EXHIBIT 10.14
BIG O TIRES, INC.
FORM OF FRANCHISE AGREEMENT
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BIG O TIRES, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
SUMMARY PAGES............................................................... v
1. CERTAIN DEFINITIONS................................................ 1
2. GRANT OF FRANCHISE................................................. 5
2.01 Grant of Franchise...................................... 5
2.02 Trade Area.............................................. 5
3. FIRST OPTION RIGHTS................................................ 5
3.01 First Option Rights..................................... 5
3.02 Notification by Big O................................... 5
3.03 Multiple First Option Rights............................ 5
3.04 Notification of Qualification........................... 6
3.05 Exercise of Option by Franchisee........................ 6
3.06 Transfer of First Option Rights......................... 6
3.07 Limitation on First Option Rights....................... 6
3.08 Expiration of First Option Rights....................... 6
4. TERM ........................................................ 6
4.01 Term.................................................... 6
5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS............................. 6
5.01 Grant of Successor Franchise Rights..................... 6
5.02 Conditions to Grant of Successor Franchise.............. 6
5.03 Notification of Non-Renewal............................. 7
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS............................... 7
6.01 Financing Approval...................................... 7
6.02 Site Selection.......................................... 7
6.03 Equipment and Signage................................... 8
6.04 Conditions to Opening................................... 8
6.05 Commencement of Business................................ 8
7. PRE-OPENING AND ONGOING ASSISTANCE................................. 8
7.01 Pre-Opening Assistance.................................. 8
7.02 On-Going Assistance..................................... 9
8. FEES ........................................................ 10
8.01 Initial Franchise Fee................................... 10
8.02 Royalty Fee............................................. 10
8.03 National Advertising Fee................................ 10
8.04 Late Fees............................................... 10
8.05 Taxes................................................... 10
8.06 Allocation of Payments.................................. 10
9. LICENSED MARKS..................................................... 11
9.01 Licensed Marks.......................................... 11
9.02 Limitations on Use...................................... 11
9.03 Infringement............................................ 11
9.04 Franchisee's Business Name.............................. 11
9.05 Change of Licensed Marks................................ 11
9.06 Franchisor's Rights..................................... 11
Page i
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10. STANDARDS OF OPERATION............................................. 12
10.01 Standards of Operations................................. 12
11. STORE MANAGEMENT................................................... 13
11.01 Store Management........................................ 13
11.02 Completion of Training by Operator or Manager........... 13
11.03 Operation of Store by Big O............................. 13
12. QUALITY CONTROL.................................................... 13
12.01 Inspections............................................. 13
13. MANUAL; NEW PROCESSES.............................................. 14
13.01 Manual.................................................. 14
13.02 Confidentiality of Information.......................... 14
13.03 Revisions to Manual..................................... 14
13.04 Improvements to System.................................. 14
14. PRODUCTS AND SERVICES ............................................. 14
14.01 Products and Services................................... 14
14.02 Approval of Products and Services....................... 15
14.03 Inventory............................................... 15
14.04 Warranties and Guaranties............................... 15
14.05 Open Account Financing.................................. 16
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS....................... 16
15.01 Initial Advertising..................................... 16
15.02 National Advertising Program............................ 16
15.03 Local Fund.............................................. 17
15.04 Approval of Advertising................................. 18
16. STATEMENTS AND RECORDS............................................. 18
16.01 Invoices................................................ 18
16.02 Audit................................................... 18
16.03 Monthly Reports......................................... 18
16.04 Financial Statements.................................... 18
16.05 Management Systems...................................... 19
16.06 Retail Accounting Center................................ 19
17. COVENANTS.......................................................... 19
17.01 Noncompetition During Term.............................. 19
17.02 Confidentiality......................................... 19
17.03 No Interference with Business........................... 19
17.04 Post Termination Covenant Not to Compete................ 19
17.05 Survivability of Covenants.............................. 19
17.06 Modification of Covenants............................... 20
18. TRANSFER AND ASSIGNMENT............................................ 20
18.01 Assignment by Big O..................................... 20
18.02 Right of First Refusal.................................. 20
18.03 Transfer Legend......................................... 20
18.04 Pre-Conditions to Franchisee's Assignment............... 20
18.05 Death of Franchisee..................................... 22
18.06 No Waiver............................................... 23
18.07 Excepted Transfers...................................... 23
19. DEFAULT AND TERMINATION............................................ 23
Page ii
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19.01 Termination by Big O.................................... 23
19.02 Governing State Law..................................... 25
19.03 Termination by Franchisee............................... 25
19.04 Force Majeure........................................... 25
20. POST TERMINATION OBLIGATIONS....................................... 25
20.01 Post-Termination Obligations............................ 25
20.02 Right to Repurchase..................................... 26
20.03 Right of First Refusal.................................. 26
20.04 De-Identification of Assets Upon Sale................... 26
21. INSURANCE.......................................................... 27
21.01 Insurance Coverage...................................... 27
21.02 Proof of Insurance...................................... 28
21.03 Survival of Indemnification............................. 28
22. TAXES, PERMITS, AND INDEBTEDNESS................................... 28
22.01 Payment of Taxes........................................ 28
22.02 Compliance with Laws.................................... 28
22.03 Payment of Debts........................................ 28
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS.................. 28
23.01 Indemnification......................................... 28
23.02 Independent Contractor.................................. 29
24. WRITTEN APPROVALS, WAIVERS, AND AMENDMENT.......................... 29
24.01 Written Approval........................................ 29
24.02 Waiver.................................................. 29
24.03 Modification............................................ 29
25. DEALER PLANNING BOARD.............................................. 29
25.01 Dealer Planning Board................................... 29
25.02 Special Interest Issues................................. 29
25.03 Disapproval of Management Proposal...................... 30
25.04 Compliance with Modification............................ 30
26. RIGHT OF OFFSET.................................................... 30
26.01 Right of Offset......................................... 30
27. ENFORCEMENT........................................................ 30
27.01 Declaratory and Injunctive Relief....................... 30
27.02 Costs of Enforcement ................................... 30
28. NOTICES............................................................ 30
28.01 Notices................................................. 30
29. GOVERNING LAW...................................................... 31
29.01 Governing Law........................................... 31
29.02 Jurisdiction............................................ 31
Page iii
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30. SEVERABILITY AND CONSTRUCTION...................................... 31
30.01 Severability............................................ 31
30.02 Counterparts............................................ 31
30.03 Construction............................................ 31
31. ACKNOWLEDGEMENTS................................................... 32
Schedule 1 - Premises and Trade Area
Schedule 2 - Ownership Verification
Schedule 3 - Guaranty
Schedule 4 - Lease Rider and Modification
Schedule 5 - Renewal Rider
Schedule 6 - Trademarks
Schedule 7 - Converter Rider
Schedule 8 - Farm Class Rider
Page iv
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BIG O TIRES, INC. FRANCHISE AGREEMENT
SUMMARY PAGES
These pages summarize the attached Franchise Agreement, the details of which
shall control in the event of any conflict.
1. FRANCHISEE:
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2. INITIAL FRANCHISE FEE: Amount Due:
-with Application:
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-upon signing Agreement:
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Total:
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3. ROYALTY FEE Two percent (2%) of Gross Sales
4. LOCAL ADVERTISING Minimum of four percent (4%) of Gross Sales
CONTRIBUTION:
5. NATIONAL ADVERTISING See SECTIONS 15 AND 25
CONTRIBUTION:
6. INITIAL ADVERTISING REQUIREMENT:
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7. STORE LOCATION:
Street and Number
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City, State and Zip Code
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Phone Number
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8. Franchisee's Operator:
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9. Franchisee's Manager:
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10. Franchisee's Agent for Service of Process:
Name:
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Address:
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11. Big O's Agent for Service of Process:
Name: CT Corporation
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Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Page v
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12. Effective Date:
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13. Commencement Date:
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14. Expiration Date:
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15. Franchisee's Advisor:
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16. Send Notices to Big O to:
Name: General Counsel
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Address: Big O Tires, Inc.
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12650 E. Briarwood Avenue, Suite 2-D
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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17. Send Notices to Franchisee to the Store at:
Name:
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Address:
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With a copy to:
Name:
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Address:
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18. Business not subject to SECTION 17.01
Name:
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Address:
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19. Farm Class Franchise:
Yes:
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No:
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Page vi
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BIG O TIRES, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") is made by and between Big O
Tires, Inc. ("Big O"), a Nevada corporation, with its principal place of
business at ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and _______________________________________________ ("Franchisee"),
a(n) __________________ with a place of business at ___________________________
____________________, with reference to the following facts.
RECITALS
A. Big O has developed and provides franchisees with access to Products
and Services and a System for marketing and servicing such Products and Services
to retail customers through Big O Stores. Since its inception, Big O has added
to the Product and Services and System to enhance the competitive posture of its
franchisees. Big O has developed and owns certain Licensed Marks which are
licensed to franchisees for use in the Big O Stores.
B. Franchisee desires, upon the terms and conditions set forth herein,
to obtain a license to operate a Franchised Business and to offer and sell Big O
Products and Services. Franchisee acknowledges that it is essential to the
preservation of the integrity of the Licensed Marks, and the goodwill of Big O
and the Big O System, that Franchisee maintain and adhere to certain standards,
procedures and policies described hereinafter and in the Manual.
C. Big O is willing, upon the terms and conditions set forth herein, to
license Franchisee to operate a Franchised Business which will utilize the
Licensed Marks and the Big O System.
NOW THEREFORE, in consideration of the promises and the mutual
provisions herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. CERTAIN DEFINITIONS
Some words will from time to time be defined in other Sections of this
Agreement. However, the following capitalized words shall have the following
meanings when used in this Agreement:
Advertising - All advertising, promotional materials and programs, public
relations programs and marketing programs, publications and activities approved
or administered by Big O, by Franchisee, or utilizing the resources of the
National Advertising Program or local franchisee cooperatives or franchisee
associations or which pertain to the Big O Store or the Big O System generally.
Affiliate - Includes each Entity, which directly, or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with
Big O or Franchisee, as applicable. Without limiting the foregoing, the term
"Affiliate" when used herein in connection with Franchisee includes any Entity
more than fifty percent (50%) of whose Equity or voting control, is held by
person(s) or Entities who, jointly, or severally, hold more than fifty percent
(50%) of the Equity or voting control of Franchisee.
Agreement - This Agreement, the Summary Pages and all Riders and Schedules
hereto.
Big O - Big O Tires, Inc.
Big O Brand Tires - Tires carrying the "Big O" label, as well as the Prestige,
Pathmax and Fulda brands and any other brand(s) Big O subsequently includes in
its Big O Brand Tires as part of its marketing programs.
Big O Store or Store - A retail store operated under the Licensed Marks and
pursuant to the Big O System.
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Big O System or System - The plan and system developed by Big O relating to the
complete operation of Stores which are authorized to sell Products and Services,
which include some or all of the following: site selection as required, site
approval, Store layout and design, product selection and display, purchasing and
inventory control methods, accounting methods, merchandising, advertising, sales
and promotional ideas, franchisee training, personnel training, and other
matters relating to the efficient operation and supervision of Stores and the
maintenance of uniform standards of retail merchandising.
Blue Book - See the definition of "Manual".
Commencement Date - The date upon which the Store opens for business or, in the
event of transfer, or Conversion, the date designated by Big O Tires, Inc.
Conversion - The conversion by a Converter of an independent retail tire store
to Big O Store pursuant to this Agreement.
Converter - A person who converts an independent retail tire store to a Big O
Store pursuant to this Agreement, regardless of whether such person previously
operated such independent retail tire store or recently purchased the assets or
business of each store.
Dealer Planning Board - The group of franchisee representatives elected from
each Local Group which meets periodically with Big O's management to review
aspects of Big O's strategic plans as may be presented from time to time by Big
O and to discuss issues of concern to franchisees. The functions of the Dealer
Planning Board are described in SECTION 25 of this Agreement.
Development Agreement - An agreement between Big O and a person or Entity
pursuant to which the person or Entity ("Developer") agrees to open and to
continue to operate an agreed number of Big O Stores pursuant to a development
schedule and within a defined territory. Developers must execute Franchise
Agreements prior to commencing business at any Store developed pursuant to a
Development Agreement.
Due Date - The fifteenth (15th) day of each month: the date by which all royalty
fees and advertising contributions must be postmarked and mailed to Big O.
Effective Date - The date upon which the Franchise Agreement has been executed
in full by both the Franchisee and Big O.
Entity - Any limited liability company or partnership, general or limited, each
of which shall be referred to as a "Partnership", and any trust, association,
corporation or other entity, which is not an individual.
Equity - Stock; membership interests; partnership interests; or other equity
ownership interests in a Franchisee which is an Entity.
Expiration Date - The date on which the initial term of the Agreement expires.
First Option - Franchisee's right to acquire a franchise for a new Store planned
for development within a five (5) mile radius of Franchisee's Premises in the
manner described in SECTION 3 of this Agreement.
Franchise - The rights granted by this Agreement, subject to the terms and
conditions set forth in the Agreement.
Franchised Business - The business of operating a Big O Store pursuant to this
license granted by Big O which utilizes the Licensed Marks and the Big O System.
Franchisee - The individual(s), or Entity to which the Franchise is granted.
Depending on the context of this Agreement, the term Franchisee may include the
Owners or guarantors of an Entity Franchisee.
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Gross Sales - The aggregate gross amount of all revenues from whatever source
derived whether in form of cash, credit, agreements to pay or other
consideration including the actual retail value of any goods or services traded,
bartered, or otherwise received by Franchisee (whether or not payment is
received at the time of sale or any such amount is proved uncollectible) from or
derived by Franchisee or any other person from business conducted or which
originated in, on, from or through the Premises, whether such business is
conducted in compliance with or in violation of the terms of the Franchise
Agreement. Gross Sales includes sums paid for claims made on business
interruption insurance policies, Federal Excise Taxes collected, as well as
payments received from employees of Franchisee for products purchased at a
discounted price. However, Gross Sales does not include: (i) sales or use taxes
collected by Franchisee and paid to the appropriate governmental taxing
authority; (ii) the amount of any refunds or allowances made on Products and
Services returned by customers; (iii) sums received on account of returns to
shippers, vendors and manufacturers; (iv) proceeds derived from the sale of
equipment or supplies used by Franchisee in the operation of the Store and not
acquired for resale; (v) sums received on account of sales of Products and
Services to other Big O Stores; (vi) tire disposal fees to the extent the fees
charged do not exceed the highest fee recommended by any applicable governmental
agency; and (vii) sums received in settlement of claims for loss or damage to
fixtures, equipment or leasehold improvements, other than sums received from
business interruption insurance.
Information - The contents of the Manual or any other manual, computer software,
materials, goods, training module and any other proprietary information and
information created or used by Big O designated for confidential use within the
Big O System, and the information contained therein.
Initial Advertising - Advertising conducted within the first twelve (12) months
following the Commencement Date to promote the opening of the Store.
Licensed Marks - The trademarks and trade names, service marks and associated
logos and symbols which Big O may from time to time authorize or direct
Franchisee to use and display in connection with the operation and promotion of
the Franchised Business licensed hereunder, including, but not limited to, those
enumerated on SCHEDULE 6, attached hereto.
Local Fund - The fund, which may be an account at a bank or other financial
institution or a trust fund, corporation or other Entity, derived from
contributions by Big O franchisees which shall be maintained by Big O or a Local
Group for Advertising or related expenditures pursuant to such guidelines as Big
O may approve or prescribe.
Local Group - A cooperative, association or other entity of Big O franchisees
formed and operating in their marketing area pursuant to a structure approved or
prescribed by Big O for the purpose of promoting Big O Stores and their Products
and Services, and providing Management Systems and related services to its
members to the extent approved by Big O.
Management Systems - Computer hardware, software, cash registers, bookkeeping
and accounting services or systems, point of sale systems and inventory control
systems, and other systems designed to provide information for the management of
Big O Stores.
Manager - An individual who is responsible for the day-to-day operation of a
Store. This individual could be the Operator or could be a different person.
Manual - The various written, electronic, audio and video instructions and
manuals, including amendments thereto relating to the operation of the
Franchised Business which are provided to Franchisee by Big O and identified as
such, including but not limited to A BLUEPRINT FOR SUCCESS, also known as the
"Blue Book", Big O's Franchise Compliance and Procedures Manual, any training
tapes, guides and any training module or any other proprietary information.
National Advertising Program - The advertising program described in and
conducted in accordance with SECTION 15.02.
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Operator - The individual who shall be responsible for the operation of the
Franchised Business. The Operator may be the Franchisee if the Franchisee is an
individual.
Option - Big O's right to purchase the interest being offered by the Franchisee
and/or any Owner in the event of any proposed Transfer, pursuant to SECTION
18.04(B).
Owner - Any partner, limited partner, member, shareholder, individual or sole
proprietor, trustee, or any other person possessing a legal or beneficial
interest or holding Equity of any kind or nature in a Franchisee which is an
Entity or sole proprietorship.
