What sections of the Cinnaholic Development Agreement are Bound Parties personally bound by through the Personal Covenants?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
eloper also agrees that it and all of its employees and agents will take appropriate steps to protect Franchisor's confidential information from any unauthorized disclosure, copying or use. At any time upon Franchisor's request, and in any event upon termination or expiration of this Agreement, Developer will immediately return any copies of documents where there are materials containing confidential information and will take appropriate steps to permanently delete and render unusable any confidential information stored electronically.
- 14.4. Personal Covenants of Certain Bound Parties. As a condition to the effectiveness of this Agreement, and at the time Developer delivers this signed Agreement to Franchisor, each Bound Party of Developer must sign and deliver to Franchisor the Personal Covenants attached hereto as Exhibit C (the "Personal Covenants"), agreeing to be bound personally by all the provisions of Sections 14.1, 14.2 and 14.3 hereof. If there are any changes in the identity of any such Bound Party while this Agreement is in effect, Developer must notify Franchisor promptly and make sure the new Bound Party signs and delivers to Franchisor the Personal Covenants.
- 14.5. Agreements by Other Third Parties. As a condition to Franchisor's execution of this Agreement, Developer, if requested by Franchisor, shall cause each of its management and supervisory employees and other employees to whom disclosures of confidential information are made to execute a noncompetition, nonsolicitation and/or nondisclosure agreement in the form(s) prescribed by Franchisor from time to time.
- 14.6. Reasonable Restrictive Covenants. Developer acknowledges and agrees that (i) the covenants and restrictions in this Section 14 are reasonable, appropriate and necessary to protect the CINNAHOLIC® System, other franchisees and the legitimate interest of the Franchisor, and (ii) do not cause undue hardship on Developer or any of the other individuals required by this Section 14 to comply with the covenants and restrictions.
15. RIGHT OF FIRST REFUSAL
If during the term of this Agreement, Developer shall receive a bona fide offer from a prospective purchaser for any interest in Developer or any Bakeries (whether by sale of assets, sale of equity interest, merger, consolidation or otherwise), it shall offer the same to Franchisor in writing at the same price and on the same terms or the monetary equivalent; which offer Franchisor may accept at any time within 30 days after receipt thereof. If the parties cannot agree on a reasonable monetary equivalent, an independent appraiser designated by Franchisor shall determine the monetary equivalent and the appraiser's determination will be final. If Franchisor declines, or does not within such 30 day period accept, such offer, then Developer may make such Transfer to such purchaser (provided Franchisor approves of such purchaser in accordance with Section 13.2 and subject to compliance with Section 13.4), but not at a lower price nor on more favorable terms than have been offered to Franchisor. If Developer fails to complete such Transfer within 90 days following the refusal or failure to act by Franchisor, then Developer may not complete such Transfer without first offering the same to Franchisor again as provided above. The parties recognize that the terms of this Section 15 do not apply to a sale and subsequent leaseback of any site of any Bakery or any furnishings or equipment used thereon, or any other Transfer of the site of any Bakery or the furnishings or equipment thereon in connection with any bona fide financing plan. In no event shall Developer or any Equity Holder offer any interest in this Agreement or in Developer or any Equity Holder for Transfer at public auction, nor at any time shall an offer be made to the public to Transfer this Agreement or any interest in Developer or any Equity Holder, through the medium of advertisement, either in the newspapers or otherwise, without having first obtained the written consent of Franchisor to such advertisement or publication.
16. OWNERSHIP OF DEVELOPER
Attached hereto as Exhibit D is a description of the legal organization of Developer (whether a corporation, limited, liability company, partnership or otherwise), the names and addresses of each person or entity owning a 10% or greater interest in Developer (the "Principal Owners") and the percentage of such interest owned by such person or entity. Developer agrees to notify Franchisor in writing whenever there is any change in the organizational structure or ownership interest of Developer as set forth on Exhibit D. Franchisor may require each Principal Owner to execute the Guaranty Agreement attached hereto as Exhibit E.
17. SUCCESSORS AND THIRD PARTY BENEFICIARIES
This Agreement and the covenants, restrictions and limitations contained herein shall be binding upon and shall inure to the benefit of Franchisor and its successors and assigns and shall be binding upon and shall inure to the benefit of Developer and its permitted heirs, successors and assigns. Nothing in this Agreement is intended, nor is deemed, to confer any rights or remedies upon any person or legal entity not a party hereto. This Agreement is, however, intended to bind the Bound Parties to the extent set forth in this Agreement.
18. CONSTRUCTION
All terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed and construed to include any other number, and any other gender, as the context or sense of this Agreement or any provision hereof may require, as if such words had been fully and properly written in the appropriate number and gender. All covenants, agreements and obligations assumed herein by Developer shall be deemed to be joint and several covenants, agreements and obligations of each of the persons named as Developer, if more than one person is so named. Except where this Agreement expressly obligates Franchisor not to unreasonably withhold its approval of any of Developer's actions or requests, Franchisor has the absolute right, in its sole and arbitrary discretion, to refuse any request Developer makes or to withhold its approval of any of Developer's proposed or effected actions that require Franchisor's approval.
19. INTERPRETATION AND HEADINGS
The parties agree that this Agreement should be interpreted according to its fair meaning. Developer waives to the fullest extent possible the application of any rule which would construe ambiguous language against Franchisor as the drafter of this Agreement.
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to the 2025 Cinnaholic Franchise Disclosure Document, as a condition of the Development Agreement, certain bound parties must sign and deliver Personal Covenants, agreeing to be personally bound by the provisions of Sections 14.1, 14.2, and 14.3 of the Development Agreement. These sections pertain to restrictive covenants, including non-competition during and after the term of the agreement, non-solicitation of employees, and trade secrets and confidential information.
Specifically, Section 14.1 outlines covenants not to compete, preventing bound parties from having a direct or indirect interest in a Competitive Business during the agreement's term and for one year after termination or transfer, within a five-mile radius of any Cinnaholic bakery. Section 14.2 restricts the bound parties from soliciting or interfering with the employment relationships of Cinnaholic's employees or other franchisees' employees during the agreement and for one year after its expiration or termination. Section 14.3 addresses trade secrets and confidential information, prohibiting the disclosure, publication, copying, or use of Cinnaholic's proprietary information during the agreement's term and for five years after termination, with an indefinite restriction for information rising to the level of a trade secret.
In essence, the Personal Covenants ensure that key individuals associated with the Cinnaholic developer are legally obligated to uphold the restrictive covenants, protecting Cinnaholic's business interests, trade secrets, and employee relationships. This personal liability is a significant commitment for the bound parties, as breaches of these covenants could result in legal action against them individually. Prospective developers and their bound parties should carefully review these sections to understand the full scope of their obligations and potential liabilities.