Franchise Agreement - Mrs. Fields Development Corp. and Butterwings Inc.
FRANCHISE AGREEMENT
BETWEEN
MRS. FIELDS DEVELOPMENT CORPORATION
AND
BUTTERWINGS, INC.
FRANCHISEE
<PAGE>
MRS. FIELDS DEVELOPMENT CORPORATION
FRANCHISE AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 .DEFINITIONS; 1REAMBLES; AND ACKNOWLEDGMENTS ..................... 1
1.1Date of Agreement ................................................ 1
1.2Certain Definitions .............................................. 1
1.3Preambles ........................................................ 3
1.4Acknowledgments .................................................. 3
ARTICLE 2GRANT OF FRANCHISE ................................................ 3
2.1Franchise ........................................................ 3
2.2Initial Term of the Franchise Agreement .......................... 4
2.3Renewals ......................................................... 4
2.4Reservation of Certain Rights .................................... 4
ARTICLE 3SITE SELECTION, LEASE OF PREMISES AND DEVELOPMENT OF THE LICENSED
STORE ................................................. 4
3.1 Site Selection .................................................. 4
3.2 Acquisition of the Premises ..................................... 5
(a)Your Obligation to Obtain Lease 5
(b)Use of Premises Currently Under Lease to Us 5
(c)Expiration of Lease 6
(d)Effect of our Approval of Lease 6
3.3Licensed Store Development ....................................... 6
(a)Plans and Specifications ........................ 6
(b)Contractors ..................................... 6
(c)Development Obligations ......................... 6
3.4Fixtures, Furnishings, Equipment and Signs .............................. 6
3.5Licensed Store Opening .................................................. 7
3.6Grand Opening Promotion ................................................. 7
ARTICLE 4TRAINING AND GUIDANCE ............................................. 7
4.1 Training .......................................................... 7
(a) Training for You and the Licensed Store Manager ................... 7
(b) Use of the Licensed Store for Training ............................ 8
(C) Failure to Complete Training ...................................... 8
(d) Refresher Training ................................................ 8
4.2 Operations Manual ............................................... 8
4.3 Guidance ........................................................ 8
ARTICLE 5 FEES ............................................................. 9
5.1 The Franchise Fee ............................................... 9
5.2 Royalty Fee ..................................................... 9
5.3 Late Charge; Interest on Late Payments .......................... 9
5.4 Application of Payments ......................................... 9
ARTICLE 6 ADDITIONAL OBLIGATIONS .......................................... 9
6.1 System Standards ............................................... 9
6.2 Performance of Duties and Obligations .......................... 11
6.3 Restrictions on Operations and Customers ....................... 11
6.4 Accounting, Reports and Financial Statements ................... 11
(a) Gross Revenue Reports ......................................... 11
(b) Monthly Financial Reports ..................................... 11
(c) Semi-Annual Reports ........................................... 11
(d) Tax Returns ................................................... 11
6.5 Retention of Records .................................................. 12
6.6 Our Right to Inspect the Licensed Store ............................... 12
6.7 Our Right to Audit .................................................... 12
6.8 Surveys ............................................................... 13
6.9 Guaranties by Entity Owners ........................................... 13
6.10 Obligations with Respect to Restricted Persons . . ; ................. 13
6.11 Insurance ............................................................ 13
(a) Casualty Insurance ..................................... 13
(b) Liability Insurance .................................... 13
(c) Workmen's Compensation Insurance ....................... 13
(d) Other Insurance Policies ............................... 13
(e) Policy Requirements .................................... 13
(f) Release of Insured Claims .............................. 14
ARTICLE 7 MARKETING AND PROMOTION ......................................... 14
7.1 The Marketing Fund .................................................... 14
(a) Establishment of Marketing Funds; Marketing Fund
Contributions ............................................... 14
(b) Right to Direct Operation of the Marketing Fund ............. 14
(c) Accounting for the Marketing Fund ........................... 14
(d) Benefits to Individual Stores ............................... 15
(e) Collection of Marketing Fund Contributions .................. 15
(f) Suspension or Termination of Marketing Fund; Reinstatement15
7.2Advertising and Promotional Activities by You .......................... 15
7.3Marketing Contributions From Suppliers ................................. 16
7.4Our Advertising Materials .............................................. 16
ARTICLE 8 CONFIDENTIAL INFORMATION AND USE
OF THE MARKS ....................................................... 16
8.1Confidential Information ............................................... 16
8.2Concepts Developed by You .............................................. 16
8.3Ownership and Goodwill of Marks ........................................ 16
8.4Limitations on Your Use of Marks ....................................... 17
8.5Discontinuance of Use of Marks ......................................... 17
8.6Notification of Infringements and Claims ............................... 17
8.7Our Indemnification of You ............................................. 17
8.8Copyrights ............................................................. 17
ARTICLE 9 EXCLUSIVE RELATIONSHIP .......................................... 18
9.1 Non-Competition ....................................................... 18
ARTICLE 10 TRANSFERS ............................................. 18
10.1Transfers by Us ....................................... 18
10.2Restrictions on Transfers by You ...................... 18
10.3Conditions for Approval of Transfers by You ........... 19
(a) Character ............................................. 19
(b) Business Experience ................................... 19
(c) Training .............................................. 19
(d) Satisfaction of Obligations ........................... 19
(e) Assumption of Agreement ............................... 19
(f) Payment of Transfer Fees .............................. 19
(g) Release ............................................... 19
(h) Approval of Terms of Transfer ......................... 19
(i) Subordination ......................................... 19
(j) Non-Competition Agreement ............................. 19
(k) Landlord Consent ...................................... 20
(1) Non-Use of Marks ...................................... 20
10.4 Transfer to a Wholly-Owned Corporation .................. 20
10.5 Our Right of First Refusal .............................. 20
(a)Submission of Offers to Us ........................... 20
(b)Our Right to Purchase ................................ 21
(c)Non-Competition Restriction .......................... 21
(d)Non-Exercise by Us of Our Right of First Refusal ..... 21
10.6 Death or Permanent Disability ........................ 21
10.7 Effect of Consent to Transfer ........................ 21
ARTICLE 11 DEFAULTS ....................................................... 22
11.1 Our Defaults .................................................. 22
11.2 Your Defaults ................................................. 22
(a) Insolvency ................................................... 22
(b) Unauthorized Transfer ........................................ 22
(C) Misstatements and other Adverse Developments ................. 22
(d) Unauthorized Use of Marks or Confidential Information ........ 22
(e) Abandonment .................................................. 22
(f) Breach of Lease; Loss of Right of Possession ................. 22
(g) Failure to Comply with Certain System Standards and
Health Requirements .......................................... 22
(h) Understatements of Gross Revenues ............................ 23
(i) Failure to Make Payments ..................................... 23
(j) Failure to Pay Taxes ......................................... 23
(k) Other Breaches ............................................... 23
(1) Repeated Breaches ............................................ 23
(m) Termination Without Cause .................................... 23
(n) Financing Defaults ........................................... 23
ARTICLE 12 TERMINATION OF AGREEMENT ..................................... 23
12.1 Termination Upon Expiration of Term ........................... 23
12.2 Your Right to Terminate if We Default ......................... 23
12.3 Termination by You without Cause .............................. 23
12.4 Our Right to Terminate if You Default ......................... 24
12.5 Our Right to Terminate in Certain Other Circumstances ......... 24
(a)Failure to Complete Training ........................... 24
(b)Failure to Commence Operations ......................... 24
12.6 Your Opportunity to Acquire a Successor Franchise Agreement ... 24
(a)Conditions to Issuance of a Successor Franchise ........ 24
(b)Grant of a Successor Franchise ......................... 24
(c)Agreements and Releases to be Executed ................. 25
12.7 Payment of Amounts Owed to Us and Others following Termination... 25
12.8 Discontinuance of the Use of the Marks following Termination .... 25
12.9 Discontinuance of Use of Confidential Information following
Termination ................................................... 26
12.10 Covenant Not to Compete ........................................ 26
12.11 Our Option to Purchase Licensed Stores ......................... 26
(a) Option to Purchase ........................................ 26
(b) Purchase Price ............................................ 27
(c) Payment of Purchase Price ................................. 27
(d) Lease of Premises ......................................... 27
(e) Interim Management ........................................ 27
(f) Termination of Franchise Agreement ........................ 28
12.12 Continuing Obligations .............................................. 28
ARTICLE 13 RELATIONSHIP OF THE PARTIES/
INDEMNIFICATION .................................. 28
13.1 Independent Contractors ............................................ 28
13.2 No Liability for the Act of Other Party ............................ 28
13.3 Taxes .............................................................. 28
13.4 Indemnification .................................................... 28
ARTICLE 14 SECURITY AGREEMENT ............................................ 29
14.1 Security Agreement ................................................. 29
ARTICLE 15 GENERAL PROVISIONS ............................................ 29
15.1 Severability ........................................................ 29
15.2 Enforcement of Non-Competition Provisions ........................... 30
15.3 Rights Provided by Law .............................................. 30
15.4 Waivers by Either of Us ............................................. 30
15.5 Certain Acts Not to Constitute Waivers .............................. 30
15.6 Excusable Non-Performance ........................................... 30
15.7 Injunctive Relief ................................................... 31
15.8 Rights of Parties Are Cumulative .................................... 31
15.9 Costs and Attorneys' Fees ........................................... 31
15.10 Arbitration ........................................................ 31
(a) Disputes Subject to Arbitration ..................................... 31
(b) Excluded Matters .................................................... 31
(c) Awards .............................................................. 31
(d) Permissible Parties ................................................. 32
(e) Survival ............................................................ 32
15.11 Governing Law ...................................................... 32
15.12 Consent to Jurisdiction ............................................ 32
15.13 Waiver of Punitive Damages ......................................... 32
15.14 Waiver of Jury Trial ............................................... 32
15.15 Binding Effect ..................................................... 32
15.16 Limitation of Claims ............................................... 33
15.17 No Third Party Beneficiaries ....................................... 33
15.18 Approvals .......................................................... 33
15.19 Headings ........................................................... 33
15.20 Joint and Several Liability ........................................ 33
15.21 Counterparts ....................................................... 33
15.22 Notices and Payments ............................................... 33
15.23 Entire Agreement ................................................... 33
<PAGE>
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the "Agreement') is between MRS. FIELDS
DEVELOPMENT CORPORATION, a Delaware corporation, with its principal business
address at 462 West Bearcat Drive, Salt Lake City, Utah 84115 (referred to in
this Agreement as 'we' and like terms), and BUTTERWINGS, INC., an Illinois
corporation, whose principal address is 2345 Pembroke Avenue, Hoffman Estates,
IL 60195 (referred to in this Agreement as 'you' and like terms).
OUR AGREEMENT WITH YOU: By signing this Agreement, you and we agree to
all of the terms and provisions in this Agreement and in the Exhibits to this
Agreement. By signing this Agreement, you are also affirming that you understand
and accept the Preamble and Acknowledgements in Article 1 of this Agreement.
ARTICLE 1
DEFINITIONS; PREAMBLES; AND ACKNOWLEDGMENTS
1.1 Date of Agreement. The date of this Agreement is December 23rd, 1995.
1.2 Certain Definitions.
(a) 'Affiliate,' as used in relation to us, means any person or
entity that directly or indirectly owns or controls us, is
directly or indirectly owned or controlled by us or is under
common control with us.
(b) 'Competitive Business' means any business operating or granting
franchises or licenses to others to operate a cookie, bakery or
dessert outlet or any similar food service business. The term
'Competitive Business' does not include a business which is (i)
owned and operated by you, (ii) is in existence on the date of
this Agreement, and (iii) has been disclosed to us in writing
prior to execution of this Agreement.
(c) 'Confidential Information' means any information relating to the
Mrs. Fields Products or the development or operation of Mrs.
Fields Cookies Stores, including site selection criteria; recipes
and methods for the preparation of Mrs. Fields Products; methods,
techniques, formats, specifications, systems, procedures, sales
and marketing techniques and knowledge of and experience in the
development and operation of Mrs. Fields Cookies Stores;
marketing programs for Mrs. Fields Cookies Stores; knowledge of
specifications for and suppliers of certain Mrs. Fields Products,
materials, supplies, equipment, furnishings and fixtures; and
knowledge of operating results and financial performance of Mrs.
Fields Cookies Stores.
(d) 'Controlling Interest' means an interest, the ownership of which
empowers the holder to exercise a controlling influence over the
management, policies or personnel of an Entity. Ownership of 10%
or more of the equity or voting securities of a corporation,
limited liability company or limited liability partnership or
ownership of any general partnership interest in a general or
limited partnership will be deemed conclusively to constitute a
Controlling Interest in the corporation, limited liability
company, or partnership, as the case may be.
(e) 'Entity' means a corporation, general partnership, joint venture,
limited partnership, limited liability partnership, limited
liability company, trust, estate or other business entity.
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(f) "Entity Owner' means, with respect to an Entity, any shareholder
owning directly or beneficially 10% or more of any class of
securities of the Entity; any general partner or co-venturer in
the Entity; any partner in a limited liability partnership or
member in a limited liability company owning directly or
beneficially 10% or more of the ownership interests in the
limited liability partnership or limited liability company; the
trustees or administrators of any trust or estate; and any
beneficiary of a trust or estate owning, directly or
beneficially, 10% or more of the interests in the trust or
estate. If any Entity Owner within the scope of this definition
is itself an Entity (including an Entity Owner that is an Entity
Owner because of this sentence), the term 'Entity Owner' also
includes Entity Owners (as defined in the preceding sentence) in
the Entity. It is the intent of this definition to 'trace back'
and include within the definition of Entity Owner all natural
persons owning the requisite interests to qualify as Entity
Owners.
(g) 'Gross Revenues' means the aggregate amount of all sales of Mrs.
Fields Products, other items, and services made and rendered in
connection with the operation of each Licensed Store (as defined
in Section 2.11(a) below), including sales made at or away from
the premises of the Licensed Store, whether for cash or credit,
but excluding all federal, state or municipal sales, use, or
service taxes collected from customers and paid to the
appropriate taxing authority.
(h) 'Marks' means any trade names, trademarks, service marks and
other commercial symbols, including the trade and service marks
'MRS. FIELDS' and 'MRS. FIELDS COOKIES' and associated logos,
used from time to time in the operation of Mrs. Fields Retail
Outlets and sale of Mrs. Fields Products.
(i) 'Mrs. Fields Cookies Store' means a retail snack, dessert, and
beverage outlet selling any Mrs. Fields Products and other items
and services specified by us. The term "Mrs. Fields Cookies
Store' includes cookie carts and kiosks selling the Products.
Mrs. Fields Cookies Stores that are offering an expanded product
line may also be designated as 'Mrs. Fields Bakery Stores'.
(j) 'Mrs. Fields Retail Outlet' means any store or outlet, such as a
Mrs. Fields Cookies Store, a Mrs. Fields Bakery Store, a mail
order outlet, or an in-store bakery outlet located in a retail
grocery, fast food, convenience or other retail store, which
sells any of the Mrs. Fields Products under the Marks or other
trademarks or service marks. A Mrs. Fields Retail Outlet may be
owned or operated by us or our Affiliates or by franchisees or
licensees of us or our Affiliates.
(k) 'Mrs. Fields Products' means specialty snacks and other bakery
items, desserts, and beverages (such as cookies, brownies, cakes,
muffins, bagels, croissants, cinnamon rolls, sticky buns, and
coffee) developed by us or our Affiliates.