Pioneer - A person or Entity who owned at least twenty-five percent (25%) Equity
interest in a Big O franchisee on March 1, 1987, provided such Equity interest
appeared on Big O's records as of July 1, 1987.
Premises - The site from which a Franchised Business will be operated at the
Store Location described on the Summary Pages, or where applicable, on SCHEDULE
1 to the Franchise Agreement.
Products and Services - All tires (including but not limited to Big O Brand
Tires), products and services produced, organized or distributed under a license
granted by Big O, which are now or hereafter approved or designated by Big O for
sale or lease in Stores.
Retail Accounting Center - A cooperative, association, or other entity owned by
Big O, Franchisees or third parties which provides accounting, payroll, tax and
related services for the purpose of providing such services at a reasonable cost
and providing the financial reporting Big O requires.
Successor Franchise Agreement - A new franchise agreement executed by the
parties hereto granting a Franchisee the right to operate the Franchised
Business licensed hereunder following the expiration of the initial term of this
Agreement.
Summary Pages - The pages of this Agreement, beginning on Page v and ending on
Page vi, that summarize stipulated provisions of this Agreement.
Survivor - A surviving spouse, heir(s) or representative(s) of the estate of any
Franchisee who is an individual, or any deceased person owning Equity in a
Franchisee which is an Entity.
Termination Date - The date upon which this Agreement is canceled or ended by
Big O or the Franchisee in accordance with the terms of this Agreement.
Trade Area - The area described on SCHEDULE 1 to this Agreement within which,
subject to certain conditions, Big O agrees to limit the number of Stores to one
(1) for every fifty thousand (50,000) persons residing therein. (See also
SECTION 2.02.) Big O may, from time to time, redefine Franchisee's Trade Area.
Trade Dress - Any shop or architectural designs, fixtures, improvements, signs,
color schemes or other elements of the appearance of the Store which in any
manner suggest affiliation of the Store or Premises with Big O, or the System.
Transfer - To give away, sell, assign, pledge, lease, sublease, devise, or
otherwise transfer, either directly or by operation of law or in any other
manner, this Agreement, any of Franchisee's rights or obligations hereunder, or
any interest or Equity in Franchisee or in Franchisee's exclusive right to
occupy the Premises. In the case of a Franchisee which is an Entity, any merger,
reorganization, recapitalization or consolidation involving Franchisee or the
issuance of additional securities representing Equity in Franchisee, shall also
be deemed to be a "Transfer" for purposes of this Agreement.
2. GRANT OF FRANCHISE
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2.01. Grant of Franchise. Subject to all of the terms and conditions
herein, including but not limited to, the condition that Franchisee or its
Owners or some of them, personally guarantee the obligations of Franchisee to
Big O under this Agreement as set forth in SCHEDULE 3 to this Agreement, Big O
grants to Franchisee the non-exclusive license to use the Licensed Marks and the
exclusive right to operate a Franchised Business solely at the Premises set
forth in SCHEDULE 1 to this Agreement. If, at the time of execution of this
Agreement, the Premises cannot be designated as a specific address because a
location has not been selected by Franchisee and approved by Big O, then
Franchisee shall promptly take steps to choose and acquire a location for its
Big O Store within the following city, county or other geographical area: _____
____________________________________ ("Designated Area"). In such circumstances,
Franchisee shall select and submit to Big O for approval a specific location for
the Premises, which shall hereinafter be set forth in SCHEDULE 1.
2.02 Trade Area. During the term of this Agreement, Big O agrees not to
operate itself or grant to any other person the right to operate any more than
one (1) Store for every fifty thousand (50,000) persons residing in the Trade
Area described on SCHEDULE 1. Generally, SCHEDULE 1 will define Trade Areas in
metropolitan areas as the Metropolitan Statistical Area ("MSA"). For Franchised
Businesses located in more rural areas, the Trade Area may be defined within the
boundaries of a county line. Big O may, from time to time, redefine the Trade
Area. Absent Franchisee's prior approval, Big O shall not permit the
establishment or operation of another Store within a two (2) mile radius of
Franchisee's Store. Big O shall offer Products and Services bearing the Licensed
Marks at retail only through Big O Stores.
3. FIRST OPTION RIGHTS
3.01. First Option Rights. Subject to the conditions described below,
if Big O or any prospective Big O franchisee should propose to open a Store
within a five (5) mile radius of Franchisee's Store, Franchisee shall be
notified of its First Option to acquire a Franchise for an additional Store
within the five (5) mile radius of its Store. Franchisee may exercise the First
Option only if:
(a) at the time Big O notifies Franchisee of the proposal for the new
Store, Franchisee is in full compliance with all the terms of this
Agreement and any other agreements it has with Big O;
(b) Franchisee meets Big O's then current criteria for new franchisees;
and
(c) There are not two (2) or more Big O franchisees with Stores within
a five (5) mile radius of the site of a proposed new Store, except in
accordance with SECTION 3.03 below.
3.02. Notification by Big O. When notifying Franchisee of a proposal to
establish a new Store in accordance with Franchisee's First Option, Big O may
notify Franchisee of the proposal to establish the new Store within the general
vicinity of Franchisee's Store without identifying a specific site or sites.
3.03. Multiple First Option Rights. If two (2) or more Big O
franchisees have Stores within a five (5) mile radius of the site of a proposed
new Store, the Franchisee and all such franchisees will be invited
simultaneously by written notice from Big O to exercise their First Option
rights; but if two (2) or more such franchisees apply for the same franchise, it
shall be awarded to the qualified franchisee which has a Store that is closest
to the site of the proposed new Store or, if two qualified franchisees have
Stores that are equidistant from such site, it shall be awarded to the qualified
franchisee which owns the franchised Big O Store which was first licensed as a
Big O Store by the current or a previous owner.
3.04. Notification of Qualification. If Franchisee qualifies for the
First Option pursuant to this SECTION 3, Big O will provide Franchisee with
written notice that it has thirty (30) days within which to submit an
application for the franchise in the manner prescribed by Big O in the notice.
Franchisee must submit the application within the prescribed time along with the
standard franchise deposit then required by Big O. Upon approval of the
application by Big O, Franchisee must execute Big O's then current standard
Franchise Agreement and pay the remainder of any initial fee due.
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3.05. Exercise of Option by Franchisee. If Franchisee is an Entity, the
First Option may be exercised only by the Entity itself, or by the individual
designated as First Option holder on the Summary Pages.
3.06. Transfer of First Option Rights. The First Option is not
transferable without Big O's prior written approval, WHICH MAY BE WITHHELD FOR
ANY REASON, IN BIG O'S SOLE DISCRETION. Notwithstanding the foregoing, Big O's
discretionary approval process will be in accordance with its established
procedures.
3.07. Limitation on First Option Rights. The First Option rights
described above are void and unenforceable with respect to:
(a) a site proposed for development in an area which is at the time of
the proposal subject to a Development Agreement between Big O and
Developer; and
(b) a Conversion.
3.08. Expiration of First Option Rights. If a Franchisee has failed to
qualify for or otherwise submit an application for a Franchise pursuant to this
SECTION 3 for a proposed franchise to be granted within the area in which
Franchisee holds First Option rights, Franchisee's First Option rights for that
proposed franchise shall lapse regardless of whether the site actually selected
for development by Big O is different from the site which was initially proposed
for development.
4. TERM
4.01. Term. This Agreement shall take effect upon the earlier of the
Effective Date or of the Commencement Date and, unless previously terminated
pursuant to SECTION 19 hereof, its term shall extend until the earlier of the
tenth anniversary of the Commencement Date or such other Expiration Date as is
stated on the Summary Pages.
5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS
5.01. Grant of Successor Franchise Rights. If Franchisee is not in
default under this Agreement and has complied with all of its provisions during
the initial term, and has complied in all material respects with all of the
provisions of this Agreement and the Franchise Compliance and Procedures Manual,
upon its expiration Big O will offer a Successor Franchise Agreement with
Franchisee, provided the parties mutually agree to the terms of a Successor
Franchise Agreement at least one hundred eighty (180) days before the Expiration
Date.
5.02. Conditions to Grant of Successor Franchise. Big O will only offer
to execute a Successor Franchise Agreement with Franchisee in accordance with
its then current terms and conditions for granting successor franchises, which
may include any or all of the following:
(a) That Franchisee executes a Successor Franchise Agreement on the
then current form being offered to franchisees in the State in which
the Big O Store is located, which may include, among other matters, a
different fee structure, increased fees, a modified Trade Area and
different purchase requirements;
(b) That Franchisee must agree to refurbish the Premises or relocate
the Premises to conform to Big O's then current standards for similar
Stores;
(c) That Franchisee shall pay Big O's renewal administration fee of One
Thousand Five Hundred Dollars ($1,500);
(d) That Franchisee, and its Owners shall execute a general release in
favor of Big O and its representatives on a form prescribed by Big O,
of any and all known and unknown claims against Big O and its
Affiliates and their officers, directors, agents, Owners and employees;
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(e) That at the time Franchisee delivers its renewal notice to Big O
and at all times thereafter until the commencement of the renewal term,
Franchisee shall have fully performed all of its material obligations
under this Agreement, the Manuals and all other agreements then in
effect between Franchisee and Big O (or its Affiliates);
(f) Without limiting the generality of SECTION 5.01, Franchisee shall
not have committed three (3) or more material breaches of this
Agreement during any twelve (12) month period during the Term of this
Agreement for which Big O shall have delivered notices of default,
whether or not such defaults were cured; and
(g) Franchisee shall have in all material respects maintained its
status as a Franchisee in good standing (e.g., achieving at least
minimum scores on inspections, and have substantially complied with all
material obligations of the Big O System throughout the Term).
5.03. Notification of Non-Renewal. If Big O is willing to execute a new
franchise agreement with Franchisee, at least one (1) year before the Expiration
Date, Big O shall notify Franchisee of the Expiration Date and the terms and
conditions upon which Big O is willing to execute a new franchise agreement with
Franchisee. Franchisee must execute a Successor Franchise Agreement within sixty
(60) days of its receipt. The Franchise Agreement will expire on the Expiration
Date and the franchise relationship will terminate unless Franchisee and Big O
have executed a Successor Franchise Agreement at least one hundred eighty (180)
days prior to the Expiration Date, and Franchisee has satisfied all other terms
and conditions agreed upon as a prerequisite to renewal. If Big O intends not to
offer Franchisee a Successor Franchise Agreement, Big O shall give Franchisee at
least one hundred eighty (180) days notice of nonrenewal prior to the Expiration
Date. If Big O has not given Franchisee at least one hundred eighty (180) days
notice of nonrenewal prior to the Expiration Date, the term of this Agreement
will automatically be extended by the amount of time necessary to give
Franchisee one hundred eighty (180) days notice of nonrenewal.
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS
6.01. Financing Approval. Unless otherwise agreed to by Big O,
Franchisee shall obtain a letter of commitment for the provision of financing
through a lender approved by Big O and with minimum credit terms, also approved
by Big O, no later than one hundred twenty (120) days from the Effective Date of
this Agreement.
6.02. Site Selection. Franchisee shall obtain the written approval of
Big O of the site for the Store within one hundred twenty (120) days from the
Effective Date of this Agreement. Franchisee shall propose sites for approval by
Big O on forms and in the manner designated from time to time by Big O. A
proposed site shall only be submitted to Big O for approval after Franchisee has
evaluated the site and determined that it meets Big O's then current criteria
for sites which Big O shall have communicated to Franchisee. Franchisee shall be
responsible for obtaining Big O's then current site criteria prior to submitting
a site approval application. Big O shall review the site approval application
and within thirty (30) days of Big O's receipt thereof, Big O shall approve or
reject the proposed site. Unless otherwise agreed to in writing by Big O, final
site approval will be conditioned upon Big O's receipt of evidence of
Franchisee's ownership, lease or control of the property in such form as Big O,
in its sole discretion shall deem to be acceptable, including, without
limitation, a deed to the property, an executed contract to purchase the
property, a lease with a duration of not less than ten (10) years, or an option
to purchase the property. Big O may, at its sole discretion, require that the
Franchisee negotiate with its landlord the right, but not the obligation, for
Big O to cure any Franchisee breaches and/or the right for Big O to assume the
franchisee's lease obligations. Franchisee acknowledges and agrees that Big O's
approval of a site or provision of criteria regarding the site do not constitute
a representation or warranty of any kind, express or implied, as to the
suitability of the site for a Big O Store or for any other purpose. Big O's
approval of the site indicates only that Big O believes that a site falls within
the acceptable criteria established by Big O as of that time. In the case of a
Converter, Big O shall deem execution of this Agreement approval of the Store
location, unless additional obligations to convert or upgrade the premises are
described in SCHEDULE 7 to this Agreement.
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6.03. Equipment and Signage. Franchisee agrees to purchase, lease or
otherwise use in the establishment and operation of the Big O Store only those
fixtures, equipment, signs and hardware and/or software that Big O has approved
as meeting its specifications and standards for quality, design, appearance,
function and performance. Franchisee shall purchase or lease approved brands,
types or models of fixtures, equipment, and signs only from suppliers designated
or approved by Big O. Franchisee agrees to place or display at the Premises only
such signs, logos and display materials that Big O approves from time to time.
6.04. Conditions to Opening. Franchisee agrees, at its sole expense, to
do or cause to be done the following prior to opening the Big O Store for
business: (i) secure all required financing; (ii) obtain all required permits
and licenses; (iii) construct all required improvements and decorate the Store
in compliance with approved plans and specifications approved by Big O pursuant
to SECTION 7.01(B) below; (iv) purchase and install all fixtures, equipment and
signs required by Big O for the Big O Store; (v) purchase an opening inventory
of tires and supplies in accordance with SECTION 14.01 AND 14.02; (vi) provide
Big O with copies of all required insurance policies, or such other evidence of
coverage and payment as Big O requests; and (vii) provide Big O with any other
documents as may be reasonably required by Big O, including but not limited to
financing statements.
6.05. Commencement of Business. Franchisee agrees to open the Big O
Store for business within fourteen (14) days after Big O notifies Franchisee
that the conditions set forth in this SECTION 6 have been satisfied. Unless
otherwise agreed in writing by Big O and Franchisee, Franchisee has sixteen (16)
months from the Effective Date of this Agreement within which to have its Big O
Store opened and operating ("Development Period"). Big O will extend the
Development Period for a reasonable period of time in the event that factors
beyond Franchisee's reasonable control prevent Franchisee from meeting this
Development Period, so long as Franchisee has made reasonable and continuing
effort to comply with such development obligations and Franchisee requests, in
writing, an extension of time in which to have its Big O Store open and
operating before the Development Period lapses.
7. PRE-OPENING AND ONGOING ASSISTANCE
7.01. Pre-Opening Assistance. Prior to Franchisee's Commencement Date,
Big O shall provide Franchisee with such of the following and on the same basis
as it will from time to time provide to similarly situated franchisees of Big O:
(a) Assistance to Franchisee related to approval of a site for the
Store, although Franchisee acknowledges that Big O shall have no
obligation to select or acquire a site on behalf of Franchisee. Big O's
assistance will consist of providing criteria for a satisfactory site,
an on-site inspection and determination of whether a proposed site
fulfills the requisite criteria, prior to formal approval of a site
selected by Franchisee. At Big O's option, Big O may, without fee or
expense to Franchisee, review the proposed Store lease. The final
decision about whether to acquire a given approved site or whether to
execute any particular lease shall be the sole decision of Franchisee.
Big O disclaims all liability for the consequences of approving a given
site. Big O's participation in site selection in no way is meant to
constitute a warranty or guaranty that the Franchised Business will be
profitable or otherwise successful. Big O's written approval of the
Premises and Store must be obtained by Franchisee before the Store may
be opened or relocated. Big O may condition its approval of a Store
lease upon Franchisee's execution of a conditional lease assignment in
a form, which is the same as, or similar to the one found on SCHEDULE
4.
(b) A prototype floor plan, elevation and equipment layout for the
Store, if requested by Franchisee. Big O may charge Franchisee its
costs (as reasonably determined by Big O) of these. The plans must be
modified by Franchisee's architect or contractor to adapt them to
conditions at the Premises and to satisfy all local code requirements.
Revisions or modifications to the plans must be approved by Big O. Big
O's approval of the revisions or modifications to the plans will not be
unreasonably withheld.
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(c) Five consecutive (5) weeks of training for one person in the
operation of the Franchised Business ("Initial Training Program") at
one or more locations designated by Big O. Unless Big O waives the
training requirement, the Manager of the Franchisee's Store and
Franchisee's Operator must attend and successfully complete the Initial
Training Program. Franchisee shall pay for its own transportation,
lodging, and living expenses which are incurred while attending the
Initial Training Program, except that Big O will pay lodging and
transportation for the first person to attend the Initial Training
Program. In the event that, in Big O's sole discretion, Franchisee's
Operator fails to successfully complete the Initial Training Program,
Big O may, in its sole discretion, require Franchisee's Operator to
attend and successfully complete another training program at
Franchisee's cost or terminate this Agreement and, upon receipt from
Franchisee of a general release in a form approved by Big O, refund the
initial franchise fee paid by Franchisee, less any amounts necessary to
reimburse Big O for the costs it incurred in approving Franchisee and
in training Franchisee's Operator and Manager.
