EXHIBIT 10.25
BIG O TIRES, INC.
FRANCHISE AGREEMENT
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BIG O TIRES, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
SUMMARY PAGES . . . . . . . . . . . . . . . . . . . . . . . . i
GLOSSARY. . . . . . . . . . . . . . . . . . . . . . . . . . iii
1. PARTIES AND RECITALS. . . . . . . . . . . . . . . . . . . 1
2. GRANT OF FRANCHISE. . . . . . . . . . . . . . . . . . . . 1
2.01 Grant of Franchise. . . . . . . . . . . . . . . . . 1
2.02 Trade Area. . . . . . . . . . . . . . . . . . . . . 1
3. FIRST OPTION RIGHTS . . . . . . . . . . . . . . . . . . . 2
3.01 First Option Rights . . . . . . . . . . . . . . . . 2
3.02 Notification by Big O . . . . . . . . . . . . . . . 2
3.03 Multiple First Option Rights. . . . . . . . . . . . 2
3.04 Notification of Qualification . . . . . . . . . . . 2
3.05 Exercise of Option by Franchisee. . . . . . . . . . 2
3.06 Transfer of First Option Rights . . . . . . . . . . 2
3.07 Limitation on First Option Rights . . . . . . . . . 2
3.08 Expiration of First Option Rights . . . . . . . . . 2
4. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.01 Term. . . . . . . . . . . . . . . . . . . . . . . . 3
5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS. . . . . . . . . . 3
5.01 Grant of Successor Franchise Rights . . . . . . . . 3
5.02 Conditions to Grant of Successor Franchise. . . . . 3
5.03 Notification of Non-Renewal . . . . . . . . . . . . 3
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS. . . . . . . . . . . 4
6.01 Financing Approval. . . . . . . . . . . . . . . . . 4
6.02 Site Selection. . . . . . . . . . . . . . . . . . . 4
6.03 Equipment and Signage . . . . . . . . . . . . . . . 4
6.04 Conditions to Opening . . . . . . . . . . . . . . . 4
6.05 Commencement of Business. . . . . . . . . . . . . . 4
7. PRE-OPENING AND ONGOING ASSISTANCE. . . . . . . . . . . . 5
7.01 Pre-Opening Assistance. . . . . . . . . . . . . . . 5
7.02 On-Going Assistance . . . . . . . . . . . . . . . . 6
8. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.01 Initial Franchise Fee . . . . . . . . . . . . . . . 6
8.02 Royalty Fee . . . . . . . . . . . . . . . . . . . . 6
8.03 Late Fees . . . . . . . . . . . . . . . . . . . . . 6
8.04 Taxes . . . . . . . . . . . . . . . . . . . . . . . 6
8.05 Allocation of Payments. . . . . . . . . . . . . . . 7
9. LICENSED MARKS. . . . . . . . . . . . . . . . . . . . . . 7
9.01 Licensed Marks. . . . . . . . . . . . . . . . . . . 7
9.02 Limitation on Use . . . . . . . . . . . . . . . . . 7
9.03 Infringement. . . . . . . . . . . . . . . . . . . . 7
9.04 Franchisee's Business Name. . . . . . . . . . . . . 7
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9.05 Change of Licensed Marks. . . . . . . . . . . . . . 7
9.06 Franchisor's Rights . . . . . . . . . . . . . . . . 8
10. STANDARDS OF OPERATION. . . . . . . . . . . . . . . . . . 8
10.01 Standards of Operations. . . . . . . . . . . . . . 8
11. STORE MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 9
11.01 Store Management . . . . . . . . . . . . . . . . . 9
11.02 Completion of Training by Operator or Manager. . . 9
11.03 Operation of Store by Big O. . . . . . . . . . . . 9
12. QUALITY CONTROL . . . . . . . . . . . . . . . . . . . . . 9
12.01 Inspections. . . . . . . . . . . . . . . . . . . . 9
13. MANUAL: NEW PROCESSES. . . . . . . . . . . . . . . . . .10
13.01 Manual . . . . . . . . . . . . . . . . . . . . . .10
13.02 Confidentiality of Information . . . . . . . . . .10
13.03 Revisions to Manual. . . . . . . . . . . . . . . .10
13.04 Improvements to System . . . . . . . . . . . . . .11
14. PRODUCTS AND SERVICES . . . . . . . . . . . . . . . . . .11
14.01 Products and Services. . . . . . . . . . . . . . .11
14.02 Approval of Products and Services. . . . . . . . .11
14.03 Inventory. . . . . . . . . . . . . . . . . . . . .12
14.04 Warranties and Guaranties. . . . . . . . . . . . .12
14.05 Open Account Financing . . . . . . . . . . . . . .12
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS. . . . . . .12
15.01 Initial Advertising. . . . . . . . . . . . . . . .12