(1) 'Mrs. Fields System' means our business formats, signs,
equipment, methods, procedures, designs, layouts, and
specifications, including the use of the Marks, as we may modify
them in the future.
(m) 'Restricted Person' means you; each of your Entity Owners, if you
are an Entity and the parents, spouses, natural and adopted
children, and siblings of any of you and your Entity Owners.
(n) System Standards' means the specifications, standards, operating
procedures and rules we require for the operation of Mrs. Fields
Cookies Stores.
(o) Transfer' means the voluntary or involuntary, direct or indirect
transfer, assignment, sale, gift, pledge, mortgage, hypothecation
or other disposition (including those occurring by operation of
law and a series of transfers that in the aggregate constitute a
Transfer) of any of your interest in this Agreement of a
Controlling Interest in you.
<PAGE>
1.3 Preambles. Mrs. Fields Cookies Stores operate under distinctive business
formats, systems, methods, procedures, designs, layouts and specifications, all
of which we may improve, further develop or modify in the future. We and our
Affiliates have expended a considerable amount of time and effort in developing
and refining the recipes for and the methods of preparation of Mrs. Fields
Products to obtain high product quality. We may modify these recipes and methods
of preparation, and these modifications may require you to prepare cookies and
other Mrs. Fields Products from scratch mixes and to purchase prepared cookie
dough or other prepared food products from us or other approved suppliers. Our
Affiliates currently own and operate a variety of Mrs. Fields Retail Outlets,
and we and our Affiliates may continue to own and operate Mrs. Fields Retail
Outlets in the future. We own the Marks. We and our Affiliates have franchised
and licensed and, in the future, will continue to franchise and license others
to operate Mrs. Fields Cookies Stores and other Mrs. Fields Retail Outlets.
1.4 Acknowledgments. You acknowledge that you have read this Agreement and our
offering circular and understand and accept the provisions of this Agreement as
being reasonably necessary to maintain our high standards of quality and service
and the uniformity of those standards at all Mrs. Fields Cookies Stores
franchised by us and to protect and preserve the goodwill of the Marks. You have
conducted an independent investigation of the business venture contemplated by
this Agreement and you recognize that, like any other business, the nature of
the business contemplated by this Agreement may change over time, that an
investment in a Mrs. Fields Cookies Stores involves business risks, and that the
success of the venture is largely dependent upon your business abilities and
efforts. Any information relating to the sales, profits or cash flows of Mrs.
Fields Cookies Stores operated by us or our franchisees that is contained in our
offering circular and other materials is intended only to be an indication of
historical performance of certain Mrs. Fields Cookies Stores and NOT of
potential future financial performance. We expressly disclaim the making of, and
you acknowledges that you have not received or relied on, any express or implied
warranty or guarantee as to the revenues, profits or success of the business
venture contemplated by this Agreement. Our officers, directors, employees and
agents are acting only in a representative and not a personal capacity in their
dealings with you. You have not received or relied on any representations about
us or our franchising program or policies from us or our officers, directors,
employees or agents that are contrary to the statements made in our offering
circular or to the terms of this Agreement. You further represent to us, as an
inducement to your entry into this Agreement, that all statements in your
application for the rights granted in this Agreement are accurate and complete
and that you have made no misrepresentations or material omissions in obtaining
these rights.
ARTICLE 2
GRANT OF FRANCHISE
2.1 Franchise.
(a) Grant of Franchise. You have applied for a franchise to own and
operate a Mrs. Fields Cookies Store (the 'Licensed Store') at and
only at Genesee Valley Mall, 3319 Lindon Road, Flint, MI 48507
(the 'Premises'). Subject to the terms and conditions of this
Agreement, we grant you a NON-EXCLUSIVE franchise (the
'Franchise") to operate the Licensed Store at the Premises and to
use the Mrs. Fields System in the operation of the Licensed
Store.
<PAGE>
(b) Mrs. Fields Products. In operating your Cookie Store, you may
offer for sale only those Mrs. Fields Products that we approve
from time to time for you to sell at the Premises. The Mrs.
Fields Products that you Initially are authorized to offer at
your Cookie Store are explained in the Operations Manual referred
to in Section 4.2 of this Agreement. In the future, we may change
or add to the Mrs. Fields Products that you are authorized to
offer at the Premises. We typically base our determination on
whether you will be allowed to offer an expanded line of Mrs.
Fields Products on our evaluation of your compliance, over time,
with the System Standards described in Section 6.1 below,
particularly those related to quality. We do not base our
determinations on sales or marketing quotas, volumes or results.
You must offer all Mrs. Fields Products that we authorize you to
sell; however, we are not required to authorize you to sell all
available Mrs. Fields Products.
2.2 Initial Term of the Franchise Agreement. The initial term of this Agreement
will be 7 years, commencing on the date of this Agreement. This Agreement may be
renewed as provided in Section 2.3 of this Agreement and may be terminated prior
to expiration of its term in accordance with Article 12 of this Agreement.
References in this Agreement to the term of this Agreement mean the initial term
and any renewal term. Following the expiration of the initial term and any
renewal terms, you may have the opportunity to obtain a successor Franchise
Agreement in accordance with the provisions of Section 12.6 of this Agreement.
2.3 Renewals. If you are not in default at the time of exercise of a renewal
option and at the time the prior term expires, you may renew this Agreement for
2 successive 5-year terms, upon giving us written notice of your intention to
renew at least 180 days prior to expiration of the then current term. The
renewal will be upon the terms and conditions contained in the form of Franchise
Agreement in use by us at the time the renewal option is exercised. That form of
Franchise Agreement may include different royalty fees and marketing fees, other
fees and charges, and changes in performance criteria and in other terms and
conditions. In connection with any renewal, we may also require you to
refurbish, remodel, redecorate, and renovate the Licensed Store at the
commencement of the renewal term to meet our then current standards for Mrs.
Fields Cookie Stores, including designs and service systems, trade dress, and
color schemes. We will not charge any renewal fee in connection with any renewal
under this Section 2.3. Following receipt of your election to renew, we will
provide you with an execution copy of the form of Franchise Agreement to be
entered into for the renewal term. If you do not execute and return the renewal
Franchise Agreement to us within 30 days of receipt, then you will be deemed to
have withdrawn your notice of renewal, and this Agreement will terminate at the
end of the current term.
2.4 Reservation of Certain Rights. We and our Affiliates retain the right to:
(1) sell and franchise and license others to sell Mrs. Fields Products and other
items and services offered by Mrs. Fields Cookies Retail Outlets under the Marks
and other trademarks and service marks through Mrs. Fields Retail Outlets on any
terms and conditions and at any location that we deem appropriate; (2) sell and
license and franchise others to sell any other products or services under the
Marks (including items such as refrigerated ready-to-bake cookie dough sold
through various retail outlets); (3) own, operate and grant others the right to
own or operate Mrs. Fields Cookies Stores, other Mrs. Fields Retail Outlets, or
other dessert and snack food businesses at the locations and on the terms and
conditions as we, in our sole discretion, deem appropriate.
<PAGE>
ARTICLE 3
SITE SELECTION, LEASE OF PREMISES
AND DEVELOPPAENT OF THE LICENSED STORE.
3.1 Site Selection. Prior to the execution of this Agreement, you located and we
approved the Premises for the Licensed Store. Our approval of the Premises was
made in reliance by us upon information furnished and representations made by
you (all of which have been carefully and fully considered by you in proposing
the Premises to us) with respect to the size, appearance and other physical
characteristics of the Premises, photographs of the Premises, and demographic
characteristics, traffic patterns, competition from other businesses in the area
(including other Mrs. Fields Retail Outlets) and other commercial
characteristics (including the purchase price, rental obligations, and other
leas; terms). Our approval of the Premises and any information communicated to
you regarding the Premises do not constitute an express or implied
representation or warranty of any kind as to the suitability of the Premises for
a Mrs. Fields Cookies Store or for any other purpose. Our approval of the
Premises indicates only that we believe that the Premises falls within our
criteria as of the time period encompassing the evaluation. Both you and we
acknowledge that application of criteria that have been effective with respect
to other sites and premises may not be predictive of potential for a specific
site and that, subsequent to our approval of a site and Premises, demographic
and/or economic factors, including competition from other dessert and snack food
and similar food service businesses, included in or excluded from our criteria,
could change, thereby altering the potential of a site. The uncertainty and
instability of the factors included in the criteria are beyond our control and
we will not be responsible to you for the failure of the Premises to meet
expectations as to potential revenue or operational criteria. Your acceptance of
a Franchise for the operation of a Mrs. Fields Cookies Store at the Premises is
based on your own independent investigation of the suitability of the Premises.
3.2 Acquisition of the Premises.
(a) Your Obligation to Obtain Lease. Unless you own the Premises, you
agree to obtain any necessary lease or sublease for the Premises. You
agree to obtain our approval of the terms of the lease or sublease for
the Premises prior to your execution of the lease or sublease. You
agree not to execute a lease or sublease which we have disapproved,
and you must deliver a copy of the signed, approved lease to us within
1 5 days after its execution. Any lease or sublease must be in a form
satisfactory to us and must:
(i) Provide for notice to us of any default by you under the
lease or sublease and provide us with a right to cure the default. If
we cure any default, the total amount of all costs and payments
incurred by us in curing the default will be immediately due and owing
to us by you;
(ii) Provide that you may assign your interest under the lease or
sublease to us without the lessor's or sublessor's consent;
(iii) Authorize and require the lessor or sublessor to disclose
to us, upon our request, sales and other information that you furnish
to the lessor or sublessor; and
(v) Provide that we, one of our Affiliates or, in the case that
clause (4) below is applicable, our assignee may assume the lease or
sublease:
(1) Upon termination of this Agreement (unless a successor
Franchise Agreement is granted to you as provided in
Section 12.6 below), or
(2) If you fail to exercise any options to renew or extend
the lease or sublease, or
(3) If you commit a default that gives the lessor or
sublessor the right to terminate the lease or sublease,
or
(4) If we or one of our Affiliates or our assignee
purchases the Licensed Store as permitted by Section 1
2.1 1 below.
(b) Use of Premises Currently Under Lease to Us. If one of our Affiliates
is currently leasing the Premises and has the right under that lease
to sublease the Premises to you, you desire to sublease the Premises
from our Affiliate, and if our Affiliate offers the Premises to you,
you agree to execute our standard sublease form and, if requested by
us, to have each of your Entity Owners execute a guaranty agreement
guarantying payment and performance of all of your obligations under
the sublease. If one of our Affiliates elects to assign an existing
lease to you and you desire to obtain an assignment of the existing
lease, unless we otherwise agree, you agree to arrange for the release
of our Affiliate from its obligations under the assigned lease, as of
the date of the assignment, and you agree to obtain from the landlord
any consents, agreements, and lease amendments as are required so that
the assigned lease satisfies the requirements of Section 3.2(a) above,
as if the assigned lease were a third-party lease.
(c) Expiration of Lease. If a lease or sublease expires prior to
expiration of this Agreement, you agree to obtain any necessary
replacement lease or sublease, and we will have the right to approve
the replacement lease or sublease as otherwise provided in this
Article.
(d) Effect of our Approval of Lease. Our approval of a lease or sublease
for the Premises or the granting by one of our Affiliates of a
sublease or lease assignment for the Premises does not constitute an
express or implied warranty by us of the successful operation or
profitability of a Mrs. Fields Cookies Store operated at the Premises.
The approval indicates only that we believe the Premises and the terms
of the lease fall within the acceptable criteria established by us as
of the time period encompassing the evaluation.
3.3 Licensed Store Development.
(a) Plans and Specifications. You are responsible for constructing and
developing the Licensed Store. Promptly following execution of this
Agreement, we will furnish you prototypical plans and specifications
for a Mrs. Fields Cookies Store, including requirements for exterior
and interior materials and finishes, dimensions, design, image,
interior layout, decor, fixtures, equipment, signs, furnishings and
color scheme. You must comply with these plans and specifications. You
agree to have prepared all required construction plans and
specifications to suit the shape and dimensions of the Premises and to
insure that the plans and specifications comply with applicable
ordinances, building codes and permit requirements and with lease
requirements and restrictions. You agree to submit construction plans
and specifications to us for our approval before construction of the
Licensed Store is commenced, and you agree to submit all revised plans
and specifications to us for our approval during the course of
construction. Upon completion of construction, you agree to provide us
with a set of 'as built' plans and specifications.
(b) Contractors. All construction will be done by competent, licensed
contractors selected by you. We have the right to approve any
contractor hired by you. However, our approval will not be
unreasonably withheld.
(c) Development Obligations. You agree to do each of the following:
(i) Secure all financing required to develop and operate the Licensed
Store;
(ii) Obtain all required building, utility, sign, health, sanitation,
business, environmental and other permits and licenses required
for construction and operation of the Licensed Store;
(iii)Construct all required improvements to the Premises and decorate
the Licensed Store in compliance with plans and specifications
that we approve;
(vi) Purchase and install all fixtures, furnishings, equipment and
signs required for the Licensed Store. However, we reserve the
right, in our sole discretion, to install all required signs at
the Premises at your sole expense; and
(v) Purchase an opening inventory of Mrs. Fields Products, materials
and supplies.
3.4 Fixtures, Furnishings, Equipment and Signs. In developing and operating the
Licensed Store, you agree to use only the fixtures, furnishings, equipment
(including cash registers and computer hardware and software) and signs that we
require and have approved for Mrs. Fields Cookies Stores as meeting our
specifications and standards for quality, design, appearance, function and
performance. You agree to place or display at the Premises (interior and
exterior) only the signs, emblems, lettering, logos and display materials that
we approve in writing. However, we have the right, in our sole discretion, to
install all required signs at the Premises at your sole expense. You agree that
all fixtures, furnishings and equipment used in connection with the operation of
the Licensed Store will be free and clear of all liens, claims and encumbrances,
except for liens, claims or encumbrances asserted by us and except for third
party purchase money security interests.
3.5 Licensed Store Opening. You will not open the Licensed Store for business
until:
(a) We approve the Licensed Store;
(b) Pre-opening training of you and Licensed Store personnel has been
completed to our satisfaction;
(c) The initial franchise fee and all other amounts then due to us
have been paid in full;
(d) The lease documentation has been executed and all other
documentation has been completed in connection with the
development of the Licensed Store; and
(e) We have been furnished with copies of all insurance policies
required by this Agreement and evidence of payment of premiums.
You agree to open the Licensed Store for business within 5 days after we notify
you that the conditions set forth in this Section 3.5 have been satisfied.
3.6 Grand Opening Promotion. You agree to conduct a grand opening advertising
and promotion program for a newly developed Licensed Store for a period of at
least 7 days, commencing within 30 days after opening of the Licensed Store. You
agree to spend no less than $5,000 for the grand opening. The advertising and
promotion will utilize the standard marketing and public relations programs and
media and advertising materials that we have developed for grand opening
programs. You must purchase these materials from us, and we will make them
available to you upon written request, in advance of the opening of your
Licensed Store. Payments for these materials are non-refundable. You may also
incur expenses from other vendors and suppliers in connection with your grand
opening promotion.
