Exhibit 10.6
Amendment to License Agreement
AMENDMENT TO
JIFFY LUBE INTERNATIONAL, INC.
LICENSE AGREEMENT
THIS AMENDMENT AGREEMENT (the "Amendment") is entered into on June 30,
1992 by and between JIFFY LUBE INTERNATIONAL, INC., a Nevada corporation
with its principal place of business at 700 Xxxxx, Xxxxxxx, Xxxxx 00000
("JLI"), and CB Lubes, Inc., Congress Corporate Plaza, 902 Xxxxx Xxxxx
Road, Suite 100, Building 4, Xxxx Xxxxx, Xxxxxxx 00000 ("Franchisee");
WHEREAS, JLI and Franchisee are parties to a Jiffy Lube International,
Inc. License Agreement or Franchise Agreement dated June 30, 1992 for Jiffy
Lube service center No. 1333, 0000 Xxxxx Xxxx., Xxxxxxx, Xxxxx Xxxxxxxx
00000 (the "Agreement");
WHEREAS, JLI and Franchisee desire to amend the Agreement as set forth
in this Amendment;
NOW THEREFORE, the parties agree as follows:
1. Definitions
1.1 For purposes of this Amendment:
"Service Center" means the Jiffy Lube service center to which the
Agreement is applicable.
"Pennzoil" means Pennzoil Company.
"PPC" means Pennzoil Products Company.
The term "affiliates means an entity controlling, controlled by,
or under common control with entity referred to.
1.2 All other capitalized terms used but not defined in this Amendment
shall have the same meaning as in the Agreement.
2. Royalty Fee
Notwithstanding anything to the contrary in the Agreement:
2.1 Franchisee shall pay JLI a monthly Royalty Fee equal to five percent
(5%) of the Gross Sales of the Service Center, as Gross Sales is defined in
Paragraph 2.2 below. The Royalty Fee is due and payable on or before the
fifteenth (15th) of each month, based on Gross Sales for the preceding
month. If (i) Franchisee is then current on its royalty obligation to JLI
under the Agreement, and (ii) Franchisee's monthly sales report is received
by JLI by the fifteenth (15th ) of the month, and (iii) Franchisee's full
monthly Royalty Fee is received at a lockbox, or wire transferred to an
account, designated by JLI on or before the fifteenth (15th) of the month,
then Franchisee shall be entitled to deduct from the Royalty Fee prompt
payment discount equal to one percent (1%) of the Gross Sales of the
Service Center for the preceding month.
2.2 For the purposes of the Agreement, Gross Sales shall mean the entire
amount of sales and business receipts of the Service Center, including, but
not limited to, retail sales and any other sums or the value of any
services received or charged for services provided, but excluding the
amount of any sales and use taxes, gross receipts taxes, and similar taxes
paid by Franchisee based on sales; any bona fide refunds or discounts from
the original purchase price; and sales of used motor oil and other
recovered fluids or materials.
2.3 If Franchisee has made timely royalty payments at or above the rate set
forth in Paragraph 2.1 on all business done on and after June 1, 1991, the
effective date of Paragraph 2.1 shall be June 1, 1991. Otherwise, the
effective date of Paragraph 2.1 shall be the first day of the month nearest
the date of execution of this Amendment.
3. Advertising
Notwithstanding anything to the contrary in the Agreement:
3.1 Franchisee shall spend or contribute five percent (5%) of Gross Sales
for advertising and promotion of the Service Center, as follows:
3.1.1 If a Cooperative applicable to the Service Center has been
established or is established pursuant to the terms of the Agreement,
Franchisee shall contribute monthly to the Cooperative the entire five
percent (5%) of Gross Sales, unless JLI has consented in writing to the
Cooperative's assessment of monthly contributions at a rate of less than
five percent of Gross Sales, in which case Franchisee shall contribute to
the Cooperative at the rate consented to by JLI and spend the balance of
the five percent of Gross Sales on local advertising. Franchisee
acknowledges that JLI's right of approval with respect to a Cooperative
under the Agreement include the right to monitor and/or audit advertising
expenditures by the Cooperative.
