I. If the transferee is a partnership, the partnership agreement
shall provide that further assignments or transfers of any interest in the
partnership are subject to all restrictions imposed upon assignments and
transfers in this Agreement;
J. Franchisee shall, at Franchisor's option and request, execute a
written guarantee of the transferee's obligations under the Agreement,
which guarantee shall not exceed a period of three (3) years from the date
of transfer.
K. The Franchisee shall pay to Franchisor a transfer fee of Five
Thousand Dollars ($5,000), to cover Franchisor's administrative expenses in
connection with the transfer; however no additional franchise fee shall be
charged by Franchisor for a transfer. If the transferee is (i) a
corporation formed by Franchisee for the convenience of ownership and in
which the Franchisee is the sole shareholder, or (ii) an existing
Franchisee under this Agreement, no transfer fee shall be required.
14.04. Grant of Security Interest. Franchisee shall grant no security
--------------------------
interest in this Agreement, the Franchised Business, or in any of its assets
unless the secured party agrees that, in the event of any default by Franchisee
under any documents related to the security interest (i) Franchisor shall be
provided with notice of default and given a reasonable time within which to cure
said default, (ii) Franchisor shall have the right and option to be substituted
as obligor to the secured party and to cure any default of Franchisee or to
purchase the rights of the secured party upon payment of all sums then due to
such secured party, except such amounts which may have become due as a result of
any acceleration of the payment dates based upon the Franchisee's default, and
(iii) the secured party shall agree to such other requirements as Franchisor, in
its sole discretion, deems reasonable and necessary to protect the integrity of
the Proprietary Marks and the CINNABON System.
14.05. Transfer on Death or Mental Incapacity. Upon the death or mental
--------------------------------------
incapacity of any person with an interest in this Agreement, the Franchised
Business or Franchisee, the executor, administrator, or personal representative
of such person shall transfer his interest to a third party approved by
Franchisor within 12 months after such death or mental incapacity. Such
transfer, including, without limitation, transfer by devise or inheritance,
shall be subject to the same conditions as any inter vivos transfer. However,
----- -----
in the case of transfer by devise or inheritance, if the heirs or beneficiaries
of any such person are unable to meet the conditions in this Section XIV, the
personal representative of the deceased Franchisee shall have a reasonable time,
but in no event more than eighteen (18) months from Franchisee's death, to
dispose of the deceased's interest in this Agreement and
26
the business conducted pursuant hereto, which disposition shall be subject to
all the terms and conditions for assignments and transfers contained in this
Agreement. If the interest is not disposed of within twelve (12) or eighteen
(18) months, whichever is applicable, Franchisor may terminate this Agreement.
14.06. Right of First Refusal. Any party holding an interest in this
----------------------
Agreement, the Franchised Business or in Franchisee, and who desires to accept a
bona fide offer from a third party to purchase such interest, shall notify
---- ----
Franchisor in writing of such offer within ten (10) days of receipt of such
offer, and shall provide such information and documentation relating to the
offer as Franchisor may require. Franchisor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the seller that Franchisor intends to purchase the
seller's interest on the same terms and conditions offered by the third party.
In the event that Franchisor elects to purchase the seller's interest, closing
on such purchase must occur within sixty (60) days from the date of notice to
the seller of the election to purchase by Franchisor. Any material change in the
terms of any offer prior to closing shall constitute a new offer subject to the
same rights of first refusal by Franchisor as in the case of an initial offer.
Failure of Franchisor to exercise the option afforded by this Section 14.06.
shall not constitute a waiver of any other provisions of this Agreement,
including all of the requirements of this Section XIV, with respect to a
proposed transfer.
In the event the consideration, terms, and/or conditions offered by a third
party are such that Franchisor may not reasonably be required to furnish the
same consideration, terms, and/or conditions, then Franchisor may purchase the
interest in this Agreement, Franchisee, or the Franchised Business proposed to
be sold for the reasonable equivalent in cash. If the parties cannot agree
within a reasonable time as to the reasonable equivalent in cash of the
consideration, terms, and/or conditions offered by the third party, an
independent appraiser shall be designated by Franchisor, and his determination
shall be binding upon the parties.