<PAGE>
ARTICLE 4
TRAINING AND GUIDANCE
4.1 Training.
(a)Training for You and the Licensed Store Manager. Prior to the Licensed
Store's opening, we will furnish an initial training program on the
operation of Mrs. Fields Cookies Stores to you and the initial store
manager (if the store manager is different from you). The training
program will be furnished at our designated training facility or a
Mrs. Fields Cookies Store owned and operated by us or one of our
franchises. You (or one of your principal owners) and the manager of
the Licensed Store (if different from you) agree to complete all
phases of the training program to our satisfaction and to participate
in all other activities required to open the Licensed Store.
Subsequent managers will also be required to satisfactorily complete
all phases of our training program. You will replace any manager who
we determine, in our sole discretion, is not qualified to manage a
Mrs. Fields Cookies Store. We will furnish the initial training
program to you (or one of your principal owners) and to the initial
Licensed Store manager (if different from you) free of charge. We may
charge a fee for the training for subsequent managers, which you will
be required to pay at least 1 0 days prior to beginning of training.
You will be responsible for all travel and living expenses which you
and your manager incur in connection with the initial and subsequent
training programs.
(b)Use of the Licensed Store for Training. You agree that we may conduct
future franchise training programs at the Licensed Store.
(c)Failure to Complete Training. If you do not satisfactorily complete the
initial training program, we have the right to terminate this
Agreement pursuant to Section 12.5 below.
(d)Refresher Training. We may require you and/or previously trained and
experienced managers to attend periodic refresher courses at the times
and locations that we designate. We may charge fees for refresher
training courses.
4.2 Operations Manual. We will make available to you during the term of the
Franchise one copy of our operations manual (the 'Operations Manual'), either by
loaning a copy of the Operations Manual to you or by making the Operations
Manual available electronically through your computer system. The Operations
Manual contains mandatory and suggested specifications, standards and operating
procedures that we prescribe for Mrs. Fields Cookies Stores and contains
information relating to your other obligations under this Agreement.
TheOperationsManualmaybemodifiedinthefuturetoreflectchangesintheimage,
specifications, standards, procedures, Mrs. Fields Products, Mrs. Fields System,
and System Standards. However, we will not make any addition or modification
that will alter your fundamental status and rights under this Agreement. You may
not at any time copy any part of the Operations Manual, either physically or
electronically. If your copy of the Operations Manual is lost, destroyed or
significantly damaged, you will be obligated to obtain from us, at our then
applicable charge, a replacement copy of the Operations Manual.
4.3 Guidance and Operating Assistance. Although we do not have an obligation to
do so, we may advise you from time to time of operating problems of the Licensed
Store which come to our attention. At your request, we will furnish to you
guidance and operating assistance in connection with:
(a) Methods, standards, specifications and operating procedures
utilized by Mrs. Fields Cookies Stores;
(b) Purchasing required fixtures, furnishings, equipment, signs, Mrs.
Fields Products, materials and supplies;
(c) Advertising and promotional programs;
(d) Employee training; and
(e) Administrative, bookkeeping, accounting and general operating and
management procedures.
The guidance and assistance may, in our discretion, be furnished in the form of
references to the Operations Manual, bulletins and other written materials,
electronic computer messages, telephonic conversations and/or consultations at
our offices or at the Licensed Store. You agree that we will not be liable to
you or any other person, and you waive all claims for liability or damages of
any type (whether direct, indirect, incidental, consequential, or exemplary), on
account of any guidance 6r operating assistance offered by us in accordance with
this Section 4.3, except to the extent caused by our gross negligence or
intentional misconduct. We will make no separate charge to you for such
operating assistance and guidance as we customarily provide to our franchisees
generally. Occasionally, we may make special assistance programs available to
you; however, you will be required to pay the daily fees and charges that we
establish for these special assistance programs.
ARTICLE 5
FEES
5.1 The Franchise Fee. You agree to pay us a nonrecurring franchise fee in the
amount of $-O upon execution of this Agreement. This franchise fee will be fully
earned by us when paid and is not refundable, except as provided in Section
1.2.5(a). The franchise fee represents payment to us for your right to use the
Marks and the Mrs. Fields System in the development and operation of your Cookie
Store.
5.2 Royalty Fee. You agree to pay us a monthly royalty fee of 6 % of the
Licensed Store's Gross Revenues, payable on or before the 10th day of the month
following the month for which the royalty fee is due. Without limiting any of
our rights and remedies under this Agreement or otherwise available under
applicable law, if you fail to pay the monthly royalty fee in a timely fashion,
we may require you to pay the royalty fee on a weekly basis. We may also require
you to make these weekly payments by electronic transfer.
5.3 Late Charge; Interest on Late Payments. To compensate us for the increased
administrative expense of handling late payments, we may charge a $1 00 late
charge for each delinquent payment, due upon making the delinquent payment. All
royalty fees, amounts due for purchases by you from us or our Affiliates and
other amounts which you owe to us or our Affiliates will bear interest from
their due date until paid at a rate equal to the lesser of the highest
applicable legal rate for open account business credit, or 1.5% per month,
payable when the corresponding delinquent payment is made. You agree that this
Section does not constitute our or our Affiliates' agreement to accept payments
after they are due or a commitment by us or our Affiliates to extend credit to
you or otherwise to finance the operation of the Licensed Store. Your failure to
pay all amounts when due will constitute grounds for termination of this
Agreement by us, as provided in Section 11.2 and Section 12.4 below.
5.4 Application of Payments. Regardless of any designation by you, we have sole
discretion to apply any payments by you to any of your past due indebtedness for
royalty fees, purchases from us or our Affiliates, interest or any other
indebtedness or amounts owed to us or our Affiliates.
ARTICLE 6
ADDITIONAL OBLIGATIONS
6.1 System Standards. You acknowledge and agree that the operation of the
Licensed Store in accordance with the System Standards is the essence of this
Agreement and is essential to preserve the goodwill of the Marks and all Mrs.
Fields Cookies Stores. Therefore, you agree that, at all times during the term
of this Agreement, you will maintain and operate the Licensed Store in
accordance with each of the System Standards. System Standards may regulate any
one or more of the following with respect to the Licensed Store:
(a) Design, layout, decor, appearance and lighting; periodic and
daily maintenance, cleaning and sanitation; replacement of
obsolete or worn-out fixtures, furnishings, equipment and signs;
use of interior and exterior signs, emblems, lettering and logos
and the illumination thereof;
(b) Types, specifications, models, brands, maintenance and
replacement of required equipment, fixtures, furnishings and
signs;
(c) Approved, disapproved and required Mrs. Fields Products and other
items and services to be offered for sale;
(d) Designated and approved suppliers (including us or our
Affiliates) of equipment, fixtures, furnishings, signs, Mrs.
Fields Products, materials and supplies;
(e) Use and operation of an approved point of sale register;
(f) Payment of vendors; terms and conditions of sale and delivery of
and payment for Mrs. Fields Products, materials, supplies and
services sold to you by us, our Affiliates or unaffiliated
suppliers;
(g) Marketing, advertising and promotional activities and materials
required or authorized for use;
(h) Use of the Marks;
(i) Qualifications, training, dress, appearance and staffing of
employees;
(j) Minimum hours of operation;
(k) Methods, standards, specifications, and operating procedures for
Mrs. Fields Cookies Stores, including quality and customer
service requirements, terms under which you are required to
guarantee customer satisfaction with Mrs. Fields Products, accept
returns, and provide replacement products;
(1) Restrictions on the storage, use, or sale of 'out-of-code' (old)
materials, supplies, or products, and requirements relating to
the disposition of old or unsalable Mrs. Fields Products;
(m) Participation in market research and testing and product and
service development programs designated by us;
(n) Management by full-time managers who have successfully completed
our training program; communication to us of the identities of
the managers; replacement of managers whom we determine to be
unqualified to manage the Licensed Store; and other matters
relating to the management of the Licensed Store and its
management personnel;
(o) Use of a designated computer hardware and software system and
equipment with telecommunications capability, including the
procedures for providing daily sales information of the Licensed
Store to us;
(p) Bookkeeping, accounting, data processing and record keeping
systems and forms; methods, formats, content and frequency of
reports to us of sales, revenues, financial performance and
condition; tax returns and other operating and financial
information;
(q) Types, amounts, terms and conditions and approved underwriters
and brokers of public liability, product, business interruption,
crime loss, fire and other required insurance coverage; our
rights under the policies as an additional named insured;
required or impermissible insurance contract provisions;
assignment of policy rights to us; periodic verification of the
coverage that must be furnished to us; our right to obtain
insurance coverage for the Licensed Store at your expense if you
fail to obtain required coverage; our right to defend claims; and
similar matters relating to insurance and insured and uninsured
claims;
(r) Compliance with applicable laws, rules, and regulations
(including those relating to health, safety, and sanitation;
obtaining required licenses and permits; adherence to good
business practices; observing high standards of honesty,
integrity, fair dealing and ethical business conduct in all
dealings with customers, suppliers and with us and our
Affiliates; and notification to us if any action, suit or
proceeding is commenced against you or the Licensed Store; and
(s) Regulation of the other elements and aspects of the appearance,
operation of and conduct of business as we determine from time to
time, in our sole discretion, to be required to preserve or
enhance the efficient operation, image or goodwill of Mrs. Fields
Cookies Stores and the Marks.
You agree that the System Standards may be periodically modified by us and
acknowledge that the modifications may obligate you to invest additional capital
in the Licensed Store and to incur higher operating costs. We agree not to
obligate you to invest additional capital at a time when the investment cannot
in our reasonable judgment be amortized during the remaining term of this
Agreement. You agree that System too Standards constitute provisions of this
Agreement as if fully set forth in this Agreement. All references to this
Agreement include all System Standards as periodically modified by us.
6.2 Performance of Duties and Obligations. You will at all times faithfully,
honestly and diligently perform your obligations under this Agreement and you
will continuously exert your best efforts to promote and enhance the business of
the Licensed Store. You will not engage in any other business or activity that
may conflict with your obligations under this Agreement.
6.3 Restrictions on Operations and Customers. You may not operate the Licensed
Store at any site other than the Premises without our prior written consent. You
may not sell Mrs. Fields Products approved for sale or services of the Licensed
Store or any materials, supplies, or inventory bearing the Marks at any site
other than the Premises. without our prior written consent. However, this
restriction will not apply to catering events or to the offering of samples of
Mrs. Fields Products approved for sale at or directly in front of the Licensed
Store. In addition, you may not sell to anyone any materials, supplies, or
inventory used in the preparation of any Mrs. Fields Products. You may only sell
finished Mrs. Fields Products that have been approved for sale, as provided in
Section 2.1 lb) above, and then only to retail customers. You may not sell any
Mrs. Fields Products to any person or entity purchasing the Mrs. Fields Products
for resale.
6.4 Accounting, Reports and Financial Statements. You agree to establish and
maintain a bookkeeping, accounting, record keeping and data processing system
conforming to the requirements and formats that we prescribe. We will, however,
provide you with computer software programs on which to maintain certain sales
data, as further described in the Operations Manual. You agree to furnish to us
on the forms that we prescribe from time to time:
(a) Gross Revenue Reports. Within 1 0 days after the end of each
calendar month (or weekly if we require you to pay the royalty
fees described in Section 5.1 above on a weekly basis), a report
on the Licensed Store's Gross Revenues for the previous calendar
month (or week);
(b) Monthly Financial Reports. Within 1 5 days after the end of
calendar month, a profit and loss statement for the Licensed
Store for the previous month and a year-to-date statement of
financial condition as of the end of the previous month;
(C) Semi-Annual Reports. Within 1 5 days after the end of each
6-calendar month period, a balance sheet for the Licensed Store
as of the end of that semi-annual period; and
(d) Tax Returns. Within 1 0 days after the returns are filed, exact
copies of federal and state income, sales and any other tax
returns and the other forms, records, books and other information
as we may periodically require.
Each report and financial statement will be signed and verified by you in the
manner we specify. We may disclose data derived from the sales reports to other
franchisees and licensees. We may also require you to have audited or reviewed
financial statements prepared on an annual basis. We may, on a daily basis,
access the data base contained in the computerized records of the Licensed Store
and transfer the data from your data base to our data base.
6.5 Retention of Records. You agree to keep full, complete and proper books,
records and accounts of Gross Revenues and of your operations at the Licensed
Store. All the books, records and accounts will be kept in the English language
and will be retained for a period of at least 3 years following the end of each
fiscal year. The books and records will include daily cash reports; cash
receipts journal and general ledger; cash disbursements journal and weekly
payroll register; monthly bank statements and daily deposit slips and cancelled
checks; tax returns (sales and income); supplier invoices; dated cash register
tapes (detail and summary); semi-annual balance sheets and monthly profit and
loss statements; daily production, leftover and donations records and weekly
inventories; records of promotions and coupon redemptions; records of all
corporate accounts; and such other records as we may request.
6.6 Our Right to Inspect the Licensed Store. To determine whether you are
complying with this Agreement and with all System Standards and whether the
Licensed Store is in compliance with the terms of this Agreement, we and our
designated agents may, at any reasonable time and without prior notice to you:
(a) Inspect the Premises;
(b) Observe, photograph and video tape the Licensed Store's
operations for such consecutive or intermittent periods as we
deem necessary;
(c) Remove samples of any Mrs. Fields Products, materials or supplies
for testing and analysis;
(d) Interview personnel of the Licensed Store;
(e) Interview customers of the Licensed Store; and
<PAGE>
(f) Inspect and copy any books, records and documents relating to the
operation of the Licensed Store.
You agree to cooperate fully with us in connection with any of our inspections,
observations, photographing, video taping, product removal and interviews.
6.7 Our Right to Audit. At any time during business hours and without prior
notice to you, we and our representative may inspect and audit the business
records, bookkeeping and accounting records, sales and income tax records and
returns and other records of the Licensed Store as well as your books and
records. You agree to fully cooperate with representatives and independent
accountants hired by us to conduct any inspection or audit. If an inspection or
audit discloses an understatement of the Licensed Store's Gross Revenues, you
will pay to us, within 1 5 days after receipt of the inspection or audit report,
the royalty fees due on the amount of the understatement, plus interest (at the
rate and on the terms provided in Section 5.3 above) from the date originally
due until the date of payment. Further, if inspection or audit is made necessary
by your failure to furnish reports, supporting records or other information as
required by this Agreement, or to furnish the reports, records or information on
a timely basis, or if an understatement of Gross Revenues for the period of any
audit is determined by the audit or inspection to be greater than 2%, then
within 1 5 days after receipt of the inspection or audit report, you will
reimburse us for the cost of the audit or inspection, including the charges of
attorneys and any independent accountants and the travel expenses, room and
board and compensation of our employees. These remedies are in addition to our
other remedies and rights under this Agreement or applicable law, and our right
to audit will continue for 2 years following termination of this Agreement.
6.8 Surveys. You will present to your customers such evaluation forms as we
periodically require and will participate in and request your customers to
participate in any surveys performed by or on our behalf.
6.9 Guaranties by Entity Owners. If you are an Entity, you represent and warrant
to us that you are duly organized or formed and validly existing in good
standing under the laws of the state of your incorporation or formation, are
qualified to do business in all states in which you are required to qualify and
have the authority to execute, deliver and carry out all of the terms of this
Agreement. If you are an Entity, we may require each of your Entity Owners at
any time during the term of this Agreement to execute a guarantee in our favor
in which the Entity Owner guarantees payment of all amounts owed by you under
this Agreement and performance by you of the terms and conditions of this
Agreement and assumes full and unconditional liability for the payment and
performance of all of your obligations, covenants and agreements. You agree to
furnish us upon request, in such form as we may require, a list of all of your
Entity Owners, now and in the future, reflecting their respective interests in
you.