(d) One (1) copy of the Big O Manual or other such proprietary
information.
(e) Assistance in selecting Franchisee's initial inventory.
(f) Assistance in the layout, merchandising and display of the Store.
7.02. On-Going Assistance.
(a) Big O agrees to make available to Franchisee the following ongoing
assistance for which Big O will not charge the Franchisee a fee for
such assistance:
(i) To the extent available to Big O, a source of Big O
private brand tires;
(ii) Ongoing marketing research into new tire selections and
other lines of Products and Services and ways to enhance the
competitive posture of Big O Stores;
(iii) Suggested prices for Big O brands sold at the
Franchisee's Store and from time to time Big O may establish
maximum pricing for certain products, provided that Franchisee
will not be required to sell at any particular price if such a
requirement would be unlawful.
(b) Big O agrees to make available to Franchisee the following on-going
assistance for which Big O may charge the Franchisee a fee:
(i) Additional training for the Operator or other personnel of
Franchisee;
(ii) Regional training provided by Big O personnel and field
assistance, inspections and advice pertaining to the
Franchisee's Store provided by Big O area managers.
(iii) Monthly point of sale advertising materials and
wearables utilizing Big O Licensed Marks will be purchased
through Big O's subsidiary, O Advertising, Inc., or such other
licensee as designated by Big O for which Big O may charge the
franchisee a fee, and from time to time, local advertising
plans and materials, special promotions and similar
advertising;
(iv) At the request of Franchisee's Local Group, Big O will
supply Franchisee with newspaper mats and radio and television
commercial tapes, for which Big O may charge a fee to the
Local Group or to the Franchisee.
Notwithstanding SUBSECTIONS 7.02(B)(I) and (III), above, in certain
situations where training is being provided by Big O personnel,
training will be provided at no cost to the Franchisee for the
personnel conducting the training but, the Franchisee may be charged a
fee for costs associated with the materials and training location.
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(c) Big O may, at its option, assist the Franchisee in locating a
Manager or other employees for its Big O Store by offering to the
Franchisee the services of an employee of Big O to fill one or more of
those positions. If the Franchisee hires an employee of Big O, then the
Franchisee will pay Big O a fee in the then-current amount designated
in writing by Big O. Such fee must be paid to Big O within thirty (30)
days of the date the individual so hired commences employment with the
Franchisee. This provision will not be construed to impose any
obligation upon Big O to serve as an employment source for the
Franchisee's Store.
8. FEES
8.01. Initial Franchise Fee. In consideration of the execution of this
Agreement, Franchisee agrees to pay Big O an initial franchise fee in the amount
and at the times specified on the Summary Pages. Except as described in SECTION
7.01(C) above, the initial franchise fee is not refundable.
8.02. Royalty Fee. After the Commencement Date, Franchisee shall pay to
Big O a monthly royalty fee equal to two percent (2%) of Gross Sales. The
royalty fee for each month must be postmarked and mailed to Big O by no later
than the Due Date in the following month.
8.03. National Advertising Fee. Franchisee shall pay to Big O a monthly
contribution to the National Advertising Program pursuant to SECTION 15.02(A)
below.
8.04. Late Fees. If any fee or any other amount due under this
Agreement, including payments for Products and Services, is not received within
ten (10) days after such payment is due, Franchisee shall pay Big O interest
equal to the lesser of the daily equivalent of eighteen percent (18%) per annum
of such overdue amount per year, or the highest rate then permitted by
applicable law, for each day such amount is past due.
8.05. Taxes. If any federal, state, or local tax other than an income
tax is imposed upon royalty fees paid by Franchisee to Big O which Big O cannot
offset against taxes it is required to pay under the laws of the United States
or the state of its domicile, Franchisee agrees to compensate Big O in the
manner prescribed by Big O so that the net amount or net rate received by Big O
is no less than that which has been established by this Agreement and which was
due Big O on the Effective Date of this Agreement.
8.06. Allocation of Payments. Unless other written instructions
accompany a specific payment, all payments made by Franchisee pursuant to this
Agreement shall be applied in such order as Big O may designate from time to
time. Big O shall comply with any written instructions for allocation specified
by Franchisee to the extent, in Big O's opinion, it is reasonable to do so.
9. LICENSED MARKS
9.01. Licensed Marks. Franchisee expressly acknowledges that Big O is
the sole and exclusive licensor of the Licensed Marks. Franchisee shall not
represent in any manner that Franchisee has acquired any ownership rights in the
Licensed Marks. Franchisee shall not use any of the Licensed Marks or any marks,
names, or indicia which are or may be confusingly similar in its own Entity or
business name. Franchisee further acknowledges and agrees that any and all
goodwill associated with the Big O System and identified by the Licensed Marks
shall inure directly and exclusively to the benefit of Big O and that, upon the
expiration or termination of this Agreement for any reason, no monetary amount
shall be assigned as attributable to any goodwill associated with Franchisee's
use of Licensed Marks.
9.02. Limitations on Use. Franchisee understands and agrees that any
use of the Licensed Marks other than as expressly authorized by this Agreement,
without Big O's prior written consent, is an infringement of Big O's rights
therein and that the right to use the Licensed Marks granted herein does not
extend beyond the termination or expiration of this Agreement. Franchisee
expressly covenants that, during the term of this Agreement and thereafter,
Franchisee shall not, directly or indirectly, commit any
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act of infringement or contest or aid others in contesting the validity of Big
O's right to use the Licensed Marks or take any other action in derogation
thereof.
9.03. Infringement. Franchisee acknowledges Big O's right to regulate
the use of the Licensed Marks and Trade Dress of the Big O System. Franchisee
shall promptly notify Big O if it becomes aware of any use or any attempt by any
person or legal entity to use the Licensed Marks or Trade Dress of the Big O
System, any colorable variation thereof, or any other ▇▇▇▇, name, or indicia in
which Big O has or claims a proprietary interest. Franchisee shall assist Big O,
upon request and at Big O's expense, in taking such action, if any, as Big O may
deem appropriate to halt such activities, but shall take no action nor incur any
expenses on Big O's behalf without Big O's prior written approval.
9.04. Franchisee's Business Name. Franchisee further agrees and
covenants (i) to operate and advertise only under the name or names from time to
time designated by Big O for use by similar Big O System franchisees; (ii) to
refrain from using the Licensed Marks to perform any activity or to incur any
obligation or indebtedness in such a manner as may, in a way, subject Big O to
liability therefor; (iii) to observe all laws with respect to the registration
of trade names and assumed or fictitious names; (iv) to include in any
application for the above a statement that Franchisee's use of the Licensed
Marks is limited by the terms of this Agreement, and to provide Big O with a
copy of any such application and other registration document(s); and (v) to
observe such requirements with respect to trademark and service ▇▇▇▇
registrations, copyright notices, and other notices as Big O may, from time to
time, require.
9.05. Change of Licensed Marks. Subject to the requirements of SECTION
25 of this Agreement, Big O reserves the right, in its sole discretion, to
designate one or more new, modified, or replacement Licensed Marks or trade
names for use by franchisees and to require the use by Franchisee of any such
new, modified, or replacement Licensed Marks or trade names in addition to or in
lieu of any previously designated Licensed Marks. Any expenses or costs
associated with the use by Franchisee of any such new, modified, or replacement
Licensed Marks shall be the sole responsibility of Franchisee. Any expenses or
costs associated with a change from the name "Big O" to an unrelated name will
be allocated between Big O and the Franchisee in proportionate amounts to be
determined by Big O and, if applicable in accordance with SECTION 25 of this
Agreement.
9.06. Franchisor's Rights. Big O retains the right to, among others:
(i) use, and license others to use, the Licensed Marks and the Big O System for
other Big O Stores or company-owned Stores; (ii) solicit, sell to and service
local, regional or national accounts wherever located; (iii) use the Licensed
Marks and the Big O System with other services or products, or in alternative
channels of distribution, including the Internet, without regard to location;
and (iv) use and license the use of other proprietary marks or methods which are
not the same as or confusingly similar to the Licensed Marks, whether in
alternative channels of distribution or with the operation of any type of tire
sales and service business, at any location, which may be the same as, similar
to or different from the business of a Big O Store. Big O may use or license
these rights on any terms and conditions it deems advisable, and without
granting Franchisee any rights in them.
10. STANDARDS OF OPERATION
10.01. Standards of Operations. Big O shall establish and Franchisee
shall maintain high standards of quality, appearance and operation for the
Franchised Business. For the purpose of enhancing the public image and
reputation of the businesses operating under the System and for the purpose of
increasing the demand for Products and Services provided by Franchisee and Big
O, the parties agree as follows:
(a) Franchisee shall not open the Store for business until Big O has
provided Franchisee with written authorization to do so;
(b) Franchisee shall comply in good faith with all published Big O
System rules, regulations, policies, and standards, including, without
limitation, those contained in the Manual. Franchisee shall operate and
maintain the Franchised Business solely in accordance with high
standards of quality, appearance and operation for the Franchised
Business, and in the manner and pursuant
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to the standards prescribed herein, in the Manual and in other
materials provided by Big O to Franchisee, and shall make such
modifications thereto as Big O may require;
(c) Franchisee shall at all times operate the Store diligently and in a
manner, which is consistent with sound business practices so as to
maximize the revenues therefrom;
(d) Franchisee shall at all times maintain working capital and a net
worth which is sufficient, in Big O's opinion, to enable Franchisee to
fulfill properly all of Franchisee's responsibilities under this
Agreement;
(e) Franchisee shall at all times maintain its Store in the image of
and according to the standards of Big O as prescribed in the Manual.
These standards and specifications may include, but are not limited to
the safety, maintenance, cleanliness, sanitation, function and
appearance of the Store and its equipment and signs, as well as the
requirement that the employees of the Store shall be required to wear
uniforms and to maintain a standard of appearance while employed at the
Store. Moreover, Franchisee agrees to cooperate with Big O at
Franchisee's expense, to the extent building and site limitations
permit, in the implementation of new programs, including those which
may require the addition of new equipment or fixtures for the Store. In
its sole discretion, Big O may waive some or all of any of its
franchisees' obligations to comply with such programs;
(f) Prior to opening, Franchisee shall provide Big O with written
certificates or documentary evidence from an insurance company or
companies that Franchisee has obtained the insurance coverage
prescribed by SECTION 21;
(g) If Franchisee maintains a customer list, such lists or parts
thereof shall be disclosed to no one other than Franchisee's employees
or Big O without Big O's prior written consent; and
(h) Big O will assign Franchisee to a Local Group and Franchisee must
become a member of that Local Group and shall be bound by any decisions
the Local Group makes to the extent they are approved by Big O and are
consistent with the standards and within the guidelines prescribed or
approved by Big O, provided however, that (i) Franchisee shall not be
subject to any agreement to fix prices, or allocate customers or
territories which would violate any applicable laws; and (ii)
Franchisee shall not be subject to any capital investment requirements
or other standards established by the Local Group which are
inconsistent with this Agreement or which have not been approved or
prescribed by Big O.
11. STORE MANAGEMENT
11.01. Store Management. Franchisee's Store shall only be operated by
the Operator or a Manager employed by the Franchisee who are subject to approval
by Big O. All initial and subsequent Operators and Managers are also subject to
approval by Big O. Franchisee will notify Big O of each initial and subsequent
Operator and Manager prior to his or her appointment to give Big O a reasonable
opportunity to determine whether Big O will exercise its right of approval or
disapproval as to such Operator or Manager. Big O's approval, if required, will
be conditioned upon the Operator's or Manager's successful completion of any
training required by Big O. Big O may waive some or all of its initial training
requirements for Operators or Managers who have already received such training
as a result of their affiliation with another Store or Big O franchisee or in
other circumstances, in its sole discretion. If Franchisee or Franchisee's
Operator has not already successfully completed such training, he shall be
required to successfully complete the training described in SECTION 7.01 (C)
above.
11.02. Completion of Training by Operator or Manager. Franchisee's
Operator or Manager and such of its managerial personnel or Owners as are
designated by Big O, shall complete, to Big O's reasonable satisfaction, any and
all training programs Big O may reasonably require or provide at such time as
Big O may reasonably prescribe. All expenses incurred by persons receiving such
training, including, without limitation, costs of travel, room and board, as
well as wages of the person(s) receiving such training shall be borne by the
Franchisee except that the transportation and lodging costs for the first person
receiving such training shall be paid by Big O.
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11.03. Operation of Store by Big O. Under the circumstances described
below, upon Franchisee's request, Big O has the option, but not the duty, to
replace Franchisee's Operator, Manager, or both, with its own employees or
agents, to operate the Franchisee's Store for the benefit of Franchisee with
complete discretion over all matters relating to its operation. Franchisee shall
pay Big O's then current Store management fee as well as the out-of-pocket
expenses Big O incurs for travel, food and lodging in the course of providing
such services, provided that such expenses are reasonably related to the
services rendered. Big O may operate Franchisee's Store if:
(a) Franchisee's Operator or Manager has failed to satisfactorily
complete any training required by this SECTION 11; or
(b) Franchisee's Operator or Manager becomes physically or mentally
incapable of operating the Franchised Business; or
(c) Franchisee's Operator or Manager dies and a new Operator or Manager
has not completed initial training.
Notwithstanding the foregoing, prior to Big O operating the
Franchisee's Store pursuant to the terms of this SECTION 11.03, Big O shall have
provided the Franchisee with notice of the nature and extent of Franchisee's
failure to comply with the operational requirements of this SECTION 11 and the
reasonable opportunity to cure the failure by the Franchisee to comply with the
operational requirements of this SECTION 11.
12. QUALITY CONTROL
12.01. Inspections. Franchisee hereby grants to Big O and its
authorized agents the right to enter the Premises during regular business hours:
(a) To conduct inspections and, upon Big O's request, Franchisee agrees
to render such assistance as may reasonably be requested and to take such steps
as may be necessary immediately to correct any deficiencies in the operation of
its Franchised Business pursuant to this Agreement which are detected during
such an inspection; and
(b) To remove from the Premises, certain samples of any Products and
Services, supplies or goods, in amounts reasonably necessary for testing or
examination by Big O or an independent laboratory, to determine whether such
samples meet Big O's then current standards and specifications. Big O will grant
Franchisee a credit equivalent to the cost of any approved Products and Services
or supplies damaged or removed by it.
13. MANUAL; NEW PROCESSES
13.01. Manual. To protect the reputation and goodwill of the businesses
operating under the System and to maintain high standards of operation under the
Licensed Marks, Franchisee shall conduct the Franchised Business strictly in
accordance with the Manual, which Franchisee acknowledges belongs solely to Big
O and shall be on loan from Big O during the term of this Agreement. Franchisee
agrees to pay Big O up to Five Thousand Dollars ($5,000) for the failure to
return the Manual, Big O's Blueprint for Success, otherwise known as the Blue
Book, any training module or any other proprietary information to Big O within
five (5) days of the Expiration Date or Termination Date of this Agreement, or
the date upon which controlling interest in the Franchisee, the Franchised
Business or its assets is transferred. However, Big O will waive the payment if
Franchisee notifies Big O that it has lost or mislaid all or part of the Manual
at any time prior to six (6) months before the date upon which the Franchise is
transferred, terminates, or expires.
13.02. Confidentiality of Information. Franchisee shall at all times
use its best efforts to keep Big O's Information confidential and shall limit
access to the Information to employees and independent contractors of Franchisee
on a need-to-know basis. Franchisee acknowledges that the unauthorized use
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or disclosure of Big O's Information will cause irreparable injury to Big O and
that damages are not an adequate remedy. Franchisee accordingly covenants that
it shall not at any time, without Big O's prior written consent, disclose, use,
permit the use thereof (except as may be required by applicable law or
authorized by this Agreement), copy, duplicate, record, transfer, transmit, or
otherwise reproduce such Information, in any form or by any means, in whole or
in part, or otherwise make the same available to any unauthorized person or
source. Any and all Information, knowledge, and know-how not generally known
about the System and Big O's Products and Services, standards, procedures,
techniques, and such other Information or material as Big O may designate as
confidential shall be deemed confidential for purposes of this Agreement, except
Information which Franchisee can demonstrate was lawfully in Franchisee's
possession prior to disclosure by Big O, or which legally is or has become a
part of the public domain by lawful publication or communication by others.
13.03. Revisions to Manual. Franchisee understands and acknowledges
that subject to the requirements of SECTION 25, Big O may, from time to time,
revise the contents of the Manual to implement new or different requirements for
the operation of the Franchised Business, and Franchisee expressly agrees to
comply with all such changed requirements which are by their terms mandatory,
provided, that such requirements apply in a reasonably nondiscriminatory manner
to comparable Big O franchisees. The implementation of such requirements may
require the expenditure of reasonable sums of money by Franchisee. Big O will
not alter the basic rights and obligations of the parties arising under this
Agreement through changes to the Manual.