14.07. Offerings by Franchisee. Securities or partnership interests in
-----------------------
Franchisee may be offered to the public, by private offering or otherwise, only
with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld. All materials required for such offering by federal or
state law shall be submitted to Franchisor for review prior to their being filed
with any governmental agency; and any materials to be used in any exempt
offering shall be submitted to Franchisor for review prior to their use. No
offering of such securities shall imply (by use of the Proprietary Marks or
otherwise) that Franchisor is participating in the underwriting, issuance, or
offering of securities by Franchisee; and Franchisor's review of any offering
shall be limited solely to the subject of the relationship between Franchisee
and Franchisor. Franchisee and the other participants in the offering shall
fully indemnify Franchisor in connection with the offering. For each proposed
offering, Franchisee shall pay to Franchisor a non-refundable fee of Five
Thousand Dollars ($5,000), or such greater amount as is necessary to reimburse
Franchisor for its reasonable costs and expenses associated with reviewing the
proposed offering, including, without limitation, legal and accounting fees.
Franchisee shall give Franchisor written notice at least sixty (60) days prior
to the date of commencement any offering or other transaction covered by this
Section 14.07.
XV. TERMINATION
27
15.01. Franchisee shall be deemed to be in default under this Agreement,
and all rights granted herein shall automatically terminate without notice to
Franchisee, if Franchisee shall become insolvent or make a general assignment
for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee
or such a petition is filed against Franchisee and not opposed by Franchisee; or
if Franchisee is adjudicated bankrupt or insolvent; or if a receiver or other
custodian (permanent or temporary) of Franchisee's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction; or if
proceedings for a composition with creditors under the applicable law of any
jurisdiction should be instituted by Franchisee or against Franchisee and not
opposed by Franchisee; or if a final judgment remains unsatisfied or of record
for thirty (30) days or longer (unless a supersedeas bond is filed); or if
Franchisee is dissolved; or if execution is levied against Franchisee's property
or business; or if suit to foreclose any lien or mortgage against the premises
or equipment of any Franchised Unit developed hereunder is instituted against
the Franchisee and not dismissed within thirty (30) days; or if the real or
personal property of any Bakery developed hereunder shall be sold after levy
thereon by any sheriff, marshal, or constable.
15.02. Franchisee shall be deemed to be in default and Franchisor may, at
its option, terminate this Agreement and all rights granted hereunder without
affording Franchisee any opportunity to cure the default upon the occurrence of
any of the following events:
A. If Franchisee fails to complete construction of the Franchised
Unit and opens for business within one hundred eighty (180) days of
execution of this Agreement. Franchisor may, in its reasonable discretion,
extend this period to address unforeseen construction delays, not within
the control of Franchisee.
B. If Franchisee at any time ceases to operate the Franchised Unit
or otherwise abandons the Franchised Unit, or loses the right to possession
of the premises of the Franchised Unit, or otherwise forfeits the right to
do or transact business in the jurisdiction where the Franchised Unit is
located; provided, however, that if, through no fault of Franchisee, the
premises are damaged or destroyed by an event not within the control of
Franchisee such that repairs or reconstruction cannot be completed within
one hundred eighty (180) days thereafter, then Franchisee shall have thirty
(30) days after such event in which to apply for Franchisor's approval to
relocate and/or reconstruct the premises, which approval shall not be
unreasonably withheld, but may be conditioned upon the payment of an agreed
minimum royalty to Franchisor during the period in which the Franchised
Unit is not in operation;
C. If Franchisee is convicted of or pleads guilty to a felony, a
crime involving moral turpitude, or any other crime or offense that
Franchisor believes is reasonably likely to have an adverse effect on the
System, the Proprietary Marks, the goodwill associated therewith, or
Franchisor's interest therein;
D. If a threat or danger to public health or safety results from
the construction, maintenance, or operation of the Franchised Unit;
28
E. If Franchisee, or any partner or shareholder of Franchisee
purports to transfer any rights or obligations under this Agreement or any
interest in Franchisee to any third party without Franchisor's prior
written consent, contrary to the terms of Section XIV hereof;
F. If Franchisee fails to comply with the in-term covenants in
Section 13.02. hereof or fails to obtain execution of the covenants