6.10 Obligations with Respect to Restricted Persons. Upon execution of this
Agreement, you agree to furnish us with a list of all Restricted Persons and
promptly to update that list as changes in Restricted Persons occur. In
addition, at our request at any time during the term of this Agreement, you will
obtain and provide to us a written agreement from each Restricted Person
designated by us in which the Restricted Person agrees to be bound by the
provisions of Sections 9.1, 10.3(j), 10.5(c), and 1 2.1 0 of this Agreement.
6.11 Insurance.
(a) Casualty Insurance. You agree, at all times during the term of
this Franchise Agreement and at your sole cost and expense, to
keep all of your goods, fixtures, furniture, equipment, and other
personal property located on the Licensed Store premises insured
to the extent of 100% of the full replacement cost against loss
or damage from fire and other risks normally insured against in
extended risk coverage.
(b) Liability Insurance. You agree, at your sole cost and expense, at
all times during the term of this Franchise Agreement, to
maintain in force an insurance policy or policies which will name
both us and you as insured, insuring against all liability
resulting from damage, injury, or death occurring to persons or
property in or about the Licensed Store premises (including
products liability insurance), the liability under such insurance
to be not less than $ 1,000,000 for one person injured,
$1,000,000 for any one accident, and $1,000,000 for property
damage. The original of such policy or policies shall remain in
your possession. However you agree to give us a copy of the
policy upon our request.
(c) Workmen's Compensation Insurance. You also agree to maintain and
keep in force all workmen's compensation insurance on your
employees, if any, required under the applicable workmen's
compensation laws of the state in which the Licensed Store is
located.
(d) Other Insurance Policies. At your sole cost, you agree, at all
times during the term of this Franchise Agreement, to maintain in
force such other and additional insurance policies as a prudent
franchisee in your position would maintain or as we may
reasonably require.
(e) Policy Requirements. All insurance policies required under this
Section 6.1 1 will contain provisions to the effect that the
insurance will not be canceled or modified without at least 30
days prior written notice to us and that no modification will be
effective unless approved in writing by us. All such policies
will be issued by a company or companies, rated 'A-XII" or better
by Best's Insurance Guide, responsible and authorized to do
business in the state in which the Licensed Store is located, as
you may determine, and will be approved by us, which approval
will not be unreasonably withheld.
(f) Release of Insured Claims. You release and relieve us and our
officers, directors, shareholders, employees, agents, successors,
assigns, contractors, and invitees and waive your entire right of
recovery against us and our officers, directors, shareholders,
employees, agents, successors, assigns, contractors, and invitees
for loss or damage arising out of or incident to the perils
required to be insured against under this Section 6.1 1, which
perils occur in, on or about the Licensed Store premises or
relate to your business on the premises, whether due to the
negligence of us or you or any of our or your related parties.
ARTICLE 7
MARKETING AND PROMOTION
7.1 The Marketing Fund.
(a) Establishment of Marketing , Funds: Marketing Fund Contributions.
Recognizing the value of marketing to the goodwill and public
image of Mrs. Fields Cookies Stores, you agree that, although we
are not obligated to do so, we may, upon 30 days' prior written
notice to you, to establish, maintain and administer one or more
national or regional marketing funds (a 'Marketing Fund'). If a
Marketing Fund is established, you agree to contribute to the
Marketing Fund the amounts that we require. Marketing Fund
contributions will not exceed 2% of the Licensed Store's monthly
Gross Revenues through the end of 1995, 3% of the Licensed
Store's monthly Gross Revenues during calendar year 1996, and 4%
of the Licensed Store's monthly Gross Revenues during calendar
year 1997 and thereafter. However, increases in the
year-over-year percent of Gross Revenues to be paid to the
Marketing Fund will be limited to no more than 1 % per year.
Marketing Fund contributions will be payable monthly together
with the royalty fees. If you fail to pay the monthly Marketing
Fund contribution in a timely fashion, we may require you to pay
the contribution on a weekly basis. We may also require you to
pay the weekly amounts by electronic transfer. Mrs. Fields
Cookies Stores owned by us and our Affiliates in the same market
area as you will contribute to the Marketing Fund on the same
basis as you.
(b) Right to Direct Operation of the Marketing Fund. We will direct
all marketing programs financed by the Marketing Fund, with sole
discretion over the creative concepts, materials and endorsements
used and the geographic, market and media placement and
allocation. You agree that the Marketing Fund may be used to pay
the costs of preparing and producing video, audio and advertising
materials; administering regional and multi-regional marketing
programs, including purchasing direct mail and other media
marketing and employing advertising, promotion and marketing
agencies to assist with advertising; and supporting public
relations, market research and other advertising, promotion and
marketing activities. The Marketing Fund will furnish you with
samples of advertising, marketing and promotional formats and
materials at no cost to you, other than shipping and handling.
Multiple copies of the materials will be furnished to you at our
or the Marketing Fund's direct cost of producing them, including
any related shipping, handling and storage charges, payable when
the materials are ordered.
(c) Accounting for the Marketing Fund. The Marketing Fund will be
accounted for separately from our other funds and will not be
used to defray an y of our general operating expenses, except for
the reasonable salaries, administrative costs and overhead we may
incur in activities related to the administration of the
Marketing Fund and its marketing programs, including conducting
market research, preparing advertising, promotion and marketing
materials and collecting and accounting for contributions to the
Marketing Fund. If we provide goods and services to the Marketing
Fund, we may charge the Marketing Fund our cost for those good,
and services. We may spend in any fiscal year an amount greater
or less than the aggregate contributions of all Mrs. Fields
Cookies Stores to the Marketing Fund in that year, and the
Marketing fund may borrow from us or other lenders to cover
deficits of the Marketing Fund or cause the Marketing Fund to
invest any surplus for future use by the Marketing Fund. All
interest earned on moneys contributed to the Marketing Fund will
be used to pay marketing costs incurred by the Marketing Fund
before other assets of the Marketing Fund are expended. A
statement of moneys collected and costs incurred by the Marketing
Fund will be prepared annually by us and will be furnished to
you. We may cause the Marketing Fund to be incorporated or
operated through an entity separate from us, and that entity will
have all of our rights and duties pursuant to this Section 7.1.
(d) Benefits to Individual Stores. You understand and agree that the
Marketing Fund is intended to maximize recognition of the Marks
and patronage of Mrs. Fields Cookies Stores. Although we will
endeavor to utilize the Marketing Fund to develop advertising and
marketing materials and programs and to place advertising that
will benefit all Mrs. Fields Cookies Stores, we cannot ensure you
that expenditures by the Marketing Fund in or affecting any
geographic area will be proportionate or equivalent to the
contributions to the Marketing Fund by Mrs. Fields Cookies Stores
operating in that geographic area or that any Mrs. Fields Cookies
Store will benefit directly or in proportion to its contribution
to the Marketing Fund from the development of advertising and
marketing materials or the placement of advertising.
(e) Collection of Marketing Fund Contributions. We will attempt to
collect all past due Marketing Fund contributions from Mrs.
Fields Cookies Store franchisees. We also attempt to collect
other amounts due to us and our Affiliates. You agree that any
payments made by a Mrs. Fields Cookies ' Store franchisee will
first be applied to the costs incurred by us in collecting the
amount, including reasonable attorneys' fees and costs. The
remainder, if any, will be allocated proportionally, among the
Marketing Fund, us, and our Affiliates, based on the amount the
franchisee owes the Marketing Fund, us and our Affiliates. Except
as expressly provided in this Section, we are assuming no direct
or indirect liability or obligation to you with respect to
collection of amounts due, or the maintenance, direction or
administration of, the Marketing Fund.
(f) Suspension or Termination of Marketing Fund; Reinstatement. We
reserve the right to suspend contributions to and operations of
the Marketing Fund for one or more periods and the right to
terminate the Marketing Fund upon 30 days' prior written notice
to you. All unspent moneys on the date of termination will be
distributed to our franchisees, us, and our Affiliates in
proportion to their respective contributions to the Marketing
Fund during the preceding 1 2 month period. We may reinstate the
Marketing Fund upon the same terms and conditions as set forth in
this Agreement upon 30 days' prior written notice to you.
7.2 Advertising and Promotional Activities by You. In addition to any
contributions by you to the Marketing F Fund, you agree that you will spend on
marketing and related programs any amount that is required under your lease or
sublease. Those amounts typically vary from lease to lease, and therefore, all
Mrs. Fields Cookies Store franchisees will not be obligated to spend the same
amount on local advertising and marketing. You agree that all advertising,
promotion and marketing by you will comply with the requirements of Article 8,
will be completely clear and factual and not misleading, and will conform to the
highest standards of ethical marketing and promotion policies which may be
prescribed by us. Prior to use, all press releases and policy statements and
samples of all local advertising, marketing and related materials not prepared
or previously approved by us will be submitted to us for approval. Our approval
will not be unreasonably withheld. Pamphlets, brochures, cards or other
promotional materials offering free Products may only be used if prepared by us,
unless otherwise approved in advance by us. However, we will give favorable
consideration to your use of free product cards developed by you, if the cards
clearly state that they may only be redeemed at Mrs. Fields Cookies Stores owned
by you. If we do not give you written approval of any advertising or other
promotional materials within 1 5 days from the date of receipt by us of the
materials, we will be deemed to have disapproved the submission. You agree not
to use any advertising, marketing or related materials that we have disapproved.
You also agree to list the Licensed Store in the principal telephone directories
distributed in your metropolitan area.
7.3 Marketing Contributions From Suppliers. You acknowledge that we and our
Affiliates may receive marketing or promotional contributions, allowances,
rebates, or similar funds from suppliers of products which are sold at Cookie
Stores. We and our Affiliates will be entitled to all the funds and you waive
any rights to those funds. Amounts received by us or our Affiliates on account
of supplies purchased by you will not reduce the contributions due from you to
the Marketing Fund.
7.4 Our Advertising Materials. Upon request, we will provide you with copies of
advertising, marketing and promotional formats and materials that we have
prepared and that are suitable for use at local Mrs. Fields Cookies Stores.
Those items will be provided at our direct cost of producing them, including any
related shipping, handling and storage charges, payable when the materials are
ordered. These payments are not refundable.
ARTICLE 8
CONFIDENTIAL INFORMATION AND USE OF THE MARKS
8.1 Confidential Information. We may disclose certain Confidential Information
to you in the initial training program and subsequent training, the Operations
Manual and in guidance furnished to you during the term of the Franchise. You
are not acquiring any interest in Confidential Information, other than the right
to utilize Confidential Information disclosed to you in the operation of the
Licensed Store during the term of this Agreement. Your use or duplication of any
Confidential Information in any other business will constitute an unfair method
of competition and a violation of this Agreement. The Confidential Information
is proprietary, includes our trade secrets and is disclosed to you solely on the
condition that you agree:
(a) Not to use Confidential Information in any other business or
capacity;
(b) To maintain the absolute confidentiality of Confidential
Information during and after the term of this Agreement;
(c) Not to make unauthorized copies of any portion of Confidential
Information disclosed in written or other tangible form; and
(d) To adopt and implement all reasonable procedures that we
prescribe to prevent unauthorized use or disclosure of
Confidential Information, including restrictions on disclosure of
Confidential Information to your employees and to comply with
requirements we may impose that certain key employees execute
confidentiality agreements as a condition of employment.
8.2 Concepts Developed by You. We and our Affiliates will have the perpetual
right to own and use and authorize other Mrs. Fields Cookies Stores to use, and
you will fully and promptly disclose to us, all ideas, concepts, formulas,
recipes, methods and techniques relating to the development or operation of a
dessert or snack food business conceived or developed by you or your employees
during the term of this Agreement. You may not test, offer, or sell any new
products without our prior written consent.
8.3 Ownership and Goodwill of Marks. You acknowledge that we own the Marks and
that your right to use the Marks is derived solely from this Agreement and is
limited to the conduct of business in compliance With this Agreement and all
applicable standards, specifications and operating procedures that we require.
Any unauthorized use of the Marks by you will constitute a breach of this
Agreement and an infringement of our rights in the Marks. You agree that your
usage of the Marks and any goodwill established by that use will be for our
exclusive benefit. This Agreement does not confer any goodwill or other
interests in the Marks upon you, other than the right to operate a Mrs. Fields
Cookies Store in compliance with this Agreement. All provisions of this
Agreement applicable to the Marks will apply to any additional proprietary trade
and service marks and commercial symbols we or our Affiliates may authorize for
your use in the future.
8.4 Limitations on Your Use of Marks. You agree to use the Marks as the sole
identification of the Licensed Store. However, you will identify yourself as the
independent owner of the Licensed Store in the manner we require. You will not
use any Mark as part of any corporate or trade name or with any prefix, suffix
or other modifying words, terms, designs or symbols (other than logos licensed
to you under this Agreement), or in any modified form, nor may you use any Mark
in connection with the performance or sale of any unauthorized services or
products or in any other manner not expressly authorized in writing by us. You
agree to display the Marks prominently at the Licensed Store, on supplies or
materials designated by us and in connection with packaging materials, forms,
labels and advertising and marketing materials. All Marks will be displayed in
the manner we require. You agree to use the registration symbol "(D' in
connection with your use of the Marks that are registered. You agree to refrain
from any business or marketing practice which may be injurious to our business
and the good will associated with the Marks and other Mrs. Fields Cookies
Stores. You agree to give such notices of trade and service mark registrations
as we specify and to obtain such fictitious or assumed name registrations as may
be required under applicable law.
8.5 Discontinuance of Use of Marks. If it becomes advisable at any time in our
sole discretion for us or you to modify or discontinue use of any Mark or use
one or more additional or substitute trade or service marks, you agree to comply
with our directions to modify or discontinue the use of the Mark or use one or
more additional or substitute trade or service marks within a reasonable time
after notice from us. We will reimburse you for your reasonable direct expenses
in modifying or discontinuing the use of a Mark and substituting a different
trademark or service mark. However, we will not be obligated to reimburse you
for any loss of goodwill associated with any modified or discontinued Mark or
for any expenditures made by you to promote a modified or substitute trademark
or service mark.
8.6 Notification Of Infringements and Claims. You agree to immediately notify us
of any apparent infringement of or challenge to your use of any Mark or claim by
any person of any rights in any Mark, and you will not communicate with any
person other than us or our counsel in connection with the infringement,
challenge or claim. We will have sole discretion to take the action we deem
appropriate and the right to control exclusively any litigation, U.S. Patent and
Trademark Office proceeding or any other administrative or court proceeding
arising out of any such infringement, challenge or claim or otherwise relating
to any Mark. You agree to execute any instruments and documents, render such
assistance and do those things as, in the opinion of our legal counsel, may be
necessary or advisable to protect and maintain our interests in any litigation
or U.S. Patent and Trademark Office or other proceeding or otherwise to protect
and maintain our interests in the Marks.
8.7 Our Indemnification of You. We agree to indemnify you against and to
reimburse you for all damages for which you are held liable in any proceeding
arising out of your authorized use of any Mark in compliance with this Agreement
and for all costs you reasonably incur in defending any claim brought against
you or any proceeding in which you are named as a party, provided that you have
timely notified us of the claim or proceeding and have otherwise complied with
this Agreement. We and our Affiliates, at our option, will be entitled to defend
and control the defense of any proceeding arising Qut of your authorized use of
any Mark.
