As filed with the Securities and Exchange Commission on October 21, 1996.
Registration No. 333-12957
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Amendment No. 1
to
Registration Statement Under The Securities Act of 1933
BOWLIN OUTDOOR ADVERTISING
& TRAVEL CENTERS INCORPORATED
(Name of small business issuer in its charter)
Nevada 5399 85-0113644
- ------------------------ ---------------------------- ------------------
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
150 Louisiana N.E., Albuquerque, New Mexico
87108, (505) 266-5985 (Address and telephone number of registrant's
principal executive offices and principal place of business)
---------------------------
Michael L. Bowlin
Chairman of the Board and President
150 Louisiana N.E.
Albuquerque, New Mexico 87108
(505) 266-5985
(Name, address, and telephone number of agent for service)
---------------------------
Copies to:
Christopher D. Johnson, Esq. Steven D. Pidgeon, Esq.
Squire, Sanders & Dempsey Snell & Wilmer L.L.P.
Two Renaissance Square One Arizona Center
40 North Central Avenue, Suite 2700 Phoenix, Arizona 85004
Phoenix, Arizona 85004 Telephone: (602) 382-6252
Telephone: (602) 528-4046 FAX: (602) 382-6070
FAX: (602) 253-8129
-----------------------------
Approximate date of proposed sale to the public: As soon as practicable from
time to time after this Registration Statement becomes effective.
-----------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.|_| __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering.|_| __________________
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
EXPLANATORY NOTE
BOWLIN Outdoor Advertising & Travel Centers Incorporated (the "Registrant")
has prepared this Amendment No. 1 to Registration Statement on Form SB-2 (Reg.
No. 333-12957) for the purpose of filing with the Securities and Exchange
Commission certain exhibits submitted herewith and no amendments to the
Registration Statement, with the exception of those corresponding to such
exhibits reflected in Item 27 of Part II, are intended to be effected hereby.
<PAGE>
Item 27. Exhibits
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
1.1 Form of Underwriting Agreement *
1.2 Form of Agreement Among Underwriters **
3.1 Articles of Incorporation of Registrant ***
3.2 By-laws of Registrant ***
4 Specimen of Common Stock Certificate **
5 Opinion of Squire, Sanders & Dempsey **
10.1 Form of Billboard Outdoor Advertising Agreement ***
10.2 Form of Poster Outdoor Advertising Agreement ***
10.3 Distributor Franchise Agreement, dated as of July 19, ***
1995, between the Registrant and CITGO Petroleum
Corporation
10.4 Form of Representative's Option *
10.5 Form of Employment Agreement, dated as of September
27, 1996, between the Registrant and Michael L. Bowlin *
10.6 Form of Employment Agreement, dated as of September
27, 1996, between the Registrant and C. Christopher Bess *
10.7 Loan Agreement, dated as of January 31, 1995, between
the Registrant and First Security Bank of New Mexico, *
N.A. ("First Security Bank")
10.8 Loan Agreement, dated as of May 16, 1995, between the *
Registrant and First Security Bank
10.9 Promissory Note, dated as of May 16, 1995, payable to *
First Security Bank in the aggregate principal amount of
$900,000
10.10 Revolving Promissory Note, dated as of June 1, 1996, *
payable by the Registrant to First Security Bank in the
aggregate principal amount of $150,000
10.11 Revision Agreement, dated as of May 16, 1995, between *
the Registrant and First Security Bank
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
10.12 Promissory Note, dated as of February 5, 1996, payable by *
the Registrant to Norwest Bank New Mexico, National
Association ("Norwest Bank") in the aggregate principal
amount of $1,700,00
10.13 Business Loan Agreement, dated as of February 5, 1996, *
between the Registrant and Norwest Bank
10.14 Promissory Note, dated as of February 5, 1996, payable *
by the Registrant to Norwest Bank in the aggregate
principal amount of $1,000,000
10.15 Promissory Note, dated as of February 5, 1996, payable *
by the Registrant to Norwest Bank in the aggregate
principal amount of up to $1,000,000
10.16 [Intentionally omitted]
10.17 Lease, dated as of November 22, 1966, between Clara *+
May Basset and the Registrant, as amended
10.18 Lease, dated as of January 12, 1987, between Janet *+
Prince and the Registrant
10.19 Commercial Lease, dated as of September 21, 1986, *
between the State of Arizona and the Registrant, as amended
10.20 Business Lease, dated as of March 16, 1995, between the New *
Mexico Commissioner of Public Lands and the Registrant,
as amended
10.21 Lease, dated as of June 3, 1974, between the Registrant *+
and Elbert and Ina Jean Roundy, as amended
10.22 Lease Agreement, dated as of June 23, 1989, between *+
the Registrant and Rex Kipp, Jr., as amended
10.23 Lease, dated as of September 29, 1983, between J.T. and *+
Idra M. Turner and the Registrant
10.24 Business Lease, dated as of October 1, 1991, between the *
Registrant and the New Mexico Commissioner of Public
Lands
10.25 Commercial Lease, dated as of September 21, 1986, *
between the Registrant and the State of Arizona, as
amended
10.26 Commercial Lease, dated as of June 11, 1986, between *
the Registrant and the State of Arizona, as amended
10.27 1996 Stock Option Plan ***
10.28 Profit-Sharing 401(k) Plan and Trust ***
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
10.29 Letter of Agreement, dated as of April 26, 1996, between ***
the Registrant and Miller Capital Corporation
10.30 Promissory Note, dated as of August 23, 1996, payable *
by the Registrant to Norwest Bank in the aggregate
principal amount of $535,000
10.31 Commercial Guaranty, dated August 23, 1996, by Michael L. Bowlin *
in favor of Norwest Bank New Mexico, National Association.