15.02 National Advertising Fund. . . . . . . . . . . . .12
15.03 Local Fund . . . . . . . . . . . . . . . . . . . .13
15.04 Approval of Advertising. . . . . . . . . . . . . .14
16. STATEMENTS AND RECORDS. . . . . . . . . . . . . . . . . .14
16.01 Invoices . . . . . . . . . . . . . . . . . . . . .14
16.02 Audit. . . . . . . . . . . . . . . . . . . . . . .14
16.03 Monthly Reports. . . . . . . . . . . . . . . . . .14
16.04 Financial Statements . . . . . . . . . . . . . . .14
16.05 Management System. . . . . . . . . . . . . . . . .15
16.06 Retail Accounting Center . . . . . . . . . . . . .15
17. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .15
17.01 Noncompetition During Term . . . . . . . . . . . .15
17.02 Confidentiality. . . . . . . . . . . . . . . . . .15
17.03 No Interference with Business. . . . . . . . . . .15
17.04 Post Termination Covenant Not to Compete . . . . .15
17.05 Survivability of Covenants . . . . . . . . . . . .15
17.06 Modification of Covenants. . . . . . . . . . . . .16
18. TRANSFER AND ASSIGNMENT . . . . . . . . . . . . . . . . .16
18.01 Assignment by Big O. . . . . . . . . . . . . . . .16
18.02 Right of First Refusal . . . . . . . . . . . . . .16
18.03 Transfer Legend. . . . . . . . . . . . . . . . . .16
18.04 Pre-Conditions to Franchisee's Assignment. . . . .16
18.05 Death of Franchisee. . . . . . . . . . . . . . . .18
18.06 No Waiver. . . . . . . . . . . . . . . . . . . . .19
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18.07 Excepted Transfers . . . . . . . . . . . . . . . .19
19. DEFAULT AND TERMINATION . . . . . . . . . . . . . . . . .19
19.01 Termination by Big O . . . . . . . . . . . . . . .19
19.02 Governing State Law. . . . . . . . . . . . . . . .21
19.03 Termination by Franchisee. . . . . . . . . . . . .21
19.04 Force Majeure. . . . . . . . . . . . . . . . . . .21
20. POST TERMINATION OBLIGATIONS. . . . . . . . . . . . . . .21
20.01 Post-Termination Obligations . . . . . . . . . . .21
20.02 Right to Repurchase. . . . . . . . . . . . . . . .23
20.03 Right of First Refusal . . . . . . . . . . . . . .23
20.04 De-Identification of Assets Upon Sale. . . . . . .23
21. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . .23
21.01 Insurance Coverage . . . . . . . . . . . . . . . .23
21.02 Proof of Insurance . . . . . . . . . . . . . . . .24
21.03 Survival of Indemnification. . . . . . . . . . . .25
22. TAXES, PERMITS AND INDEBTEDNESS . . . . . . . . . . . . .25
22.01 Payment of Taxes . . . . . . . . . . . . . . . . .25
22.02 Compliance with Laws . . . . . . . . . . . . . . 25
22.03 Payment of Debts . . . . . . . . . . . . . . . . .25
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS . . . .25
23.01 Indemnification. . . . . . . . . . . . . . . . . .25
23.02 Independent Contractor . . . . . . . . . . . . . .25
24. WRITTEN APPROVALS, WAIVERS AND AMENDMENT. . . . . . . . .26
24.01 Written Approval . . . . . . . . . . . . . . . . .26
24.02 Waiver . . . . . . . . . . . . . . . . . . . . . .26
24.03 Modification . . . . . . . . . . . . . . . . . . .26
25. DEALER PLANNING BOARD . . . . . . . . . . . . . . . . . .26
25.01 Dealer Planning Board. . . . . . . . . . . . . . .26
25.02 Special Interest Issues. . . . . . . . . . . . . .26
25.03 Disapproval of Management Proposal . . . . . . . .26
25.04 Compliance with Modification . . . . . . . . . . .27
26. RIGHT OF OFFSET . . . . . . . . . . . . . . . . . . . . .27
26.01 Right of Offset. . . . . . . . . . . . . . . . . .27
27. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . .27
27.01 Declaratory and Injunctive Relief. . . . . . . . .27
27.02 Costs of Enforcement . . . . . . . . . . . . . . .27
28. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . .27
28.01 Notices. . . . . . . . . . . . . . . . . . . . . .27
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29. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . .28
29.01 Governing Law. . . . . . . . . . . . . . . . . . .27
29.02 Jurisdiction . . . . . . . . . . . . . . . . . . .27
30. SEVERABILITY AND CONSTRUCTION . . . . . . . . . . . . . .28
30.01 Severability . . . . . . . . . . . . . . . . . . .28