8.8 Copyrights. We claim copyrights in the Confidential Information, the
Operations Manual, our construction plans, specifications and materials, printed
advertising and promotional materials and in related items used in operating the
Franchise. Such copyrights have not been registered with the United States
Registrar of Copyrights but have been protected under the federal copyright
laws, where appropriate, by virtue of our placing the appropriate notice of
copyright on such items. You may use the Operations Manual and other materials
during the term of the Franchise Agreement. The provisions of Sections 8.3, 8.5,
8.6, and 8.7 of this Agreement relating to Marks also apply to copyrights owned
by us, as if copyrights were included within the definition of Marks.
ARTICLE 9
EXCLUSIVE RELATIONSHIP
9.1 Non-Competition. You agree and acknowledge that we would be unable to
protect the Confidential Information against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and information among Mrs.
Fields Cookies Stores if franchised owners of Mrs. Fields Cookies Stores or the
manager of the Licensed Store were permitted to hold interests in or perform
services for a Competitive Business. You also acknowledge and agree that we have
granted the Franchise to you in consideration of and reliance upon your
agreement to deal exclusively with us. Therefore, during the term of this
Agreement, no Restricted Person and no manager of the Licensed Store will:
(a) Have any direct or indirect interest in a Competitive Business
located or operating within 1 mile of the Licensed Store, except
other Mrs. Fields Cookies Stores operated by you under franchise
agreements with us;
(b) Have any direct or indirect interest in a Competitive Business
located or operating within 1 mile of any Mrs. Fields Retail
Outlet in the metropolitan area in which you are located, except
other Mrs. Fields Cookies Stores operated by you under franchise
agreements with us;
(C) Have any direct or indirect interest in a Competitive Business
located or operating within 1 mile of any Mrs. Fields Retail
Outlet, except Mrs. Fields Cookies Stores operated by you under
franchise agreements with us;
(d) Have any direct or indirect interest in a Competitive Business,
except other Mrs. Fields Cookies Stores operated by you under
franchise agreements with us;
(e) Perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for a Competitive
Business, except other Mrs. Fields Cookies Stores operated by you
under franchise agreements with us; or
(f) Recruit or hire any employee who, within the immediately
preceding 6-month period, was employed by us or any Mrs. Fields
Retail Outlet operated by us, our Affiliates or another
franchisee or licensee of us, without obtaining the prior written
permission of us or the franchisee of licensee.
The restrictions of this Section 9.1 do not apply to the ownership of shares of
a class of securities listed on a stock exchange or traded on the
over-the-counter market that represent 2% or less of the number of shares of
that class of securities issued and outstanding. Prior to any Licensed Store
manager commencing employment, you agree to provide us with a written agreement
from that Licensed Store manager accepting and agreeing to be bound by the
provisions of this Section 9.1.
ARTICLE 10
TRANSFERS
10.1 Transfers by Us. This Agreement is fully transferable by us and will inure
to the benefit of any transferee or other legal successor to our interest in
this Agreement.
10.2 Restrictions on Transfers by You. Your rights and duties created by this
Agreement are personal to you, and we have granted this Agreement to you in
reliance upon our perceptions of the individual or collective character, skill,
aptitude, attitude, business ability and financial capacity of you and, if you
are not an individual, your Entity Owners. Accordingly, no Transfer will be made
without our prior written approval. Any Transfer without our approval will
constitute a breach of this Agreement and will be void and of no effect.
10.3 Conditions for Approval of Transfers by You. If you are in full compliance
with this Agreement, we will not unreasonably withhold our approval of a
Transfer that meets the following requirements:
(a) Character. The proposed transferee and the individuals ultimately
owning the transferee, if the transferee is an Entity, must be
individuals of good moral character and otherwise meet our then
applicable standards for owners of Mrs. Fields Cookies Stores.
(b) Business Experience. The transferee and, if the transferee is an
Entity, its Entity Owners must have sufficient business
experience, aptitude and financial resources to operate its
business and comply. with this Agreement;
(c) Training. The transferee and/or its senior management personnel
have agreed to complete our training program to our satisfaction;
(d) Satisfaction of Obliggations. You have paid all amounts owed for
purchases by you from us and our Affiliates and all other amounts
owed to us or our Affiliates and third-party creditors;
(e) Assumption of Agreement. The transferee has agreed to be bound by
and expressly assume all of the terms and conditions of this
Agreement for the remainder of its term, and if the transferee is
an Entity, each Entity Owner of the transferee has executed a
guarantee in our favor in which each Entity Owner of the
transferee guarantees performance by the transferee of the terms
and conditions of this Agreement and assumes full and
unconditional liability for the performance of all obligations,
covenants and agreements of you contained in this Agreement;
(f) Payment of Transfer Fees. You or the transferee has paid our then
current transfer fee for a Franchise Agreement. However, no
transfer fee will be required if the Transfer is to a
wholly-owned corporation under Section 10.4 of this Agreement or
if the Transfer is among existing Entity Owners of you;
(g) Release. You and your transferring Entity Owners, if you are an
Entity, have executed a general release, in form satisfactory to
us, of any and all claims against us and our Affiliates and our
respective officers, directors, employees arid agents;
(h) Approval of Terms of Transfer. We have approved the material
terms and conditions of the Transfer, including, without
limitation, that the price and terms of payment are not so
burdensome as to affect adversely the operation of the Licensed
Stores. However, our approval of a Transfer does not ensure the
transferee's success as a Mrs. Fields Cookies Store franchisee
nor should the transferee rely upon our approval of the Transfer
in determining whether to acquire the Licensed Store;
(i) Subordination. If you (or your Entity Owners) finance any part of
the sale price of the transferred interest, you and the Entity
Owners have agreed that all obligations of the transferee under
any promissory notes, agreements or security interests reserved
by you (or your Entity Owners) will be subordinate to the
transferee's obligations to us and our Affiliates; and
(j) Non-Competition Agreement. Each Restricted Person has executed a
non-competition agreement in our favor and in favor of the
transferee agreeing that, for a period of 3 years commencing on
the effective date of the transfer, no Restricted Person will
acquire or hold any direct or indirect interest as an owner,
investor, partner, director, officer, manager, employee,
consultant, representative or agent, or in any other capacity, in
a Competitive Business located within W 1 mile of the Licensed
Store, (ii) 1 mile of any Mrs. Fields Retail Outlet in the
metropolitan area in which you are located, or (iii) 1 mile of
any other Mrs. Fields Retail Outlet, except Mrs. Fields Cookies
Stores operate under agreements with us or our Affiliates. The
restrictions of this Section 10.3(j) will not apply to the
ownership of shares of a class of securities listed on a stock
exchange or traded on the over-the-counter market that represent
2% or less of the number of shares of that class of securities
issued and outstanding.
(k) Landlord Consent. If consent is required, the lessor of the
Premises consents to the assignment or sublease of the Premises
to the transferee; and
(1) Non-Use of Marks. You and your Entity Owners have agreed that you
and they will not directly or indirectly at any time or in any
manner (except with respect to Mrs. Fields Cookies Stores owned
and operated by you or them) identify yourself or themselves or
any of their businesses as a current or former Mrs. Fields
Cookies Store, or as a franchisee, licensee or dealer of us or
our Affiliates, use any Mark, any colorable imitation of any of
the Marks or other indicia of a Mrs. Fields Cookies Store in any
manner or for any purpose or utilize for any purpose any trade
name, trade or service mark or other commercial symbol that
suggests or indicates a connection or association with us or our
Affiliates.
In connection with any assignment permitted under this Section 10.3, you will
provide us with all documents to be executed by you and the proposed transferee
at least 30 days prior to execution.
10.4 Transfer to a Wholly-Owned Corporation. If you are in full compliance with
this Agreement, you may transfer your rights in this Agreement to a corporation
which will conduct no business other than the business contemplated by this
Agreement, which you actually manage and in which you maintain management
control and own and control 100% of the equity and voting power of all issued
and outstanding capital stock. Transfers of shares of such corporation will be
subject to the provisions of Section 10.2 and Section 10.3 of this Agreement.
Even though a transfer is made under this Section, you will remain personally
liable under this Agreement as if the transfer to such corporation had not
occurred. The articles of incorporation, by-laws and other organizational
documents of the corporation will recite that the issuance and assignment of any
interest in the corporation is restricted by the terms of this Article 1 0, and
all issued and outstanding stock certificates of such corporation will bear a
legend reciting or referring to these restrictions.
10.5 Our Right of First Refusal.
(a) Submission of Offers to Us. If you or one or more of your Entity
Owners desires to make a Transfer, you or the Entity Owner will
obtain a bona fide, executed written offer and an earnest money
deposit (in the amount of 5% or more of the offering price) from
a responsible and fully disclosed purchaser and will immediately
submit to us a true and complete copy of such offer, which will
include details of the payment terms of the proposed sale and the
sources and terms of any financing for the proposed purchase
price and a list of the owners of record and beneficially of any
offeror that is an Entity and the individuals ultimately owning
or controlling the offeror. If the offeror or an owner of the
offeror is a publicly-held Entity, you will also submit to us
copies of the most current annual and quarterly reports of the
publicly-held Entity. To be a valid, bona fide offer, the
proposed purchase price will be denominated in a dollar amount.
The offer must apply only to an interest in this Agreement or a
Controlling Interest in you and may not include an offer to
purchase any other property or rights of you or your Entity
-Owners. However, if the offeror proposes to buy any other
property or rights from you or your Entity Owners under a
separate, contemporaneous offer, the price and terms of purchase
offered to you or your Entity owners for the interest in this
Agreement or the Controlling Interest in you will reflect the
bona fide price offered for that interest and will not reflect
any value for any other property or rights.
(b)Our Riqht to Purchase. We will have the right, exercisable by
written notice delivered to you or your Entity Owners within 30
days from the date of delivery of an exact copy of the offer to
us, to purchase the interest in this Agreement or such
Controlling Interest in you for the price and on the terms and
conditions contained in the offer. However we may substitute cash
for any form of payment proposed in the offer, our credit will be
deemed equal to the credit of any proposed purchaser, 'and we
will have not less than 60 days to close the purchase. Without
regard to the representations and warranties demanded by the
proposed purchaser, if any, we will be entitled to purchase the
interest, receiving from you all customary representations and
warranties given by the seller of the assets of a business or
equity interest in an Entity, as applicable, including
representations and warranties as to ownership, condition of and
title to assets, absence of liens and encumbrances relating to
the ownership interest and assets, and validity of contracts and
liabilities affecting the assets being purchased, contingent or
otherwise.
(c) Non-Competition Restriction. If we exercise our right of first
refusal, you and each other Restricted Person agree that, for a
period of 3 years commencing on the date of the closing, no
Restricted Person will acquire or hold any direct or indirect
interest as an owner, investor, partner, director, officer,
manager, employee, consultant, representative or agent, or in any
other capacity, in a Competitive Business located within W within
1 mile from the Licensed Store, (ii) within 1 mile of any Mrs.
Fields Retail Outlet in the metropolitan area in which you are
located, or (iii) 1 mile of any other Mrs. Fields Retail Outlet,
except Mrs. Fields Cookies Stores operated under agreements with
us or our Affiliates. The restrictions of this Section will not
be applicable to the ownership of shares of a class of securities
listed on a stock exchange or traded on the over-the-counter
market that represent 2% or less of the number of shares of that
class of securities issued and outstanding. If we exercise our
right of first refusal, you and your Entity Owners further agree
that you will abide by the restrictions of Section 10.30).
(d)Non-Exercise by Us of Our Right of First Refusal. If we do not
exercise our right of first refusal, you (or your Entity Owners)
may complete the sale to such purchaser pursuant to and on the
terms of such offer, subject to our approval as provided in
Sections 10.2 and 10.3 above. However, if the sale to the
purchaser is not completed within 1 20 days after delivery of the
offer to us, or if there is a material change in the terms of the
sale, our right of first refusal will be extended for 30 days
after the expiration of the 1 20-day period or after the material
change in the terms of the sale.
10.6 Death or Permanent Disability. If you are an individual, upon your death
or permanent disability or, if you are an Entity, upon the death or permanent
disability of an individual owner of a Controlling Interest in you, the
executor, administrator, conservator or other personal representative of that
person will transfer his interest in this Agreement or his Controlling Interest
in you within a reasonable time, not to exceed 6 months from the date of death
or permanent disability, to a third party approved by us. A transfer under this
Section, including, without limitation, transfer by devise or inheritance, will
be subject to all of the terms and conditions for Transfers contained in
Sections 10.2 and 10.3 of this Agreement, and unless transferred by gift, devise
or inheritance, subject to the terms of Section 10.5 above. Failure to dispose
of such interest within the specified period of time will constitute a breach '
of this Agreement. For purposes of this Agreement, the term 'permanent
disability' will mean a mental or physical disability, impairment or condition
that is reasonably expected to prevent or actually does prevent you or an owner
of a Controlling Interest in you from supervising the operation of the Licensed
Store for a period of 6 months from the onset of such disability, impairment or
condition.
10.7 Ef f ect of Consent to Transfer. Our consent to a Transfer will not
constitute a waiver of any claims we may have against the transferor nor be
deemed a waiver of our right to demand full compliance by the transferee with
the terms or conditions of this Agreement.
ARTICLE 11
DEFAULTS
11.1 Our Defaults. If we materially breach a provision of this Agreement and
fail within 30 days after written notice of breach is delivered to us, either to
correct such failure or, if such failure cannot reasonably be corrected within
30 days, to provide proof acceptable to you of efforts which are reasonably
calculated to correct such failure within a reasonable time, which will in no
event be more than 60 days after such notice, and thereafter to cure such
failure within the 60-day time period, then we will be in default under this
Agreement.