10.32 "Dairy Queen" Operating Agreement, dated as of March 10, 1983, *
between Interstate Dairy Queen Corporation and the Registrant
d/b/a DQ/B of Edgewood, NM, together with amendments and
ancillary agreements related thereto
10.33 "Dairy Queen" Operating Agreement, dated as of May 1, 1982, *
between Interstate Dairy Queen Corporation and the Registrant
d/b/a DQ/B of Flying C, New Mexico, together with amendments and
ancillary agreements related thereto
10.34 "Dairy Queen" Store Operating Agreement, dated as of November 18, *
1986, between Dairy Queen of Southern Arizona, Inc. and the
Registrant, together with amendments and ancillary agreements
related thereto
10.35 "Dairy Queen" Operating Agreement, dated as of September 1, *
1982, between Interstate Dairy Queen Corporation and the
Registrant d/b/a DQ of Bluewater, New Mexico, together with
amendments and ancillary agreements related thereto
10.36 "Dairy Queen" Operating Agreement, dated as of July 29, 1976, *
between Richard G. Kassel and G. Leone Kassel and the Registrant,
as amended
10.37 "Dairy Queen" Store Operating License Agreement, dated as of *
February 1, 1984, between Dairy Queen of Arizona, Inc. and the
Registrant, together with amendments and ancillary agreements
related thereto
10.38 "Dairy Queen" Operating Agreement dated as of October 30, *
1985, between Interstate Dairy Queen Corporation and the
Registrant, as amended
10.39 "Dairy Queen" Operating Agreement, dated as of June 7, 1989, *
between Interstate Dairy Queen Corporation and the Registrant
d/b/a "DQ" at Butterfield Station, together with amendments and
ancillary agreements related thereto
10.40 Letter of Agreement, dated as of March 1, 1987, between Stuckey's *
Corporation and the Registrant confirming franchise of Benson,
AZ Stuckey's Pecan Shoppe
10.41 Franchise Agreement, dated as of February 22, 1982, between *
Stuckey's, Inc. and the Registrant, together with a related
Personal Guaranty and Indemnity
11 Computation of Per Share Earnings ***
15 Letter on Unaudited Interim Financial Information **
16.1 Letter from Arthur Andersen LLP on Change in ***
Certifying Accountant
16.2 Letter from Ricci & Ricci on Change in Certifying ***
Accountant
21 List of Subsidiaries ***
23.1 Consent of KPMG Peat Marwick LLP ***
23.2 Consent of Ricci & Ricci ***
II-3
<PAGE>
23.3 Consent of Squire, Sanders & Dempsey To be included in
Exhibit 5
24 Powers of Attorney ***
99.1 Consent of James A. Clark ***
99.2 Consent of Brian McCarty ***
- ------------------
* Filed herewith.
** To be filed by Amendment.
*** Previously filed.
+ Confidential treatment requested as to certain portions of this exhibit.
II-4
</TABLE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Phoenix
and State of Arizona on October 18, 1996.
