MASTER DEVELOPMENT AND FRANCHISE AGREEMENT
THIS MASTER DEVELOPMENT AND FRANCHISE AGREEMENT (the "Agreement") is
made and entered into this ____ day of September, 1996, by and between
SUPERCUTS, INC., a Delaware corporation, with its principal business address
at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"),
and LA CARINA SUPERCUTS, INC., whose principal business address is _____________
("Franchisee").
R E C I T A L S
Franchisee has expressed an interest in acquiring and developing
additional Supercuts Store franchises in the Tampa/Ft. ▇▇▇▇▇, Florida market
(the "Market").
Company, through its wholly-owned subsidiary, Supercuts Corporate Shops,
Inc. (which is included in the references to "Company"), currently owns and
operates Supercuts Stores in the Market, the assets of some of which Company
would like to sell, and franchises for some of which Company would like to
grant, to Franchisee. The addresses of the Supercuts Stores the assets of
which Company would like to sell, and franchises for which Company would like
to grant, to Franchisee (the "Purchased Stores") are listed in Exhibit A to
this Agreement. The addresses of the Supercuts Stores the assets of which
Company will allow Franchisee to use (but not buy) during this Agreement's
term, but franchises for which Company would like to grant to Franchisee (the
"Corporate Stores"), are listed in Exhibit B to this Agreement.
Franchisee desires to buy the assets of, and franchises for, the
Purchased Stores, to acquire franchises for the Corporate Stores, and to
develop and open additional Supercuts Store franchises in the Market and is
willing to comply with this Agreement's terms and conditions in order to
receive these rights.
Company is willing to sell Franchisee the assets of the Purchased
Stores, to grant franchises to Franchisee for the Purchased Stores and the
Corporate Stores, and to grant Franchisee the right to develop and open
additional Supercuts Store franchises in the Market if Franchisee complies
with this Agreement's terms and conditions.
NOW, THEREFORE, in consideration of the mutual promises and obligations
contained in this Agreement and the other agreements and documents that this
Agreement references, Company and Franchisee agree as follows:
1. (a) Subject to this Agreement's terms and conditions, Company hereby
grants Franchisee the right to operate the Purchased Stores and Corporate
Stores as franchises. To reflect these franchises, Company and Franchisee
are, concurrently with the signing of this Agreement, also signing 36
separate Franchise Agreements, one for each Purchased Store
and Corporate Store, that will regulate Franchisee's operation of those
Stores according to Company's standards, specifications and operating
procedures. The form of Franchise Agreement that Company and Franchisee
are signing for each Purchased Store and Corporate Store, which is
Company's current standard form of Franchise Agreement, is attached as
Exhibit C. The Franchise Agreements for the Purchased Stores and
Corporate Stores will include a Rider in the form attached as Exhibits D
and E, respectively.
(a) Company will retain title to all of the fixed assets and
leasehold improvements of the Corporate Stores unless and until Franchisee
exercises the buyout option described in Section 8. During this
Agreement's term, Company will lease these items to Franchisee to use in
operating the Corporate Stores. No additional consideration is due from
Franchisee for these leases.
(b) Company hereby sells to Franchisee all of the fixed assets and
leasehold improvements of the Purchased Stores. Company is selling these
items to Franchisee on an "as is, where is" basis, with no warranties of
condition, merchantability or the like. Company represents it has good and
marketable title to these items and is selling such items free and clear of
all mortgages, pledges, liens, encumbrances, security interests and fixture
filings. Concurrently with the signing of this Agreement, Company is
giving Franchisee a ▇▇▇▇ of Sale, in the form attached as Exhibit F, to
document the sale of the fixed assets and leasehold improvements.
(c) Company hereby sells to Franchisee at cost all of the retail
supplies/inventory, and will allow Franchisee to keep all of the ▇▇▇▇▇
cash, now located at the Purchased Stores and Corporate Stores. Such
inventory shall not be dated. Company and Franchisee agree to determine
the amounts due for the retail supplies/inventory, and the total value of
the ▇▇▇▇▇ cash, within 15 days after this Agreement's date. Franchisee
must pay Company the sum of these amounts within 15 days after the parties
determine the amounts. Despite the foregoing, Franchisee need not pay for
the "backbar" supplies (I.E., the non-retail inventory) located at the
Purchased Stores and Corporate Stores.
(d) Company will pay to Franchisee all of the accrued vacation pay of
the existing employees of the Purchased Stores and Corporate Stores as of
this Agreement's date. Franchisee then will be responsible for all of the
employees' accrued vacation pay. Company and Franchisee agree to determine
the amounts due for accrued vacation pay within 15 days after this
Agreement's date. Company must pay Franchisee these amounts within 15 days
after they determine them, although Company may set off the amounts that it
must pay under this subparagraph against the amounts that Franchisee must
pay Company under subparagraph (d).
(e) Any credits in the Five Percent Fund associated with the
Purchased Stores and the Corporate Stores shall continue to apply to such
stores.
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2. Subject to this Agreement's terms and conditions and any landlord
approval required by a store lease, Company hereby grants Franchisee the
right to occupy the premises of each Purchased Store and Corporate Store
during the term of the Franchise Agreement for that Store. To reflect these
occupancy rights, Company and Franchisee are, concurrently with the signing
of this Agreement, also signing 36 separate Subleases, one for each Purchased
Store and Corporate Store, that will regulate Franchisee's occupancy of those
Stores. Company represents to Franchisee that the leases for the Purchased
Stores and Corporate Stores allow Company to enter into the Subleases with
Franchisee. Franchisee will make all required Sublease payments directly to
Company, which then will pay the landlord of each Store. However, if Company
fails to make any Sublease payment and to cure that default within the time
period the lease specifies after notice from the Store's landlord, Franchisee
may make the Sublease payment and set off that amount against the payments
Franchisee must make under this Agreement. The form of Sublease that Company
and Franchisee are signing for each Purchased Store and Corporate Store,
which is Company's current standard form of Sublease, is attached as Exhibit
G. The Sublease for each Corporate Store also will include a Rider in the
form attached as Exhibit H. While Franchisee has the right to close one or
more of the Purchased Stores, Franchisee agrees to remain liable for all
payments due under the Subleases for those closed Purchased Stores. Company
and Franchisee agree that their intent, and part of the consideration for
this transaction, is Franchisee's willingness to remain liable for all
payments due under the Sub-leases during the entire term of the leases for
the Purchased Stores, whether or not Franchisee operates those Purchased
Stores.
3. Subject to this Agreement's terms and conditions, Company hereby
grants Franchisee the right, and Franchisee hereby undertakes the obligation,
to develop and open 5 additional Supercuts Store franchises (the "Additional
Stores") within the Market on or before December 31, 2000. Of these 5
Additional Stores, Franchisee agrees to develop and open at least one during
each of the 1997, 1998 and 1999 calendar years. To reflect these development
rights, Company and Franchisee are, concurrently with the signing of this
Agreement, also signing a separate Area Development Agreement that will
incorporate the terms of this Agreement and this development schedule and,
together with Company's existing "Supercuts Expansion Policy," regulate
Franchisee's development of these Additional Stores within the Market
according to Company's standards, specifications and operating procedures.