13.04. Improvements to System. If Franchisee develops any concept,
process, service, or improvement in the operation or promotion of the Store, Big
O may itself use or disclose it to other Big O franchisees without any
obligation to compensate Franchisee therefor. If the concept, process, service,
or improvement is adopted for use by the majority of Big O Stores, such concept,
process, service, or improvement shall become the property of Big O and Big O
may itself use or disclose it to other Big O franchisees without any obligation
to compensate Franchisee therefor.
14. PRODUCTS AND SERVICES
14.01. Products and Services. Franchisee acknowledges that its
principal interest in acquiring a Big O Franchise is to sell Big O private brand
tires and related merchandise and benefit from Big O's Products and Services
selection, purchasing programs, including programs for the purchase of major
brand tires, and marketing expertise. The consuming public expects Big O Stores
to offer the full line of Big O Products and Services and advertised warranty
services. Accordingly, Franchisee shall at all times have, in stock and on the
Premises, a complete representative line of Big O private brand tires, shock
absorbers, related merchandise, and other Products and Services in such
quantities as Big O may prescribe from time to time. Franchisee agrees that
within a one hundred eighty (180) day period from the Commencement Date and for
each one hundred eighty (180) day period thereafter, it will have purchased at
least seventy-five percent (75%) (cumulative amount in dollars, not units) of
all of its purchases of products for resale in the Franchised Business from the
regional service centers (RSC) or through other supply programs, if any,
designated by Big O from time to time in its discretion. In addition, Franchisee
agrees that fifty percent (50%) or more of all tire sales at the Store will be
Big O Brand Tires, excluding sales of snow tires and farm class tires.
14.02. Approval of Products and Services. Prior to commencing business
at the Premises, Franchisee shall stock the Store with Products and Services and
supplies of such variety and in such amounts as Big O may require. Franchisee
may not sell any product or service that has not been selected, designated or
approved by Big O. Big O is not obliged to approve any product, service, or
merchandise selected by the Franchisee. Big O will not give its approval of
suppliers selected by the Franchisee which are not at the time approved by Big O
for use by the Franchisee, except in accordance with the following procedure:
(a) The Franchisee must submit a written request to Big O for approval
of the supplier;
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(b) The Franchisee must demonstrate to Big O the existence of a need
for the product or service and that the product or service does not
conflict with Big O's existing marketing program of Products and
Services;
(c) The supplier must demonstrate to Big O's reasonable satisfaction,
that it is able to supply a commodity to the Franchisee meeting Big O's
specifications for such commodity and that it is able to do so on a
timely basis;
(d) The supplier must demonstrate to Big O's reasonable satisfaction
that the supplier is of good standing in the business community with
respect to its financial soundness and reliability of its product and
service;
(e) The supplier must agree to indemnify and hold Big O and the
Franchisee harmless from and against any claim or liability by reason
of the supplier's products, including without limitation, defects in
materials and workmanship and supplier must provide to Big O
certificates or other evidences of insurance coverage with coverage
limits sufficient to cover the risks and an endorsement reflecting that
Big O and Franchisee are named as additional insureds under the
supplier's insurance policies; and
(f) Big O must be reasonably satisfied that the commodity is priced
competitively.
Big O's current practice is to notify the Franchisee of its approval or
disapproval in writing as soon as practicable. Big O may revoke its
approval of an approved supplier at any time in its sole discretion.
14.03. Inventory. Franchisee shall at all times maintain an inventory
of Products in such amounts and of such variety as Big O may reasonably require,
and shall offer all Services which Big O may require.
14.04. Warranties and Guaranties. Franchisee agrees to issue and honor
warranties and guarantees written on certain Products and Services sold to
consumers in accordance with the terms and procedures prescribed in the Manual.
Any such warranty or guaranty will be offered through all Big O Tire Stores on a
nondiscriminatory basis. Only warranties or guarantees sponsored or approved by
Big O may be offered or honored by Franchisee (other than those required by
law). Franchisee and Big O shall only honor warranties and guaranties on
Products and Services that have been sold to and returned by consumers in
accordance with the terms and procedures prescribed in the Manual. Franchisee
acknowledges that it will honor any and all warranties and guarantees sponsored
or approved by Big O, regardless of where or by whom they were issued.
Franchisee shall make no charge to a customer for honoring such a warranty or
guaranty unless the charge is permitted by the express terms of the warranty or
guaranty or the then current Manual. Big O agrees not to change or alter any
warranty or guaranty without giving Franchisee at least thirty (30) days prior
written notice. Warranties or guarantees issued prior to any such revocation or
modification shall be honored according to their terms as interpreted in the
Manual.
14.05. Open Account Financing. In its sole discretion, Big O may
provide Franchisee with open account financing for some or all of the Products
and Services it sells Franchisee. Whether or not such credit is offered,
Franchisee will be required to execute a security agreement and comply with all
other requirements of Big O to secure Franchisee's obligations to Big O under
the Franchise Agreement and perfect its security interest therein. If such
credit is offered, Franchisee will be required to execute a credit agreement and
security agreement and comply with all other requirements of Big O to secure
such payments and perfect its security interest therein. Franchisee's failure to
comply with any credit terms set forth above may cause Big O to terminate these
credit terms or, where appropriate, Big O reserves the right to place Franchisee
on C.O.D. as well as notifying the Franchisee of an event of default of this
Agreement.
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS
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15.01. Initial Advertising. Recognizing the value of standardized
Advertising programs to the furtherance of the goodwill and public image of the
Big O System, within the first year of business, Franchisee is required to spend
on Initial Advertising, in addition to the required four percent (4%), the
amount specified on the Summary Pages. The exact amount to be spent on Initial
Advertising shall be determined by Big O and the Franchisee's Local Group and
will depend, in part, on Big O's then current presence in the market place,
reputation and name recognition. The amount and manner of the Initial
Advertising must be approved in advance by Big O. If no Local Group exists for
the region where Franchisee's Store is located, then the amount of the Initial
Advertising shall be agreed upon by Big O and Franchisee.
15.02. National Advertising Program. Big O has established a National
Advertising Program which Big O, in its sole discretion, may decide to terminate
or suspend at any time. If Big O does terminate or suspend the National
Advertising Program, Big O, in its sole discretion, may re-establish it at any
time. Big O shall notify Franchisee as to the manner in which it shall function
and the amount of contribution required of Franchisee.
(a) Not later than the Due Date, Big O or its designee must have
received from Franchisee such amount as Big O shall designate, but not
more than one percent (1%) of its previous month's Gross Sales, as a
contribution to the National Advertising Program which shall be
maintained or approved by Big O for Big O system-wide advertising
efforts. Big O shall limit any increase in Franchisee's contribution to
the National Advertising Program from any amount then currently being
charged to one-tenth of one percent (0.1%) in any twelve (12)
consecutive month period and an additional one- tenth of one percent
(0.1%) for each twelve (12) consecutive months thereafter until the one
percent (1%) limitation is reached. Such incremental increases shall
not be cumulative so that if Big O fails to adopt an additional
incremental increase after any twelve (12) consecutive month period,
the next one-tenth of one percent (0.1%) incremental increase will not
accrue until actually adopted by Big O and shall constitute the maximum
for the next consecutive twelve (12) months; provided, however, in the
event Big O shall determine, in its sole judgment and discretion, that
a special advertising circumstance or opportunity is available to Big O
and/or its franchisees, Big O may propose to the Dealer Planning Board
a greater increase during any consecutive twelve (12) month period (up
to one percent (1%) limit), and if a majority of the members of the
Dealer Planning Board agree to such increase, it shall be implemented
by Big O, not withstanding Big O's limitation as to the phasing in of
any increases.
(b) Big O shall, following consultation with the Dealer Planning Board,
direct all system-wide advertising efforts, which is provided through
the National Advertising Program with sole discretion over the
concepts, materials, and media used therein. All National Advertising
Program contributions paid by Franchisee and other similarly situated
Big O System franchisees to Big O shall be part of the National
Advertising Program.
(c) Franchisee understands and acknowledges that the National
Advertising Program is intended to maximize general public recognition
and acceptance of the Licensed Marks and for other benefits for the
System and that Big O undertakes no obligation in administering the
National Advertising Program to insure that any particular franchisee
benefits directly or pro rata from the national Advertising. Franchisee
agrees that the National Advertising Program may otherwise be used to
meet any and all costs incident to such Advertising; provided that no
part thereof shall be used by Big O to defray its general operating
expenses other than (i) those reasonably allocable to such Advertising,
or (ii) other activities reasonably related to the administration or
direction of the National Advertising Program and its related programs.
No refund of contributions to the National Fund shall be due Franchisee
upon termination or nonrenewal of this Agreement.
(d) Any part of the National Advertising Program contributions paid to
Big O, but not spent by Big O during Big O's fiscal year, which Big O
may change in its sole discretion, shall remain in the National
Advertising Program. Any taxes imposed on the National Advertising
Program shall be paid from the National Advertising Program.
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(e) The Dealer Planning Board shall have the right to review all
expenditures of the National Advertising Program on a regular basis.
15.03. Local Fund.
(a) Franchisee shall also contribute by the Due Date a minimum of four
percent (4%) of its Store's Gross Sales for the previous month to Big O or as
directed by Big O. If a Local Fund has been established by a Local Group in
Franchisee's marketing area, Big O may, in its discretion, direct that all or
any part of that contribution be (i) paid to the Local Fund formed by the Local
Group for the purpose of local advertising and operated pursuant to such
structure and guidelines as Big O may prescribe or approve or (ii) paid to Big
O, which may include all or some of such payment in a Local Fund administered by
it or may forward all or some of such payment to the Local Fund formed by the
Local Group. Franchisee agrees to be bound by the decisions of Big O (or its
designee) and its Local Group, if one has been established in Franchisee's
marketing area, pertaining to local Advertising, provided such decisions have
been approved by Big O and do not violate any applicable laws. From time to
time, the Local Group may agree to increase the amount Franchisee is required to
spend for Advertising (by contributions to the Local Fund or otherwise), but,
subject to the terms of certain documents already effective on this Agreement's
Effective Date, not by more than one percent (1%) of Franchisee's Gross Sales on
an annual basis.
(b) Franchisee understands and acknowledges that the Local Fund to
which it contributes will generally be used for Advertising in the local area or
region of the Store location identified in the Summary Pages, but Big O
undertakes no obligation with regard to any Local Funds administered by it or by
any Local Group to insure that any particular franchisee benefits directly or
pro rata from the expenditures by the Local Fund. The Local Funds may be used to
meet any and all costs incident to the Advertising it supports; provided that,
as to Local Funds administered by Big O, no part thereof shall be used by Big O
to defray its general operating expenses other than (i) those reasonably
allocable to such Advertising, or (ii) other activities reasonably related to
the administration or direction of the Local Funds and related programs. No
refund of contributions to the Local Fund shall be due Franchisee upon
termination or nonrenewal of this Agreement. Any part of the Local Fund
contributions not spent by Big O or a Local Group during its fiscal year, shall
remain in the Local Fund. Any taxes imposed on the Local Fund shall be paid from
the Local Fund. Big O retains the discretion to take such action or refrain from
taking action as it deems appropriate to enforce the obligation of Franchisee to
contribute to a Local Fund as provided in this Agreement and to enforce or
refrain from enforcing the obligation of other franchisee to contribute to Local
Funds as provided in their franchise agreements with Big O, but Big O has no
obligation to Franchisee to enforce payments or contributions (in whole or in
part) by other franchisees.
15.04. Approval of Advertising. Franchisee or the Local Group shall
submit (through the mail, return receipt requested) to Big O for its prior
written approval (except with respect to prices to be charged), samples of all
marketing materials and advertising to be used by Franchisee that have not been
prepared or previously approved in all respects by Big O or its designated
agents, such approval by Big O shall not be unreasonably withheld. Franchisee
shall submit tear sheets, receipts, and other evidence of such Advertising in
the manner prescribed by Big O. Franchisee will not be required to submit to Big
O copies of any proposed Advertising which has been adopted for use by the Local
Group and which was previously approved by Big O for use by the Local Group.
Franchisee shall not cause or allow the Licensed Marks, or any of them, to be
used or displayed, in whole or in part, as an Internet domain name, or on or in
connection with any Internet home page, website or other Internet-related
activity without Big O's express prior written consent, and then only in such
manner and in accordance with such procedures, standards and specifications as
Big O establishes.
16. STATEMENTS AND RECORDS
16.01. Invoices. Every sale of Products and Services from the
Franchisee's Store shall be accurately recorded on a consecutively numbered
invoice or in such other format as Big O may reasonably approve. All invoices,
whether voided or used, shall be accounted for by Franchisee.
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16.02. Audit. Throughout the term of this Agreement and for two (2)
years thereafter, Franchisee shall maintain for not less than three (3) years
original, full, and complete records, accounts, books, data, licenses, and
contracts which shall accurately reflect all particulars relating to the
Franchised Business and such other statistical and other information or records
as Big O may require. Big O or its designated agent shall have the right to
examine and audit such records, accounts, books, and data during regular
business hours or at reasonable times. If any such examination or audit
discloses that Franchisee has understated its Store's Gross Sales by more than
two percent (2%), Franchisee shall be obliged to reimburse Big O for the cost
and expense of such examination or audit. If Franchisee has understated any
amount due Big O or any Local Group or Local Fund, it shall tender payment of
the amount due not later than ten (10) days following receipt of the auditor's
report, plus interest calculated at a rate which is the lower of eighteen
percent (18%) per annum or the highest rate permitted by law. If Franchisee has
overpaid Big O or such Local Group or Local Fund, such amount will be credited
to Franchisee against monthly royalty fees or advertising contributions due to
Big O, the Local Group or the Local Fund beginning with the month following
receipt of the auditor's report and continuing until the credit is exhausted.
16.03. Monthly Reports. On or before each Due Date, Franchisee shall
mail to Big O, together with its payments of royalty fees and advertising
contributions, monthly reports on forms prescribed from time to time by Big O,
stating the fees or contributions due to Big O on account of Gross Sales for the
prior month, copies of all sales tax receipts or returns and such other
information as Big O may require, all signed and certified as true and correct
by Franchisee or Franchisee's Operator. Big O reserves the right to require such
reporting and payments to be performed and submitted to Big O electronically.
16.04. Financial Statements. Franchisee shall deliver to Big O, no
later than sixty (60) days from the end of each of Franchisee's fiscal quarters,
an unaudited profit and loss statement covering the Franchised Business for such
quarter and a balance sheet of the Franchised Business as of the end of such
quarter, all of which shall be certified by Franchisee as true and correct. All
such statements shall be prepared in a format that has been prescribed or
approved by Big O. In addition, Franchisee, as well as any guarantor(s) of this
Agreement, shall, within thirty (30) days after request from Big O, deliver to
Big O a financial statement, certified as correct and current, in a form which
is satisfactory to Big O and which fairly represents the total assets and
liabilities of Franchisee and any such guarantor(s).
16.05. Management Systems. Franchisee must implement any Management
Systems required by Big O. Notwithstanding the foregoing, if Franchisee is
required to implement a management system, it will not be required to do so more
than once every four (4) years.
16.06. Retail Accounting Center. For the generation of financial
statements, the Franchisee is required to use some or all of the services
provided by a Retail Accounting Center operating within the Franchisee's Local
Group. Franchisee is required to provide sufficient financial information to a
Retail Accounting Center to enable that center to prepare on an accurate and
timely basis the financial statements that the Franchisee is required to deliver
to Big O. Franchisee authorizes the Retail Accounting Centers to deliver such
financial statements directly to Big O.
17. COVENANTS
17.01. Noncompetition During Term. Except for any businesses already
operating and identified on the Summary Pages, during the term of this
Agreement, Franchisee and any guarantor(s) hereof covenant, individually, not to
engage in or open any business, at any location, other than as a Franchisee of
the Big O System, which offers or sells tires, wheels, shock absorbers,
automotive services, or other products or services which compete with Big O
Products and Services. The purpose of this covenant is to encourage Franchisee
and any guarantor(s) hereof to use their best efforts to promote the Big O
System, its Products and Services, to protect its Information and trade secrets,
and to generate a successful business at the Store.
17.02. Confidentiality. During the term of this Agreement and
thereafter, Franchisee covenants not to communicate either directly or
indirectly, divulge to or use for its benefit or the benefit of any other person
or legal entity, any trade secrets which are proprietary to Big O or any
Information, knowledge, or
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know-how deemed confidential under SECTION 13 hereof, except as expressly
authorized by Big O. The protection granted hereunder shall be in addition to
and not in lieu of all other protections for such trade secrets and confidential
Information as may otherwise be afforded in law or in equity.
17.03. No Interference with Business. Franchisee agrees that during the
term of this Agreement that it shall not divert or attempt to divert any
business of or any actual customers of the Big O System to any competitive
business, by direct or indirect inducement or otherwise.