required under Sections 10.08. or 13.04.. hereof;
G. If, contrary to the terms of Section VII hereof, Franchisee
discloses or divulges the contents of the Manual or any other confidential
information provided to Franchisee by Franchisor;
H. If an approved transfer is not effected as required by Section
14.05 hereof, following Franchisee's death or mental incapacity;
I. If Franchisee knowingly maintains false books or records, or
submits any false reports to Franchisor;
J. If Franchisee or any individual, group, association, limited or
general partnership, corporation or other business entity which directly or
indirectly controls, is controlled by, or is under common control with
Franchisee; or which directly or indirectly owns, controls, or holds power
to vote ten percent (10%) or more of the outstanding voting securities of
Franchisee; or which has in common with Franchisee one or more partners,
officers, directors, trustees, branch managers, or other persons occupying
similar status or performing similar functions ("Affiliate") commits any
act of default under any other Franchise Agreement, Development Agreement
(except for failure to meet the development schedule thereunder), asset
purchase agreement, promissory note or any other agreement entered into by
Franchisee or an Affiliate of Franchisee, and Franchisor, or any parent,
subsidiary, affiliate, predecessor or successor to Franchisor;
K. If Franchisee, after or during a default pursuant to Section
15.03. hereof, commits the same default again, whether or not such default
is cured after notice; or
L. If Franchisee defaults more than once in any twelve (12) month
period under Section 15.03. hereof for failure to substantially comply with
any of the requirements imposed by this Agreement, whether or not cured
after notice.
M. If Franchisee refuses to permit Franchisor or its agents to
enter upon the premises of the Franchised Unit to conduct any periodic
inspection as set forth in Sections 5.09. and 10.02.H hereof.
N. If Franchisee uses any of Franchisor's Proprietary Marks in any
unauthorized manner or is otherwise in default of the provisions of Section
V hereof.
29
O. Franchisor discovers that Franchisee made a material
misrepresentation or omitted a material fact in the information that was
furnished to Franchisor in connection with its decision to enter into this
Agreement.
P. Franchisee knowingly falsifies any report required to be
furnished Franchisor or makes any material misrepresentation in its
dealings with Franchisor or fails to disclose any material facts to
Franchisor.
Q. There is a material breach of any representation or warranty set
forth in this Agreement.
15.03. Except as provided in Sections 15.01 and 15.02 of this Agreement,
upon any default by Franchisee which is susceptible of being cured, Franchisor
may terminate this Agreement only by giving written Notice of Termination
stating the nature of such default to Franchisee at least ten (10) days prior to
the effective date of termination if the default is for failure to pay
royalties, NCP Fund Contributions (including any other financial obligations
owed to Franchisor by Franchisee), and thirty (30) days, prior to the effective
date of termination for any other default, provided, however, that Franchisee
may avoid termination by curing such default to Franchisor's satisfaction within
the ten (10) day or thirty (30) day period, as applicable. If any such default
is not cured within the specified time, this Agreement shall terminate without
further notice to Franchisee effective immediately upon the expiration of the
ten (10) day or thirty (30) day period, as applicable, or such longer period as
applicable law may require. Notwithstanding anything to the contrary set forth
in this Agreement, Franchisee hereby acknowledges that any agreement between
Franchisee and Franchisor relating to past due amounts accruing hereunder, (an
"Arrearage Agreement"), including, but not limited to any promissory note,
payment plan or amendment to this agreement shall be deemed to be a material
part of this agreement and shall be incorporated herein by reference. A default
under any Arrearage Agreement shall be deemed a material default of this
Franchise Agreement, regardless of the reason Franchisee fails to pay the amount
which is the subject of such Arrearage Agreement.
15.04. Franchisee shall indemnify and hold Franchisor harmless for all
costs, expenses and any losses incurred by Franchisor in enforcing the
provisions hereof, or in upholding the propriety of any action or determination
by Franchisor pursuant to this Agreement, or in defending any claims made by
Franchisee against Franchisor, or arising in any manner from Franchisee's breach
of or failure to perform any covenant or obligation hereunder, including,
without limitation, reasonable litigation expenses and attorney's fees incurred
by Franchisor in connection with any threatened or pending litigation relating
to any part of this Agreement, unless Franchisee shall be found, after due legal
proceedings, to have complied with all of the terms, provisions, conditions and
covenants hereof.