3.1.2 If no Cooperative has been or is established, or if Franchisee is
not required to become a member of an otherwise applicable Cooperative,
Franchisee shall spend five percent (5%) of Gross Sales on local
advertising. Franchisee shall be deemed to have satisfied this requirement
if Franchisee's aggregate calendar-year expenditures on local advertising
equal or exceed five percent of the aggregate Gross Sales of the Service
Center during such calendar year.
3.1.3 Upon request of JLI, Franchisee shall make available to JLI at
Franchisee's principal place of business, or such other location where
Franchisee's books and records are maintained, invoices, receipts, and
other documentation to verify any required minimum local advertising
expenditure hereunder.
3.2 JLI shall not arbitrarily refuse to approve proposed advertising
or promotional plans or materials submitted for approval by Franchisee
pursuant to the Agreement.
3.3 During the term of the Agreement, JLI shall provide print, radio,
and/or television marketing materials at no charge to Franchisee. Such
marketing materials shall include materials which use only the Jiffy Lube
name and do not contain references to any specific supplier to Jiffy Lube
service centers ("Generic Materials"). Franchisee acknowledges and agrees
that there shall be no requirement of numerical or other equality between
Generic Materials, on the one hand, and supplier-specific materials
(including materials which feature Xxxxxx Xxxxxx or other Pennzoil
spokesmen and/or Pennzoil-brand products ad or Pennzoil-marketed products
(such as Gumout)), on the other, including with respect to the relative
amounts spent to produce such Generic Materials and supplier-specific
materials.
4. Territorial Protection
Without limiting the rights explicitly granted in the Agreement:
4.1 During the term of the Agreement, JLI shall not establish, operate,
or license others to establish or operate a service center under the Jiffy
Lube name or system within three (3) miles of the Service Center. The
foregoing sentence shall not apply to:
4.1.1 Any Jiffy Lube service center within two (2) miles of the
service center which was operating, under construction, under contract, or
for which a site was purchased, leased, or optioned before March 17, 1989;
or
4.1.2 Any Jiffy Lube service center more than two (2) miles, but less
than three (3) miles, from the Service Center which was operating, under
construction, under contract, or for which a site was purchased, leased or
optioned before the date of this Amendment; or
4.1.3 Any Jiffy Lube service center which may be established by
another Jiffy Lube franchisee pursuant to the terms of, and within the area
defined in, an area development agreement existing on the date of this
Amendment.
4.2 JLI represents and warrants to Franchisee that during the term of
the Agreement (but only as long as Pennzoil owns or controls, directly or
indirectly, both JLI and PPC) PPC, as set forth in the Commitment and
Release attached to this amendment, will not:
4.2.1 Authorize the installation of any new "Pennzoil 10-Minute Oil
Change" signs within a two (2) mile radius of the Service Center, other
than the replacement in the normal course of business of any sign installed
prior to the date of this Amendment; or
4.2.2 Extend new major financing to any free-standing quick lube
center located within one (1) mile of the Service Center. For purposes of
this provision, "major financing" means financing substantially in excess
of that generally offered by Castrol, Quaker State, Valvoline, or other
major marketers in order to obtain the borrower's commitment to purchase
that marketer's brand of oil (other than financing packages made available
only to franchisees of those marketers or their affiliates), and "lube
center" means any automotive service center the primary business of which
is to provide fast, convenient lubrication and fluid maintenance service.
4.3 Paragraphs 4.1 and 4.2 shall not be construed to reduce any
territorial protection to which Franchisee is entitled under the terms of
any separate written arrangement with JLI or PPC existing on the date of
this Amendment. A copy of each such separate written arrangement (if any)
is attached to this Amendment in Exhibit 1. Any territorial protection
granted by JLI or PPC under a separate arrangement remains binding only on
JLI or PPC, as the case may be.
5. Renewal Rights
5.1 This Paragraph 5 shall apply if the Agreement contains no provision
regarding renewal of the Agreement or of the rights granted Franchisee
thereunder, or if the Agreement contains renewal rights of less than two
(2) consecutive ten (10) year terms.