30.02 Counterparts . . . . . . . . . . . . . . . . . . .28
30.03 Construction . . . . . . . . . . . . . . . . . . .28
31. ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . .28
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
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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:
2. INITIAL FRANCHISE FEE: Amount Due:
-with Application:
-upon signing Agreement:
Total:
3. ROYALTY FEE Two percent (2%) of Gross Sales
4. LOCAL ADVERTISING
CONTRIBUTION: Minimum of four percent (4%) of Gross Sales
5. NATIONAL ADVERTISING
CONTRIBUTION: See sections 15 and 25
6. INITIAL ADVERTISING REQUIREMENT:
7. STORE LOCATION:
Street and Number
City, State and Zip Code
Phone Number
8. Franchisee's Operator:
9. Franchisee's Manager:
10. Franchisee's Agent For Service of Process:
Name:
Address:
11. Big O's Agent for Service of Process:
Name: CT Corporation
Address: 0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
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12. Effective Date:
13. Commencement Date:
14. Expiration Date:
15. Franchisee's Advisor:
16. Send Notices to Big O to:
Name: Xxxxx X. Xxxxxx (Legal Department)
Address: Big O Tires, Inc.
00000 X. Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxxx, Xxxxxxxx 00000
17. Send Notices to Franchisee to:
Name:
Address:
18. Business not subject to Section 17.01
Name:
Address:
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GLOSSARY (in alphabetical order)
Advertising - The advertising, promotional programs, public relations
programs and marketing programs approved or administered by Big O
utilizing the resources of the National Advertising Fund or local
franchisee cooperatives or franchisee associations.
Agreement - This contract, the Summary Pages and all Riders and
Schedules hereto, as interpreted through the Manual.
Big O - Big O Tires, Inc.
Big O Store or Store - A retail tire store operated pursuant to the
Big O System.
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 and offer other authorized tire and
automotive services at retail, 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 II - 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.
Converter - A person who converts a retail tire store it owns to a
Big O Store pursuant to this Agreement.
Dealer Planning Board - The group of franchisee representatives
elected from each Local Group which meets periodically with Big O's
management to develop Big O's strategic plans 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 to
which the person ("Developer") agrees that within a defined territory
to open and commence operating an agreed number of Big O Stores
pursuant to a development schedule. Developers must execute
Franchise Agreements prior to commencing business at any Store
developed pursuant to a Development Agreement.
Due Date - The fifteenth 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.
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. The First Option and method of exercising it
are described in Section 3 of this Agreement.
Franchise - The rights granted by the Franchise Agreement.
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Franchised Business - The business operated pursuant to a license
granted by Big O which utilizes the Licensed Marks and the Big O
System.
Franchisee - The individual(s), corporation or other entity to which
the Franchise is granted. Depending on the context of this
Agreement, the term Franchisee may include the shareholders or
guarantors of a corporate Franchisee.
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 in exchange for any form of non-monetary consideration,
(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;
(ii) the amount of any refunds or allowances made on Products and
Services returned by customers; (iii) 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) sales of Products and Services to other Big
O Stores; (vi) tire disposal fees so long as 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 year of
business from the Commencement Date to promote the opening of the
Store.