The form of Area Development Agreement that Company and Franchisee are
signing, which is Company's current standard form of Area Development
Agreement, is attached as Exhibit I. The Area Development Agreement also
will include a Rider in the form attached as Exhibit J. The forms of
Franchise Agreement and Sublease that Franchisee will sign for each
Additional Store it develops under the Area Development Agreement will be (at
Company's option) either the forms of Franchise Agreement and Sublease
attached as Exhibits C and G or Company's then current forms of Franchise
Agreement and Sublease offered to all prospective franchisees (if Company
modifies those documents after the date of this Agreement), although
Franchisee will sign the same forms of Franchise Agreement and Sublease for
each Additional Store it develops under the Area Development Agreement. If
one of the Additional Stores that Franchisee develops and opens under
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this Section 3 is destroyed or otherwise rendered inoperable through no fault
of Franchisee, Company will continue to count that Additional Store as one of
the 5 Additional Stores that Franchisee must develop by December 31, 2000 if
Franchisee replaces that Store within one year after the Store is destroyed
or rendered inoperable. If Franchisee fails to do so, its failure will be a
default of its development obligations under this Section 3.
4. (a) Notwithstanding anything to the contrary contained in the forms
of Franchise Agreement and Sublease attached as Exhibits C and G, the
initial term of the franchise for each Corporate Store that Company is
granting under Section 1 above will be 7 years. When that initial term
expires, Franchisee will not have the right to renew the franchises (and
subleases) for the Corporate Stores unless it exercises the buyout right
under Section 8. Despite the foregoing provisions, Company and Franchisee
acknowledge and agree that the terms of the Subleases for the premises of
the Corporate Stores, including any renewal rights under those Subleases,
might not equal 7 years. If Company cannot maintain legal possession of
the premises of one or more Corporate Stores for at least the 7 year term
of this Agreement, Company agrees to allow Franchisee to relocate those
Corporate Stores to acceptable substitute premises, at no additional fee,
for which Company will sign leases and then sublease to Franchisee. The
initial and renewal terms of any Purchased Store or Additional Store
franchises are or will be as provided in the Franchise Agreements and
Subleases that Franchisee signs for those Stores.
(a) The initial term of the franchise for each Corporate Store will
be less than 7 years if Franchisee breaches any provision of this Agreement
and Company exercises its termination rights under Section 10 below.
5. After the date of this Agreement, Franchisee is responsible for all
of the costs and expenses of operating the Corporate Stores (even though
Company retains title to all of the fixed assets and leasehold improvements)
and Purchased Stores, including the costs of insurance coverage of the type
that Company customarily requires for its own Supercuts Stores (with Company
named as an additional insured and co-loss payee), and for all liabilities
that arise during the operation of the Corporate Stores and Purchased Stores.
Company and Franchisee agree to pro-rate the expenses of operating the
Corporate Stores and Purchased Stores for the month in which the parties sign
this Agreement. Company and Franchise agree to pro-rate these expenses within
15 days after this Agreement's date. All amounts owed by one party to the
other due to these pro-rations must be paid within 15 days after the parties
determine the appropriate pro-rations. Concomitantly, Franchisee will have
the right, except as otherwise provided in Sections 6 and 7, to all revenue
that the Purchased Stores and Corporate Stores generate after this
Agreement's date.
6. As partial consideration for Company's willingness to allow
Franchisee to operate the Corporate Stores and the Purchased Stores as
franchises, and to use the assets and leasehold improvements of the Corporate
Stores, and notwithstanding anything to the contrary contained in the
Franchise Agreements for the Corporate Stores and the Purchased Stores,
Franchisee agrees to
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make monthly payments to Company during this Agreement's term in the amount
of $65,584. Each monthly payment of $65,584 is due on or before the tenth
day of each calendar month. Franchisee must make this monthly payment even
if it closes one or more Purchased Stores. (Franchisee does not have the
right to close a Corporate Store.) There will be no reduction whatsoever in
this required monthly payment, although the payment due for the month in
which the parties sign this Agreement will be prorated for the number of days
during that month that Franchisee actually operates the Corporate Stores and
the Purchased Stores. These lump sum $65,584 monthly payments are in place
of the royalty fees payable under the Franchise Agreements for the Corporate
Stores and the Purchased Stores. However, if the Corporate Stores and
Purchased Stores generate, in the aggregate, more than $5.5 million in Gross
Revenue (as defined below) during any calendar year during this Agreement's
term beginning in the year 2000, Franchisee also agrees to pay a royalty on
the excess revenue (that portion exceeding $5.5 million) equal to 10% of the
excess related to services provided and 4% of the excess related to product
sales. Franchisee will begin paying this additional royalty on the service
and product sales made during the month following the calendar month in which
Franchisee's aggregate Gross Revenue from all Corporate Stores and Purchased
Stores first exceeds $5.5 million. Except as otherwise specifically provided
in this Agreement, all amounts which Franchisee owes Company under this
Agreement will bear interest after their original due date at the highest
commercial contract rate of interest that the law allows, not to exceed 18%
per year. "Gross Revenue" means the total gross revenue Franchisee derives
in accordance with such accounting practices and procedures as Company
determines and requires with respect to the operation of Supercuts Stores,
whether from sales for cash or credit, and without regard to the source of
payment thereof or the collection thereof, or the cost of collection,
including the sales of all merchandise and services but excluding all sales,
use, gross receipt and other similar taxes added to the sales price and
collected from the customer and less any bona fide refunds. The term "sales
of all merchandise and services" shall be construed in its most comprehensive
sense.
The first $250,000 that Franchisee must pay in the aggregate under this
Section 6 and for monthly interest under Section 7 is to be paid by a
Promissory Note in the form attached as Exhibit K. The $250,000 principal
due under the Promissory Note is payable in full on the third anniversary
date of this Agreement. Interest on the outstanding principal, accruing at
an 8% per annum rate, is payable monthly by the tenth day of each month.
7. As consideration for Company's sale to Franchisee of the assets and
leasehold improvements of the Purchased Stores, Franchisee agrees to pay
Company the principal amount of $550,000. This amount is to be paid by a
Promissory Note in the form attached as Exhibit L. The principal due under
the Promissory Note is payable in full on the seventh anniversary date of
this Agreement. Interest on the outstanding principal, accruing at an 8% per
annum rate, is payable monthly by the tenth day of each month (except for the
portion of these interest payments that Company allows Franchisee to add to
the Promissory Note referenced in Section 6 above). Such interest payments
are in addition to payments required in Section 6 above.
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8. If Franchisee substantially and materially complies with this
Agreement, the Franchise Agreements and Subleases for the Purchased Stores
and Corporate Stores, the Area Development Agreement and the Franchise
Agreements for the Additional Stores by (i) making all required payments,
(ii) developing the Additional Stores as required, and (iii) operating all
Purchased Stores, Corporate Stores and Additional Stores according to
Company's standards and specifications (or has fully cured any defaults which
it has the right to cure), Franchisee will have the right, on the seventh
anniversary date of this Agreement, to purchase the fixed assets and
leasehold improvements of the Corporate Stores, to terminate the Franchise
Agreements, Subleases and related documents for the Corporate Stores and to
replace them with new Franchise Agreements, Subleases and related documents
(the standard terms of which will govern the operation of those Stores) by
paying Company $2.85 million (including the $550,000 due under the Promissory
Note for the Purchased Stores). This amount will be payable in full at the
closing, which must take place on or before this Agreement's term expires.
If Franchisee exercises this right, Franchisee must exercise the right with
respect to all of the Corporate Stores. Franchisee may not elect to exercise
the right with respect to only some, but not all, of the Corporate Stores.
The Additional Stores are not affected by Franchisee's exercise of this
right. If Franchisee exercises its right to buy the fixed assets and
leasehold improvements of the Corporate Stores, Company will give Franchisee
customary bills of sale and similar transfer documents. All assets will be
sold on an "as is, where is" basis with no warranties of condition,
merchantability or the like but free and clear of all mortgages, pledges,
liens, encumbrances, security interests and fixture filings.
9. If Franchisee does not exercise the buyout right described in
Section 8 by the seventh anniversary date of this Agreement, then:
(i) Franchisee's right to operate the Corporate Stores as franchises
will cease immediately; and
(ii) all rights to operate the Corporate Stores will revert
immediately to Company without any payment of any kind.