17.04. Post Termination Covenant Not to Compete. If Franchisee
terminates this Agreement other than in a manner prescribed by SECTION 19.03 or
if this Agreement is terminated for "good cause" as defined in SECTION 19.01,
Franchisee, its Owners, officers, directors, and guarantors covenant that they
shall not directly or indirectly, for a period of two (2) years after the
Termination Date of this Agreement, engage in any business, other than as a
Franchisee of the Big O System, which offers or sells tires, wheels, shock
absorbers, automotive services, or other products or services which compete with
Big O Products and Services within a ten (10) mile radius of the Premises or
within a ten (10) mile radius of any other Big O Store which was operational or
under construction on the Termination Date.
If a former Franchisee or guarantor commits a breach of this SECTION 17.04, the
two year period shall start on the date that the former Franchisee or guarantor
is enjoined from competing or stops competing, whichever is later.
17.05. Survivability of Covenants. The parties agree that each of the
foregoing covenants shall be construed as independent of any other covenant or
provision of this Agreement. If all or any portion of a covenant in this SECTION
17 is held unenforceable by a court or agency having valid jurisdiction in an
unappealed final decision to which Big O is a party, Franchisee expressly agrees
to be bound by any lesser covenant imposing the maximum duty permitted by law
that is subsumed within the terms of the covenant, as if the resulting covenant
were separately stated in and made a part of this SECTION 17. Franchisee further
expressly agrees that the existence of any claim it may have against Big O,
whether or not arising from this Agreement, shall not constitute a defense to
the enforcement by Big O of the covenants in this SECTION 17. The covenants in
this SECTION 17 shall survive the Termination Date or Expiration Date of this
Agreement.
17.06. Modification of Covenants. Franchisee understands and
acknowledges that Big O shall have the right, in its sole discretion, to reduce
the scope of any covenant set forth in this SECTION 17 or any portion hereof,
without Franchisee's consent, effective immediately upon receipt by Franchisee
of written notice thereof; and Franchisee agrees that it shall comply
immediately with any covenant as so modified.
18. TRANSFER AND ASSIGNMENT
18.01. Assignment by Big O. This Agreement and all rights and duties
hereunder may be freely assigned or transferred by Big O and shall be binding
upon and inure to the benefit of Big O's successors and assigns.
18.02. Right of First Refusal. Because Big O or someone known to Big O
may be interested in purchasing Franchisee's Franchised Business, the Premises,
or an interest in either, if Franchisee decides to make a Transfer, Franchisee
agrees to offer in writing to make the Transfer to Big O, and describe the terms
under which Franchisee offers to make such a Transfer. If Big O has not offered
to purchase what the Franchisee has offered to Transfer to Big O within thirty
(30) days after Big O receives the notice from Franchisee, Franchisee may then
offer to make the Transfer to third parties on the same or not more favorable
terms and conditions as were offered to Big O. If Franchisee does not
consummate, in accordance with the terms offered to Big O, the Transfer within
six (6) months after Franchisee gives notice of the Transfer to Big O,
Franchisee shall not make the Transfer without again first offering to make the
Transfer to Big O.
18.03. Transfer Legend. Franchisee understands and acknowledges that
the rights and duties set forth in this Agreement are personal to Franchisee and
that Big O has granted the Franchise in reliance
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on Franchisee's personal background, business skills, experience, and financial
capacity. It is important to Big O that Franchisee be known to Big O and always
meet Big O's standards and requirements. Accordingly, neither Franchisee nor any
Owner shall be permitted or have the power, without the prior written consent of
Big O, to make any Transfer. To assure compliance by Franchisee with the
transfer restrictions contained in this SECTION 18, all share or stock
certificates of Franchisee, or other evidence of ownership in a Franchisee which
is an Entity, shall at all times contain a legend sufficient under applicable
law to constitute notice of the restrictions on such stock, or other said
evidence of ownership, contained in this Agreement and to allow such
restrictions to be enforceable. Such legend shall appear in substantially the
following form:
"The sale, transfer, pledge, or hypothecation of this [stock]
is restricted pursuant to the terms of SECTION 18 of a
Franchise Agreement dated between Big O Tires, Inc., and the
issuer of these [shares]."
Any Transfer that does not comply with the terms of this SECTION 18 shall be
null and void.
18.04. Pre-Conditions to Franchisee's Assignment. If Franchisee or any
Owner desires to make a Transfer, such person or Entity must comply with the
following terms, conditions, and procedures to effectuate a valid Transfer:
(a) If any proposed assignment of any rights under this Agreement, or
if any other Transfer which, when aggregated with all previous
Transfers, would in the reasonable opinion of Big O, result in the
transfer of fifty percent (50%) or more of the voting and Equity
interest of the ownership of the Premises or Franchisee or the
Franchised Business ("Change in Control"):
(i) The transferee must apply for a Big O franchise and must
meet all of Big O's then current standards and requirements
for becoming a Big O franchisee (which standards and
requirements need not be written);
(ii) The transferee or Franchisee shall, at Big O's election,
execute the then current form of Franchise Agreement generally
being offered to franchisees in the State in which the Big O
Store is located. Such agreement shall generally provide for a
new term equal to the term of the standard Big O franchise
agreement then being offered, and may include, without
limitation, different fee structures, modified Trade Areas
and/or increased fees;
(iii) Notwithstanding the foregoing, Big O or its assignee
may, within thirty (30) days after receipt of notice as
provided in SECTION 18.04(B)(I), below, elect the Option to
purchase the interest being offered by Franchisee or any
Owner; and
(iv) The transferee or Franchisee shall, at Big O's election,
have obtained prior to the Transfer a surety bond or letter of
credit in an amount not less than $10,000 (or such other
amount as designated by Big O from time to time) per each Big
O Store which is subject to the Transfer issued by a surety
company or bank reasonably acceptable to Big O in favor of Big
O or, at Big O's election, to the Local Group designated by
Big O, which surety bond or letter of credit may not be
revoked, terminated or modified until two years (or such other
time period as designated by Big O from time to time) after
the date of the Transfer. Such bond or letter of credit shall
be payable to the order of Big O or the Local Group, as the
case may be, for any nonpayment by the transferee or
Franchisee of contributions due to the National Advertising
Program or the Local Fund pursuant to the Franchise Agreement
to which the transferee or Franchisee is a party; or
(b) Regardless of the degree of control which would be affected by a
proposed Transfer:
(i) Franchisee shall first notify Big O in writing of any bona
fide proposed Transfer and set forth a complete description of
all terms and fees of the proposed Transfer in the manner
prescribed by Big O, including the name, address, financial
qualifications, and previous five
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(5) years business experience of the prospective transferee
and its owners, officers, directors, partners, members and
management, in the case of an Entity;
(ii) If Big O or its assignee fails to exercise the Option to
purchase the interest as provided in SECTION 18.04(A)(III) or
if the Option right is not available to Big O due to a
transfer of less than fifty percent (50%) of Franchisee's
ownership, Big O shall, within thirty (30) days after receipt
of the notice as provided in SECTION 18.04(B)(I), above,
notify Franchisee in writing of its approval or disapproval of
the prospective transferee. Big O's approval will be granted
only if the prospective transferee, its Owners, and/or
Operator: (a) meets Big O's then current standards for new
franchisees, which standards need not be in writing; (b)
demonstrates to Big O's satisfaction that it or its Operator
meets Big O's managerial, business, and technical standards;
(c) possesses a good moral character, business reputation, and
satisfactory credit rating; and (d) has the aptitude, ability,
and financial capacity to operate the Franchised Business (as
may be evidenced by prior related business experience or
otherwise). Big O reserves the right to disallow a transfer of
the Premises (without a transfer of the Franchised Business)
to a person which would operate a business from the Premises
which sells or offers for sale products or services which are
the same as or similar to those offered for sale through the
Franchised Business;
(iii) If Big O approves the proposed transferee, Franchisee or
the Owner may transfer the interest to the proposed transferee
at a price and under terms and conditions which are not more
favorable than the terms offered to Big O. Big O's approval is
conditioned upon the proposed transferee or its Operator
having completed (to the satisfaction of Big O) the training
program then currently required of Big O franchisees or
Operators;
(iv) Prior to the consummation of any such Transfer,
Franchisee shall pay all amounts due to Big O and cure all
other breaches of this Agreement and any other agreement or
loan document it may have with Big O;
(v) Big O will, as a condition of any Transfer involving a
Change in Control of Franchisee, the Store or its Assets,
require Franchisee or transferee to pay a transfer fee (but no
initial franchise fee) to reimburse Big O for any expenses
which may be incurred in its review, analysis, and preparation
of any documentation relating to the Transfer, including legal
and accounting fees, and additional assistance as may be
requested by the Franchisee related to the Franchisee's resale
of the Store. The transfer fee will be one thousand five
hundred dollars ($1,500). In addition, if the transferee
requires training, the Franchisee or Transferee will also be
charged a training fee of three thousand dollars ($3,000). Big
O shall be the sole arbiter of whether a Change in Control
occurred as a result of a single Transfer or a group of
Transfers.
For any transfer of less than fifty percent (50%) of
Franchisee's ownership, Big O will, as a condition of any
Transfer involving less than fifty percent (50%) of
Franchisee's ownership in the Franchise, the store or its
assets, require the Franchisee or the transferee to pay a
transfer fee (but no initial franchise fee) to reimburse Big O
for any expenses which may be incurred in its review, analysis
and preparation of any documentation relating to the Transfer,
including legal and accounting fees and additional assistance
as may be requested by the Franchisee related to the resale of
the Store. The transfer fee will be five hundred dollars
($500). Big O shall be the sole arbiter of whether a Change in
Control will occur as a result of a single Transfer or a group
of Transfers;
(vi) Big O may require the transferor and its Owners and
guarantors to guarantee the obligations of Transferee under
this Agreement or under any new Franchise Agreement entered
into between transferee and Big O;
(vii) Prior to approving a Transfer involving a Change in
Control, Big O may inspect Franchisee's Store and as a result
of such inspection, Big O may prepare a "Punch List"
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setting forth the necessary repairs, maintenance, or other
upgrading of the Store which will become a condition of Big
O's approval of the Transfer;
(viii) If the Franchisee acquired its interest in the
Franchise as a Pioneer, Converter, or pursuant to a
Development Agreement, and the Franchisee makes a Transfer of
its interest within two (2) years of the Effective Date of
this Agreement, the Franchisee must pay Big O as a condition
of such Transfer the difference between the initial franchise
fee paid by Franchisee and twenty-five thousand dollars
($25,000), the standard initial franchisee fee charged by Big
O for new franchises when Franchisee executed this Agreement;
and
(ix) Franchisee shall comply with all other applicable
transfer requirements as designated in the Manual or otherwise
in writing.
18.05. Death of Franchisee. Notwithstanding any other provision in this
SECTION 18, if a Survivor desires to acquire or retain the interest of a
decedent of a Franchisee or in a Franchisee and continues to operate the
Franchised Business pursuant to the System, the Survivor may do so under the
terms of this Agreement subject only to:
(a) The Survivor's execution and delivery to Big O of a written
agreement to be bound:
(i) By the terms of this Agreement; and
(ii) By the terms of any guaranty of this Agreement;
(b) Satisfactory completion of initial training by the Survivor,
Survivor's Operator, or Manager and such other managerial personnel as
Big O may designate within the time periods prescribed by Big O; and
(c) The Survivor's payment of all travel, lodging, food, and similar
expenses incurred by it or its Operator or managerial personnel in
attending the training prescribed by SECTION 11.02. If the Survivor
does not desire to acquire or retain such interest, then the Survivor
shall have a reasonable period of time, but no more than six (6)
months, to make a Transfer to a transferee acceptable to Big O subject
to compliance with the procedures set forth in this SECTION 18,
provided, the Survivor throughout such period fulfills all duties of
Franchisee under this Agreement.
18.06. No Waiver. Big O's consent to a Transfer hereunder shall not
constitute a waiver of any claims Big O may have against Franchisee or the
transferring party or Big O's right to demand exact compliance with any
provision of this Agreement.
18.07. Excepted Transfers. The provisions of SECTIONS 18.02 and
18.04(B)(II) shall not apply to: (a) any Transfer to a spouse, parent, child, or
sibling of Franchisee or any Owner; (b) a Transfer to a spouse, parent, child,
or sibling of Franchisee or any Owner which, in the aggregate, amounts to a
Transfer of less than a controlling interest in Franchisee, the Franchised
Business, or the Premises; or (c) any Transfer to a Manager or Operator of the
Franchised Business pursuant to an equity acquisition program or agreement of
Franchisee approved by Big O prior to such Transfer.
19. DEFAULT AND TERMINATION
19.01. Termination by Big O. Big O may terminate this Agreement for
good cause, without prejudice to the enforcement of any legal or equitable right
or remedy, immediately upon giving written notice of such termination and the
reason or cause for the termination, and, except as hereinafter provided,
without providing Franchisee an opportunity to cure the default. Without in any
way limiting the generality of the meaning of the term "good cause," the
following occurrences shall constitute sufficient basis for Big O to terminate
the Agreement:
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(a) If Franchisee fails to pay any financial obligation pursuant to
this Agreement including, but not limited to, payments to Big O or any
other supplier for Products and Services, and fails to cure such
failure to pay within five (5) days after Big O gives Franchisee a
written notice of default;
(b) If Franchisee fails to perform or breaches any covenant,
obligation, term, condition, warranty, or certification herein and
fails to cure such non-compliance within thirty (30) days after Big O
gives Franchisee written notice of default;
(c) If Franchisee fails to open the Store and commence business within
eighteen (18) months of the Effective Date of this Agreement, or if
Franchisee fails to commence business on such other Commencement Date
as the parties hereto may have agreed. Notwithstanding the foregoing,
Big O will agree to extend the time period to commence business so long
as the Franchisee can demonstrate to Big O's reasonable satisfaction
that the need to extend the time period is a result of factors beyond
the Franchisee's reasonable control;
(d) If Franchisee makes, or has made, any materially false statement or
report to Big O in connection with this Agreement or the application
therefor;
(e) If Franchisee operates the Franchised Business or uses the Licensed
Marks in a manner contrary to or inconsistent with this Agreement,
specifications by Big O, or as stated in the Manual, and Franchisee
fails to cure such deficiency within thirty (30) days after Big O gives
a written notice of default;
(f) If Franchisee, a Owner, guarantor, or transferee violates any
transfer or assignment provision contained in SECTION 18 of this
Agreement;
(g) If Franchisee receives from Big O more than three (3) valid notices
of default of this Agreement in the same twelve (12) month period,
regardless of whether previous defaults have been cured;
(h) If Franchisee fails to operate or keep the Franchised Business open
for more than five (5) consecutive business days other than with Big
O's express written approval or due to an event beyond the Franchisee's
reasonable control (e.g.: damage or destruction, flooding, civil
disturbance), or if Franchisee ceases to operate all or any part of the
Franchised Business conducted under this Agreement or defaults under
any loan, lending agreement, mortgage, deed of trust or lease with any
party covering the Premises, and such party treats such act or omission
as a default, and Franchisee fails to cure such default to the
satisfaction of such party within any applicable cure period granted
Franchisee by such party and such default with a third party has or
would likely have an adverse impact to the Franchisee or the Big O
System generally;
(i) If Franchisee or any person owning an interest in Franchisee is
convicted of any felony or crime of moral turpitude regardless of the
nature thereof, or any other crime or offense relating to the operation
of the Franchised Business, or if Franchisee engages in any conduct
which reflects materially and unfavorably upon the operation of the
Franchised Business;
(j) If Franchisee becomes insolvent or makes a general assignment for
the benefit of creditors, or if a petition in bankruptcy is filed by
Franchisee, or such a petition is filed against and consented to by
Franchisee, or if a ▇▇▇▇ in equity or other proceeding for the
appointment of a receiver of Franchisee or other custodian for
Franchisee's business or assets is filed and consented to by
Franchisee, or if a receiver or other custodian (permanent or
temporary) of Franchisee's assets or property, or any part thereof,
other than as described in SECTION 18.05, is appointed;
(k) If Franchisee or any guarantor(s) hereof defaults in any other
agreement or loan document with Big O or if Franchisee defaults under
the terms of any lease of the Premises or if Franchisee fails to comply
with the requirements of any Local Group operating pursuant to
standards prescribed or approved by Big O including, but not limited
to, any requirement to pay dues or
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make advertising contributions, and such default is not cured in
accordance with the terms of such other agreement, loan document, or
lease, or the by-laws of the Local Group;
(l) If Franchisee fails, for a period of ten (10) days after
notification of non-compliance, to comply with any law or regulation
applicable to the operation of the Franchised Business;
(m) If Franchisee sells, offers for sale, or gives away at the Premises
any products or services which have not been previously approved by Big
O in writing, or which have been subsequently disapproved;
(n) If Franchisee shall have understated its Gross Sales to Big O on
two (2) or more occasions; or
(o) If a court of competent jurisdiction or an arbitration tribunal in
a final and unappealed judgment determines that any significant amount
of the payments or compensation which Franchisee has agreed to pay Big
O pursuant to the terms hereof is unlawful, or that all or a
significant part of Franchisee's payment obligations hereunder are void
or voidable by Franchisee.