30
15.05. In addition to the other provisions of this Section XVI, if
Franchisor reasonably determines that Franchisee becomes or will become unable
to meet its obligations to Franchisor under this Agreement, Franchisor may
provide Franchisee written notice to that effect and demand that Franchisee
provide those assurances reasonably designated by Franchisor, which may include
security or letters of credit for the payment of Franchisee's obligations to
Franchisor. If Franchisee fails to provide the assurances demanded by Franchisor
within 30 days after its receipt of written notice from Franchisor, this
Agreement shall terminate without further notice to Franchisee effective
immediately upon expiration of that time, unless Franchisor notifies Franchisee
otherwise in writing.
XVI. EFFECT OF TERMINATION OR EXPIRATION
16.01. Upon termination or expiration of this Agreement, all rights granted
herein shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the Franchised
Unit as a CINNABON Bakery, and shall not thereafter, directly or
indirectly, represent to the public that the Bakery is a CINNABON Bakery;
B. Franchisee shall immediately and permanently cease to use, by
advertising or in any manner whatsoever, any menus, recipes, confidential
food for formulae, equipment, methods, procedures, and the techniques
associated with the System, Franchisor's Proprietary Marks, and
Franchisor's other trade names, trademarks and service marks associated
with the CINNABON System. In particular, and without limitation, Franchisee
shall cease to use all signs, furniture, fixtures, equipment, advertising
materials, stationery, forms, packaging, containers and any other articles
which display the Proprietary Marks;
C. Franchisee agrees, in the event Franchisee continues to operate
or subsequently begins to operate Bakeries or other businesses, not to use
any reproduction, counterfeit, copy, or colorable imitation of the
Proprietary Marks in conjunction with such other business which is likely
to cause confusion or mistake or to deceive, and further agrees not to
utilize any trade dress, designation of origin, description, or
representation which falsely suggests or represents an association or
connection with Franchisor;
D. Franchisee agrees, upon termination or expiration of this
Agreement or upon cessation of the Franchised Business at the location
specified in Section I hereof for any reason, whether or not Franchisee
continues to operate any business at such location, and whether or not
Franchisee owns or leases the location, to make such modifications or
alterations to the Franchised Unit premises immediately upon termination or
expiration of this Agreement or cessation of operation of the Franchised
Business as may be necessary to prevent the operation of any businesses
thereon by Franchisee or others in derogation of this Section XVI, and
shall make such specified additional changes thereto as
31
Franchisor may reasonably request for that purpose. The modifications and
alterations required by this Section XVI shall include, but are not limited
to, removal of all trade dress, proprietary marks and other indicia of the
CINNABON System;
E. Franchisee shall immediately pay all sums owing to Franchisor
and its subsidiaries and affiliates. In the event of termination for any
default by Franchisee, such sums shall include all damages, costs and
expenses, including reasonable attorneys' fees, incurred by Franchisor as a
result of the default; and
F. Franchisee shall immediately turn over to Franchisor the Manual,
all other manuals, records, files, instructions, correspondence and any and
all other materials relating to the operation of the Franchised Business in
Franchisee's possession and all copies thereof (all of which are
acknowledged to be Franchisor's property) and shall retain no copy or
record of any of the foregoing, with the exception of Franchisee's copy of
this Agreement, any correspondence between the parties, and any other
documents which Franchisee reasonably needs for compliance with any
provision of law.
16.02. Franchisor shall have the right (but not the duty) to be exercised
by notice of intent to do so within thirty (30) days after termination or
expiration of this Agreement, to purchase any and all improvements, equipment,
advertising and promotional materials, ingredients, products, materials,
supplies, paper goods and any items bearing Franchisor's Proprietary Marks at
current fair market value. If the parties cannot agree on a fair market value
within a reasonable time, an independent appraiser shall be designated by
Franchisor, and his determination of fair market value shall be binding. If
Franchisor elects to exercise any option to purchase herein provided, it shall
have the right to set-off all amounts due from Franchisee under this Agreement
and the cost of the appraisal, if any, against any payment therefor.
16.03. In the event the premises are leased to Franchisee, Franchisee
shall, upon termination of this Agreement and upon request by Franchisor,
immediately assign, set over and transfer unto Franchisor, at Franchisor's sole
option and discretion, said lease and the premises, including improvements. Any
such lease entered into by Franchisee shall contain a clause specifying the
landlord's consent to assign such lease to Franchisor or its assignee in the
event this Agreement is terminated.