Licensed Marks - Trademarks and trade names, service marks and
associated logos and symbols owned or sublicensed by Big O, including
those enumerated on Schedule 6 and such other marks, logos and names
as Big O may designate.
Local Fund - The fund, which may be a trust fund, corporation or
other entity, derived from contributions by Big O franchisees who are
members of a Local Group which shall be maintained by the Local Group
for Advertising pursuant to such guidelines as Big O may approve or
prescribe.
Local Group - A cooperative or association 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. Big O will assign a Franchisee to a Local Group and
Franchisee must become a member of that Local Group and be bound by
any decisions it makes to the extent they are 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, including but not
limited Boss2.
Manager - An individual other than the Operator who is responsible
for the day-to-day operation of a Store.
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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 "Blue II", Big O's
Franchise Compliance and Procedures Manual, any training tapes,
guides and any training module or any other proprietary information.
National Advertising Fund - The fund derived from contributions by
Big O franchisees which shall be exclusively maintained and
administered by Big O for national Advertising in cooperation with
the Dealer Planning Board.
National Fund - Big O Tires, Inc. National Advertising Fund.
Operator - The individual approved by Big O 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 or any Shareholder by matching the bona fide monetary
purchase price and payment schedule terms of the proposed Transfer,
less any brokerage commission (without having to match any other
non-monetary terms).
Pioneer - A person who owned at least twenty-five percent (25%)
equity interest in a Big O franchisee on March 1, 1987, provided such
ownership interest appeared on Big O's records as of July 1, 1987. A
Pioneer is entitled to acquire Big O franchises for one-third of the
applicable initial franchise fee, provided the Pioneer satisfies Big
O's other requirements.
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's private brand lines of tires), products and services produced,
organized or distributed under a license granted by Big O, which are
designated by Big O for sale or lease in Stores.
Retail Accounting Center - A cooperative or association which
provides accounting, payroll, tax and related services for the
purpose of providing such services at a lower cost and providing the
financial reporting Big O requires.
Shareholder - Any person possessing a legal or beneficial interest or
holding a share of stock of any kind or nature in the Franchisee,
including partners in a Franchisee which is a partnership.
Survivor - A surviving spouse or heir of estate of any deceased
person owning stock or any other interest in the Franchisee.
Termination Date - The date upon which the Franchise Agreement is
canceled or ended by Big O or the Franchisee.
Trade Area - The area described on Schedule 1 to the 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. 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, the Agreement, any of Franchisee's rights or
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obligations hereunder, or any interest or shares of stock or
partnership interest of any kind or nature in Franchisee or the
Premises. The merger or consolidation or issuance of additional
securities representing an ownership interest in Franchisee shall
also be deemed to be a "Transfer" for purposes of this Agreement.
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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 00000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx X, Xxxxxxxxx, Xxxxxxxx
00000, and ("Franchisee"), a(n)
corporation with a place of business at .
1. PARTIES AND RECITALS
1.01 Big O was established to provide franchisees with access to
Products and Services and a System for marketing and servicing such
Products and Services. 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. In connection
therewith, Big O has developed the Big O System relating to the operation
of Stores which are authorized to offer and sell Big O tires as part of
the Products and Services offered to retail customers.
1.02 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 each franchisee in the
System maintain and adhere to certain standards, procedures and policies
described hereinafter and in the Manual.
1.03 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.
2. GRANT OF FRANCHISE
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
Shareholders 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. 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.
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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 only exercise the First Option 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.
3.05 Exercise of Option by Franchisee. If Franchisee is a
corporation or partnership, the First Option may be exercised only by the
corporation or partnership 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.
3.07 Limitation on First Option Rights. The First Option rights
described above are void and unenforceable with respect to 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.
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.
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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 cooperated with Big O, its Local Group
and other Big O franchisees in programs and suggestions developed by Big
O, 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 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 new franchise agreement in accordance with its then
current terms and conditions for granting successor franchises, which may
include any or all of the following:
(a) Execution of a new and modified franchise agreement which
may include, among other matters, a different fee structure, increased
fees, a modified Trade Area and different purchase requirements;
(b) A requirement that Franchisee refurbish the Premises or
relocate the Premises to conform to Big O's then current standards for
similar Stores;
(c) Payment of Big O's renewal administration fee of One
Thousand Five Hundred Dollars ($1,500); and
(d) Execution of a general release in favor of Big O and its
representatives.