Remedies to Big O. If the Franchisee is in default and has failed to
cure such default in a manner prescribed by the Franchise Agreement, in addition
to the rights Big O has to terminate the agreement, the Franchisee agrees to pay
to Big O, among the many remedies available to Big O, royalties and any lost
gross profits.
19.02. Governing State Law. If a different notice or cure period or
good cause standard is prescribed by applicable law, it shall apply to a
termination of this Agreement.
19.03. Termination by Franchisee. Franchisee may only terminate this
Agreement if Big O has committed a material breach of any of Big O's obligations
under this Agreement and has failed to cure such breach within thirty (30) days
after Franchisee has given written notice to Big O of such breach.
19.04. Force Majeure. Notwithstanding anything contained in this
Agreement to the contrary, neither party shall be in default hereunder by reason
of its delay in performance of, or failure to perform, any of its obligations
hereunder, if such delay or failure is caused by:
(a) strikes or other labor disturbance;
(b) acts of God, or the public enemy, riots or other civil
disturbances, fire, or flood;
(c) interference by civil or military authorities;
(d) compliance with governmental laws, rules, or regulations that were
not in effect and could not be reasonably anticipated as of the date of
this Agreement;
(e) delays in transportation, failure of delivery by suppliers, or
inability to secure necessary governmental priorities for materials; or
(f) any other fault beyond its control or without its fault or
negligence. In any such event, the time required for performance of
such obligation shall be the duration of the unavoidable delay.
20. POST TERMINATION OBLIGATIONS
20.01. Post-Termination Obligations. Upon the Expiration or Termination
of this Agreement by any means or for any reason, Franchisee shall immediately:
(a) Cease to be a Franchisee of Big O and cease to operate the former
Franchised Business under the Big O System. Franchisee shall not
thereafter, directly or indirectly, represent to the
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public that the former Franchised Business is or was operated or in any
way connected with the Big O System or hold itself out as a present or
former Franchisee of Big O;
(b) Pay all sums owing to Big O. Upon termination for any default by
Franchisee, such sums shall include actual and consequential damages,
costs, and expenses incurred by Big O as a result of the default;
(c) Return to Big O the (i) Manual and any training modules or other
proprietary information and supplements thereto and all trade secrets
and confidential materials owned or licensed by Big O and all copies
thereof other than Franchisee's copy of the Franchise Agreement, copies
of any correspondence between the parties, and any other document which
Franchisee reasonably needs for compliance with any applicable law;
(ii) return or discontinue use of all forms, advertising matter, marks,
devises, insignias, slogans, designs, signs, any computer systems
including software and/or hardware; and (iii) discontinue the use of
all copyrights, Licensed Marks, trade names and patents now or
hereafter applied for or granted in connection with the operation of
the Franchise;
(d) Provide to Big O, upon its request, a complete list of any
outstanding obligations that Franchisee may have to any third parties
including outstanding customer orders. Big O shall have the right, but
not the obligation, to fill any such outstanding customer orders
generated by Franchisee and in such event, Franchisee shall immediately
reimburse Big O for any costs or expenses incurred by Big O in doing
so. In addition, Big O shall have the right to cancel any orders placed
by Franchisee for which delivery has not been made;
(e) Take such action as may be required by Big O to transfer and assign
to Big O or its designee all telephone numbers, white and yellow page
telephone references and advertisements, and all trade and similar name
registrations and business licenses, and to cancel any interest which
Franchisee may have in the same. The Franchisor is hereby appointed as
the Franchisee's attorney-in-fact for such purpose and such power,
being coupled with an interest, shall be irrevocable;
(f) Cease to use in Advertising, or in any manner whatsoever, any
methods, procedures, or techniques associated with the Big O System in
which Big O has a proprietary right, title, or interest; cease to use
the Licensed Marks, and any other marks and indicia of operation
associated with the Big O System and remove or change all Trade Dress,
Products and Services, and other indicia of operation under the Big O
System from the Premises, at Franchisee's expense and in a manner
satisfactory to Big O. Unless otherwise approved in writing by Big O,
Franchisee shall return to Big O all copies of materials bearing the
Licensed Marks;
(g) Cease accepting the Big O credit card Franchisee has with Bank One,
or any other designated lender;
(h) Franchisee shall immediately make available to Big O all customer
lists as such was developed while a Franchisee;
(i) Strictly comply with all other provisions of this Agreement
pertaining to post-termination obligations, including, without
limitation, those contained in SECTIONS 13 and 17; and
(j) Cease performing any tire adjustments as of the Termination Date
and refer such adjustments to other existing RSCs or other Stores for
processing. Franchisee shall receive no allowance for tire adjustments
upon termination.
20.02. Right to Repurchase. Big O shall have the right, but not the
obligation, to purchase:
(a) Some or all of the Products and Services and supplies at the Store
and the equipment, furnishings, fixtures, or signs at the Premises
which bear the Licensed Marks for a mutually agreed upon price within
thirty (30) days of the Termination Date or the Expiration Date.
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(b) If Big O elects to exercise such a right, it may offset the
purchase price against any other amounts owed by Franchisee to Big O
pursuant to this or any agreement or loan document. Before exercising
any such rights, Big O shall have the right to enter upon the Premises
during reasonable hours to take an inventory of the Franchised
Business.
20.03. Right of First Refusal. Upon receipt by Franchisee of an offer
to purchase Franchisee's Products and Services, equipment, supplies, fixtures or
signs at the Premises, Franchisee hereby grants Big O a right of first refusal
to purchase any of such items by matching the bona fide monetary purchase price
and payment schedule terms, less any brokerage commission without having to
match any other non- monetary terms of the proposed purchase by Franchisee's
buyer(s). Franchisee must give Big O written notice of any such bona fide offer.
If within thirty (30) days after receipt of such notice, Big O has neither
exercised its right of first refusal nor notified Franchisee of its rejection
thereof, Franchisee may sell such items as were covered by the offer at the
expiration of the thirty (30) day period.
20.04. De-Identification of Assets Upon Sale. If Big O determines not
to exercise its option to repurchase any such items, Franchisee may continue to
sell its remaining Products and Services, equipment, supplies, and fixtures, but
may not identify itself as a Big O Franchisee. Franchisee shall otherwise abide
by the terms of this SECTION 20.
21. INSURANCE
21.01. Insurance Coverage. Franchisee shall, at its expense and no
later than upon the Commencement Date, procure and maintain in full force and
effect throughout the term of this Agreement either the approved Big O Dealers
National Insurance Program ("Program") then in effect or the types of insurance
enumerated in this Agreement, which shall be in such coverages, limits and
amounts as may from time to time be required by Big O, and which shall designate
Big O, its directors, officers, employees, agents and other Big O designees as
additional named insured(s). Unless otherwise agreed to by Big O, Franchisee
shall procure and maintain whichever limits and coverages are greater in a
comparison of the insurance enumerated in the Manual and the insurance
enumerated in the Program. If the Franchisee chooses not to procure insurance
pursuant to the Program, Franchisee shall procure the following insurance
coverages, limits and amounts:
(a) Workers' Compensation insurance with statutory limits for Coverage
A as prescribed by the statutes of the state of the Franchised
Business; including Coverage B, Employers Liability, with limits not
less than or equivalent to five hundred thousand dollars ($500,000)
each person, five hundred thousand dollars ($500,000) each occurrence,
and five hundred thousand dollars ($500,000) annual aggregate;
(b) Comprehensive or Commercial General Liability insurance covering
all operations and premises of the Franchised Business, including but
not limited to Product Liability, Completed Operations Liability,
Personal Injury Protection, Advertisers Liability, Fire Legal
Liability, Medical Payments, and Contractual Liability, with limits not
less than the equivalent of one million dollars ($1,000,000) per
occurrence combined single limit for bodily injury and property damage;
(c) Vehicular/Automobile Liability insurance, including Uninsured
Motorist and Medical Payments, covering owned, non-owned, hired, leased
or other vehicles associated, directly or indirectly, with the
Franchised Business, with limits of not less than the equivalent of one
million dollars ($1,000,000) per occurrence combined single limit for
bodily injury and property damage;
(d) "All Risk" Property insurance covering risk of loss to real and
personal property; including but not limited to, Accounts Receivable,
Valuable Papers, Glass, Signs, Employees' Tools, Loss of Rents, and
other building contents - including flood and earthquake coverage if
appropriate for the location of the specific Franchised Business-for
repair/replacement coverage and valuation of all assets. This coverage
will include Business Income/Extra Expense insurance for extra expenses
incurred and/or profits lost due to a covered, "All Risk" peril
(Business Interruption Valuation Worksheets will be submitted by
Franchisee to Big O annually for evaluation and approval). Any
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coinsurance provisions should apply only to values reported and should
have no adverse impact on claim settlement (an Agreed Amount
Endorsement should be obtained, if possible);
(e) Inland Marine insurance covering all signs, tools and equipment,
and cargo being transported by rail, motortruck, or other common
carrier conveyances where the Franchised Business has title or
responsibility for transported goods, with limits of no less than ten
thousand dollars ($10,000) per any one conveyance;
(f) Garage Liability and Garagekeepers Legal Liability insurance
covering all vehicle storage, garage premises and other operations
arising out of the Franchised Business and non-owned use and/or
operation of vehicles, with Garage Liability limits of not less than
the equivalent of one million dollars ($1,000,000) per occurrence
combined single limit for bodily injury and property damage and
Garagekeepers Legal Liability of not less than the equivalent of one
hundred thousand dollars ($100,000) per location;
(g) Boiler and Machinery insurance covering all real and personal
property; including, but not limited to, pressure vessels, machinery,
piping, tubing and other high and low pressurized items at the
Franchised Business for the repair/replacement valuation of all assets.
This coverage shall include Business Income/Extra Expenses insurance
for additional expenses incurred and/or profits lost;
(h) Comprehensive Fidelity/Crime insurance covering Employee Dishonesty
with limits no less than twenty-five thousand dollars ($25,000);
Forgery with limits no less than ten thousand dollars ($10,000); Money
and Securities Inside Premises with limits no less than ten thousand
dollars ($10,000); and Money and Securities Outside Premises with
limits no less than ten thousand dollars ($10,000); and
(i) Commercial Umbrella Liability insurance covering all underlying
liability insurance coverages enumerated in this section, with no gaps
between underlying and umbrella limits or coverage with excess and
primary limits of no less than the equivalent of two million dollars
($2,000,000) per occurrence combined single limit for bodily injury and
property damage.
21.02. Proof of Insurance. Prior to the Commencement Date, Franchisee
shall make timely delivery of a signed original certificate or certificates of
all required insurance coverages to Big O, which shall contain the authorized
agent's business name, address and phone number, together with a statement by
the insurer that the policy will not be canceled or materially changed without
at least sixty (60) days prior written notice to Big O that the alteration or
cancellation is being made. All insurance coverages will be underwritten by a
company acceptable to Big O, with a Best's Rating of no less than "A-" or a
financial statement of the insurer approved by Big O. If Franchisee fails to
purchase required insurance conforming to the standards prescribed by Big O, Big
O may obtain such insurance for Franchisee, and Franchisee shall pay Big O the
cost of such insurance plus a ten percent (10%) administrative surcharge.
21.03. Survival of Indemnification. The procurement and maintenance of
the greater of the prescribed insurance coverages set forth in the Manual or
those set forth in the Program shall not relieve Franchisee of any liability to
Big O assumed under any indemnification requirement of this Agreement.
If Big O deems it appropriate, Franchisee shall, upon Big O's request,
provide to Big O a true, complete certified copy of all, or a part of the
Franchisee's insurance policies within 10 days of receiving such request. In
addition, upon Big O's request, the Franchisee shall provide to Big O renewal
certificates of insurance, or certified insurance binders, for all required
coverages no fewer than 10 days before the indicated anniversary date(s) of such
insurance coverages.
22. TAXES, PERMITS, AND INDEBTEDNESS
22.01. Payment of Taxes. Franchisee shall promptly pay when due any and
all federal, state, and local taxes including without limitation, unemployment
and sales taxes, levied or assessed with
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respect to any Products and Services distributed or sold pursuant to this
Agreement and all accounts or other indebtedness of every kind incurred by
Franchisee in the operation of the Franchised Business.
22.02. Compliance with Laws. Franchisee shall comply with all
applicable federal, state, and local laws, rules and regulations, including,
without limitation, environmental laws related to tire disposal. Franchisee
shall obtain any and all permits, certificates, and licenses required for the
full and proper conduct of the Franchised Business.
22.03. Payment of Debts. Franchisee hereby expressly covenants and
agrees to accept full and sole responsibility for any and all debts and
obligations incurred in the operation of the Franchised Business.
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS
23.01. Indemnification. Franchisee agrees to protect, defend,
indemnify, and hold Big O and its Affiliates, their directors, officers,
shareholders, employees and agents jointly and severally, harmless from and
against all claims, actions, proceedings, damages, costs, expenses and other
losses (including death) and liabilities, consequently, directly or indirectly
incurred (including, without limitation, attorneys', accountants' and other
related fees) as a result of, arising out of, or connected with the operation of
the Franchised Business, including, without limitation, the failure of
Franchisee to comply with any relevant environmental and tire disposal laws.
Franchisee shall not, however, be liable for claims arising exclusively as a
result of Big O's intentional or fraudulent acts or omissions or to the extent
such acts are Big O's sole negligence.
23.02. Independent Contractor. In all dealings with third parties,
including, without limitation, customers, employees, and suppliers, Franchisee
shall disclose in an appropriate manner acceptable to Big O that it is an
independent entity operating under a franchise granted by Big O. Franchisee
shall submit all applications and enter into all contracts in its designated
corporate name or such other fictitious names, which have been approved by Big
O, but not in the name "Big O Tires" or in any other name which includes the
name "Big O". Nothing in this Agreement is intended by the parties hereto to
create a fiduciary relationship between them nor to constitute Franchisee or
Franchisee's employees or contractors as an agent, legal representative,
subsidiary, joint venturer, partner, employee, or servant of Big O for any
purpose whatsoever. It is understood and agreed that Franchisee is an
independent contractor and is in no way authorized to make any contract,
warranty, or representation or to create or imply any obligation on behalf of
Big O.
24. WRITTEN APPROVALS, WAIVERS, AND AMENDMENT
24.01. Written Approval. Whenever this Agreement requires Big O's prior
approval, Franchisee shall make a timely written request. Unless a different
time period is specified in this Agreement, Big O shall respond with its
approval or disapproval within fifteen (15) business days.
24.02. Waiver. No failure of Big O to exercise any power reserved to it
by this Agreement and no custom or practice of the parties at variance with the
terms hereof shall constitute a waiver of Big O's right to demand exact
compliance with any of the terms herein. A waiver or approval by Big O of any
particular default by Franchisee or any other Big O franchisee or acceptance by
Big O of any payments due hereunder shall not be considered a waiver or approval
by Big O of any preceding or subsequent breach by Franchisee of any term,
covenant, or condition of this Agreement. Big O shall not be deemed to have
waived any of its rights under this Agreement, including any right to receive
payment in full for any Product or Service provided, nor shall Franchisee be
deemed to have been excused from performance of any of its obligations pursuant
to this Agreement, unless such waiver or excuse is written and executed by an
authorized representative of Big O and Franchisee.
24.03. Modification. No amendment, change, or variance from this
Agreement shall be binding upon either Big O or Franchisee except by mutual
written agreement. If an amendment of this Agreement is executed at Franchisee's
request, any legal fees or costs of preparation of such
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amendment and any amendment of a franchise registration arising in connection
therewith shall be paid by Franchisee.
25. DEALER PLANNING BOARD
25.01. Dealer Planning Board. Big O has established a Dealer Planning
Board ("DPB"), consisting of franchisee representatives, which is designed to
review aspects of Big O's strategic business plan as may be presented from time
to time by Big O and to advise Big O's management on issues of concern to Big O
franchisees. Through a representative elected from Franchisee's Local Group,
Franchisee shall be represented on the DPB.
25.02. Special Interest Issues. Big O has granted the DPB the authority
to participate with Big O's management in making policy decisions relating to
issues in which the DPB is deemed to have a special interest. The issues of
"Special Interest" include, but may not be limited to:
(a) advertising policies and the creation of a National Advertising
Program;
(b) standards of operation; and the implementation of new programs
which may require the addition of new equipment and fixtures for the
store;
(c) selection of Products and Services offered at Big O Stores;
(d) changes in the Licensed Marks anticipated to require the majority
of franchisees to expend more than five thousand dollars ($5,000.00)
per Store; and
(e) input in establishment of warranties and guaranties.
25.03. Disapproval of Management Proposal. With respect to those issues
in which the DPB has a Special Interest, the DPB may, after consulting with the
members of the Local Groups, vote to disapprove a proposal of Big O's
management. If, pursuant to established procedures which have been approved by
Big O, the DPB shall disapprove a proposal of Big O's management, the proposal
may only become effective if, following a presentation to the Big O policy
committee by a representative of the DPB, Big O's policy committee votes to
adopt management's proposal.
25.04. Compliance with Modification. Franchisee agrees to comply with
any and all modifications to Big O's standards of operation, procedures, or
other requirements adopted pursuant to the procedures described in this SECTION
25.