16.04. Franchisee shall pay to Franchisor all damages, costs, and expenses,
including reasonable attorneys' fees, incurred by Franchisor in seeking recovery
of damages caused by any action of Franchisee in violation of, or in obtaining
injunctive relief for the enforcement of, any portion of this Section XVI.
Further, Franchisee acknowledges and agrees that any failure to comply with the
provisions of this Section XVI, shall result in irreparable injury to
Franchisor.
16.05. All provisions of this Agreement which, by their terms or intent,
are designed to survive the expiration or termination of this Agreement, shall
so survive the expiration and/or termination of this Agreement.
32
16.06. Franchisee shall comply with the covenants contained in Section
XIII of this Agreement.
16.07. Franchisee shall execute such documents as Franchisor may
reasonably require to effectuate termination of the franchise and Franchisee's
rights to use the trademarks and systems of Franchisor.
XVII. TAXES, PERMITS, AND INDEBTEDNESS
17.01. Franchisee shall promptly pay when due all taxes, accounts and
other indebtedness of every kind incurred by Franchisee in the conduct of the
Franchised Business under this Agreement. Notwithstanding the foregoing,
Franchisee shall not be deemed in default of this Section 17.01 in the event
Franchisee asserts any legal challenge to the validity of any such taxes,
accounts and/or other indebtedness and either (i) deposits all such amounts in
an escrow account or (ii) provides such evidence as may be requested by
Franchisor to establish that Franchisee is financially capable of paying such
amount in the event the challenge is denied after due legal or administrative
hearings.
17.02. Franchisee, in the conduct of the Franchised Business, shall comply
with all applicable laws and regulations, and shall timely obtain any and all
permits, certificates, or licenses necessary for the full and proper conduct of
the businesses operated under this Agreement, including, without limitation,
licenses to do business, trade name registrations, sales tax permits and fire
clearances.
XIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
18.01. This Agreement does not constitute Franchisee an agent, legal
representative, joint venturer, partner, employee or servant of Franchisor for
any purpose whatsoever. It is understood and agreed that Franchisee shall be an
independent contractor and is in no way authorized to make any contract,
agreement, warranty, or representation on behalf of Franchisor. The parties
further agree that this Agreement does not create any fiduciary relationship
between them.
18.02. During the term of this Agreement and any extensions hereof,
Franchisee agrees to take such action as Franchisor deems reasonably necessary
for Franchisee to inform and hold itself out to the public as an independent
contractor operating the Franchised Business pursuant to a franchise from
Franchisor, including, without limitation, exhibiting a notice of that fact at
the Franchised Business in form and substance satisfactory to Franchisor.
18.03 Franchisee agrees to defend, indemnify and hold harmless
Franchisor, its parent, subsidiaries and affiliates, and their respective
officers, directors, employees, agents, successors and assigns from all claims,
demands, losses, damages, liabilities, cost and expenses (including attorney's
fees and expense of litigation) resulting from, or alleged to have resulted
from, or in connection with Franchisee's operation of the Franchised Business,
including, but not limited to,
33
any claim or actions based on or arising out of any injuries, including death to
persons or damages to or destruction of property, sustained or alleged to have
been sustained in connection with or to have arisen out of or incidental to the
Franchised Business and/or the performance of this contract by Franchisee, its
agents, employees, and/or its subcontractors, their agents and employees, or
anyone for whose acts they may be liable, regardless of whether or not such
claim, demand, damage, loss, liability, cost or expense is caused in whole or in
part by the negligence of Franchisor, Franchisor's representative, or the
employees, agents, invitees, or licensees thereof.
18.04 Franchisor shall advise Franchisee in the event Franchisor receives
notice that a claim has been or may be filed with respect to a matter covered by
this Agreement, and Franchisee shall immediately assume the defense thereof at
Franchisee's sole cost and expense. In any event, Franchisor will have the
right, through counsel of its choice, to control any matter to the extent it
could directly or indirectly affect Franchisor and/or its parent, subsidiaries
or affiliates or their officers, directors, employees, agents, successors or
assigns. If Franchisee fails to assume such defense, Franchisor may defend,
settle, and litigate such action in the manner it deems appropriate and
Franchisee shall, immediately upon demand, pay to Franchisor all costs
(including attorney's fees and cost of litigation) incurred by Franchisor in
affecting such defense, in addition to any sum which Franchisor may pay by
reason of any settlement or judgment against Franchisor.