5.2 Franchisee, at its option, may renew the rights granted under the
Agreement for two (2) consecutive terms of ten (10) years each, subject to
the following conditions:
5.2.1 Franchisee shall have given JLI written notice of Franchisee's
election to renew not less than six (6) months nor more than twelve (12)
months prior to the end of the then-current term.
5.2.2 Franchisee shall have completed, to JLI's satisfaction, such
maintenance, renovation, and remodeling of the Service Center as JLI may
reasonably require.
5.2.3 Franchisee, at the expiration of the then-current term, shall
not be in default of any provision of the Agreement, this Amendment, any
other amendment of or successor to the Agreement, or any other agreement
between Franchisee and JLI or its subsidiaries, and shall not have
committed more than two (2) defaults identified in notices of default
received from JLI (whether or not such defaults were cured ) during the
last five (5) years of the then-current term.
5.2.4 Franchisee, at the expiration of the then-current term, shall
have satisfied all monetary obligations owed by Franchisee to JLI and its
subsidiaries, and shall not have committed more than two (2) monetary
defaults identified in notices of default received from JLI (whether or not
such defaults were cured) during the last five (5) years of the
then-current term.
5.2.5 At JLI's option, Franchisee shall execute the form of franchise
agreement then being offered by JLI to new System Franchisees, as modified
to (i) delete the initial franchisee fee payable thereunder and substitute
the renewal fee payable pursuant to Paragraph 5.2.8 of this Amendment; and
(ii) provide for a term of ten (10) years, with such renewal terms (if any)
as are then remaining under the terms of this Amendment. The new franchise
agreement shall supersede the Agreement and this Amendment (or the
agreement then expiring) in all respects, and its terms may differ from the
terms of the Agreement and this Amendment (or the agreement then expiring).
Franchisee acknowledges and agrees that the new franchise agreement may
provide for, among other things, a higher monthly Royalty Fee and a greater
required advertising expenditure than are specified in the agreement then
expiring.
5.2.6 Franchisee shall comply with JLI's then-current qualification
and training requirements.
5.2.7 Franchisee and JLI shall execute a mutual general release, in a
form acceptable to both parties, of any and all claims against each other
and their respective affiliates, officers, directors, shareholders, agents,
and employees, except (1) claims for which either party has previously
given written notice to the other party; and (ii) any claims Franchisee may
have which arise from its express third party beneficiary rights under
Paragraphs 7, 8, 10, and 11 of the Settlement Agreement dated July 29,
1991, between JLI, PPC, and Jiffy Lube Association of Franchisee, Inc. Any
claim excepted under (i) shall be lost and forever waived in the event such
claim is not resolved or suit instituted within one (1) year from the date
of the written notification of such claim.
5.2.8 Franchisee shall pay to JLI a nonrefundable renewal fee of ten
thousand dollars ($10,000) for the first renewal term hereunder and seven
thousand five hundred dollars ($7,500) for the second renewal term
hereunder. The applicable renewal fee shall be adjusted upward in
proportion to the rate of inflation from the date of this Amendment to the
date of renewal, as measured by the Consumer Price Index for urban wage
earners and clerical workers, U.S. city average (all items, 1967=100).
6. Supervision of Service Center
Notwithstanding anything to the contrary in the Agreement, the
requirement of direct, personal supervision of the Service Center by
Franchisee may be satisfied by a manager who has successfully completed the
standard Operations Training Course and who devotes full time and best
efforts to the operation of the Service Center.
7. Manager Training
Notwithstanding anything to the contrary in the Agreement, Franchisee
shall have the right to conduct the standard Operations Training Course
required to be completed by each person employed by Franchisee as a manager
of the Service Center, provided that the content and administration of
Franchisee's training program are approved in advance by JLI. JLI shall
have the right to review Franchisee's training program periodically to
ensure its quality and to verify that managers are being trained in a
timely manner. JLI shall notify Franchisee of any deficiencies in the
program. If Franchisee fails to take action to cure such deficiencies
within a reasonable time, JLI may revoke its approval of the training
program and require Franchisee's managers to attend an Operations Training
Course conducted by JLI, until such time as the deficiencies have been
corrected.