10. Company has the right to terminate this Agreement if Franchisee
fails at any time to perform any of its obligations under this Agreement,
including, but not limited to, operating the Purchased Stores and Corporate
Stores as required under this Agreement and the Franchise Agreements,
Subleases and related documents that Franchisee signs for the Purchased
Stores and Corporate Stores; developing, opening and operating the Additional
Stores as required under this Agreement, the Area Development Agreement and
the Franchise Agreements, Subleases and related documents that Franchisee
signs for the Additional Stores; and making all payments required under this
Agreement; and fails to cure any of these defaults within 20 days after
receiving notice of that default from Company, provided, however, that
Company need not provide Franchisee with any notice of and opportunity to
cure a default, and may terminate this Agreement
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immediately, if Franchisee commits its second default within any 12 month
period during this Agreement's term.
11. The term of this Agreement is 7 years, unless earlier terminated
under Section 10.
12. Company agrees that, as additional consideration for the
transaction this Agreement describes, it will:
(a) Replace, at its own cost and expense, the "Cutting Edge" point-
of-sale system currently at the Purchased Stores and Corporate Stores with
the "Helikon" point-of-sale system. Company will complete the replacement
within 30 days after this Agreement's date.
(b) Maintain, at its own cost and expense, a total of at least 2
educators in the Market during this Agreement's term to train, at no cost
to Franchisee, employees of Purchased Stores and Corporate Stores.
(c) Reimburse Franchisee, during the first year of this Agreement's
term only, for the salaries and fringe benefits of the 3 Market Directors
operating in the Market, who will become Franchisee's employees after the
date of this Agreement. Franchisee agrees not to increase the salaries and
fringe benefits of these 3 Market Directors during the first year of this
Agreement's term. If Franchisee does so, Franchisee must pay the excess
portion of their salaries and fringe benefits over their current levels.
(d) Pay, on a pro-rata basis, $200,000 of the first $300,000 that
Franchisee elects to spend during the first 2 years of this Agreement's
term on approved deferred maintenance at the Purchased Stores and Corporate
Stores (E.G., signs, floors, remodeling, fixtures and equipment and the
like). Company agrees to pay its pro rata share of this maintenance within
30 days after it receives a verified invoice detailing the work that has
been, or is to be, done at the Purchased Stores and Corporate Stores (or
within any other time period acceptable to the contractor or supplier).
(e) Supply Franchisee with store financial information for the
Purchased Stores and Corporate Stores for the two year period immediately
preceding the date hereof in the format in which Company originally
prepared such information.
13. Concurrently with the signing of this Agreement, each of
Franchisee's owners will sign the form of Guaranty attached as Exhibit M in
which they will guarantee Franchisee's obligations under this Agreement and
all other agreements that Franchisee signs for the Corporate Stores,
Purchased Stores and Additional Stores. These Guaranties will be secured by
Pledge and Security Agreements in the form attached as Exhibit N that each
owner will sign concurrently with the execution of his or her Guaranty.
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14. EXCEPT TO THE EXTENT GOVERNED BY FEDERAL LAW, THIS AGREEMENT WILL
BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO ITS
CONFLICT OF LAWS PRINCIPLES. IF AND TO THE EXTENT THAT THE PARTIES AGREE NOT
TO PROCEED BY MEANS OF ARBITRATION OR ARE NOT REQUIRED TO PROCEED BY
ARBITRATION, FRANCHISEE WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT
OR ANY OTHER DOCUMENT SIGNED CONCURRENTLY WITH OR PURSUANT TO THIS AGREEMENT.
FRANCHISEE CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE CITY OF SAN FRANCISCO AND SAN FRANCISCO COUNTY,
CALIFORNIA, WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED
TO FRANCHISEE AT THE ADDRESSES PROVIDED IN SECTION 21 BELOW. SERVICE SO MADE
WILL BE DEEMED TO BE COMPLETED THREE (3) BUSINESS DAYS AFTER DEPOSIT IN THE
UNITED STATES MAILS, POSTAGE PREPAID. FRANCHISEE WAIVES ANY OBJECTION TO
VENUE OF ANY ACTION INSTITUTED UNDER THIS SECTION AND CONSENTS TO THE
GRANTING OF ANY LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
15. This Agreement is binding upon Company and Franchisee and their
respective assigns and successors in interest and may not be modified except
by a written agreement signed by both Company and Franchisee. Franchisee may
not assign this Agreement or any of its rights or obligations under this
Agreement, and no owner of Franchisee may assign an ownership interest in
Franchisee, without Company's prior written consent, which Company will not
unreasonably withhold, although Company may condition its consent on
Franchisee's sale or assignment of all of its rights and responsibilities
under all documents signed concurrently with or pursuant to this Agreement.
If Company consents to any assignment, Franchisee's owners must reaffirm the
Guaranties they are signing under Section 13 of this Agreement. All
Guaranties and Pledge and Security Agreements signed concurrently with the
signing of this Agreement will remain in full force and effect despite any
assignment. Company may assign this Agreement without restriction.
16. Company and Franchisee may by written instrument unilaterally waive
or reduce any obligation of or restriction upon the other under this
Agreement, effective upon delivery of written notice to the other or any
other effective date stated in the notice of waiver. Any waiver Company
grants will be without prejudice to any other rights it may have, will be
subject to its continuing review and may be revoked, in its sole discretion,
at any time and for any reason, effective upon delivery to Franchisee of 10
days' prior written notice.
Company and Franchisee will not be deemed to have waived or impaired any
right, power or option this Agreement reserves (including, without
limitation, Company's right to demand exact
8
compliance with every term, condition and covenant or to declare any breach
to be a default and to terminate this Agreement and all other documents that
Company and Franchisee are signing concurrently with or pursuant to this
Agreement before their terms expire) by virtue of any custom or practice at
variance with this Agreement's terms; Company's or Franchisee's failure,
refusal or neglect to exercise any right under this Agreement or to insist
upon the other's exact compliance with its obligations under this Agreement;
Company's waiver, forbearance, delay, failure or omission to exercise any
right, power or option, whether of the same, similar or different nature,
with other Supercuts Store franchisees; the existence of other agreements for
Supercuts Stores which contain provisions different from those this Agreement
contains; or Company's acceptance of any payments due from Franchisee after
any breach of this Agreement. Company and Franchisee agree that, if
Franchisee commits a default under any Franchise Agreement, Rider, Sublease
or other document signed concurrently with or pursuant to this Agreement, but
that default is not so serious in Company's sole discretion as to warrant
Company's termination of this Agreement, Company may elect to pursue
Franchisee for that specific default and need not exercise all of its rights
under this Agreement. However, that decision will not preclude Company, in
the event of another default, from exercising any and all rights under this
Agreement.
17. If any part of this Agreement is declared by a court or arbitrator
to be invalid, unenforceable or unlawful for any reason, that decision will
not affect the validity, enforceability or lawfulness of any other part or
the rest of this Agreement, which will continue in full force and effect and
bind the parties as though the invalid, unenforceable or unlawful part was
not contained in the Agreement.
18. Except as provided below, all controversies, disputes or claims
between Company and Franchisee in connection with, arising from or with
respect to: any provision of this Agreement or any other related agreement;
the relationship of the parties; or the validity of this Agreement or any
other related agreement, or any provision of that agreement; which is not
resolved within 15 days after either party notifies the other in writing of
the controversy, dispute or claim, must be submitted for arbitration to the
San Francisco, California office of the American Arbitration Association on
demand of either party. The arbitration proceedings will be conducted in San
Francisco, California and heard by one arbitrator in accordance with the then
current Commercial Arbitration Rules of the American Arbitration Association.