18.05. Franchisor's right to indemnity hereunder shall exist
notwithstanding that joint or several liability may be imposed upon Franchisor
by statute, ordinance, regulation or judicial decision.
18.06. Franchisee agrees to pay Franchisor all expenses including
attorney's fees and court costs, incurred by Franchisor, its parent,
subsidiaries, affiliates, and their successors and assigns to remedy any
defaults of or enforce any rights under this Agreement, effect termination of
this Agreement or collect any amounts due under this Agreement.
XIX. APPROVALS AND WAIVERS
19.01. Whenever this Agreement requires the prior approval of Franchisor,
Franchisee shall make a timely written request to Franchisor therefor, and such
approval or consent shall be in writing.
19.02. Franchisor makes no warranties or guarantees upon which Franchisee
may rely, and assumes no liability or obligation to Franchisee or any third
party to which Franchisor would not otherwise be subject, by providing any
waiver, approval, advice, consent, or suggestions to Franchisee in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.
19.03. No failure of Franchisor to exercise any power reserved to it in
this Agreement, or to insist upon compliance by Franchisee with any obligation
or condition in this Agreement, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of
34
Franchisor's right to demand exact compliance with the terms of this Agreement.
Waiver by Franchisor of any particular default shall not affect or impair
Franchisor's right in respect to any subsequent default of the same or of a
different nature, nor shall any delay, forbearance, or omission of Franchisor to
exercise any power or rights arising out of any breach or default by Franchisee
of any of the terms, provisions, or covenants of this Agreement, affect or
impair Franchisor's rights, nor shall such constitute a waiver by Franchisor of
any rights, hereunder or right to declare any subsequent breach or default.
Subsequent acceptance by Franchisor of any payments due to it shall not be
deemed to be a waiver by Franchisor of any preceding breach by Franchisee of any
terms, covenants, or conditions of this Agreement.
XX. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered , sent by registered mail, or by other
means which will provide evidence of the date received to the respective parties
at the following addresses unless and until a different address has been
designated by written notice to the other party:
Notices to Franchisor: Franchise Department
CINNABON, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
cc: Legal Department
Notices to Franchisee: ____________________________
____________________________
____________________________
[ATTN:] ____________________
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement shall be addressed to the party to be notified
at its most current principal business address of which the notifying party has
been notified and shall be deemed so delivered (i) at the time delivered by
hand; (ii) one (1) business day after sending by telegraph, facsimile,
electronic mail or comparable electronic system with electronic confirmation of
receipt; or (iii) if sent by registered or certified mail or by other means
which affords the sender evidence of delivery, on the date and time of receipt
or attempted delivery if delivery has been refused or rendered impossible by the
party being notified.
XXI. SEVERABILITY AND CONSTRUCTION
21.01. Except as expressly provided to the contrary herein, each section,
paragraph, part, term, and/or provision of this Agreement shall be considered
severable; and if, for any reason, any section, part, term, and/or provision
herein is determined to be invalid and contrary to, or in conflict with, any
existing or future law or regulation by a court or agency having valid
35
jurisdiction, such shall not impair the operation, or have any other effect
upon, such other portions, sections, parts, terms, and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect to bind the parties hereto; and said invalid
portions, sections, parts, terms, and/or provisions shall be deemed not to be
part of this Agreement.
21.02. Except as has been expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any
person or legal entity other than Franchisee, Franchisor, Franchisor's officer,
directors, and employees, and Franchisee's permitted and Franchisor's respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
21.03. All captions in the Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
21.04. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable, and all acknowledgments, promises, covenants, agreements and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all the parties hereto on behalf of Franchisee.
21.05. This Agreement may be executed in counterparts, and each copy so
executed shall be deemed an original.