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.
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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 has 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. 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, execution of this
Agreement shall be deemed approval of the Store Location by Big O, unless
additional obligations to convert or upgrade the premises are described in
Schedule 7 to this Agreement.
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;
(iv) purchase and install all required fixtures, equipment and signs
required for the Big O Store; (v) purchase an opening inventory of tires
and supplies; (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 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.
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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 the provision of 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. 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.
(c) Five consecutive (5) weeks of training for one person in the
operation of the Franchised Business at one or more locations
designated by Big O. Unless Big O waives the training requirement,
the Manager of the Franchisee's Store, provided he or she has been
approved by Big O, and Franchisee's Operator must attend and
successfully complete such training. 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
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 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 Big O's Franchise Compliance and Procedures
Manual and Big O's Operations Manual, known as "Blue II"or other such
proprietary information.
(e) Assistance in selecting Franchisee's initial inventory.
(f) Assistance in the lay-out, merchandising and display of the
Store.
7.02 On-Going Assistance. Big O agrees to make available to
Franchisee the following ongoing assistance for which Big O may charge the
Franchisee a fee:
(a) To the extent available to Big O, a source of Big O private
brand tires;
(b) Ongoing research and development into new tires and other
lines of Products and Services and ways to enhance the competitive
posture of Big O Stores;
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(c) Additional training for the Operator or other personnel of
Franchisee, for which Big O may charge the Franchisee a fee;
(d) Suggested prices for Big O brands sold at the Franchisee's
Store, provided that Franchisee will not be required to sell at any
particular price if such a requirement would be unlawful;
(e) A warranty or replacement program for Big O private brand
tires and related automotive Products and Services;
(f) 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;
(g) Monthly point of sale advertising materials and wearables
utilizing Big O 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, for which Big O may charge the Franchisee a fee;
(h) 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 Franchisee or the Local Group a
fee.
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 the prior
month's Gross Sales. The royalty fee must be postmarked and mailed to Big
O by no later than the Due Date.
8.03 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.
8.04 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.
8.05 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
agrees not to represent in any manner that Franchisee has
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acquired any ownership rights in the Licensed Marks. Franchisee agrees
not to use any of the Licensed Marks or any marks, names, or indicia which
are or may be confusingly similar in its own corporate or business name
except as authorized in this Agreement. 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 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 xxxx, 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 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;
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 to Big O to liability therefor; to observe all laws with respect
to the registration of trade names and assumed or fictitious names; 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 to observe such requirements with respect to trademark
and service xxxx 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.
9.06 Franchisor's Rights. Big O retains the right to, among others:
(1) use, and license others to use, the Licensed Marks and the Big O
System for other Big O Stores or company-owned Stores; (2) solicit, sell
to and service local, regional or national accounts wherever located; (3)
use the Licensed Marks and the Big O System with other services or
products, or in alternative channels of distribution, without regard to
location; and (4) 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
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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 the manner and pursuant 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 its 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) Franchisee shall participate in and be bound by the decisions of
any Local Group established and operated pursuant to standards and within
the guidelines prescribed or approved by Big O. Franchisee shall not be
subject to any agreement to fix prices, or allocate customers or
territories which would violate any applicable laws. Nor will Franchisee
be subject to any capital investment requirements or other standards 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 has previously
been approved by Big O. All initial and subsequent Operators or Managers
must be approved by Big O. Big O's approval 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. If
Franchisee
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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 Shareholders
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.
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 or substitute for Franchisee's Operator, Manager, or
both, 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.
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.
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
Confidential Operating Manual, Big O's Blueprint for Success, otherwise
known as Blue II, 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
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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 or disclosure of Big O's Information will cause
irreparable injury to Big O and that damages are not 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
lawfully came to its attention prior to disclosure by Big O, or which
legally is or has become a part of the public domain by 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 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 at least 75% on a quarterly basis of
all products purchased for resale from your Store will be purchased from
the RSC or BOX warehouses. In addition, Franchisee agrees that 50% of all
tire sales at the Store will be Big O brand product, excluding sales of
snow 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 which 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
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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;
(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 which 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 revoke 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
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such payments and perfect its security interest therein. Franchisee's
failure to comply with any credit terms set forth above shall constitute
an event of default of this Agreement.