The arbitrator has the right to award or include in his or her award any
relief which he or she deems proper in the circumstances, including, without
limitation, money damages (with interest on unpaid amounts from date due),
specific performance, injunctive relief and attorneys' fees. The award and
decision of the arbitrator will be conclusive and binding upon all parties,
and judgment upon the award may be entered in any court of competent
jurisdiction. The parties acknowledge and agree that any arbitration award
may be enforced against either or both of them in a court of competent
jurisdiction, and each waives any right to contest the validity or
enforceability of the award. The parties further agree to be bound by the
provision of any statute of limitations which otherwise would be applicable
to the controversy, dispute or claim which is the subject of the arbitration
proceeding. Without limiting the foregoing, the parties are entitled in any
arbitration proceeding to
9
the entry of an order by a court of competent jurisdiction pursuant to an
opinion of the arbitrator for specific performance of any of the requirements
of this Agreement. This provision will continue in full force and effect
subsequent to and notwithstanding this Agreement's expiration or termination.
All matters relating to arbitration will be governed by the Federal
Arbitration Act (9 U.S.C. Sections 1 ET SEQ.) and not by any state
arbitration law.
Despite Company's and Franchisee's agreement to arbitrate, each has the
right in a proper case to seek temporary restraining orders and temporary or
preliminary injunctive relief from a court of competent jurisdiction;
provided, however, that Company and Franchisee must contemporaneously submit
their dispute for arbitration on the merits as provided in this Section.
19. Company's and Franchisee's rights under this Agreement are
cumulative, and either party's exercise or enforcement of any right or remedy
under this Agreement will not preclude its exercise or enforcement of any
other right or remedy under this Agreement which Company or Franchisee is
entitled by law to enforce.
20. The recitals and exhibits are a part of this Agreement which,
together with the documents that Company and Franchisee are signing
concurrently with this Agreement, constitutes Company's and Franchisee's
entire agreement and supersedes all prior negotiations, representations,
inducements, promises or agreements, oral or otherwise.
21. All notices and reports to Company and Franchisee, if not
personally served, will be deemed delivered the same business day after
sending by telegraph, facsimile or comparable electronic system, one business
day after deposit with Federal Express or a comparable overnight courier
company or 3 days after being placed in the U.S. mail by registered or
certified mail, return receipt requested. All notices must be sent postage
prepaid and addressed to the respective party at the addresses noted on page
1 above or as either party otherwise designates in writing from time to time.
22. COMPANY AND FRANCHISEE INTEND THIS AGREEMENT, ALL OTHER AGREEMENTS
AND DOCUMENTS SIGNED CONCURRENTLY WITH THIS AGREEMENT AND ALL OTHER
AGREEMENTS AND DOCUMENTS TO BE SIGNED PURSUANT TO THE RIGHTS GRANTED BY THIS
AGREEMENT (INCLUDING, BUT NOT LIMITED TO, FRANCHISE AGREEMENTS, RIDERS AND
SUBLEASES FOR PURCHASED STORES, CORPORATE STORES AND ADDITIONAL STORES) TO BE
PART OF ONE INTEGRATED TRANSACTION AND NOT SEPARATE TRANSACTIONS. IN THE
EVENT OF A CONFLICT BETWEEN THIS AGREEMENT AND ANY OTHER AGREEMENT, THIS
AGREEMENT WILL PREVAIL.
23. Company makes the following additional representations:
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(a) The transactions this Agreement contemplates do not conflict
with any of the Company's current financing arrangements;
(b) It will reasonably advise any future financing sources of its
obligations under this Agreement;
(c) It has the authority to enter into and perform this Agreement,
and all actions this Agreement contemplates have been approved by all
requisite corporate action;
(d) To the best of its knowledge:
(i) all leases for the Purchased Stores and Corporate Stores
are in full force and effect and not in default;
(ii) it has not received notice from any governmental agency
which would adversely affect the transaction this Agreement
contemplates or the Purchased Stores and Corporate Stores;
(iii) it is not a party to any litigation which would
adversely affect the Purchased Stores and Corporate Stores;
and
(iv) it is in compliance with all laws related to the Purchased
Stores and Corporate Stores; and
(e) The historical financial statements concerning the Purchased
Stores and Corporate Stores that Company has provided to Franchisee were
taken from the records maintained by Company. Company warrants that the
sales levels reflected in those financial statements are true and correct.
However, Franchisee acknowledges and agrees that any historical information
is not a warranty or guaranty that the Purchased Stores and Corporate
Stores will reach those levels of performance after this Agreement's date.
SUPERCUTS, INC., a Delaware LA CARINA SUPERCUTS, INC., a
corporation Florida corporation
By:______________________________ By:______________________________
Its:___________________________ Its:___________________________
Dated:___________________________ Dated:___________________________
11
EXHIBIT L
PROMISSORY NOTE
$550,000 September 9, 1996
FOR VALUE RECEIVED, LA CARINA SUPERCUTS, INC., a Florida corporation (La
Carina Supercuts, Inc., its successors and assigns are hereinafter
collectively referred to as "Maker") promises to pay to the order of
SUPERCUTS, INC. (Supercuts, Inc., its successors and assigns are hereinafter
collectively referred to as "Lender") at its office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, or such other place as the holder hereof
may from time to time appoint in writing, in lawful money of the United
States of America, the principal sum of FIVE HUNDRED FIFTY THOUSAND DOLLARS
($550,000), together with interest on the principal balance from time to time
unpaid at the rate of eight percent (8%) per annum. From and after the
occurrence of an Event of Default (as hereinafter defined) the outstanding
principal amount hereof shall bear interest at the rate of ten percent (10%)
per annum until paid in full. Interest will be computed on the daily
principal balance outstanding during the period from the last payment date to
the current payment date. Interest shall be the product resulting when
multiplying the rate of interest by the principal balance outstanding,
dividing by 360 and then multiplying by the actual number of days interest
has accrued.
Accrued interest on this Note shall be payable in arrears upon the
receipt by Maker of a statement from Lender, but in no event later than the
tenth day of each month for the immediately preceding month, with the first
such payment due no later than October 10, 1996. The principal indebtedness
evidenced by this Note shall be payable in a single installment on September
9, 2003, unless earlier declared due and payable as provided in this Note.
This Note may be prepaid in whole or in part at any time without premium
or penalty.
This Note has been issued pursuant to the terms of Section 7 of that
certain Master Development and Franchise Agreement, dated September 9, 1996
(the "Master Agreement"), between Lender and Maker. The terms, covenants,
conditions, provisions, stipulations and agreements of the Master Agreement
are hereby made a part of this Note, to the same extent and with the same
effect as if they were fully set forth herein. Maker does hereby covenant to
abide by and comply with each and every term, covenant, provision,
stipulation, promise, agreement and condition set forth in the Master
Agreement.
Maker shall remain liable for the payment of this Note, including
interest, notwithstanding any extensions of time of payment or any indulgence
of any kind or nature that Lender may grant to Maker or any guarantor,
whether with or without notice to Maker, and Maker hereby expressly waives
such notice. No release of any or all of the security given for this
obligation shall release any other maker, co-maker, surety, guarantor, or
other party hereto in any capacity.
Each of the following shall constitute an "Event or Default" under this
Note: (i) the failure of Maker to make any payment of the principal of or
interest on this Note when due and payable, (ii) the failure of Maker to
perform any of its obligations under the Master Agreement in accordance with
the terms thereof, or (iii) the failure of Maker to perform any of its
obligations under the documents and agreements delivered pursuant to the
Master Agreement (the "Documents"). Upon the occurrence of an Event of
Default, this Note shall become immediately due and payable and Lender shall
have all of the rights and remedies provided in the Master Agreement, as well
as those rights and remedies provided by any other applicable law, rule or
regulation.