8. Point-of-Sale Computer System
8.1 JLI shall provide to Franchisee, and when provided Franchisee
shall accept and operate, a point-of-sale computer system specified by JLI
(the "POS System"), on the terms set forth below. JLI shall have sole
discretion as to the timing of implementation of the POS System for
Franchisee. Franchisee shall have the right to substitute, at Franchisee's
expense, a POS System for all of Franchisee's existing and future Jiffy
Lube Service centers other than the system specified by JLI, but only if
(i) Franchisee, prior to or concurrently with the execution of this
Amendment, executes a POS election form in the form designated by JLI; (ii)
the substitute system is capable of transmitting to JLI the same data at
the same times and in the same form prescribed by JLI for franchisees using
the approved POS System; (iii) the substitute system is capable of
receiving fleet data from JLI; and (iv) Franchisee actually transmits and
receives such data at the same times and in the same form prescribed by JLI
for franchisees using the approved POS System.
8.2 JLI shall provide, at no charge to Franchisee:
8.2.1 A single-station POS unit for the Service Center;
8.2.2 The basic POS System software, and periodic updates of such
software:
8.2.3 Written standards and procedures for the operation of the POS
System, as modified from time to time in accordance with Paragraph 8.5; and
8.2.4 At the time of installation of the POS unit, a training session
for Franchisee, Franchisee's managers, and Service Center employees in the
operation of the POS System.
8.3 Franchisee shall commence installation of the POS System within
ninety (90) days of its receipt of written notice from JLI to implement the
POS System.
8.4 JLI shall bear the cost of initial installation of the POS System
at the Service Center, except for any extraordinary costs resulting from
special installation needs (such as construction, remodeling, rewiring,
additional wiring, or telephone line installation). In addition, JLI shall
bear the cost of telecommunication charges associated with Franchisee's
daily transmission of data to, or Franchisee's receipt of data from, JLI.
Franchisee shall bear (i) all costs of operation of the POS System other
than such telecommunications charges, including but not limited to the cost
of having available a separate telephone line and labor costs; (ii) all
costs of hardware maintenance, repair, and replacement; and (iii)
third-party vendor charges for hardware maintenance and support and
software operational support, subject to a maximum annual increase in such
charges of no more than the annual increase in the unadjusted Producer
Price Index for finished goods.
8.5 Franchisee shall operate the POS System in conformance with the
standards and procedures prescribed by JLI from time to time. Franchisee
shall, among other things, transmit individual work order/invoice
information daily to JLI, and shall transmit specified demographic data
(which may, at Franchisee's option, include names and addresses of
customers) at least weekly to JLI. Except as otherwise provided in
Xxxxxxxxx 00, XXX shall not sell, disclose, or use such transmitted data
for the benefit of any other person or entity without Franchisee's consent.
8.6 JLI shall solicit comments from Franchisees before making any
substantial modification in the POS System. JLI may satisfy this obligation
by soliciting comments from (i) a committee or group of franchisees formed
specifically to monitor POS matters (which may also include representatives
of JLI); or (ii) from a representative sample of Jiffy Lube franchises.
8.7 JLI shall not license, sublicense, furnish, or provide any
enhancements to the POS System developed specifically for, and licensed to,
JLI to any person or entity other than a Jiffy Lube franchisee or a Jiffy
Lube service center operated by JLI or affiliated of JLI.
9. Transfer Restrictions
Notwithstanding anything to the contrary in the Agreement, JLI shall
not unreasonably withhold its consent to any proposed transfer of an
interest which requires the consent of JLI under the terms of the
Agreement.
10. Changes to Manual
JLI shall not act arbitrarily in making changes to the Policies and
Procedures Manual.
11. Unexecuted Agreements
If the Agreement was signed before January 8, 1990, or if the Service
Center was opened before that date, JLI hereby forever discharges
Franchisee from any unfulfilled obligation under the Agreement to execute a
purchase option agreement or a contingent assignment and assumption
agreement pertaining to the Service Center or to lease or sublease the
Service Center to JLI. Any such agreements executed by Franchisee before
the date of this Amendment shall remain in effect according to their terms.