26. RIGHT OF OFFSET
26.01. Right of Offset. Big O shall have the right at any time before
or after termination of this Agreement, without notice to Franchisee, to offset
any amounts or liabilities that may be owed by the Franchisee to Big O against
any amounts or liabilities that may be owed by Big O to Franchisee under this
Agreement or any other agreement, loan, transaction or relationship between the
parties.
27. ENFORCEMENT
27.01. Declaratory and Injunctive Relief. Big O or its designee shall
be entitled to obtain without bond, declarations, temporary and permanent
injunctions, and orders of specific performance:
(a) To enforce the provisions of this Agreement relating to: (i)
Franchisee's use of the Licensed Marks; (ii) the obligations of
Franchisee upon termination or expiration of this Agreement; or (iii)
the Transfer and Assignment requirements of SECTION 18; or
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(b) to prohibit any act or omission by Franchisee or its employees
that: (i) constitutes a violation of any applicable law or regulation;
(ii) is dishonest or misleading to prospective or current customers or
clients of businesses operated under the System; (iii) constitutes a
danger to other Big O franchisees, their employees, customers, clients
or the public; or (iv) may impair the goodwill associated with the
Licensed Marks.
27.02. Costs of Enforcement. If Big O secures any declaration,
injunction or order of specific performance pursuant to SECTION 27.01 hereof, if
any provision of this Agreement is enforced at any time by Big O or if any
amounts due from Franchisee to Big O are, at any time, collected by or through
an attorney at law or collection agency, Franchisee shall be liable to Big O for
all costs and expenses of enforcement and collection including, but not limited
to, court costs and reasonable attorneys' fees, including the fair market value
of any time expended by legal counsel employed by Big O.
28. NOTICES
28.01. Notices. Any notice required to be given hereunder shall be in
writing and shall be mailed by registered or certified mail or overnight
courier. Notices to Franchisee or Big O shall be addressed to it at their
address as listed on the Summary Pages or to such other addresses as that party
may hereafter prescribe by notice given in accordance with this SECTION 28.01.
Franchisee shall also simultaneously deliver a copy of each notice, which it
delivers to Big O, to the Franchisee's designated regional representative, at
the address designated by Big O in writing to Franchisee. Any notice complying
with the provisions hereof shall be deemed to be given on the date of mailing.
29. GOVERNING LAW
29.01. Governing Law. This Agreement is accepted by Big O in the State
of Colorado and shall be governed by and interpreted in accordance with Colorado
law, which law shall prevail in the event of any conflict of law. Big O and
Franchisee consent to personal and subject matter jurisdiction and venue in
Denver, Colorado.
29.02. Jurisdiction. The parties hereto agree that it is in their best
interest to resolve disputes between them in an orderly fashion and in a
consistent manner. Therefore, the parties consent to the exclusive jurisdiction
of either Colorado state courts or the United States Federal District Court for
the District of Colorado for any litigation relating to this Agreement or the
operation of the Franchised Business thereunder. Franchisor and Franchisee
irrevocably constitute and appoint the persons designated on paragraphs 10 and
11 of the Summary Pages to be their true and lawful agents, to receive service
of any lawful process in any civil litigation or proceeding arising under this
Agreement, and service upon such agent shall have the same force and validity as
if personal service had been effected on the other party; provided that notice
of service and a copy of any process served shall be sent by registered or
certified mail, addressed to the other party at the address specified pursuant
to SECTION 28.01.
30. SEVERABILITY AND CONSTRUCTION
30.01. Severability. Nothing contained in this Agreement shall be
construed as requiring the commission of any act contrary to law. Whenever there
is any conflict between any provisions of this Agreement or the Manual and any
applicable present or future statute, law, ordinance, or regulation contrary to
law to which the parties have no legal right to contract, the latter shall
prevail, but in such event, of the provisions of this Agreement or the Manual
thus affected, those provisions shall be curtailed and limited only to the
extent necessary to bring it within the requirements of the law. If any part,
Article, Section, sentence or clause of this Agreement or the Manual shall be
held to be indefinite, invalid or otherwise unenforceable, the provision which
is indefinite, invalid or unenforceable shall be deemed deleted, and the
remaining part of this Agreement shall continue in full force and effect.
30.02. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute one and the same
instrument.
-177-
30.03. Construction. All terms and words used herein shall be construed
to include the number and gender as the context of this Agreement may require.
The parties agree that each section of this Agreement shall be construed
independently of any other section or provision of this Agreement. As used in
this Agreement, the words "include", "includes" or "including" are used in a
non-exclusive sense. Unless otherwise expressly provided herein to the contrary,
any consent, approval or authorization of Big O which Franchisee may be required
to obtain hereunder may be given or withheld by Big O in its sole discretion,
and on any occasion where Big O is required or permitted hereunder to make any
judgment or determination, including any decision as to whether any condition or
circumstance meets Big O's standards or satisfaction, Big O may do so in its
sole judgment. Article and Section titles used in this Agreement are for
convenience only and shall not be deemed to affect the meaning or construction
of any of the terms, provisions, covenants, or conditions of this Agreement.
Schedules 3, 4, 5, 7 and 8 shall not be effective as part of this Agreement
unless signed by the party or parties thereto.
31. ACKNOWLEDGEMENTS
(a) Big O acknowledges that Franchisee's principal interest in
obtaining the Franchise granted herein is to obtain Big O Brand Tires
and a competitive source of supply for Products and Services. Big O
acknowledges its obligation to have products available to its
franchisee's that enhance and support the Big O System, and further
acknowledges its obligation to seek to attempt to maintain a
competitive source of supply for the benefit of its franchisees and to
aid in the promotion of Big O Products and Services.
(b) Franchisee understands and acknowledges that the business licensed
under this Agreement involves business risks and that Franchisee's
volume, profit, income and success is dependent primarily upon
Franchisee's ability as an independent business operator.
(c) Big O expressly disclaims the making of, and Franchisee
acknowledges that it has not received from any representative of Big O,
any warranty or guaranty, express or implied, as to the obligation of
Big O to provide Franchisee with any specific or sufficient amount of
Products and Services or as to the potential volume, profit, income or
success of the Franchised Business.
(d) Franchisee acknowledges that Big O or its agent has provided
Franchisee with a Franchise Offering Circular not later than the
earlier of the first personal meeting with a Big O representative held
to discuss the sale of the Franchise, ten (10) business days before the
execution of this Agreement, or ten (10) business days before any
payment of any consideration connected to the purchase of this
Franchise. Franchisee further acknowledges that Franchisee has read
such Franchise Offering Circular and understands its contents.
(e) Franchisee acknowledges that Big O has provided Franchisee with a
copy of this Agreement and all related documents, fully completed, for
at least five (5) business days prior to Franchisee's execution hereof.
(f) Franchisee acknowledges that Big O has advised it to consult with
its own attorneys, accountants, or other advisers, that Franchisee has
had ample opportunity to do so, and that the attorneys for Big O have
not advised or represented Franchisee with respect to this Agreement or
the relationship hereby created. The name and address of Franchisee's
adviser, if any, is set forth on the Summary Pages.
(g) Franchisee acknowledges that this Agreement, the documents referred
to herein, the attachments hereto, and other agreements signed
concurrently with this Agreement, if any, constitute the entire, full
and complete Agreement between Big O and Franchisee concerning the
subject matter hereof. This Agreement terminates and supersedes any
prior agreement between the parties concerning the same subject matter
and any oral or written representations which are inconsistent with the
terms of this instrument and its accompanying Franchise Offering
Circular.
-178-
(h) Franchisee acknowledges and recognizes that different terms and
conditions, including a different fee structure and investment
requirements may pertain to different Big O franchises offered in the
past, contemporaneously herewith, or in the future, and that Big O does
not represent that all franchise agreements are or will be identical.
(i) Franchisee acknowledges that except as is specifically set forth in
this Agreement, that Franchisee is not nor is it intended to be a third
party beneficiary of this Agreement or any other agreement or
contractual relationship to which Big O is a party.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement to become effective on the date it is executed by the last of
Franchisee or Big O.
FRANCHISEE:
By:
----------------------------------
Date:
----------------------------------
Home Address:
----------------------------------
Home Phone Number:
----------------------------------
Office Address:
----------------------------------
Office Phone Number:
----------------------------------
Title:
----------------------------------
Attest:
----------------------------------
Title:
----------------------------------
(Affix Corporate Seal)
BIG O TIRES, INC.
By:
----------------------------------
Date:
----------------------------------
Title:
----------------------------------
Attest:
----------------------------------
Title:
----------------------------------
(Affix Corporate Seal)
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SCHEDULE 1
TO
FRANCHISE AGREEMENT
BETWEEN BIG O TIRES, INC. AND
---------
1. The Premises of referred to in SECTION 2.01 of the Franchise Agreement
shall be:
2. Legal Description of Premises:
----------------------------------------
3. Names(s) and address(es) of holder(s) of record fee title to Premises
(the landlord):
Name:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
Name:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
Name:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
4. Description of Trade Area:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Schedule 1 of Franchise Agreement
Page 1
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SCHEDULE 2
OWNERSHIP VERIFICATION
1. Name(s) and address(es) of person(s) owning interest in
Franchisee and percentage of said person(s) interest:
Name:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
Name:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
Name:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
STATE OF )
-------------------------------------- )
COUNTY OF
-------------------------------------- )
, being first duly sworn, says that they are
respectively, the ________________________ and ________________________ of ,
the above-named __________________, and execute this instrument for and in its
behalf, by authority of its and that they have read the foregoing Agreement and
all Exhibits attached thereto.
Subscribed and sworn to before
me this day of
-----------------
, 20 .
------------------------- -----
(Notary Seal)
------------------------------------------------------
Notary Public
My Commission Expires:
----------------------------------------------
Schedule 2 to Franchise Agreement
Page 1
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SCHEDULE 3
GUARANTY OF FRANCHISEE'S AGREEMENT
In consideration of, and as an inducement to, the execution of the
foregoing Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the
undersigned hereby guarantees unto Big O that ______________ ("Franchisee") will
perform during the term of the Franchise Agreement each and every covenant,
payment, agreement and undertaking on the part of Franchisee contained and set
forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without
notice to the undersigned (a) resort to the undersigned for payment of any of
the liabilities of the Franchisee to Big O, whether or not Big O or its
successors have resorted to any property securing any of the liabilities or
proceeded against any of the undersigned or any party primarily or secondarily
liable on any of the liabilities; (b) release or compromise any liability of
the Franchisee or of any of the undersigned hereunder or any liability of any
party or parties primarily or secondarily liable on any of the liabilities; and
(c) extend, renew or credit any of the liabilities of the Franchisee to Big O
for any period (whether or not longer than the original period), alter, amend
or exchange any of the liabilities, or give any other form of indulgence,
whether under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of
dishonor, protest, nonpayment and all other notices whatsoever, including
without limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O
in attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
Schedule 3 to Franchise Agreement
Page 1
-182-
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty
under seal effective as of the date of the foregoing Franchise Agreement.
-------------------------------------------
Signature
-------------------------------------------
Date
-------------------------------------------
Printed Name
-------------------------------------------
-------------------------------------------
Home Address
-------------------------------------------
Home Telephone
-------------------------------------------
-------------------------------------------
Business Address
-------------------------------------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 2
-183-
SCHEDULE 4
LEASE RIDER AND MODIFICATION
THIS AGREEMENT is made effective this _____ day of __________________
_____________________ by and between _______________________________
("Landlord"), _____________________________________ ("Tenant"), and Big O
Tires, Inc., its affiliates, successors and assigns ("Big O").
WHEREAS, Landlord leases or will lease certain premises to Tenant at
__________ ("Premises") under that certain lease agreement dated between
Landlord and Tenant ("Lease"); and
WHEREAS, Tenant will operate a Big O Tire Store at such Premises under
a Franchise Agreement ("Franchise Agreement") between Tenant and Big O; and
WHEREAS, the parties hereto desire to provide Big O with certain
rights in the event of default under the Lease, Franchise Agreement, or other
franchise agreements between Tenant and Big O, if any;
NOW, THEREFORE, in consideration of the sum of one dollar ($1.00), in
hand paid by Big O to Landlord and to Tenant, and other good and sufficient
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. No act, failure to act, event, condition, non-payment or
other occurrence ("Event") shall constitute a breach or default under the Lease
so as to allow to Landlord any right of acceleration of obligations thereunder,
termination, cancellation or rescission:
(a) if the Event is the non-payment of rent, unless such Event is
not cured within ten (10) days after Notice of Default (as hereinafter
defined) has been received by Big O;
(b) if the Event is anything other than the non-payment of rent,
unless such Event is not cured within twenty-five (25) days after
Notice of Default (as hereinafter defined) has been received by Big O,
provided, however, if the Event is of such nature that it cannot
reasonably be cured within such twenty-five (25) day period, then, in
that case such twenty-five (25) day period shall be extended to a
period of such length as is reasonably necessary to cure such Event,
provided, however, such period shall be extended only so long as
Tenant and/or Big O diligently pursues the cure of such Event.
2. Landlord agrees to accept from Big O any payment or
performance required under the Lease. Nothing herein shall be construed as
requiring Big O to make any payments or perform any obligation under the Lease.
3. As used herein, Notice of Default means written notice mailed
by registered or certified mail or overnight courier specifying the Event
claimed and specifically describing, in each instance of a claimed Event, the
particular Event and the cure Landlord requires, such Notice of Default to be
mailed to Big O at:
Big O Tires, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President of Real Estate Development
Schedule 4 to Franchise Agreement
Page 1
-184-
4. In the event Landlord claims that an Event has occurred, or
in the event Big O notifies Landlord in writing that Big O is exercising a
right to take over possession of the Premises, then, at Big O's option,
Landlord shall accept Big O as substitute tenant under the Lease and will
cooperate with Big O in turning actual, immediate possession of the Premises
over to Big O. In such case, the Lease shall remain in full force and effect,
but with Big O as the tenant thereunder. Big O's option, hereinabove granted,
may be exercised only if Big O agrees to assume the obligations of the Tenant
to Landlord under the Lease as of the date Big O or its affiliate or successor
is given actual possession of the Premises.
5. Landlord agrees that Big O, or its affiliate or successor may
sublet or assign the Premises to a new Big O Franchisee on the same terms and
conditions as are contained in the Lease.
6. Tenant agrees that if Landlord claims that an Event has
occurred, or if any material breach occurs under any Franchise Agreement
between Tenant and Big O (whether for the Premises or not), then, Big O shall
have the right to:
(a) immediate and actual possession of the Premises, and all
equipment and inventory therein, which such possession Tenant agrees
to give peaceably, and which may be otherwise obtained by Big O by
warrant, injunction, temporary restraining order, summary process or
such other immediate legal, summary or equitable proceeding or action
as Big O may choose. Tenant hereby waives any right to a jury in any
such proceeding or action.
(b) become the Tenant under the Lease to the exclusion of the
Tenant.
7. Tenant agrees that any default under the Lease shall
constitute a material breach under all Franchise Agreements between Tenant and
Big O, or its affiliates or successors.
8. Tenant and Landlord understand that Big O is entering into or
has entered into a Franchise Agreement with Tenant for a Big O Tire Store at
the Premises in reliance on the agreements of Tenant and Landlord as herein
contained and that Big O, in this instance, would not have otherwise entered
into such Franchise Agreement.
IN WITNESS WHEREOF, the parties hereto have duly execute and delivered
this agreement as of the date first above-listed.
LANDLORD
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
(CORPORATE SEAL)
Schedule 4 to Franchise Agreement
Page 2
-185-
TENANT
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
(CORPORATE SEAL)
BIG O TIRES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
(CORPORATE SEAL)
Schedule 4 to Franchise Agreement
Page 3
-186-
SCHEDULE 5
RIDER FOR EXISTING FRANCHISEES EXECUTING THE
FRANCHISE AGREEMENT PRIOR TO THE EXPIRATION
OF THEIR PRE-EXISTING FRANCHISE AGREEMENT
Franchisee is the owner of a Store that is the subject of a franchise
agreement that has not yet expired.
Franchisee's execution of the attached Franchise Agreement is subject
to the following:
1. Unless otherwise provided herein, the attached Franchise
Agreement shall expire on the tenth anniversary of the Effective Date, to wit:
________________________________________ .
2. Prior to the expiration of the Franchisee's present franchise
agreement, to wit __________________________________, the monthly continuing
services fees (or their functional equivalent) provided in the present
franchise agreement shall continue to be the only such fees due to Big O. In
all other respects the terms of the attached Franchise Agreement shall be
applicable as of the Effective Date of this Franchise Agreement.
In Witness Whereof, the parties have set forth their signature below.
BIG O TIRES, INC.