In the event that Lender institutes legal proceedings to enforce the
provisions of this Note, Maker agrees to pay to Lender, in addition to any
indebtedness due and unpaid, all costs and expenses of such proceedings,
including reasonable attorneys' fees.
Lender shall not by any act of omission or commission be deemed to waive
any of its rights or remedies hereunder unless such waiver be in writing and
signed by an authorized officer of Lender and then only to the extent
specifically set forth therein. A waiver on one occasion shall not be
construed as continuing or as a bar to or waiver of such right or remedy on
any other occasion. All remedies conferred upon Lender by the Documents
shall be cumulative and none is exclusive, and such remedies may be exercised
concurrently or consecutively at Lender's option.
Except as expressly provided for in this Note, the Master Agreement or
any Document, every person at any time liable for the payment of the debt
evidenced hereby waives presentment for payment, demand, notice of nonpayment
of this Note, protest and notice of protest, trial by jury in any litigation
arising out of, relating to, or connected with this Note or any instrument
given as security herefor, all exemptions and homestead laws and all rights
thereunder and consents that Lender may extend the time of payment of any
part or the whole of the debt, or grant any other modifications or indulgence
pertaining to payment of this Note at any time, at the request of any other
person liable for said debt.
This Note is hereby expressly limited so that in no contingency or event
whatsoever, whether by acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to Lender for
the use, forebearance or detention of the money advanced or to be advanced
hereunder exceed the highest lawful rate permissible under the laws of the
State of California as applicable to Maker. If, from any circumstances
whatsoever, fulfillment of any provision of this Note or of any of the other
Documents shall, at the time performance of
2
such provisions shall be due, involve the payment of interest in excess of
that authorized by law, the obligation to be fulfilled shall be reduced to
the limit so authorized by law, and if, from any circumstances, Lender shall
ever receive as interest an amount which would exceed the highest lawful rate
applicable to Maker, such amount which would be excessive interest shall be
applied to the reduction of the unpaid principal balance of the indebtedness
evidenced hereby and not to the payment of interest.
All covenants, agreements, representations and warranties made herein,
in the Master Agreement and in the Documents are deemed to have been relied
upon by Lender, notwithstanding any investigation by Lender on its behalf.
All provisions contained in this Note which are contrary to, prohibited by or
invalid under applicable laws or regulations shall be deemed omitted from
this Note and shall not invalidate the remaining provisions hereof.
This Note is given and accepted as evidence of indebtedness only and not
in payment or satisfaction of any indebtedness or obligation.
The form and essential validity of this Note shall be governed by the
laws of the State of California. If any provision of this Note is prohibited
by, or is unlawful or unenforceable under, any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective
to the extent of such prohibition without invalidating the remaining
provisions hereof; provided that where the provisions of any such applicable
law may be waived, they hereby are waived by Maker to the full extent
permitted by law in order that this Note shall be deemed to be a valid and
binding Note in accordance with its terms.
Time is of the essence with respect to all Maker's obligations and
agreements under this Note.
This Note and all the provisions, conditions, promises and covenants
hereof shall inure to the benefit of Lender, its successors and assigns, and
shall be binding in accordance with the terms hereof upon Maker, its
successors and assigns, provided nothing herein shall be deemed consent to
any assignment restricted or prohibited by the terms of the Master Agreement
or the Documents.
All notices required hereunder shall be given in accordance with the
Master Agreement.
IN WITNESS WHEREOF, the undersigned has caused its duly authorized
officers to execute this Note on its behalf as of the date and year first set
forth above.
LA CARINA SUPERCUTS, INC.,
a Florida corporation
By:___________________________
Name:______________________
Title:_____________________
3
EXHIBIT K
PROMISSORY NOTE
$250,000 September 9, 1996
FOR VALUE RECEIVED, LA CARINA SUPERCUTS, INC., a Florida corporation (La
Carina Supercuts, Inc., its successors and assigns are hereinafter
collectively referred to as "Maker") promises to pay to the order of
SUPERCUTS, INC. (Supercuts, Inc., its successors and assigns are hereinafter
collectively referred to as "Lender") at its office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, or such other place as the holder hereof
may from time to time appoint in writing, in lawful money of the United
States of America, the principal sum of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000), together with interest on the principal balance which has been
advanced and which is from time to time unpaid at the rate of eight percent
(8%) per annum. From and after the occurrence of an Event of Default (as
hereinafter defined) the principal amount hereof shall bear interest at the
rate of ten percent (10%) per annum until paid in full. Interest will be
computed on the daily principal balance outstanding during the period from
the last payment date to the current payment date. Interest shall be the
product resulting when multiplying the rate of interest by the principal
balance outstanding, dividing by 360 and then multiplying by the actual
number of days interest has accrued.
Accrued interest on this Note shall be payable in arrears upon the
receipt by Maker of a statement from Lender, but in no event later than the
tenth day of each month for the immediately preceding month, with the first
such payment due no later than October 10, 1996. The principal indebtedness
evidenced by this Note shall be payable in a single installment on September
9, 1999, unless earlier declared due and payable as provided in this Note.
This Note may be prepaid in whole or in part at any time without premium
or penalty.
This Note has been issued pursuant to the terms of Section 6 of that
certain Master Development and Franchise Agreement, dated September 9, 1996
(the "Master Agreement"), between Lender and Maker. The terms, covenants,
conditions, provisions, stipulations and agreements of the Master Agreement
are hereby made a part of this Note, to the same extent and with the same
effect as if they were fully set forth herein. Maker does hereby covenant to
abide by and comply with each and every term, covenant, provision,
stipulation, promise, agreement and condition set forth in the Master
Agreement.
Maker shall remain liable for the payment of this Note, including
interest, notwithstanding any extensions of time of payment or any indulgence
of any kind or nature that Lender may grant to Maker or any guarantor,
whether with or without notice to Maker, and Maker hereby expressly waives
such notice. No release of any or all of the security given for this
obligation shall release any other maker, co-maker, surety, guarantor, or
other party hereto in any capacity.
Each of the following shall constitute an "Event or Default" under this
Note: (i) the failure of Maker to make any payment of the principal of or
interest on this Note when due and payable, (ii) the failure of Maker to
perform any of its obligations under the Master Agreement in accordance with
the terms thereof, or (iii) the failure of Maker to perform any of its
obligations under the documents and agreements delivered pursuant to the
Master Agreement (the "Documents"). Upon the occurrence of an Event of
Default, this Note shall become immediately due and payable and Lender shall
have all of the rights and remedies provided in the Master Agreement, as well
as those rights and remedies provided by any other applicable law, rule or
regulation.
In the event that Lender institutes legal proceedings to enforce the
provisions of this Note, Maker agrees to pay to Lender, in addition to any
indebtedness due and unpaid, all costs and expenses of such proceedings,
including reasonable attorneys' fees.
Lender shall not by any act of omission or commission be deemed to waive
any of its rights or remedies hereunder unless such waiver be in writing and
signed by an authorized officer of Lender and then only to the extent
specifically set forth therein. A waiver on one occasion shall not be
construed as continuing or as a bar to or waiver of such right or remedy on
any other occasion. All remedies conferred upon Lender by the Documents
shall be cumulative and none is exclusive, and such remedies may be exercised
concurrently or consecutively at Lender's option.