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS
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, the parties agree that 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 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 Fund. Big O has established a National
Advertising Fund which Big O, in its sole discretion, may decide to
terminate at any time. If Big O does terminate the National Advertising
Fund, 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 Fund which shall be
maintained or approved by Big O for Big O National Advertising. Big
O shall limit any increase in Franchisee's contribution to the
National Advertising Fund 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 National Advertising which is provided through the
National Advertising Fund with sole discretion over the concepts,
materials, and media used therein. All National Advertising Fund
contributions paid by Franchisee and other similarly situated Big O
System franchisees to Big O shall be part of the National Advertising
Fund.
(c) Franchisee understands and acknowledges that the National
Advertising Fund is intended to maximize general public recognition
and acceptance of the Licensed Marks for the benefit of the System as
a whole and that Big O undertakes no obligation in administering the
National Advertising Fund to insure that any particular franchisee
benefits directly or pro rata from the national Advertising.
Franchisee agrees that the National Advertising Fund 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
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the National Advertising Fund 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 Fund 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 Fund. Any taxes imposed on the National Advertising Fund
shall be paid from the National Advertising Fund.
(e) The Dealer Planning Board shall have the right to review all
expenditures of the National Advertising Fund on a regular basis.
15.03 Local Fund. Franchisee shall also contribute by the Due Date
a minimum of four percent (4%) of its Store's Gross Sales for the previous
month either to Big O (or as directed by Big O) or, if a Local Fund has
been established in Franchisee's marketing area, to the Local Fund formed
for the purpose of local advertising and operated pursuant to such
structure and guidelines as Big O may prescribe or approve. Franchisee
agrees to be bound by the decisions of either Big O (or its designee) or
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, 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.
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. 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.
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 approve. All
invoices, whether voided or used, shall be accounted for by Franchisee.
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.
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16.03 Monthly Reports. No later than the Due Date, Franchisee shall
mail to Big O all payments of royalty fees and advertising contributions
and monthly reports due Big O on forms prescribed by Big O, stating the
fees or contributions due to Big O which were incurred during the
preceding month as specified from time to time by Big O, the Gross Sales
at the Premises 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 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 which 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 System. Franchisee must implement any Management
System required by Big O.
16.06 Retail Accounting Center. The Franchisee is required to use
some or all of the services provided by a Retail Accounting Center
operating within the Franchisee's marketing area.
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, 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 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 know-how deemed confidential under
Section 13 hereof, except as permitted 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 and its 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.
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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 the Transfer
within six 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 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 Shareholder shall be permitted or have the
power, without the prior written consent of Big O, to make a Transfer. To
assure compliance by Franchisee with the transfer restrictions contained
in this Section 18, all share or stock certificates of Franchisee shall at
all times contain a legend sufficient under applicable law to constitute
notice of the restrictions on such stock 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 which does not comply with the terms of this Section 18 shall
be null and void.
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18.04 Pre-Conditions to Franchisee's Assignment. If Franchisee or
any Shareholder 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 effective control over the ownership and/or operation of
the Premises or Franchisee or the Franchised Business:
(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); and
(ii) The transferee shall execute the then current form of
Franchise Agreement generally issued by Big O with respect to
comparable Big O franchisees. 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;
(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 prospective transferee's
name, address, financial qualifications, and previous five (5)
years business experience;
(ii) Big O or its assignee may, within thirty (30) days after
receipt of such notice, exercise the Option to purchase the
interest being offered by Franchisee or any Shareholder;
(iii) If Big O or its assignee fails to exercise the Option to
purchase the interest, Big O shall, within thirty (30) days
after receipt of the notice of the Option, 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 Shareholders, partners, and/or
Operator: meets Big O's then current standards for new
franchisees, which standards need not be in writing;
demonstrates to Big O's satisfaction that it or its Operator
meets Big O's managerial, business, and technical standards;
possesses a good moral character, business reputation, and
satisfactory credit rating; and 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;
(iv) If Big O approves the proposed transferee, Franchisee or
the Shareholder 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;
(v) 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;
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(vi) 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 $1,500. In additional, if the
Transferee requires training, the Franchisee or Transferee will
also be charged a training fee of $3,000. Big O shall be the
sole arbiter of whether a change of 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 $500. Big O shall be the sole arbiter of whether a
change of control will occur as a result of a single Transfer or
a group of Transfers.