11.2 Your Defaults. You will be in default under the terms of this Agreement if
any of the following occur:
(a) Insolvency. You file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any federal or
state bankruptcy law or any similar federal or state law, or are
adjudicated a bankrupt or make an assignment for the benefit of
creditors or admit in writing your inability to pay your debts
generally as they become due, or if a petition or answer
proposing the adjudication of you as a bankrupt or your
reorganization pursuant to any federal or state bankruptcy law or
any similar federal or state law is filed in any court and you
consent to or acquiesce in the filing thereof or such petition or
answer is not discharged or denied within 60 days after the
occurrence of any of the foregoing, or if a receiver, trustee or
liquidator of you or of all or substantially all of your assets
or your interest in this Agreement is appointed in any proceeding
brought by you, or if any such receiver, trustee or liquidator is
appointed in any proceeding brought against you and is not
discharged within 60 days after the occurrence thereof, or if you
consent to or acquiesce in such appointment (any such event
described in this Section 1 1.2(a) being referred to as an
'Insolvency Event');
(b) Unauthorized Transfer. A Transfer occurs in violation of the
provisions of Article 10 of this Agreement;
(c) Misstatements and other Adverse Developments. You (or, if you are
an Entity, any Entity Owner of you) have made any material
misrepresentation or omission in your application for the rights
conferred by this Agreement, are convicted by a trial court of o,
plead no contest to a felony or to any other crime or offense
that may adversely affect the goodwill associated with the Marks,
or if you engage in any conduct which may adversely affect the
reputation of any Mrs. Fields Cookies Store or the goodwill
associated with the Marks;
(d) Unauthorized Use of Marks or Confidential Information. You or an
Entity Owner of you make any unauthorized use of- the Marks or
any unauthorized use or disclosure of Confidential Information;
(e) Abandonment. You abandon or fail actively to operate the Licensed
Store for 3 consecutive days unless the Licensed Store has been
closed for a purpose approved in advance by us in writing or
because of fire, flood or other casualty or government order;
(f) Breach of Lease; Loss of Right of Possession. You are in breach
of any of your obligations under your lease or sublease of the
Premises or you lose the right to possession of the Premises;
(g) Failure to Comply with Certain System Standards and Health
Requirements. You fail or refuse to comply with System Standards
relating to the cleanliness or sanitation of the Licensed Store
or violate any health, safety or sanitation law, ordinance or
regulation and do not correct the noncompliance within 48 hours
after written notice thereof is delivered to you or you store or
use 'out-of-code' products in violation of the System Standards;
(h) Understatements of Gross Revenues. You understate the Licensed
Store's Gross Revenues in any report or financial statement by an
amount greater than 2%;
(i) Failure to Make Payments. You fail to make payments, when due, of
any amounts due to us or our Affiliates for royalty fees,
Marketing Fund contributions or for any other amounts due to us
or our Affiliates under this Agreement or in connection with a
purchase by you of the Licensed Store assets and you do not
correct the failure within 1 0 days after written notice of the
failure is delivered to you;
(j) Failure to Pay Taxes. You fail to pay any federal or state
income, sales or other taxes due with respect to the Licensed
Store's operations unless you are in good faith contesting your
liability for the taxes;
(k) Other Breaches. You fail to comply with any other provision of
this Agreement or any System Standard and do not correct the
failure within 30 days after written notice of the failure to
comply is delivered to you or provide proof acceptable to us of
efforts which are reasonably calculated to correct the failure
within a reasonable time, which will in no event be more than 60
days after the notice, if the failure cannot reasonably be
corrected within 30 days after written notice of the failure to
comply is delivered to you;
(1) Repeated Breaches. You fall on 2 or more separate occasions
within any period of 1 2 consecutive months or on 3 occasions
during the term of this Agreement to submit when due reports or
other data, information or supporting records or to pay when due
the royalty fees or other payments due to us or our Affiliates or
otherwise fails to comply with this Agreement, whether or not the
failures to comply are corrected after notice thereof is
delivered to you;
(m) Termination Without Cause. You terminate this Agreement without
cause; or
(n) Financing Defaults. You default with respect to any of your
obligations to us or any other lender under any financing
provided to you in connection with this Franchise Agreement or a
purchase of Licensed Store assets.
ARTICLE 12
TERMINATION OF AGREEMENT
12.1 Termination Upon Expiration of Term. This Agreement will terminate upon
expiration of the term of this Agreement, unless terminated earlier.
12.2 Your Right to Terminate if We Default. If we are in default under this
Agreement, in addition to whatever other rights and remedies are available to
you and if you are in compliance with this Agreement, you may terminate this
Agreement effective 10 days after delivery to us of notice of termination,
unless within that time, our default is cured.
12.3 Termination by You without Cause. A termination of this Agreement by you
for any reason other than as permitted by Section 12.2 above will be deemed a
termination by you without cause and in violation of this Agreement.
12.4 Our Right to Terminate if You Default. If you are in default under this
Agreement, in addition to whatever other rights and remedies are available to
us, we may terminate this Agreement, effective upon delivery of notice of
termination to you.
12.5 Our Right to Terminate in Certain Other Circumstances.
(a) Failure to Complete Training. If you or your initial store
manager fails to complete all phases of the initial training
program to our satisfaction, we will have the right to terminate
this Agreement effective upon delivery of notice of termination
to you. If we terminate the Agreement as permitted by this
provision, we will refund to you the initial franchise fee less
all reasonable expenses incurred by us in connection with (i) the
preparation of this Agreement and all related agreements, (ii)
the grant of the Franchise, (iii) approval of the Premises, (iv)
selection of the Premises, and (v) any other services performed
by us in connection with the establishment and development of the
Licensed Store. However, in no event will the refund exceed 50%
of the initial franchise fee. The refund will be delivered to you
upon execution of all releases, waivers and other agreements
necessary to terminate the relationship between you and us.
(b) Failure to Commence Operations. If you fail to commence operation
of the Licensed Store within 1 80 days after the execution of
this Agreement, we will also have the right to terminate this
Agreement effective upon delivery of notice of termination to
you. No refund of the initial franchise fee will be made in these
circumstances.
12.6 Your Opportunity to Acquire a Successor Franchise Agreement.
(a) Conditions to Issuance of a Successor Franchise. Upon termination
of this Agreement, you may acquire a successor franchise for the
Licensed Store on the terms and conditions of the form of
franchise agreement for Mrs. Fields Cookies Stores that we are
using at the time of expiration of this Agreement if:
(i) You have substantially complied with this Agreement during
its term and are not in default of this Agreement;
(ii) You agree either:
(1) To maintain possession of and remodel and/or expand
the Premises, add or replace leasehold improvements,
equipment, fixtures, furnishings and signs and otherwise
modify the Licensed Store to bring it into compliance with
specifications and standards then applicable for Mrs. Fields
Cookies Stores, or
(2) If in our judgment the Licensed Store should be
relocated, to secure substitute premises approved by us and
construct and develop the substitute premises in compliance
with specifications and standards then applicable for Mrs.
Fields Cookies Stores;
(iii)You agree to correct any deficiencies in the Licensed Store
or the Premises, or in your operation of the Licensed Store,
as identified in the notice from us to you described in
Section 12.6(b) of this Agreement, within the time period
specified in the notice; and
(vi) You comply with the provisions of Section 12.6(c) below on
or before expiration of this Agreement.
(b) Grant of a Successor Franchise. You must give us a written notice
of your desire and election to acquire a successor franchise
during the year preceding the last year of the term of this
Agreement; otherwise, you will have no right to acquire a
successor franchise. We agree to give you written notice, not
more than 1 80 days after receipt of your notice, of our
requirements under Section 12.6(a)(iii) of this Agreement and the
time period for satisfying those requirements, as well as a list
of any deficiencies in the Licensed Store or the Premises, or in
your operation of the Licensed Store that must be corrected,
stating the actions you must take to correct the deficiencies and
specifying the time period in which the deficiencies must be
corrected. If, but only if, you have satisfied all of the
conditions set forth in Section 12.6 of this Agreement by the
date of expiration of this Agreement, we will issue the successor
franchise. We agree, however, that if any of the time periods
specified by us for compliance with the provisions of Section
12.6(a)(ii) or Section 12.6(a)(iii) above extend beyond the
expiration of this Agreement, the new franchise will be issued
conditionally, subject to compliance with those requirements
within the applicable time periods.
(c) Agreements and Releases to be Executed,. If you are entitled to a
successor franchise, you (and your Entity Owners, if you are an
Entity) will be required to execute a new franchise agreement and
any ancillary agreements we are customarily using in granting
franchises for the operation of Mrs. Fields Cookies Stores at the
time of expiration of this Agreement. You will also be required
to pay the fees and charges then being charged under the version
of franchise agreement and our franchising policies in effect
upon expiration of this Agreement. These requirements may include
payment of a new initial franchise fee (which will not exceed 50%
of the initial franchise fee then being charged to new f
franchisees) and other fees and charges at the times and in the
amounts provided for in the form of successor franchise agreement
then in use by us. These fees and charges may be different from
those in this Agreement. You (and your Entity Owners) will also
be required to execute general releases, in form satisfactory to
us, of any and all claims against us and our Affiliates and our
respective officers, directors, employees, agents, successors and
assigns arising under this Agreement. Copies of all the
agreements and releases will be delivered to you at least 60 days
prior to expiration of this Agreement and must be executed by you
(and your Equity Owners, if applicable) prior to expiration of
this Agreement.
1 2.7 Payment of Amounts Owed to Us and Others following Termination. You agree
to pay us within 1 5 days after the date of termination of this Agreement, or
such later date as the amounts due to us are determined, the royalty fees,
Marketing Fund contributions, amounts owed for purchases by you from us or our
Affiliates, interest due on any of the foregoing and all other amounts owed to
us or our Affiliates which are then unpaid.
12.8 Discontinuance of the Use of the Marks following Termination. You agree
that, upon termination of this Agreement, you will:
(a) Not directly or indirectly at any time or in any manner (except
with respect to other Mrs. Fields Cookies Stores owned and
operated by you) identify yourself or any business as a current
or former Mrs. Fields Cookies Store, or as a franchisee, licensee
or dealer of us or our Affiliates, use any Mark, any colorable
imitation of a Mark or other indicia of a Mrs. Fields Cookies
Store in any manner or for any purpose or utilize for any purpose
any trade name, trade or service mark or other commercial symbol
that suggests or indicates a connection or association with us or
our Affiliates;
(b)Deliver to us all signs, sign-faces, sign-cabinets, marketing
materials, forms, invoices and other materials containing any
Mark or otherwise identifying or relating to a Mrs. Fields
Cookies Store and allow us, without liability, to remove all such
items from the Licensed Store,-
(c)Take such action as may be required to cancel all fictitious or
assumed name or equivalent registrations relating to your use of
any Mark;
(d)Ifwe do not purchase the Licensed Store as provided in Section 1
2.1 1 below, make the changes to the exterior and interior
appearance of the Licensed Store as are reasonably required by
us;
(e)Deliver all materials and supplies identified by the Marks in full
cases or packages to us for credit and dispose of all other
materials and supplies identified by the Marks within 30 days
after the effective date of termination of this Agreement;
(f) Notify the telephone company and all telephone directory
publishers of the termination of your right to use any telephone
and telecopy numbers and any regular, classified or other
telephone directory listings associated with any Mark and to
authorize transfer of those rights to us or at our direction. You
agree that, as between you and us, we have the sole rights to and
interest in all telephone and telecopy numbers and directory
listings associated with any Mark. You authorize us and appoint
us and any of our officers as your attorney in fact, to direct
the telephone company and all telephone directory publishers to
transfer any telephone and telecopy numbers and directory
listings relating to the Licensed Store to us or at our
direction, should you fail or refuse to do so, and the telephone
company and all telephone directory publishers may accept such
direction or this Agreement as conclusive of our exclusive rights
in the telephone and telecopy numbers and directory listings and
our authority to direct their transfer; and
(g) Furnish us, within 30 days after the effective date of
termination, with evidence satisfactory to us of your compliance
with the obligations in this Section 12.8.
12.9 Discontinuance of Use of Confidential Information following Termination.
You agree that, upon termination of this Agreement, you will immediately cease
to use any Confidential Information disclosed to you pursuant to this Agreement
in any business or otherwise and you will return to us all copies of the
Operations Manual and any other confidential materials which we have loaned to
you.
12.10 Covenant Not to Compete. Upon termination of this Agreement for any
reason other than as a result of our default, you agree that, for a period of 1
year (or 3 years if we purchase the Licensed Store as provided in Section 1 2.1
1 below) commencing on the effective date of termination, no Restricted Person
will have any direct or indirect interest as an owner, investor, partner,
director, officer, employee, consultant, representative or agent or in any other
capacity in any Competitive Business located or operating within (a) 1 mile of
the Licensed Store, N 1 mile of any Mrs. Fields Retail Outlet in the
metropolitan area in which you are located, or (c) I mile of any other Mrs.
Fields Retail Outlet, except Mrs. Fields Cookies Stores operated under
agreements with us or our Affiliates. The restrictions of this Section will not
be applicable to the ownership of shares of a class of securities listed on a
stock exchange or traded on the over-the-counter market that represent two
percent (2%) or less of the number of shares of that class of securities issued
and outstanding. You expressly acknowledge that you and the other Restricted
Persons possess skills and abilities of a general nature and have other
opportunities for exploiting those skills. Consequently, enforcement of the
covenants made in this Section will not deprive you or any of the other
Restricted Persons of their personal goodwill or ability to earn a living-
12.1 1 Our Option to Purchase Licensed Stores.
(a) Option to Purchase. Upon termination of this Agreement other than
as a result of our default and if no successor franchise
agreement has been executed, we or our assignee will have the
option, exercisable by giving written notice thereof within 60
days from the date of such termination or expiration, to acquire
from you, the inventory of Mrs. Fields Products, materials, and
supplies that are in good and saleable condition and not obsolete
or discontinued (the 'Inventory') and the equipment. furnishings,
signs, and the other tangible assets of the Licensed Stores
(collectively, with t@e Inventory, the "Assets'). We will have
the unrestricted right to assign this option to purchase and our
rights under this Section 1 2.1 1. We will be entitled to all
customary warranties and representations in connection with our
purchase, including, without limitation, representations and
warranties as to ownership, condition of and title to the Assets,
no liens and encumbrances on the Assets, and validity of
contracts and agreements and liabilities benefitting us or
affecting the Assets, contingent or otherwise.
(b) Purchase Price. The purchase price for the Assets will be equal
to the greater of: W. The sum of the book value of the Licensed
Store's Assets, other than Inventory, amortized on a
straight-line basis over a 7 year period, plus the lesser of cost
and the then-current wholesale market value of the Inventory, or
(ii) The product of the Licensed Store's average cash flow for
the 2 most recently completed fiscal years, multiplied by 2.
"Cash flow" means the Licensed Store's Gross Revenues less
all Licensed Store-related costs (i.e., cost of goods sold,
labor, occupancy and other Licensed Store expenses) as well
as annual administrative costs of $1 5,000, royalty fees and
marketing fees, but not including interest and depreciation.
We will have the right to set off against and reduce the purchase price by any
and all amounts owed by you to us or our Affiliates. We may exclude from the
Assets purchased any equipment, furnishings, signs, and usable inventory of
Mrs. Fields Products, materials, or supplies of the Licensed Stores that we
have not approved as meeting our standards for Mrs. Fields Cookies Stores, and
the purchase price will be reduced by the replacement cost of such excluded
items which are required in the operation of the Licensed Stores being
purchased.
(c) Payment of Purchase Price. The purchase price will be paid
in cash at the closing of the purchase, which will take
place no later than 90 days after your receipt of our notice
of exercise of this option to purchase the Licensed Stores,
at which time you will deliver instruments transferring to
us good and merchantable title to the Assets purchased, free
and clear of all liens and encumbrances and with all sales
and other transfer taxes paid by you, and with all licenses
or permits of the Licensed Stores which may be assigned or
transferred. If the closing of the purchase does not occur
within the 90-day period because you fail to act diligently
in connection with the purchase, the purchase price will be
reduced by 10%. The purchase price will be further reduced
by 10% per month for each subsequent month you fail to act
diligently to consummate the purchase. Prior to closing, you
and we will comply with the applicable Bulk Sales provisions
of the Uniform Commercial Code as enacted in the state where
the Licensed Store is located.
(d) Lease of Premises. In connection with the purchase of the
Assets of a Licensed Store, you will also deliver to us an
assignment of the lease for the Licensed Store premises (or,
if assignment is prohibited, subleases for the full
remaining term and on the same terms and conditions as your
lease). If you own the premises of the Licensed Store, you
agree to lease the premises to us pursuant to the terms of
our standard lease, for a term of 5 years with two
successive 5-year renewal options at fair market rental
during the initial and renewal terms.