Except as expressly provided for in this Note, the Master Agreement or
any Document, every person at any time liable for the payment of the debt
evidenced hereby waives presentment for payment, demand, notice of nonpayment
of this Note, protest and notice of protest, trial by jury in any litigation
arising out of, relating to, or connected with this Note or any instrument
given as security herefor, all exemptions and homestead laws and all rights
thereunder and consents that Lender may extend the time of payment of any
part or the whole of the debt, or grant any other modifications or indulgence
pertaining to payment of this Note at any time, at the request of any other
person liable for said debt.
This Note is hereby expressly limited so that in no contingency or event
whatsoever, whether by acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to Lender for
the use, forebearance or detention of the money advanced or to be advanced
hereunder exceed the highest lawful rate permissible under the laws of the
State of California as applicable to Maker. If, from any circumstances
whatsoever, fulfillment of any provision of this Note or of any of the other
Documents shall, at the time performance of
2
such provisions shall be due, involve the payment of interest in excess of
that authorized by law, the obligation to be fulfilled shall be reduced to
the limit so authorized by law, and if, from any circumstances, Lender shall
ever receive as interest an amount which would exceed the highest lawful rate
applicable to Maker, such amount which would be excessive interest shall be
applied to the reduction of the unpaid principal balance of the indebtedness
evidenced hereby and not to the payment of interest.
All covenants, agreements, representations and warranties made herein,
in the Master Agreement and in the Documents are deemed to have been relied
upon by Lender, notwithstanding any investigation by Lender on its behalf.
All provisions contained in this Note which are contrary to, prohibited by or
invalid under applicable laws or regulations shall be deemed omitted from
this Note and shall not invalidate the remaining provisions hereof.
This Note is given and accepted as evidence of indebtedness only and not
in payment or satisfaction of any indebtedness or obligation.
The form and essential validity of this Note shall be governed by the
laws of the State of California. If any provision of this Note is prohibited
by, or is unlawful or unenforceable under, any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective
to the extent of such prohibition without invalidating the remaining
provisions hereof; provided that where the provisions of any such applicable
law may be waived, they hereby are waived by Maker to the full extent
permitted by law in order that this Note shall be deemed to be a valid and
binding Note in accordance with its terms.
Time is of the essence with respect to all Maker's obligations and
agreements under this Note.
This Note and all the provisions, conditions, promises and covenants
hereof shall inure to the benefit of Lender, its successors and assigns, and
shall be binding in accordance with the terms hereof upon Maker, its
successors and assigns, provided nothing herein shall be deemed consent to
any assignment restricted or prohibited by the terms of the Master Agreement
or the Documents.
All notices required hereunder shall be given in accordance with the
Master Agreement.
IN WITNESS WHEREOF, the undersigned has caused its duly authorized
officers to execute this Note on its behalf as of the date and year first set
forth above.
LA CARINA SUPERCUTS, INC.,
a Florida corporation
By:___________________________
Name:_______________________
Title:______________________
3
GUARANTY
GUARANTY, dated as of September 9, 1996, of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, an
individual ("Guarantor"), in favor of "SUPERCUTS, INC.," a Delaware
corporation ("Supercuts").
W I T N E S S E T H:
WHEREAS, La Carina Supercuts, Inc., a Florida corporation ("La Carina"),
has entered each of the documents and agreements set forth on Exhibit A
attached hereto with Supercuts (collectively, the "Documents").
WHEREAS, Guarantor is the owner of all of the outstanding capital stock
of La Carina and Guarantor will derive direct and indirect economic benefits
from the transactions contemplated by the Documents; and
WHEREAS, as a condition precedent to Supercuts's entering into the
Documents and the transactions contemplated thereby, Supercuts is requiring
that Guarantor shall have executed and delivered this Guaranty;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce Supercuts to enter into the Documents
and the transactions contemplated thereby, it is agreed as follows:
1. DEFINITIONS. Capitalized terms used herein shall have the meanings
assigned to them in the foregoing recitals and as set forth below:
"OBLIGATIONS" shall mean all debts, liabilities and obligations for
monetary amounts and all covenants and duties regarding such amounts of any
kind or nature, present or future, of La Carina arising under the Documents.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether Federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"PROMISSORY NOTES" shall mean, collectively, the Promissory Note, dated
September 9, 1996, issued by La Carina to Supercuts in the principal amount
of $250,000 and the Promissory Note, dated September 9, 1996, issued by La
Carina to Supercuts in the principal amount of $550,000.
References to this "Guaranty" shall mean this Guaranty, including all
amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to the Guaranty as the same may be in
effect at the time such reference becomes operative.
2. THE GUARANTY. The guaranty of Guarantor hereunder is as follows:
2.1 GUARANTY OF OBLIGATIONS OF LA CARINA. Guarantor hereby
unconditionally guarantees to Supercuts, and its successors, indorsees,
transferees and assigns, the prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of the Obligations. Guarantor
agrees that this Guaranty is a guaranty of payment and performance and not
of collection, and that his obligations under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, any Document or any other
agreement, document or instrument to which La Carina and/or Guarantor
is or are or may become a party;
(b) the absence of any action to enforce this Guaranty or any
Document or the waiver or consent by Supercuts with respect to any of
the provisions thereof;
(c) the existence, value or condition of, or failure to perfect
Supercuts's lien against, any security for the Obligations or any
action, or the absence of any action, by Supercuts in respect thereof
(including, without limitation, the release of any such security); or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor,
it being agreed by Guarantor that his obligations under this Guaranty shall
not be discharged until the payment and performance, in full, of the
Obligations. Guarantor shall be regarded, and shall be in the same
position, as principal debtor with respect to the Obligations. Guarantor
expressly waives all rights he may have, now or in the future, under any
statute, or at common law, or at law or in equity, or otherwise, to compel
Supercuts to proceed in respect of the Obligations against La Carina or any
other party or against any security for the payment and performance of the
Obligations before proceeding against, or as a condition to proceeding
against, Guarantor. Guarantor agrees that any notice or directive given at
any time to Supercuts which is inconsistent with the waiver in the
immediately preceding sentence shall be null and void and may be ignored by
Supercuts, and, in addition, may not be pleaded or introduced as evidence
in any litigation relating to this Guaranty for the reason that such
pleading or introduction would be at variance with the written terms of
this Guaranty, unless Supercuts has or have specifically agreed otherwise
in
2
writing. It is agreed among Guarantor and Supercuts that the foregoing
waivers are of the essence of the transaction contemplated by the Documents
and that, but for this Guaranty and such waivers, Supercuts would decline
to enter into the Documents.
2.2 DEMAND BY SUPERCUTS. In addition to the terms of this
Guaranty set forth in Section 2.1 hereof, and in no manner imposing any
limitation on such terms, it is expressly understood and agreed that, if
the then outstanding principal amount of the Obligations (together with
all accrued interest thereon) is declared to be immediately due and
payable, then, Guarantor shall, upon demand in writing therefor by
Supercuts to Guarantor, pay to Supercuts the entire outstanding
Obligations due and owing to Supercuts.
2.3 ENFORCEMENT OF GUARANTY. In no event shall Supercuts have any
obligation (although it is entitled, at its option) to proceed against La
Carina or any other person or any real or personal property pledged to
secure the Obligations before seeking satisfaction from Guarantor, and
Supercuts may proceed, prior or subsequent to, or simultaneously with, the
enforcement of Supercuts's rights hereunder, to exercise any right or
remedy which it may have against any property, real or personal, as a
result of any lien it may have as security for all or any portion of the
Obligations.