(vii) Big O may require any transferor of any partnership
interest, shares of stock, or any other interest of any kind or
nature in Franchisee to guarantee the obligations of Transferee
under this Agreement or under any new Franchise Agreement
entered into between transferee and Big O;
(viii) Prior to approving a Transfer of the controlling
interest in Franchisee, the Franchised Business, or the
Premises, Big O may inspect Franchisee's Store and as a result
of such inspection, Big O may prepare a "Punch List" 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; and
(ix) 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 ($25,000.00), the standard
initial franchisee fee charged by Big O for new franchises when
Franchisee executed this Agreement.
(x) Franchisee shall comply with all other applicable transfer
requirements as designated in the Confidential Operating 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;
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(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 Section 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 Shareholder; or (b) a Transfer to a
spouse, parent, child, or sibling of Franchisee or any Shareholder which,
in the aggregate, amounts to a Transfer of less than a controlling
interest in Franchisee, the Franchised Business, or the Premises.
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:
(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;
(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 Shareholder, guarantor, or transferee violates
any transfer and assignment provision contained in Section 18 of this
Agreement;
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(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 without Big O's
express written approval, 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;
(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 xxxx 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 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.
If a different notice or cure period or good cause standard is
prescribed by applicable law, it shall apply to a termination of the
Franchise Agreement.
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
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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 which
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 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) Confidential Operating Manual, Blue II,
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 BOSS2 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.
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(d) Provide Big O, upon its request, with a complete list of any
outstanding obligations 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 or 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; and
(g) If during the term of Franchisee's Franchise Agreement, the
Franchisee has made available to its customers, the ability to
purchase Products and Services from Franchisee's Store by the use of
the Big O credit card with American General Finance, upon termination
the Franchisee shall cease accepting such card from any future
customers.
(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.
(j) Any tire adjustments existing as of the Termination Date shall
be referred to other existing LSCs, 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.
(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
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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 $500,000 each person,
$500,000 each occurrence, and $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 $2,000,000 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 $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 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 $10,000 per any one conveyance;
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(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 $2,000,000
per occurrence combined single limit for bodily injury and
property damage and Garagekeepers Legal Liability of not less
than the equivalent of $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 $25,000; Forgery with limits
no less than $10,000; Money and Securities Inside Premises with
limits no less than $10,000; and Money and Securities Outside
Premises with limits no less than $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 $3,000,000 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 thirty (30) 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, the 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 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.
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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 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
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 assist Big O's management in the
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development of its strategic business plan 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:
(a) advertising policies and the creation of a National
Advertising Fund;
(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;
and
(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.
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
(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
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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. Notices
to Franchisee and Big O shall be addressed to them at their addresses as
listed on the Summary Pages or to such other addresses as the parties may
hereafter prescribe. A copy of each notice to Big O shall be addressed to
Franchisee's designated regional representative. Any notice complying
with the provisions hereof shall be deemed to be given on the date of
mailing.
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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 obtained 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 herein.
30. SEVERABILITY AND CONSTRUCTION
30.01 Severability. Subject to Section 19.01(o), should any part of
this Agreement, for any reason, be declared invalid by a court of
competent jurisdiction, such decision or determination shall not affect
the validity of any remaining portion and such remaining portion shall
remain in force and effect as if this Agreement had been executed with the
invalid portion eliminated; provided, however, that in the event of a
declaration of invalidity, the provision declared invalid shall not be
invalidated in its entirety, but shall be observed and performed by the
parties to the extent such provision is valid and enforceable. The
parties hereby agree that any such provision shall be deemed to be altered
and amended to the extent necessary to effect such validity and
enforceability.
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.
30.03 Construction. The headings and captions contained herein are
for the purpose of convenience and reference only and are not to be
construed as part of this Agreement. 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.