XXII. ENTIRE AGREEMENT: SURVIVAL
22.01. This Agreement, the documents referred to herein, the Development
Agreement, if any, and the exhibits hereto, constitute the entire, full and
complete agreement between Franchisor and Franchisee concerning the subject
matter hereof and supersede any and all prior agreements. Except for those
permitted to be made unilaterally by Franchisor hereunder, no amendment, change,
modification or variance of this Agreement shall be binding on either party
unless in writing and executed by Franchisor and Franchisee. Representations by
either party, whether oral, in writing, electronic or otherwise, that are not
set forth in this Agreement shall not be binding upon the party alleged to have
made such representations and shall be of no force or effect.
I have read this Section 22.01 and agree that I have not
been induced by and am not relying upon any representation
not contained in this Agreement.
_________________________________, Franchisee
22.02. Notwithstanding anything herein to the contrary, upon the
termination of this Agreement for any reason whatsoever (including the execution
of a subsequent Franchise
36
Agreement pursuant to the provisions of Sections 2.02.B and 14.03.F), or upon
the expiration of the Term hereof, any provisions of this Agreement which, by
their nature, extend beyond the expiration or termination of this Agreement,
shall survive termination or expiration and be fully binding and enforceable as
though such termination or expiration had not occurred.
XXIII. ACKNOWLEDGMENTS
23.01. Franchisee acknowledges that Franchisee has conducted an
independent investigation of the CINNABON franchise and recognized that the
business venture contemplated by this Agreement involves business risks and
Franchisee's success will be largely dependent upon the ability of the
Franchisee as an independent business entity.
____ FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF, AND FRANCHISEE ACKNOWLEDGES
THAT FRANCHISEE HAS NOT RECEIVED, ANY WARRANTY OR GUARANTY, EXPRESSED OR
IMPLIED, AS TO THE POTENTIAL VOLUME, PROFITS OR SUCCESS OF THE BUSINESS
VENTURE CONTEMPLATED BY THIS AGREEMENT.
____ 23.02. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED A COMPLETED
COPY OF THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND THE AGREEMENTS
RELATING THERETO, IF ANY, AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE
ON WHICH THIS AGREEMENT WAS EXECUTED.
____ FRANCHISEE FURTHER ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED THE DISCLOSURE
FRANCHISE DOCUMENT REQUIRED BY THE TRADE REGULATION RULE OF THE FEDERAL
TRADE COMMISSION ENTITLED "DISCLOSURE REQUIREMENTS AND PROHIBITIONS
CONCERNING FRANCHISING AND BUSINESS OPPORTUNITY VENTURES" AT LEAST TEN (10)
BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT WAS EXECUTED.
____ 23.03. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS READ AND UNDERSTOOD THIS
AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND AGREEMENTS RELATING THERETO, IF
ANY, AND THAT FRANCHISOR HAS ACCORDED FRANCHISEE AMPLE TIME AND OPPORTUNITY
AND HAS ENCOURAGED FRANCHISEE TO CONSULT WITH ADVISORS OF FRANCHISEE'S OWN
CHOOSING ABOUT THE POTENTIAL BENEFITS AND RISKS OF ENTERING INTO THIS
AGREEMENT.
____ 23.04. FRANCHISEE RECOGNIZES AND UNDERSTANDS THAT IT MAY INCUR OTHER
EXPENSES AND/OR OBLIGATIONS AS PART OF THE INITIAL INVESTMENT IN THE
FRANCHISED BUSINESS WHICH THE TERMS OF THIS AGREEMENT MAY NOT ADDRESS, AND
WHICH INCLUDE WITHOUT
37
LIMITATION: OPENING ADVERTISING, EQUIPMENT, FIXTURES, OTHER FIXED ASSETS,
CONSTRUCTION, LEASEHOLD IMPROVEMENTS AND DECORATING COSTS AS WELL AS
WORKING CAPITAL NECESSARY TO COMMENCE OPERATIONS.
XXIV. APPLICABLE LAW: VENUE
24.01. Applicable Law. This Agreement takes effect upon its acceptance and
--------------
execution by Franchisor and shall be interpreted and construed under the laws of
the State of Georgia which laws shall prevail in the event of any conflict of
law (without regard to, and without giving effect to, the application of Georgia
choice of law or conflict of law rules) except to the extent governed by the U.