2.4 WAIVER. In addition to the waivers contained in Section 2.1
hereof, Guarantor waives, and agrees that he shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit
or advantage of, any appraisal, valuation, stay, extension, marshalling
of assets or redemption laws, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the
performance by Guarantor of his obligations under, or the enforcement by
Supercuts of, this Guaranty. Guarantor hereby waives diligence (whether
for non-payment or protest or of acceptance, maturity, extension of
time, change in nature or form of the Obligations, acceptance of further
security, release of further security, composition or agreement arrived
at as to the amount of, or the terms of, the Obligations, notice of
adverse change in La Carina's financial condition or any other fact
which might materially increase the risk to Guarantor), presentment and
demand with respect to any of the Obligations or all other demands
whatsoever and waives the benefit of all provisions of law which are or
might be in conflict with the terms of this Guaranty. Guarantor
represents, warrants and agrees that, as of the date of this Guaranty,
his obligations under this Guaranty are not subject to any defense
against Supercuts or La Carina of any kind. Guarantor further agrees
that his obligations under this Guaranty shall not be subject to any
counterclaims, offsets or defenses against Supercuts or against La
Carina of any kind which may arise in the future.
2.5 BENEFITS OF GUARANTY. The provisions of this Guaranty are for
the benefit of Supercuts and its successors, transferees, indorsees and
assigns, and nothing herein contained shall impair, as between La Carina
and Supercuts, the obligations of La Carina under the Documents. In the
event all or any part of the Obligations are transferred,
3
indorsed or assigned by Supercuts to any person or persons in accordance
with the provisions of the Documents, any reference to "Supercuts"
herein shall be deemed to refer equally to such Person or Persons.
2.6 MODIFICATION OF OBLIGATIONS, ETC. If Supercuts shall at any
time or from time to time, with or without the consent of, or notice to,
Guarantor:
(a) change or extend the manner, place or terms of payment of,
or renew or alter all or any portion of, the Obligations;
(b) take any action under or in respect of the Documents in the
exercise of any remedy, power or privilege contained therein or
available to it at law, equity or otherwise, or waive or refrain from
exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Documents;
(d) extend or waive the time for any of Guarantor's, La
Carina's or any other Person's performance of, or compliance with,
any term, covenant or agreement on its part to be performed or
observed under the Documents, or waive such performance or
compliance or consent to a failure of, or departure from, such
performance or compliance;
(e) take and hold security or collateral for the payment of the
Obligations guaranteed hereby or sell, exchange, release, dispose of,
or otherwise deal with, any property pledged, mortgaged or conveyed,
or in which Supercuts has been granted a lien, to secure any
indebtedness of Guarantor or La Carina to Supercuts;
(f) release anyone who may be liable in any manner for the
payment of any amounts owed by Guarantor or La Carina to Supercuts;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
Guarantor or La Carina are subordinated to the claims of Supercuts;
and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by Guarantor or La Carina to Supercuts in such manner as
Supercuts shall determine in their discretion;
then Supercuts shall not incur any liability to Guarantor pursuant hereto
as a result thereof, and no such action shall impair or release the
obligations of Guarantor under this Guaranty.
4
2.7 REINSTATEMENT. This Guaranty shall remain in full force and
effect and continue to be effective in the event any petition be filed
by or against La Carina or Guarantor for liquidation or reorganization,
in the event La Carina or Guarantor becomes insolvent or makes an
assignment for the benefit of creditors or in the event a receiver or
trustee be appointed for all or any significant part of La Carina's or
Guarantor's assets, and shall continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or
returned by Supercuts, whether as a "voidable preference", "fraudulent
conveyance", or otherwise, all as though such payment or performance had
not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
2.8 ELECTION OF REMEDIES. If Supercuts may, under applicable law,
proceed to realize its benefits under any of the Documents giving
Supercuts a lien upon any collateral, whether owned by La Carina or by
any other Person, either by judicial foreclosure or by non-judicial sale
or enforcement, Supercuts may, at its sole option, determine which of
its remedies or rights it may pursue without affecting any of its rights
and remedies under this Guaranty. If, in the exercise of any of its
rights and remedies, Supercuts shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against La
Carina or any other person, whether because of any applicable laws
pertaining to "election of remedies" or the like, Guarantor hereby
consents to such action by Supercuts and waives any claim based upon
such action, even if such action by Supercuts shall result in a full or
partial loss of any rights of subrogation which Guarantor might
otherwise have had but for such action by Supercuts. Any election of
remedies which results in the denial or impairment of the right of
Supercuts to seek a deficiency judgment against La Carina shall not
impair Guarantor's obligation to pay the full amount of the Obligations.
In the event Supercuts shall bid at any foreclosure or trustee's sale or at
any private sale permitted by law or the Documents, Supercuts may bid all
or less than the amount of the Obligations and the amount of such bid need
not be paid by Supercuts but shall be credited against the Obligations.
The amount of the successful bid at any such sale, conducted in a
commercially reasonable manner, whether Supercuts or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value
of the collateral and the difference between such bid amount and the
remaining balance of the Obligations shall be conclusively deemed to be the
amount of the Obligations guaranteed under this Guaranty, notwithstanding
that any present or future law or court decision or ruling may have the
effect of reducing the amount of any deficiency claim to which Supercuts
might otherwise be entitled but for such bidding at any such sale.
5
2.9 CONTINUING GUARANTY. Guarantor agrees that this Guaranty is a
continuing guaranty and shall remain in full force and effect until the
payment and performance in full of the Obligations.
2.10 WAIVER OF SUBROGATION. Guarantor hereby waives any right of
subrogation Guarantor has or may have against La Carina with respect to
Guarantor's obligations hereunder. In addition, Guarantor hereby waives
any right to proceed against La Carina, now or hereafter, for contribution,
indemnity, reimbursement, and any other suretyship rights and claims,
whether direct or indirect, liquidated or contingent, whether arising under
express or implied contract or by operation of law, which Guarantor may now
have or hereafter have against La Carina with respect to Guarantor's
obligations hereunder. Guarantor also hereby waives any rights to recourse
to or with respect to any asset of La Carina. Guarantor agrees that in
light of the immediately foregoing waivers, the execution of this Guaranty
shall not be deemed to make Guarantor a "creditor" of La Carina, and that
for purposes of Sections 547 and 550 of the Bankruptcy Code, Guarantor
shall not be deemed a "creditor" of La Carina. Guarantor acknowledges and
agrees that this waiver is intended to benefit Supercuts and shall not
limit or otherwise affect Guarantor's liability hereunder or the
enforceability of this Guaranty, and that Supercuts and its successors and
assigns are intended third party beneficiaries of the waivers and
agreements set forth in this Section 2.10 and their rights under this
Section 2.10 shall survive payment in full of the Guaranteed Obligations.
3. DELIVERIES. Guarantor shall deliver to Supercuts, concurrently with
the execution of this Guaranty, each of the following documents duly executed
by Guarantor in form and content acceptable to Supercuts:
(a) Pledge and Security Agreement;
(b) Stock Certificate and stock powers;
(c) Assignment of Life Insurance Policy as Collateral; and
(d) UCC-1 Financing Statement.
2. REPRESENTATIONS AND WARRANTIES. To induce Supercuts to enter into
the Documents and the transactions contemplated thereby, Guarantor makes the
following representations and warranties to Supercuts, each and all of which
shall survive the execution and delivery of this Guaranty:
2.1 NO CONFLICT. The execution, delivery and performance of this
Guaranty and all instruments and documents to be delivered by Guarantor
in connection with this Guaranty, will not violate any law or
regulation, or any order or decree of any court or governmental
instrumentality, will not conflict with or result in the breach of, or
constitute a default under any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which Guarantor is a party or by
which Guarantor or any of his property is bound, will
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not result in the creation or imposition of any lien upon any of the
property of Guarantor and the same do not require the consent or
approval of any governmental body, agency, authority or any other Person
except those already obtained.
2.2 ENFORCEABILITY. This Guaranty and each of the instruments and
documents delivered by Guarantor in connection with this Guaranty
constitute the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms.