By:
----------------------------------------
Date:
--------------------------------------
Title:
-------------------------------------
Attest:
------------------------------------
Title:
-------------------------------------
(Affix Corporate Seal)
FRANCHISEE:
By:
----------------------------------------
Date:
--------------------------------------
Home Address:
------------------------------
Home Phone Number:
-------------------------
Office Address:
----------------------------
Office Phone Number:
-----------------------
Title:
-------------------------------------
Attest:
------------------------------------
Title:
-------------------------------------
(Affix Corporate Seal)
Schedule 5 to Franchise Agreement
Page 1
-187-
FRANCHISEE:
By:
----------------------------------------
Date:
--------------------------------------
Home Address:
------------------------------
Home Phone Number:
-------------------------
Office Address:
----------------------------
Office Phone Number:
-----------------------
Title:
-------------------------------------
Attest:
------------------------------------
Title:
-------------------------------------
(Affix Corporate Seal)
Schedule 5 to Franchise Agreement
Page 2
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SCHEDULE 6
TRADEMARKS
Big O is the sole and exclusive owner of the following trademarks and
service marks:
TRADEMARK, SERVICE ▇▇▇▇, TRADE WHERE REGISTRATION
NAME OR LOGOTYPE REGISTERED NUMBER REGISTRATION DATE
Sonic Principal 805,575 03/15/66
Sonic Commercial Principal 805,578 03/15/66
Super Sonic Principal 805,574 03/15/66
Ultra Sonic Principal 805,577 03/15/66
Winter Sonic Principal 805,581 03/15/66
Sun Valley Principal 871,318 06/17/69
Sonic & Design Principal 890,380 05/05/70
Sonic Principal 891,936 06/02/70
Maxima Principal 926,329 12/28/71
Golden Sonic Power Principal 962,580 07/03/73
Super S Principal 981,992 04/09/74
Saxon Principal 982,828 04/30/74
Big-O Principal 993,415 09/24/74
Big O Principal 994,466 10/01/74
Sonic Vagabond Principal 996,459 10/22/74
Sonic Sahara Principal 1,013,509 11/04/75
Big Haul Principal 1,018,800 08/26/75
Protectors of Safety Saxon and Principal 1,024,138 11/04/75
Design
Big Foot 70 Principal 1,102,059 09/12/78
Big Foot 60 Principal 1,102,058 09/12/78
Big Sur Principal 1,219,035 12/07/82
Extra Care and Design Principal 1,417,730 11/18/86
Legacy Principal 1,393,967 05/20/86
Aspen Principal 1,508,041 10/11/88
Exotic Principal 1,511,711 11/08/88
Big O Tires and Design Principal 1,559,725 10/10/89
Schedule 6 to Franchise Agreement
Page 1
-189-
TRADEMARK, SERVICE ▇▇▇▇, TRADE WHERE REGISTRATION
NAME OR LOGOTYPE REGISTERED NUMBER REGISTRATION DATE
Sun Valley III Principal 1,588,734 03/27/90
Big O Tires and Design Principal 1,611,160 08/28/90
Procomp & Design Principal 1,842,854 07/05/94
Arapahoe Principal 1,792,161 09/07/93
Hydro-Trac Principal 2,059,554 05/06/97
A Reputation You Can Ride On Principal 1,845,544 07/19/94
Big Foot Principal 1,904,955 07/11/95
Big Foot Principal 2,314,775 02/01/00
Big Lift Principal 11386T-2669 Pending
USO
Cost-U-Less Principal 1,952,457 01/30/96
STATE REGISTRATIONS
Big O Texas 40,967 11/01/82
Big O Texas 40,704 09/02/82
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 10/28/85
Extra Care Colorado T30670 04/22/86
Schedule 6 to Franchise Agreement
Page 2
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SCHEDULE 7
CONVERTER RIDER
AMENDMENT TO BIG O
FRANCHISE AGREEMENT
(CONVERSION)
BIG O TIRES, INC. ("Big O") and ____________________ ("Franchisee")
entered into a certain Big O Franchise Agreement ("Agreement") on
______________________ and desire to supplement and amend certain terms and
conditions of such Agreement in consideration of Franchisee's conversion of a
currently operating tire store to a Big O Store. The parties therefore agree as
follows:
1. The following provisions are added at the end of the definition of
"Gross Sales" in SECTION 1 of the Agreement:
Further, Gross Sales does not include revenues from the sale of
Non-Standard Services that are designated on SCHEDULE C as not
included in Gross Sales, but does include revenues (other than refunds
and allowances or revenues from sales to other Big O Stores) from
other Non-Standard Services.
2. The following sentence is added to the definition of "Products and
Services" in SECTION 1 of the Agreement:
Notwithstanding the foregoing, "Products and Services" do not include
Non-Standard Services.
3. The following provision is added to SECTION 1 after the definition of
National Advertising Program:
Non-Standard Services - See the definition in SECTION 14.02
of this Agreement.
4. The following paragraphs are hereby added to SECTION 6.03 of the
Agreement:
Subject to SECTION 14.02 of the Agreement hereof, but
notwithstanding any other provision herein to the contrary,
Franchisee's obligation to comply with Big O's standards and
specifications as are set forth in the Manual shall be phased in for a
period of six (6) months from the Commencement Date of this Agreement
in accordance with SCHEDULE A, attached hereto and by this reference
incorporated herein. Franchisee will be permitted to use Big O's
Licensed Marks in its signage, advertising and otherwise, in
conjunction with any other previous signage or identifying symbols or
names for sixty (60) days (or such longer time as approved by Big O)
from the Commencement Date of this Agreement, in a manner which shall
be approved by Big O, which approval shall not be unreasonably
withheld. Upon expiration of such sixty-day or other approved period,
Franchisee must use Big O's signage exclusively and remove all other
previous signage.
If Big O provides assistance to Franchisee for the purchase
of signage or displays (by way of matching funds or other financial
contribution) at any one or more Big O Stores operated by Franchisee,
then, Big O, at its discretion, may retain title to such signage and
displays. At Big O's request, Franchisee will sign UCC financing
statements and other documents, will take such
Schedule 7 to Franchise Agreement
Page 1
-191-
other actions as reasonably requested by Big O to document and protect
Big O's title to the same, and will not take any actions contrary to
such title. Except with regard to signs leased by Big O to Franchisee
(where the parties' rights to such signs shall be governed solely by
the lease agreement), if Franchisee remains a Big O franchisee at the
Big O Store(s) where such signs and displays are located, in good
standing ten years after such assistance is provided and has the
contractual right to continue as a Big O Franchisee at such Big O
Store or Big O Stores for not less than five additional years, then
Big O shall transfer to Franchisee title to such signs and displays at
each Big O Store meeting such qualifications within a reasonable time
after the end of such ten year period.
5. SECTION 6.05 of the Agreement is deleted in its entirety and the
following is inserted in its place:
6.05 Commencement of Business. The Big O Store shall be
considered to have commenced operation as of the Commencement Date of
this Agreement. All modifications required to bring the Premises into
compliance with the standards and specifications of Big O must be
completed within six (6) months of the Commencement Date.
6. SECTION 7.01(A) of the Agreement is hereby deleted in its entirety and
the following is inserted in its place:
(a) Franchisee acknowledges that Big O is under no
obligation to provide site selection assistance and Big O does not
guarantee the success or profitability of the Franchisee's current
site in any manner whatsoever. If Franchisee leases the Premises upon
which the Store is to be operated, Franchisee agrees to use its best
efforts to negotiate with its landlord for execution of a conditional
lease assignment in a form which is the same as or similar to the one
found on SCHEDULE 4 of the Agreement.
7. The following language shall be added to SECTION 7.01(B) of the
Agreement:
Big O will provide Franchisee with the services of a store opening
specialist to provide assessment and guidance for modification of the
interior and exterior of Franchisee's Premises, if applicable, but
makes no representations or guarantees regarding the suitability of
such assessment or guidance.
8. The third sentence of SECTION 7.01(C) of the Agreement is deleted in
its entirety and the following sentence is inserted in it place:
At Big O's discretion, (i) Big O will provide such training as it
deems appropriate (in addition to or in replacement of any part of the
Initial Training Program) at or near the Franchisee's site without
charging a training fee or transportation, lodging or living expenses
to the Franchisee; or (ii) Big O will require Franchisee's Manager
and/or Operator to attend training at the training site designated by
Big O for which Big O will not charge a training fee, but Franchisee
shall pay for its own transportation, lodging and living expenses
which are incurred while attending the Initial Training Program.
9. The following language shall be added as SECTION 7.03 of the
Agreement:
7.03 Other Discretionary Assistance. Big O may, in its
discretion, offer further assistance to the Franchisee in accordance
with Big O's Conversion programs as in effect from time to time or as
otherwise negotiated by Big O and the Franchisee.
Schedule 7 to Franchise Agreement
Page 2
-192-
10. The following language shall be added to SECTION 8.01 of the
Agreement:
Notwithstanding the foregoing provisions of this SECTION 8.01, Big O
will waive the initial franchise fee.
11. The second sentence of SECTION 14.02 of this Agreement is deleted in
its entirety and the following is inserted in its place:
Franchisee may not sell any product or service that has not been
selected, designated or approved by Big O except that during the five
(5) year period starting on the Commencement Date of this Agreement,
Franchisee may provide services (herein referred to as "Non-Standard
Services") that meet both of the following: (a) were provided by it at
the Premises immediately prior to the Commencement Date of this
Agreement, and (b) are listed on SCHEDULE C attached to this Agreement
and incorporated by reference herein.
12. The following language shall be added as SECTION 14.06 of the
Agreement:
14.06 Non-Standard Services. Franchisee may not use the
Licensed Marks for or in connection with the Non-Standard Services,
except that the same may be offered from the Premises to the extent
permitted under SECTION 14.02 of this Agreement. If Franchisee
provides any Non-Standard Services, it will provide conspicuous notice
to the public by signage, disclaimers on invoices and/or other means
that such Non-Standard Services are not provided by nor affiliated
with Big O. Franchisee acknowledges that Big O does not provide
training, supervision or support in connection with the Non-Standard
Services. Franchisee shall conduct the Non-Standard Services in
compliance with all applicable laws, rules and regulations and in a
safe and appropriate manner. Franchisee shall immediately cease or
modify any Non-Standard Services that present a threat to the health
or safety of the public or any individual and/or that could cause the
occurrence of any damages. Franchisee hereby agrees to indemnify and
hold Big O harmless from and against any and all claims or liabilities
arising out of or in connection with Franchisee's offer, sale or
provision of Non-Standard Services.
13. The following language shall be added as SECTION 15.05 of the
Agreement:
15.05 Surety Bond/ Letter of Credit. Franchisee shall, at Big
O's election, have obtained prior to the Commitment Date, a surety
bond or letter of credit in an amount not less than $10,000 (or such
other amount as designated by Big O from time to time) for each Big O
Store of Franchisee issued by a surety company or bank reasonably
acceptable to Big O in favor of Big O or, at Big O's election, to the
Local Group designated by Big O, which surety bond or letter of credit
may not be revoked, terminated or modified until two years (or such
other time period as designated by Big O from time to time) after the
Commencement Date. Such bond or letter of credit shall be payable to
the order of Big O or the Local Group, as the case may be, for any
nonpayment by the Franchisee of contributions due to the National
Advertising Program or the Local Fund pursuant to this Franchise
Agreement.
14. The following language shall be added as SECTION 16.07 of the
Agreement:
16.07 Revenues from Non-Standard Services. If SCHEDULE C
lists any Non-Standard Services for which revenues derived from such
services are not included in Gross Sales, then the following
provisions apply: (a) revenues will be attributable to such
Non-Standard Services in accordance with generally accepted accounting
principles, (b) Franchisee shall take such measures as directed by Big
O, in its sole discretion, to segregate revenues included in Gross
Sales from those not included in Gross Sales, including but not
limited to separate billing or
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separate cash drawers, (c) such Non-Standard Services shall be subject
to invoicing and audit in accordance with SECTIONS 16.01 and 16.02 of
this Agreement, as if they were included in standard Products and
Services, and (d) in the event of a dispute between Big O and
Franchisee as to whether such revenues are included in Gross Sales,
the parties shall seek to resolve such dispute in good faith and, if
they are unable to do so, such matter will be resolved by Big O in
good faith.
15. SECTION 17.04 of the Agreement is hereby deleted in its entirety.
16. SECTION 19.03 of the Agreement is hereby deleted in its entirety and
the following language is inserted in its place:
19.03 Termination by Franchisee.
(a) Franchisee may terminate this Agreement as of the
third anniversary or as of the seventh anniversary of the Commencement
Date by giving Big O written notice of its decision to do so at least
60 days prior to the effective date of such termination.
(b) Otherwise, Franchisee may terminate this Agreement
only if Big O has committed a material breach of any of Big O's
obligations under this Agreement and has failed to cure such breach
within thirty (30) days after Franchisee has given written notice to
Big O of such breach.
17. Franchisee agrees to convert all other tire stores owned or controlled
by it into Big O Stores, in the manner prescribed in SCHEDULE B, attached
hereto and by this reference incorporated herein.
18. The terms and conditions of this Converter Amendment are in addition
to or in explanation of the existing terms and conditions of the Agreement and
shall prevail over and supersede any inconsistent terms and conditions thereof.
19. Effective this _____ day of ______________, 20_____.
BIG O TIRES, INC. FRANCHISEE:
------------------------------------------ ----------------------------------
(Print Name)
By: By:
--------------------------------------- -------------------------------
Title: Title:
------------------------------------ ----------------------------
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Schedule A
Phase-In Requirements
Schedule B
Phase-In of Other Stores
Schedule C
Prior Services
Note: Revenues from these services are included in Gross Sales unless
otherwise indicated as excluded.
Schedule 7 to Franchise Agreement
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SCHEDULE 8
FARM CLASS RIDER
Big O TIRES, INC. ("Big O") and __________________ ("Franchisee")
entered into a certain Big O Franchise Agreement ("Agreement") on
_____________________ and desire to supplement and amend certain terms and
conditions of such Agreement in consideration of the mutual promises contained
in this Farm Class Rider. The parties therefore agree as follows:
1. The capitalized terms used in this Farm Class Rider have the
meanings set forth in the Agreement and, in addition, the following capitalized
words shall have the following meanings when used in this Farm Class Rider:
Farm Class Store - A Store with twenty-five percent (25%) or more of
its average Gross Sales during any twelve (12) month period arising directly
from the sale of Farm Class Tires.
Farm Class Tires - Farm tires, off road tires, large double bead truck
tires and similar select tires, as may be more specifically defined from time
to time by Big O.
2. Franchisee represents that it reasonably anticipates that at
least twenty-five percent (25%) of its Store's Gross Sales on an annual basis
will be derived directly from the sale of Farm Class Tires. In reliance on
Franchisee's representations, and its consideration for Franchisee to become or
remain a Big O franchisee, Big O has offered Franchisee the opportunity to
execute this Farm Class Rider.
3. So long as at least twenty-five percent (25%) of Franchisee's
Gross Sales on an annual basis are derived directly from Farm Class Tires, Big
O agrees to exercise its commercially reasonable efforts to provide Franchisee
with access to a supply of Farm Class Tires. Franchisee acknowledges that
production and distribution problems occasionally cause supplies to be limited,
and that so long as Big O acts in good faith and in a commercially reasonable
and lawful manner to obtain access to Farm Class Tires that it shall be deemed
in compliance with its obligations hereunder.
4. If Big O fails to comply with its obligations pursuant to
Section 3 of this Farm Class Rider and cannot or will not provide Franchisee
with access to Farm Class Tires for sixty (60) days following written notice of
such failure from Franchisee, as its sole and exclusive remedy, Franchisee
shall be relieved of its obligation to pay Big O monthly royalty fees on that
portion of its Gross Sales derived directly from the sale of Farm Class Tires
until Big O begins or resumes supplying Franchisee with access to a reasonably
sufficient supply of Farm Class Tires. Any services provided by Franchisee in
connection with the sale of Farm Class Tires, and any other Products and
Services sold by Franchisee in a transaction involving the sale of Farm Class
Tires, shall be included in the portion of Franchisee's Gross Sales upon which
monthly royalty fees are payable, even when and if Franchisee is relieved of
its obligation to pay Big O royalty fees on that portion of its Gross Sales
derived directly from the sale of Farm Class Tires. Big O may require
Franchisee to provide it with documentation to support any exclusion claimed by
Franchisee.
5. Big O may terminate Franchisee's rights under this Farm Class
Rider without in any way affecting Franchisee's obligations under the Franchise
Agreement if the Store's sales of Farm Class Tires during any twelve (12) month
period have been less than twenty-five percent (25%) of its Gross Sales.
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IN WITNESS WHEREOF, the parties have set forth their signatures below.
FRANCHISEE:
By:
----------------------------------------
Date:
--------------------------------------
Home Address:
------------------------------
Home Phone Number:
-------------------------
Office Address:
----------------------------
Office Phone Number:
-----------------------
Title:
-------------------------------------
Attest:
------------------------------------
Title:
-------------------------------------
(Affix Corporate Seal)
BIG O TIRES, INC.
By:
----------------------------------------
Date:
--------------------------------------
Title:
-------------------------------------
Attest:
------------------------------------
Title:
-------------------------------------
(Affix Corporate Seal)
Schedule 8 to Franchise Agreement
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