12. Personal Guaranties
JLI shall not request any shareholder, partner, or transferee of
Franchisee to execute personal guaranty of the obligations of Franchisee to
JLI under the Agreement unless such request is based on reasonable credit
standards. This Paragraph 12 does not enlarge, reduce, or otherwise affect
any guaranty existing on the date of this Amendment. Shareholders and
partners of Franchisee who are not guarantors of the Agreement as of the
date of this Amendment shall not be required to execute a personal guaranty
of Franchisee's obligations under this Amendment.
13. Volume Purchasing Arrangements
Notwithstanding anything to the contrary in the Agreement, JLI shall
have no obligation to negotiate or attempt to negotiate volume purchasing
arrangements for products or services used by Franchisee or other Jiffy
Lube franchisees.
14. Services Provided by JLI
Franchisee hereby forever discharges JLI from any and all oral and
written agreements and representations, express or implied and written
agreements and representations, express or implied, made prior to January
8, 1990 (whether by side letter, course of conduct, or any other means)
regarding services to be provided by JLI and/or JLI's personnel in support
of the development or operation of the Service Center, such as training,
marketing, and store operations (for example, number of long-form reviews,
inspections, and site reviews), except such service commitments as are
explicitly set forth in the Agreement (as modified by this Amendment).
15. Fleet Credits
So long as JLI is generally notifying franchisees of the amount of
fleet credits earned by franchisees within thirty (30) days of JLI's
receipt of the necessary documentation from franchisees, JLI shall have the
right, without prior notice to Franchisees, to apply fleet credits earned
by Franchisee against past due amounts owed by Franchisee to JLI and its
affiliates, as follows: first, to past due royalties owed to JLI; second,
to past due rent owed to JLI and its affiliates; third, to past due amounts
owed to Heritage Merchandising Co., Inc.; and fourth, to any other past due
amounts owed to JLI and its subsidiaries. After JLI has received payment
from the fleet customer, JLI shall pay to Franchisee (or, at Franchisee's
option, credit against future obligations of Franchisee) the amount of any
fleet credits remaining after deduction of the items referred to in the
preceding sentence, if the aggregate balance for Franchisee's Jiffy Lube
service centers at the end of the month exceeds one hundred dollars ($100).
If the aggregate monthly balance is less than one hundred dollars ($100),
JLI shall hold the balance as a credit until such time as the aggregate
monthly balance exceeds $100.
16. Franchisee Financial Information
JLI shall have the right to use any financial statements, sales
reports, or other financial or statistical information in connection with
efforts by JLI to attract additional franchisees, obtain financing, or
raise capital, provided that JLI shall not use such information in any
fashion by which such information is or could be traceable to, or identify,
a particular franchisee or service center (except with respect to the
remarketing by JLI of a service center acquired from a franchisee). In
addition, JLI may disclose any such information as may be required by any
federal or state agencies or laws, court orders, etc. Except as
specifically provided in this Xxxxxxxxx 00, XXX shall treat such
information as confidential and shall not disclose or sell such information
or use it for the benefit of any other person or entity.
17. Covenants
17.1 The undersigned individual shareholders of Franchisee's parent
hereby acknowledge and agree to be bound individually by all covenants not
to compete applicable to Franchisee under the terms of the Agreement. In
the event of termination of any undersigned shareholder's relationship with
Franchisee before the expiration or termination of the Agreement, such
shareholder or partner hereby agrees to be bound individually, commencing
upon the termination of the relationship, by a covenant of the same scope
and duration as the covenant applicable to Franchisee upon the expiration,
termination, or assignment of the Agreement.
17.2 Franchisee shall cause each individual or entity who becomes a
holder of more than 8% of Franchisee's or its parent's stock or who or which
owns any of Franchisee's or its parent's stock and who assumes an active role in
Franchisee's management after the execution of this Amendment to execute
and deliver to JLI a covenant similar in substance to Paragraph 17.1. Such
covenants shall be in a form approved by JLI, including, without limitation,
specific identification of JLI as a third party beneficiary with the
independent right to enforce such covenants.