3. PERMITTED ASSIGNMENT BY SUPERCUTS. Supercuts may freely assign its
rights and delegate its duties under this Guaranty, but no such assignment or
delegation shall increase or diminish Guarantor's obligations hereunder.
Supercuts agrees to give Guarantor prompt notice of such assignment or
delegation and agrees to use its best efforts to give such notice at least
three (3) business days prior to such assignment or delegation, but the
consent of Guarantor shall not be required for any such assignment or
delegation and failure to give such notice shall not affect the validity or
enforceability of any such assignment or delegation or this Guaranty or
subject Supercuts to any liability.
4. FURTHER ASSURANCES. Guarantor agrees, upon the written request of
Supercuts, to execute and deliver to Supercuts, from time to time, any
additional instruments or documents reasonably considered necessary by Supercuts
to cause this Guaranty to be, become or remain valid and effective in accordance
with its terms.
5. PAYMENTS FREE AND CLEAR OF TAXES. All payments required to be made
by Guarantor hereunder shall be made to Supercuts free and clear of, and
without deduction for, any and all present and future taxes, withholdings,
levies, duties, and other governmental charges ("Taxes"), excluding such
income and franchise taxes of the United States and/or any political
subdivision thereof with respect to such amounts which would otherwise have
been payable by Supercuts if La Carina had paid the Obligations to Supercuts
in accordance with the terms of the Documents. Upon request by Supercuts,
Guarantor shall furnish to Supercuts a receipt for any Taxes paid by
Guarantor pursuant to this Section 7 or, if no Taxes are payable with respect
to any payments required to be made by Guarantor hereunder, evidence
reasonably acceptable to Supercuts that no such Taxes are payable. If Taxes
are paid by Supercuts, Guarantor will, upon demand of Supercuts, and whether
or not such Taxes shall be correctly or legally asserted, indemnify Supercuts
for such payments, together with any interest, penalties and expenses in
connection therewith plus interest thereon at the rate of ten percent (10%)
per annum.
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6. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT; AMENDMENTS. This Guaranty, together with the
documents delivered in accordance with Section 3 and the other Documents,
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements relating to a
guaranty of the Obligations and may not be amended or supplemented except
by a writing signed by Guarantor and Supercuts.
6.2 HEADINGS. The headings in this Guaranty are for convenience of
reference only and are not part of the substance of this Guaranty.
6.3 SEVERABILITY. In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision or provisions in every
other respect and the remaining provisions of this Guaranty shall not be
in any way impaired.
6.4 NOTICES. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may
be given to or served upon any of the parties by another, or whenever any
of the parties desires to give or serve upon another any such communication
with respect to this Guaranty, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and either
shall be delivered pursuant to the provisions of Section 21 of the Master
Development and Franchise Agreement, dated September 9, 1996, between La
Carina and Supercuts, addressed as follows:
(a) If to Supercuts, at: Supercuts, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(a) If to Guarantor, at: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other
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communication hereunder shall be deemed to have been duly given or
served on the date on which personally delivered, in person, by delivery
service or by overnight courier service, with receipt acknowledged, the
date of telecopy transmission or three (3) business days after the same
shall have been deposited with the United States mail, postage prepaid.
3.1 BINDING EFFECT. This Guaranty shall bind Guarantor and shall
inure to the benefit of Supercuts and its successors and assigns.
Guarantor may not assign this Guaranty.
3.2 NON-WAIVER. The failure of Supercuts to enforce any right or
remedy hereunder, or promptly to enforce any such right or remedy, shall
not constitute a waiver thereof, nor give rise to any estoppel against
Supercuts, nor excuse Guarantor from its obligations hereunder. Any waiver
of any such right or remedy by Supercuts must be in writing and signed by
Supercuts.
3.3 TERMINATION. This Guaranty shall terminate and be of no
further force or effect at such time as the Obligations shall be paid
and performed in full and the Documents are terminated. Upon payment
and performance in full of the Obligations and termination of the
Documents, Supercuts shall deliver to Guarantor such documents as
Guarantor may reasonably request to evidence such termination.
3.4 GOVERNING LAW; WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. THE
TERMS OF THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA (EXCLUSIVE
OF ANY RULES AS TO CONFLICT OF LAWS) AND THE LAWS OF THE UNITED STATES
APPLICABLE THEREIN. IF AND TO THE EXTENT THAT GUARANTOR AND SUPERCUTS
AGREE NOT TO PROCEED BY MEANS OF ARBITRATION OR ARE NOT REQUIRED TO PROCEED
BY ARBITRATION, GUARANTOR WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER OR
UNDER THE OTHER DOCUMENTS DELIVERED IN CONNECTION WITH THIS GUARANTY OR
RELATING TO EACH OF THE FOREGOING. AS PART OF THE CONSIDERATION FOR NEW
VALUE THIS DAY RECEIVED, GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN SAN FRANCISCO COUNTY, CALIFORNIA
AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON GUARANTOR, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL
DIRECTED TO GUARANTOR AT THE ADDRESSES PROVIDED IN SECTION 8.4 ABOVE AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED THREE (3) BUSINESS DAYS
AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE UNITED STATES MAILS,
POSTAGE PREPAID. GUARANTOR WAIVES ANY OBJECTION TO VENUE OF
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ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
3.5 ARBITRATION. Except as provided below, all controversies,
disputes or claims between Supercuts and Guarantor in connection with,
arising from or with respect to: any provision of this Guaranty or any
other related agreement; the relationship of the parties; or the
validity of this Guaranty or any other related agreement, or any
provision of such agreement, which is not resolved within 15 days after
either party notifies the other in writing of such controversy, dispute
or claim, shall be submitted for arbitration to the San Francisco,
California office of the American Arbitration Association on demand of
either party. The arbitration proceedings will be conducted in San
Francisco, California and heard by one arbitrator in accordance with the
then current Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator has the right to award or include in his or
her award any relief which he or she deems proper in the circumstances,
including, without limitation, money damages (with interest on unpaid
amounts from date due), specific performance, injunctive relief and
attorneys' fees. The award and decision of the arbitrator will be
conclusive and binding upon all parties, and judgment upon the award may
be entered in any court of competent jurisdiction. The parties
acknowledge and agree that any arbitration award may be enforced against
either or both of them in a court of competent jurisdiction, and each
waives any right to contest the validity or enforceability of the award.
The parties further agree to be bound by the provision of any statute of
limitations which otherwise would be applicable to the controversy,
dispute or claim which is the subject of the arbitration proceeding.
Without limiting the foregoing, the parties are entitled in any
arbitration proceeding to the entry of an order by a court of competent
jurisdiction pursuant to an opinion of the arbitrator for specific
performance of any of the requirements of this Guaranty. This
provision will continue in full force and effect subsequent to and
notwithstanding expiration or termination of this Guaranty. All matters
relating to arbitration will be governed by the Federal Arbitration Act (9
U.S.C. Sections 1 ET SEQ.) and not by any state arbitration law.
Despite Supercuts's and Guarantor's agreement to arbitrate, each has
the right in a proper case to seek temporary restraining orders and
temporary or preliminary injunctive relief from a court of competent
jurisdiction; provided, however, that Supercuts and Guarantor must
contemporaneously submit their dispute for arbitration on the merits as
provided in this Section.
3.6 SECURITY. The obligations of Guarantor under this Guaranty are
secured in part pursuant to the terms of the Pledge and Security Agreement
referred to in Section 3.
3.7 COUNTERPARTS. This Guaranty may be executed in any number of
counterparts which shall individually and collectively constitute one
agreement.
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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first above written.
_________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Accepted and acknowledged by
SUPERCUTS, INC.
By:_________________________________
Name:_____________________________
Title:____________________________
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