S. Trademark Act of 1946, 15 U.S.C. ' 1051, et seq. (the " ▇▇▇▇▇▇ Act") as
-- ---
amended; provided, however, that if the covenants in Article XIII of this
Agreement would not be enforceable under the laws of Georgia, and the Franchised
Unit is located outside of Georgia, then such covenants shall be interpreted and
construed under the laws of the state in which the Franchised Unit is located.
Nothing in this Section XXV is intended by the parties to subject this Agreement
to any franchise or similar law, rule, or regulation of the State of Georgia to
which this Agreement would not otherwise be subject.
24.02. The parties agree that any action brought by Franchisee against
Franchisor in any court, whether federal or state, shall be brought within such
state and in the judicial district in which Franchisor has its principal place
of business. Any action brought by Franchisor against Franchisee in any court,
whether federal or state, may be brought within the state and in the judicial
district in which Franchisor has its principal place of business at the time
suit is filed, or in the jurisdiction where Franchisee resides or does business
or where the Franchised Bakery is or was located or where the claim arose.
Franchisee hereby consents to personal jurisdiction and venue in the state and
judicial district in which Franchisor has its principal place of business.
24.03. No right or remedy herein conferred upon or reserved to Franchisor
is exclusive of any other right or remedy herein, or by law or equity provided
or permitted; but each shall be cumulative of any other right or remedy provided
in this Agreement
24.04. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
24.05. Any and all claims and actions arising out of or relating to this
Agreement (including, but not limited to, the offer and sale of this franchise),
the relationship of Franchisee and Franchisor, or Franchisee's operation of the
Franchised Unit, brought by Franchisee shall be commenced within eighteen (18)
months from the occurrence of the facts giving rise to such claim or action, or
such claim or action shall be barred.
24.06. Franchisor and Franchisee hereby waive to the fullest extent
permitted by law any right to or claim of any consequential, punitive, or
exemplary damages against the other, and
38
agree that in the event of a dispute between them each shall be limited to the
recovery of any actual damages sustained by it.
XXV. CORPORATE FRANCHISEE
In the event the Franchisee named herein is a corporation at the time of
execution of this Agreement, it is warranted, covenanted and represented to
Franchisor that:
25.01. All of the issued and outstanding stock of Franchisee is owned,
legally and beneficially, by the person or persons listed on Exhibit "B"
---------------------
attached hereto.
---------------
25.02. The above-named person or persons has (have) individually, and
jointly and severally, executed this Agreement, and such person, or one of such
persons, is and shall be the chief executive officer of the Franchisee
corporation, holding such corporate office or offices as may be necessary to
maintain and exercise the actual power and authority actively to direct the
affairs of the Franchisee.
25.03. Franchisee is validly incorporated and duly existing under the laws
of the State of ________________________, is duly qualified to conduct business
therein, and has its principal place of business at ____________________________
_______. Franchisee shall promptly notify Franchisor in writing of any change
thereto during the term of this Agreement.
(Signatures on Following Page)
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed, and delivered this Agreement in triplicate
on the day and year first above-written.
WITNESS: FRANCHISOR:
CINNABON, INC.
__________________________ By: __________________________________
__________________________
WITNESS: FRANCHISEE:
39
__________________________ By: __________________________________
__________________________
{SIGNATURE PAGE TO FRANCHISE AGREEMENT}
40
EXHIBIT "A"
-----------
CINNABON
FRANCHISE AGREEMENT
NOTICE OF COMMENCEMENT DATE
---------------------------
Name of Franchisee: _____________________________________________________
Franchise Agreement Dated: ______________________________________________
Franchise Premises Address: _____________________________________________
_________________________________________________________________________
_________________________________________________________________________
Store Number: ___________________________________________________________
NOTICE is hereby given to the abovementioned Franchisee pursuant to Section
2.01 of the Franchise Agreement that the Term of the abovementioned Franchise
Agreement commenced on ________________, 20___, and that the Term shall expire
on ________________, _____, unless the Franchise Agreement is terminated
earlier, pursuant to its terms and conditions.
CINNABON, INC.
By: ____________________________________
Title: _________________________________
Date of Notice: ________________________
41
EXHIBIT "B"
-----------
SHAREHOLDERS OF FRANCHISEE
--------------------------
(For Corporate Franchisees)
Name of Number of % Ownership
Shareholders Shares of Franchisee Title
------------ ------ ------------- -----
42