18. INTENTIONALLY DELETED
19. INTENTIONALLY DELETED
20. INTENTIONALLY DELETED
21. Acknowledgment
21.1 Franchisee (for itself and its successors and assigns) and the
undersigned shareholders, partners, and guarantors of Franchisee hereby
acknowledge and agree that the following do not violate any of their rights
as
a Jiffy Lube franchisee or as shareholders, partners, or guarantors of
Franchisee:
21.1.1 Common ownership of JLI and PPC
21.1.2 Pennzoil's employment of personnel who provide management and
staff support for Pennzoil, JLI and PPC, so long as JLI and PPC have
separate
operating management.
21.1.3 Pennzoil's and/or PPC's efforts in support of their positions
regarding disposal of used motor oil, including applicable existing and
proposed
laws and regulations.
21.2 Paragraph 21.1 shall have no further force or effect if Pennzoil
ceases to own a controlling interest in JLI or in PPC.
21.3 Subject to Paragraph 21.2, Pennzoil, PPC, their officers, directors,
agents, and employees, and the officers, directors, agents and employees of
JLI shall be third party beneficiaries of Paragraph 21.1.
22. Future Franchise Agreements
For two (2) years from the date of this Amendment, if Franchisee exercises
any renewal rights granted under the Agreement (as modified by this
Amendment), or if Franchisee is offered and executes one or more additional
franchise agreements with JLI (whether for new or acquired Jiffy Lube
service centers), the franchise agreement(s) offered to Franchisee shall
incorporate all of the substantive provisions of this Amendment, and
otherwise shall be in the then-current form prescribed by JLI.
23. Effect of Amendment
This Amendment constitutes an integral part of the Agreement. In the
event of any conflict between the Agreement and this Amendment, the terms
of this Amendment shall control. Except as explicitly modified or
supplemented by this Amendment, the Agreement are hereby ratified and
confirmed, and the Agreement, as so modified and supplemented, shall remain
in full force and effect.
24. Effective Date
Except as otherwise provided in Paragraph 2.3, the effective date of
this Amendment shall be the date of its execution by Franchisee and JLI, as
set forth in the first paragraph of this Amendment.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
indicated above.
JIFFY LUBE INTERNATIONAL
Date: 07/30/92
By: /s/ Xxxxxxx X. Xxxxxx
JDP Vice President
Xxxxxxx X. Xxxxxx
XX LUBES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
President
Each undersigned individual represents and warrants to JLI that the
undersigned individuals own shares of Lucor, Inc., the parent corporation
of Franchisee, as of the date of this Amendment, that they are the only
shareholders of Lucor, Inc. who have an active role in the Franchisee's
management and that the officer who has executed this Amendment on behalf
of Franchisee is duly authorized to bind the Franchisee to the terms of
this Amendment.
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
EXHIBITS TO
LICENSE AGREEMENT AMENDMENT
Exhibit 1 Separate Written Arrangements
Granting Territorial Protection
Exhibit 2 Intentionally Deleted
Exhibit 3 Intentionally Deleted
Exhibit 4 Intentionally Deleted
Exhibit 5 Current Ownership of Franchisee
EXHIBIT 1
TO LICENSE AGREEMENT AMENDMENT
(See Paragraph 4.3)
Franchisee has no separate written arrangements with JLI or PPC
concerning territorial protection.
EXHIBIT 5
TO LICENSE AGREEMENT AMENDMENT (See Paragraph 19.1.3)
FRANCHISEE'S OWNERSHIP
TYPE OF ENTITY: Corporation
STATE OF INCORPORATION: Florida
OWNER'S PERCENT OWNER'S OWNER'S
NAME OWNERSHIP SPOUSE ADDRESS
LUCOR, INC. 100% N/A Congress Corp. Plaza
902 Xxxxx Xxxxx Road
Xxxxx 000, Xxxx. 0
Xxxx Xxxxx, XX 00000
Jiffy Lube approves of these owners in the percentages shown above.