(e) Interim Management. If we exercise the option to purchase
the Licensed Store, pending the closing of such purchase, we
may appoint a manager to maintain the operation of the
Licensed Store or, at our option, require you to close the
Licensed Store during such time period without removing any
assets. If we appoint a manager to maintain the operation of
the Licensed Store pending closing of such purchase, all
funds from the operation of the Licensed Store during the
period of management by our appointed manager will be kept
in a separate fund, and all expenses of the Licensed Store,
including compensation, other costs, and travel and living
expenses of our appointed manager, will be charged to such
fund. As compensation for such management services, we will
charge such fund 10% of the Gross Revenues of the Licensed
Store during the period of our management. Operation of the
Licensed Store during any such period will be on your
behalf, provided that we will have a duty only to utilize
our good faith effort and will not be liable to you for any
debts or obligations incurred by the Licensed Store or to
any of your creditors for any merchandise, materials,
supplies or services purchased by the Licensed Store during
any period in which the Licensed Store is managed by our
appointed manager. You will maintain in force for the
Licensed Store all insurance policies required by this
Agreement until the date of closing.
Terminationof Franchise Agreement. Upon the closing of the purchase of the
Assets and satisfaction by you of all of your obligations under this Agreement
accruing through the closing, this Agreement will terminate.
12.12 Continuing Obligations. All obligations of us and you which expressly or
by their nature survive the termination of this Agreement will continue in full
force and effect subsequent to and notwithstanding termination and until they
are satisfied in full or by their nature expire. Included in the obligations
that will continue following termination of this Agreement are the Provisions of
Sections 5.3, 6.5, 6.7, 6.11, 8.1, 8.7, 10.3(l), 12.7, 12.8, 12.9, 12.10, 12.11,
12.12, 13.4, 14.1, and the provisions of Article 15 of this Agreement.
ARTICLE 13
RELATIONSHIP OF THE PARTIES/INDEMNIFICATION
13.1 Independent Contractors. This Agreement does not create a fiduciary
relationship between the parties. We and you are independent contractors and
nothing in this Agreement is intended to make either party a general or special
agent, joint venturer, partner or employee of the other for any purpose. You
will conspicuously identify yourself in all dealings as the owner of the
Licensed Store under a franchise granted by us and will place such other notices
of independent ownership on the forms, business cards, stationery, marketing and
other materials as we may require from time to time.
13.2 No Liability for the Act of Other Party. You will not employ any of the
Marks in signing any contract or applying for any license or permit or in a
manner that may result in our liability for any indebtedness or obligations of
you, nor may you use the Marks in any way not expressly authorized by us.
Neither we nor you will make any express or implied agreements, warranties,
guarantees or representations or incur any debt in the name or on behalf of the
other or be obligated by or have any liability under any agreements or
representations made by the other. We will not be obligated for any damages to
any person or property directly or indirectly arising out of the operation of
your business authorized by or conducted pursuant to this Agreement.
13.3 Taxes. We will have no liability for any sales, use, service, occupation,
excise, gross receipts, income, property or other taxes, whether levied upon you
or your assets or upon us, arising in connection with your sales or the business
conducted by you pursuant to this Agreement, except for taxes that we are
required by law to collect from you with respect to purchases from us and except
for our own income taxes. Payment of all 'such taxes will be your
responsibility.
13.4 Indemnification. You agree to indemnify, defend and hold harmless us, our
parent company, subsidiaries and Affiliates and each of our respective
shareholders, directors, officers, employees, agents, successors and assigns
(the 'Indemnified Parties') against and to reimburse the Indemnified Parties for
any claims, liabilities, lawsuits, demands, actions, damages and expenses
arising from or out of (a) any breach of your agreements, covenants,
representations, or warranties contained in this Agreement, (b) any damages or
injury to any person, including, but not limited to, your employees, our
employees and agents, your customers, and members of the public, suffered or
incurred on or about any Licensed Store owned or operated by you, (c) product
liabilities claims or defective manufacturing of Mrs. Fields Products by you, or
(d) the activities under this Agreement of you or any of your officers, owners,
directors, employees, agents or contractors. For purposes of this
indemnification, claims will mean and include all obligations, actual,
consequential, and incidental damages and costs reasonably incurred in the
defense of any claim against the Indemnified Parties, including reasonable
accountants', arbitrators', attorneys' and expert witness fees, costs of
investigation and proof of facts, court costs, other litigation expenses and
travel and living expenses. We will have the right to defend any such claim
against us. This indemnity will continue in full force and effect subsequent to
and notwithstanding the termination of this Agreement.
ARTICLE 14
SECURITY AGREEMENT
14.1 Security Agreement. In order to secure full and prompt payment of the fees
and other charges to be paid by you to us, and to secure performance of your
other obligations and covenants under this Agreement, you hereby grant us a
security interest in, lien upon, and right of set off against all of your
interest in the improvements, fixtures, inventory', goods, appliances and
equipment now or hereafter owned and located at the Licensed Store (whether
annexed to the Premises or not) or used in connection with the business
conducted at the Premises, including all machinery, materials, appliances and
fixtures for generating or distributing air, water, heat, electricity, light,
fuel, or refrigeration, for ventilating, cooling or sanitary purposes, for the
exclusion of vermin or insects and for the removal of dust, refuse or garbage;
all engines, machinery, stoves, refrigerators, furnaces, partitions, doors,
vaults, sprinkling systems, light fixtures, fire hoses, fire brackets, fire
boxes, alarm systems, brackets, screens, floor tile, linoleum, carpets,
plumbing, water systems, appliances, walk-in refrigerator boxes, cabinets,
dishwashers, bake ovens, set-up tables, --kitchen ranges, display counters and
shelves, computers and computer software, and other equipment and installations;
all other and further installations and appliances; all raw materials, work in
process, finished goods, and all inventory; and all replacements thereof,
attachments, additions, and accessions thereto, and products and proceeds
thereof in any form, including but not limited to insurance proceeds and any
claims against third parties for loss or damage to or destruction of any or all
of the foregoing (collectively, the 'Collateral'). Without our prior written
consent, you agree that no lien upon or security interest in the Collateral or
any item thereof will be created or suffered to be created and that no lease
will be entered into with respect to any item of Collateral. Without our prior
written consent, you will not sell or otherwise dispose of any item of
Collateral, or remove any Collateral from the Premises, unless the same is
replaced by a similar item of equal or greater value, and except for the sales
of inventory in the ordinary course of business. You agree to give to us
advance-notice in writing of any proposed change in your name, identity, or
structure and not to make any the change without our prior written consent and
compliance with the provisions of this Agreement, including Article 10. You
agree to execute for filing the financing statements and continuation statements
as we may require from time to time. You agree to pay all filing fees, including
fees for filing continuation statements in connection with the financing
statements, and to reimburse us for all costs and expenses of any kind incurred
in connection therewith. If you default under this Agreement, we will have all
the remedies and rights available as a 'secured party" with respect to the
Collateral under the Uniform Commercial Code as in effect from time to time in
the state where the Premises are located. The grant of the security interest by
you pursuant to this Section 14.1 will not be construed to derogate from or
impair any other rights which we may have under this Agreement or otherwise at
law or equity. The provisions of this Section shall survive the termination of
this Agreement.
ARTICLE 15
GENERAL PROVISIONS
15.1 Severability. Each article, section, paragraph, term and provision of this
Agreement will be considered severable and if, for any reason, any provision of
this Agreement is held to be invalid, contrary to or in conflict with any
applicable present or future law or regulation in a final, unappealable ruling
issued by any court, agency or tribunal with competent jurisdiction in a
proceeding to which we are a party, that ruling will not impair the operation
of, or have any other effect upon, such other portions of this Agreement as may
remain otherwise intelligible, and such other portions will continue to be given
full force and effect and bind the parties, although any portion held to be
invalid will be deemed not to be a part of this Agreement from the date the time
for appeal expires, if you are a party thereto, otherwise upon your receipt of a
notice of non-enforcement thereof from us.
15.2 Enforcement of Non-Competition Provisions. If any covenant in this
Agreement which restricts competitive activity is deemed unenforceable by virtue
of its scope in terms of area, business activity prohibited and/or length of
time, but would be enforceable by reducing any part or all of the covenant, you
and we agree that the covenant will be enforced to the fullest extent
permissible under the laws and public policies applied in the jurisdiction in
which enforcement is sought.
15.3 Rights Provided by Law. If any applicable and binding law or rule of any
jurisdiction requires a greater prior notice of the termination or non-renewal
of this Agreement than is required under this Agreement, or the taking of some
other action not required under this Agreement, or if, under any applicable and
binding law or rule of any jurisdiction, any provision of this Agreement is
invalid or unenforceable, the prior notice and/or other action required by such
law or rule will be substituted for the comparable provisions of this Agreement,
and we will have the right in our sole discretion to modify the invalid or
unenforceable provision to the extent required to be valid and enforceable. You
agree to be bound by any promise or covenant imposing the maximum duty permitted
by law which is subsumed within the terms of any provision of this Agreement, as
though it were separately articulated in and made a part of this Agreement, that
may result from striking from any of the provisions of this Agreement any
portion or portions which a court or arbitrator may hold to be unenforceable in
a final decision to which we are a party, or from reducing the scope of any
promise or covenant to the extent required to comply with such a court. order or
arbitration award. Such modifications to this Agreement will be effective only
in such jurisdiction, unless we elect to give them greater applicability, and
will be enforced as originally made and entered into in all other jurisdictions.
15.4 Waivers by Either of Us. Either we or you 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 of waiver to the
other or such other effective date stated in the notice of waiver. Any waiver
granted by us will be without prejudice to -any other rights we may have, will
be subject to our continuing review and may be revoked, in our sole discretion,
at any time and for any reason, effective upon delivery to you of ten days'
prior written notice.
15.5 Certain Acts Not to Constitute Waivers. Neither we nor you will not be
deemed to have waived or impaired any right, power or option reserved by this
Agreement (including, without limitation, the right to demand exact compliance
with every term, condition and covenant in this Agreement or to declare any
breach to be a default and to terminate this Agreement prior to the expiration
of its term) by virtue of (i) any custom or practice of the parties at variance
with the terms of this Agreement; (ii) any failure, refusal or neglect of us or
you to exercise any right under this Agreement or to insist upon exact
compliance by the other with its obligations under this Agreement, including any
waiver, forbearance, delay, failure or omission by us to exercise any right,
power or option, whether of the same, similar or different nature, with respect
to other Mrs. Fields Cookies Stores or franchise agreements; or (iii) our
acceptance of any payments due from you after any breach of this Agreement.
15.6 Excusable Non-Performance. Neither we nor you will be liable for loss or
damage or deemed to be in breach of this Agreement if the failure to perform
obligations results from transportation shortages; inadequate supplies of
equipment, merchandise, supplies, labor, material or energy or the voluntary
suspension of the right to acquire or use any of those items in order to
accommodate or comply with the orders, requests, regulations, recommendations or
instructions of any federal, state or municipal government or any governmental
department or agency; compliance with any law, ruling, order, regulation,
requirement or instruction of any federal, state or municipal government or any
governmental department or agency; acts of God; fires, strikes, embargoes, war
or riot; or any other similar event or cause beyond the reasonable control of
the party. Any delay resulting from any of those causes will extend performance
accordingly or excuse performance, in whole or in part, as may be reasonable.
15.7 Injunctive Relief. Notwithstanding anything to the contrary contained in
Section 15.10 below, we and you will each have the right in a proper case to
obtain specific performance, temporary restraining orders and temporary or
preliminary injunctive relief from a court of competent jurisdiction. However,
the parties will contemporaneously submit their dispute for arbitration on the
merits. You agree that we may have temporary or preliminary injunctive relief
without bond, but upon due notice, and your sole remedy in the event of the
entry of such injunctive relief will be the dissolution of the injunctive
relief, if warranted, upon hearing duly had (all claims for damages by reason of
the wrongful issuance of any the injunction being expressly waived).
15.8 Rights of Parties Are Cumulative, Our and your rights under this Agreement
are cumulative and the exercise or enforcement of any right or remedy under this
Agreement will not preclude the exercise or enforcement by a party of any other
right or remedy under this Agreement which it is entitled by law or this
Agreement to exercise or enforce.
15.9 Costs and Attorneys' Fees. If a claim for amounts owed by you to us or our
Affiliates is asserted in judicial proceeding or appeal, or if we or you are
required to enforce this Agreement in an arbitration or proceeding or appeal,
the party prevailing in such proceeding will be entitled to reimbursement of its
costs and expenses, including reasonable arbitrators', accounting and legal
fees, whether incurred prior to, in preparation for or in contemplation of the
filing of any written demand, claim, action, hearing or proceeding to enforce
the obligations of this Agreement. If we incur expenses in connection with your
failure to pay when due amounts owing to us, to submit when due any reports,
information or supporting records or otherwise to comply with this Agreement,
including, but not limited to legal, arbitrators' and accounting fees, you will
reimburse us for any such costs and expenses which we incur.
15.10 Arbitration.
(a) Disputes Subject to Arbitration. EXCEPT FOR THE MATTERS LISTED IN
SECTION 15.1 0(b) OF THIS AGREEMENT, ALL CONTROVERSIES, DISPUTES
OR CLAIMS BETWEEN US (AND OUR SUBSIDIARIES AND AFFILIATES, AND
EACH OF OUR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS,
EMPLOYEES AND ATTORNEYS (IN THEIR REPRESENTATIVE CAPACITY), IF
APPLICABLE) AND YOU (AND YOUR ENTITY OWNERS, GUARANTORS AND
EMPLOYEES, OFFICERS, DIRECTORS, AGENTS, AND ATTORNEYS (IN THEIR
REPRESENTATIVE CAPACITY), IF APPLICABLE) ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR ANY OTHE ' R AGREEMENT BETWEEN YOU
AND US WILL BE SUBMITTED FOR ARBITRATION TO THE SALT LAKE CITY,
UTAH OFFICE OF THE AMERICAN ARBITRATION ASSOCIATION ON DEMAND OF
EITHER YOU OR US. SUCH ARBITRATION PROCEEDINGS WILL BE CONDUCTED
IN SALT LAKE CITY, UTAH AND WILL BE'HEARD BY ONE ARBITRATOR IN
ACCORDANCE WITH THE THEN CURRENT COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATOR WILL BE A
LAWYER OF RECOGNIZED STANDING AND EXPERTISE IN THE AREA OF
FRANCHISING.
(b) Excluded Matters. CONTROVERSIES, DISPUTES OR CLAIMS RELATED TO OR
BASED ON THE MARKS OR ANY LEASE OF REAL ESTATE AND ACTIONS TO
COLLECT AMOUNTS DUE TO US OR OUR AFFILIATES (i) ON ACCOUNT OF THE
PURCHASE OF ASSETS FROM US OR OUR AFFILIATES, (ii) WITH RESPECT
TO PAYMENTS DUE ON ANY PROMISSORY NOTE GIVEN BY YOU TO US OR OUR
AFFILIATES IN CONNECTION WITH THE PURCHASE OF ASSETS, OR (iii)
OTHERWISE DUE PURSUANT TO, OR ARISING IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY, THIS AGREEMENT, ARE EXCLUDED FROM
THE COVERAGE OF THE ARBITRATION PROVISIONS OF THIS AGREEMENT.