31. ACKNOWLEDGEMENTS
(a) Big O acknowledges that Franchisee's principal interest in
obtaining the Franchise granted herein is to obtain Big O private brand
tires and a competitive source of supply for Products and Services. Big O
acknowledges its obligation to seek to attempt, with no obligation, 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
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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 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.
(h) Franchisee acknowledges and recognizes that different terms and
conditions, including 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, it 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:
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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)
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 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
______________________, 19 .
Notary Public
My Commission Expires:
Schedule 2 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.
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
Schedule 3 to Franchise Agreement
Page 1
-95-
_________________________________________
Home Address
_________________________________________
Home Telephone
_________________________________________
Business Address
_________________________________________
Business Telephone
Schedule 3 to Franchise Agreement
Page 2
-96-
SCHEDULE 4
LEASE RIDER AND MODIFICATION
THIS AGREEMENT is made effective _____________________________ 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 ($1.00) Dollar, 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
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.
00000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Vice President of Business Development
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,
Schedule 4 to Franchise Agreement
Page 1
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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 Franchisor 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:___________________________________
Witness
____________________________ Attest:_______________________________
(CORPORATE SEAL)
Schedule 4 to Franchise Agreement
Page 2
-98-
TENANT
____________________________ By:___________________________________
Unofficial Witness
____________________________ Attest:_______________________________
Notary Public
(CORPORATE SEAL)
BIG O TIRES, INC.
____________________________ By:___________________________________
Unofficial Witness
(CORPORATE SEAL)
____________________________
Notary Public
Schedule 4 to Franchise Agreement
Page 3
-99-
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 which is the subject of a
franchise agreement which 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 of
Franchisee's attached Franchise Agreement, 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)
Schedule 5 to Franchise Agreement
Page 1
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FRANCHISEE:
By:
Date:
Home Address:
Home Phone Number:
Office Address:
Office Phone Number:
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 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 Xxxx, Trade Where Registration Registration
Name or Logotype Registered Number 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 06/17/75
Big Haul Principal 1,018,800 08/26/75
Protectors of Safety Saxon and
Design Principal 1,024,138 11/04/75
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
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Trademark, Service Xxxx, Trade Where Registration Registration
Name or Logotype Registered Number Date
Sonic Principal 805,575 03/15/66
Sun Valley III Principal 1,588,734 03/27/90
Big O Tires and Design Principal 1,611,160 08/28/90
Optima Principal 74/198,278 Pending
Procomp & Design Principal 74/298,320 Pending
Arapahoe Principal 74/271,501 Pending
Hydro-Trac Principal 74/357,214 Pending
A Reputation You Can Ride On Principal 74/360,838 Pending
Big Foot Principal 74/389,931 Pending
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
Xxxxxx Xxxxxxxx X00000 10/28/85
Extra Care Colorado T30670 04/22/86
Schedule 6 to Franchise Agreement
Page 2
-103-
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 _____________, 19_____ 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 paragraphs are hereby added to 6.03:
Notwithstanding any 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 months from the Commencement Date of the
Agreement in accordance with Schedule A, attached hereto and by
this reference incorporated herein. Franchisee will be
permitted to use Big O's trademarks, service marks, logos and
other identifying symbols or names, in its signage, advertising
and otherwise, in conjunction with any other previous signage or
identifying symbols or names for sixty (60) days 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 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 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. If Franchisee remains a Big O
franchisee at the Big O Store or Big O Stores 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.
2. Section 6.05 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.
3. Section 7.01(a) 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
Schedule 7 to Franchise Agreement
Page 1
-104-
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.
4. The following language shall be added to Section 7.01(b):
Big O will provide Franchisee with sample blueprints for
modification of the interior and exterior of Franchisee's
premises, if applicable, but makes no representations or
guarantees regarding the suitability of such blueprints for
required modification of Franchisee's premises.
5. The following language shall be added as Section 7.03:
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.
6. 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.
7. The terms and conditions of this Conversion 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.
Effective this _____ day of ________________, 199___.
BIG O TIRES, INC. FRANCHISEE:
_______________________________ __________________________________
(Print Name)
By: By:
Title: Title:
Schedule 7 to Franchise Agreement
Page 2
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