(c) Awards. THE ARBITRATOR WILL HAVE THE RIGHT TO AWARD OR INCLUDE IN
HIS AWARD ANY RELIEF WHICH HE DEEMS PROPER IN THE CIRCUMSTANCES,
INCLUDING MONEY DAMAGES (WITH INTEREST ON UNPAID AMOUNTS FROM THE
DATE DUE), SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF AND ATTORNEYS'
FEES AND COSTS, IN ACCORDANCE WITH SECTION 15.9 OF THIS
AGREEMENT, PROVIDED THAT THE ARBITRATOR WILL NOT HAVE THE
AUTHORITY TO AWARD EXEMPLARY OR PUNITIVE DAMAGES. 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. EACH PARTY WAIVES ANY RIGHT TO
CONTESTTHE VALIDITY OR ENFORCEABILITY OF SUCH AWARD. THE PARTIES
AGREE TO BE BOUND BY THE PROVISIONS OF ANY LIMITATION ON THE
PERIOD OF TIME BY WHICH CLAIMS MUST BE BROUGHT. THE PARTIES AGREE
THAT, IN CONNECTION WITH'ANY SUCH ARBITRATION PROCEEDING, EACH
WILL SUBMIT OR FILE ANY CLAIM WHICH WOULD CONSTITUTE A COMPULSORY
COUNTER-CLAIM (AS DEFINED BY RULE 13 OF THE FEDERAL RULES OF
CIVIL PROCEDURE) WITHIN THE SAME PROCEEDINGS AS THE CLAIM TO
WHICH IT RELATES. ANY SUCH CLAIM WHICH IS NOT SUBMITTED OR FILED
IN SUCH PROCEEDING WILL BE BARRED.
(d) Permissible Parties. YOU AND WE AGREE THAT ARBITRATION WILL BE
CONDUCTED ON AN INDIVIDUAL, NOT A CLASS-WIDE, BASIS AND THAT ANY
ARBITRATION PROO-EEDING BETWEEN YOU AND US WILL NOT BE
CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING INVOLVING US
AND ANY OTHER PERSON OR ENTITY.
(e) Survival. THE PROVISIONS OF THIS SECTION 15.10 WILL CONTINUE IN
FULL FORCE AND EFFECT SUBSEQUENT TO AND NOTWITHSTANDING THE
EXPIRATION OR TERMINATION OF THIS AGREEMENT.
15.11 Governing Law. ALLMATTERSRELATINGTOARBITRATIONANDWITHINTHESCOPEOF THE
FEDERAL ARBITRATION ACT (9 U.S.C. ss. ss. 1 ET SEQ.) Will BE GOVERNED BY SUCH
ACT. EXCEPT TO THE EXTENT GOVERNED BY THE FEDERAL ARBITRATION ACT, THE UNITED
STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR
OTHER FEDERAL LAW, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND US WILL
BE GOVERNED BY THE LAWS OF THE STATE OF UTAH, EXCEPT THAT THE UTAH BUSINESS
OPPORTUNITY DISCLOSURE ACT, AND ANY OTHER STATE LAW RELATING TO (1) THE OFFER
AND SALE OF FRANCHISEES (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS
OPPORTUNITIES, WILL NOT APPLY UNLESS THE APPLICABLE JURISDICTIONAL REQUIREMENTS
ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
15.12 Consent to Jurisdiction. WE MAY INSTITUTE ANY ACTION AGAINST YOU (WHICH IS
NOT REQUIRED TO BE ARBITRATED HEREUNDER) IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF UTAH, AND YOU IRREVOCABLY SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE ANY OBJECTION YOU MAY HAVE TO EITHER THE
JURISDICTION OF OR VENUE IN SUCH COURTS.
15.13 Waiver of Punitive Damages. EXCEPT WITH RESPECT TO YOUR OBLIGATION TO
INDEMNIFY US PURSUANT TO SECTION 13.4, THE PARTIES WAIVE TO THE FULLEST EXTENT
PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY DAMAGES
AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF A DISPUTE BETWEEN THEM, THE
PARTY MAKING A CLAIM Will BE LIMITED TO RECOVERY OF ANY ACTUAL DAMAGES IT
SUSTAINS.
15.14 Waiver of Jury Trial. EACH PARTY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY
EITHER PARTY.
15.15 Binding Effect. Subject to the restrictions on Transfers contained in this
Agreement, this Agreement is binding upon the parties hereto and their
respective executors, administrators, heirs, assigns and successors in interest
and will not be modified except by written agreement signed by both you and us.
15.16 Limitation of Claims. Any and all claims arising out of or relating to
this Agreement or the relationship arnong the parties to this Agreement will be
barred unless an action or proceeding is commenced within one year from the date
you or wo knew or should have known of the facts giving rise to such claim,
15.17 No Third Party Beneficiaries. Nothing in this Agreement is intended, nor
will be deemed, to confer any rights or remedies upon any person or legal entity
not a party to this Agreement.
15.18 Approvals. Except where this Agreement expressly obligates us reasonably
to approve or not unreasonably to withhold our approval of any action or request
by you, we have the absolute right to refuse any request by you or to withhold
our approval of any action by you that requires our approval.
15.19 Headings. The headings of the several sections and paragraphs of this
Agreement are for convenience only and do not define, limit or construe the
contents of such sections or paragraphs.
15.20 Joint and Several Liability. If you consist of two or more persons or
Entities, whether or not as partners, joint venturers, or co-owners, the
obligations and liabilities of each person and Entity to us are joint and
several.
15.21 Counterparts. This Agreement may be executed it) multiple copies, each of
which will be deemed an original.
15.22 Notices and Payments. All written notices and reports permitted or
required to be delivered by the provisions of this Agreement will be deemed so
delivered at the time delivered by hand; 1 business day after transmission by
telegraph, facsimile, or other electronic system; 1 business day after being
placed in the hands of a commercial courier service for next business day
delivery, or 3 business days after placement in the United States Mail by
registered or certified mail, return receipt requested, postage prepaid, and
will be addressed to the parties at the addresses set forth on the first page of
this Agreement or to such other address as a party may specify in a written
notice to the other party. Any required payment or report not actually received
by us during regular business hours on the date due (or postmarked by postal
authorities at least two days prior thereto) will be deemed delinquent.
15.23 Entire-Agreement. The preambles and exhibits are a part of this Agreement.
This Agreement constitutes the entire agreement of the parties except as
provided below in this Section, and there are no other oral or written
understandings or agreements between us and you relating to the subject matter
of this Agreement, except that you acknowledge that we justifiably have relied
on your representations made prior to the execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement an the day and year first above written.
MRS. FIELOS DEVELOPMENT CORPORATION, BUTTERWINGS. INC.,
a Delaware corporation, a Illinois corporation
By: By:
Title: Title:
<PAGE>
BILL OF SALE
For the consideration of One Dollar and other good and valuable
consideration, the receipt of which is hereby acknowledged, MRS. FTELDS COOKIES,
a California corporation ("Seller"), hereby sells and conveys to BUTTERWINGS,
INC., an Illinois corporation, ( "Buyer") all the assets and personal property
of Seller described on Exhibit A attached hereto (the "Property"), free and
clear of any and all liens, claims, equities, security interests or encumbrances
of any nature or description whatsoever, other than the "Assumed Liabilities",
as described in that certain Asset Purchase Agreement, dated as of December
1995, between Seller and Buyer, and any liabilities created by Buyer.
DATED as of the day of December, 1995.
MIRS. FIELDS COOKEES,
a California corporation
Its:
STATE OF UTAH
County of
The foregoing instrument was acknowledged before me this day of 199-, by
the of Mrs. Fields Cookies, a California corporation, on behalf of the
corporation.
Notary Public
Residing At:
My Commission Expires:
<PAGE>
ALLOCATION MEMORANDUM
This memorandum is intended to memorialize .the mutual intent of the
uundersigned, in connection with the Franchise Agreement and related
documentation dat6d the 12th day of December, 1995 relating to the Mrs. Fields
Cookies Stores located at Genesee Valley Mall, 3319 Lindon Road, Flint, MI 48507
entered into by the Undersigned with respect to the allocation of the Purchase
Price to the following various classification of assets Cash or Cash Equivalents
Tangible Assets $250,000
Equipmut 200,000
Lease Hold Improvements 100,000
Lease 45,000
Franchise Rights 15,000
Intangible Assets
Goodwill/Going Concern Value 4,423 SB
Total Purchase Price $364,673.00
The foregoing values are agreed to by the undersigned and will-be used for
any financial, tax or other reporting purposes, and are a best estimate of the
Fair Market values of each asset.
(SELLER) (BUYER)
MRS FIELDS COOKIES BUTTERWINGS, INC.
BY: Keith M. (non-legible) By: Stephan S. Buckley
ITS: Senior Vice President
<PAGE>
ASSUMPTION AGREEMENT
THIS AGREEMENT is made and entered into this25 th day of December, 1995,
by and between MRS. FIELDS COOKIES,' a California corporation ("Seller") and
BUTTERWINGS, INC.. an Illinois corporation ("Buyer").
WITNESSETH:
WHEREAS, Buyer and Seller are parties to that certain Asset Purchase Agreement,
dated December 1995, (the "Purchase Agreement") (all capitalized terms not
defined herein are as defined in Asset Purchase Agreement); and
WHEREAS, pursuant to the terms and condition or the Purchase Agreement
including Section 3 thereof, Buyer has agreed to assume certain of the
liabilities and obligations of Seller.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the partits hereto do agree as follows:
1. ASSUMPTION OF CERTAIN LIABILITIES. Buyer hereby assumnes and agrees
to pay, perform and discharge, to the extent not paid, performed or discharged
at Closing on the Closing Date, only the Assumed Liabilities as set forth on
Schedule A attached hereto and incorporated by reference into this Agreement.
2. NO ASNUMPTION OF OTUER LIAIIILITEES. Buyer does not assurne any
liability of Seller except as expressly provided in Section I hereof. Without
limiting the generality of the foregoing, Buyer does not assume any liability of
Seller for any loss, co3t, damage, liability, reimbursement or expense for
which, or with respect to which, Buyer is entitled to indemnification pursuant
to Section 11 of the Purchase Agreement, or for which Seller is liable or
responsible pursuant to any other provisions of the Purchase Agreement or any
other agreement, instrument or document delivered by Seller pursuant thereto, or
in connection therewith.
IN WITNESS WHEREOF, the parties hereto have causecd this Agreement to be
executed as of the date first written above.
'BUYER: SELLER:
BUTTERWINGS, INC. , MRS.FIELDS COOKIES Illinois
corporation a California Corporation
By: Stephan S. Buckley By; (signature)
Its President Its
<PAGE>
GUARANTY OF AGREEMENT
GUARANTEED AGREEMENT:
Franchise Agreement, dated December 23 rd 1995, between Mrs. Fields Development
Corporation (the 'Mrs. Fields Party') and Butterwings, Inc. (the 'Obligated
Party').
Sublease Agreement, dated December 23 rd 1995, between Mrs. Fields Cookies (the
Mrs. Fields Party") and Butterwings, Inc. (the 'Obligated Party').
THIS GUARANTY (the 'Guaranty') is given this day of December, 1 995 by
Butterwings, Inc. (referred to in this Guaranty as 'you' and like terms, with
respect to the Guaranteed Agreement described above.
For good and valuable consideration, you unconditionally guarantee to the Mrs.
Fields Party, and to its successors and assigns, the full, complete and timely
payment arid performance of each and all of the terms, covenants and conditions
of the Guaranteed Agreement land any modification or amendment to the Guaranteed
Agreement) to be kept and performed by the Obligated Party during the term of
the Guaranteed Agreement, including the payment of all royalties, rents, fees,
and other charges accruing pursuant to the Guaranteed Agreement.
You further agree as follows:
1. This Guaranty shall continue in favor of the Mrs. Fields Party
notwithstanding any extension, modification, or alteration of the Guaranteed
Agreement, and notwithstanding any assignment of the Guaranteed Agreement, with
or without the consent of the Mrs. Fields Party. No extension, modification,
alteration or assignment of the Guaranteed Agreement shall in any manner release
or discharge you, and you consent to any such extension, modification,
alteration or assignment.
2. This Guaranty will continue unchanged by the occurrence of any
Insolvency Event, as defined in the Guaranteed Agreement, with respect to the
Obligated Party or any assignee or successor of the Obligated Party or by any
disaffirmance or abandonment of the Guaranteed Agreement by a trustee in
bankruptcy of the Obligated Party. Neither your obligation to make payment or
render performance in accordance with the terms of this Guaranty nor any remedy
for the enforcement of this Guaranty will be impaired, modified, changed,
released or limited in any manner whatsoever by any impairment, modification,
change, release or limftation of the liability of the Obligated Party or its
estate in bankruptcy or of any remedy for the enforcement thereof. resulting
from the operation of 3ny present or future provision of the .U.S. Bankruptcy
Act or other statute. or from the decision of any court or agency.
3. Your liability under this Guaranty is primary and independent of the
liability of the Obligated Party. You waive any right to require the Mrs. Fields
Party to proceed 292inst any other person or to proceed against or exhaust any
security held by the Mrs. Fields Party at any time or to pursue any right of
action accruing to the Mrs. Fields Party under the Guaranteed Agreement. The
Mrs. Fields Party may proceed against you and the Obligated Party, jointly and
severally or may, at Its option, proceed against you without having commenced
any action, or having obtained any judgment, against the Obligated Party. You
waive the defense of the statute of limitations in any action under this
Guaranty or for the collection of any indebtedness or the performance of any
obligation guaranteed pursuant to this Guaranty.
4. You agree to pay all attorneys' fees and all costs and other expenses
incurred in any collection or attempted collection of this Guaranty or in any
negotiations relative to the obligations guaranteed or in enforcing this
Guaranty against you.
5. You waive notice of any demand by the Mrs. Fields Party, any notice
of default in the payment of rents or any other amounts contained or reserved in
the Guaranteed Agreement, or any other notice ot default under the Guaranteed
Agreement. You expressly agree that the validity of this Guaranty and your
obligations shall in no way be terminated, affected or impaired by reason of any
waiver by the Mrs. Fields Party, or its successors ' or assigns, or the failure
of the Mrs. Fields Party to enforce any of the terms, covenants or conditions of
the Guaranteed Agreement or this Guaranty, or the granting of any indulgence or
extension of time to the Obligated Party, all of which may be given or done
without notice to you.
6. This Guaranty shall extend, in full force and effect, to any assignee or
successor of the Mrs. Fields Party and shall be binding upon you and your
successors and assigns.
7. Until all obligations of the Obligated Party to the Mrs. Fields Party
have been paid or satisfied in full, you have no remedy or right of subrogation
and you waive any right to enforce any remedy which the Mrs. Fields Party has or
may in the future have against the Obligated Party and any benefit of, and any
right to participate in, and security now or in the future held by the Mrs.
Fields Party.
8. All existing and future Indebtedness of the Obligated Party to you is
hereby subordinated to all indebtedness and other obligations guaranteed in this
Guaranty and, without the prior written consent of the Mrs. Fields Party, shall
not be paid in whole or in part. nor will you accept any payment of or on
account of any such indebtedness while this Guaranty is in effect.
This Guaranty shall be construed in accordance with the laws of
the State of Utah, without giving effect to its conflict of laws principles.
'GUARANTOR"
BUTTERWINGS, INC.
By /s/ Stephan S Buckley
ITS: President