BOWLIN OUTDOOR ADVERTISING & TRAVEL
CENTERS INCORPORATED, a Nevada corporation
By /s/ Michael L. Bowlin
-----------------------------------
Michael L. Bowlin, President
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed below by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael L. Bowlin Chairman of the Board, Chief October 18, 1996
- -------------------------------------------- Executive Officer and President
Michael L. Bowlin (Principal Executive Officer)
* Chief Financial Officer (Principal October 18, 1996
- -------------------------------------------- Financial Officer; Principal
Michael E. Rising Accounting Officer)
* Executive Vice President, October 18, 1996
- -------------------------------------------- Chief Operating Officer and
C. Christopher Bess Director
</TABLE>
SB-1
<PAGE>
<TABLE>
<S> <C> <C>
*
- -------------------------------------------- Corporate Treasurer, October 18, 1996
Nina J. Pratz Chief Administrative Officer and
Director
*
- -------------------------------------------- Director October 18, 1996
Robert L. Beckett
*
- -------------------------------------------- Director October 18, 1996
Harold Van Tongeren
*By power of attorney
</TABLE>
SB-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
<S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Agreement Among Underwriters
3.1 Articles of Incorporation of Registrant
3.2 By-laws of Registrant
4 Specimen of Common Stock Certificate
5 Opinion of Squire, Sanders & Dempsey
10.1 Form of Billboard Outdoor Advertising Agreement
10.2 Form of Poster Outdoor Advertising Agreement
10.3 Distributor Franchise Agreement, dated as of July 19,
1995, between the Registrant and CITGO Petroleum
Corporation
10.4 Form of Representative's Option
10.5 Form of Employment Agreement, dated as of September
27, 1996, between the Registrant and Michael L. Bowlin
10.6 Form of Employment Agreement, dated as of September
27, 1996, between the Registrant and C. Christopher Bess
10.7 Loan Agreement, dated as of January 31, 1995, between
the Registrant and First Security Bank of New Mexico,
N.A. ("First Security Bank")
10.8 Loan Agreement, dated as of May 16, 1995, between the
Registrant and First Security Bank
10.9 Promissory Note, dated as of May 16, 1995, payable to
First Security Bank in the aggregate principal amount of
$900,000
10.10 Revolving Promissory Note, dated as of June 1, 1996,
payable by the Registrant to First Security Bank in the
aggregate principal amount of $150,000
10.11 Revision Agreement, dated as of May 16, 1995, between
the Registrant and First Security Bank
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.12 Promissory Note, dated as of February 5, 1996, payable by
the Registrant to Norwest Bank New Mexico, National
Association ("Norwest Bank") in the aggregate principal
amount of $1,700,00
10.13 Business Loan Agreement, dated as of February 5, 1996,
between the Registrant and Norwest Bank
10.14 Promissory Note, dated as of February 5, 1996, payable
by the Registrant to Norwest Bank in the aggregate
principal amount of $1,000,000
10.15 Promissory Note, dated as of February 5, 1996, payable
by the Registrant to Norwest Bank in the aggregate
principal amount of up to $1,000,000
10.16 [Intentionally Omitted]
10.17 Lease, dated as of November 22, 1966, between Clara
May Basset and the Registrant, as amended
10.18 Lease, dated as of January 12, 1987, between Janet
Prince and the Registrant
10.19 Commercial Lease, dated as of September 21, 1986,
between the State of Arizona and the Registrant, as amended
10.20 Business Lease, dated as of March 16, 1995, between the New
Mexico Commissioner of Public Lands and the Registrant,
as amended
10.21 Lease, dated as of June 3, 1974, between the Registrant
and Elbert and Ina Jean Roundy, as amended
10.22 Lease Agreement, dated as of June 23, 1989, between
the Registrant and Rex Kipp, Jr., as amended
10.23 Lease, dated as of September 29, 1983, between J.T. and
Idra M. Turner and the Registrant
10.24 Business Lease, dated as of October 1, 1991, between the
Registrant and the New Mexico Commissioner of Public
Lands
10.25 Commercial Lease, dated as of September 21, 1986,
between the Registrant and the State of Arizona, as
amended
10.26 Commercial Lease, dated as of June 11, 1986, between
the Registrant and the State of Arizona, as amended
10.27 1996 Stock Option Plan
10.28 Profit-Sharing 401(k) Plan and Trust
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.29 Letter of Agreement, dated as of April 26, 1996, between
the Registrant and Miller Capital Corporation
10.30 Promissory Note, dated as of August 23, 1996, payable
by the Registrant to Norwest Bank in the aggregate
principal amount of $535,000
10.31 Commercial Guaranty, dated August 23, 1996, by Michael L. Bowlin
in favor of Norwest Bank New Mexico, National Association.
10.32 "Dairy Queen" Operating Agreement, dated as of March 10, 1983,
between Interstate Dairy Queen Corporation and the Registrant
d/b/a DQ/B of Edgewood, NM, together with amendments and
ancillary agreements related thereto
10.33 "Dairy Queen" Operating Agreement, dated as of May 1, 1982,
between Interstate Dairy Queen Corporation and the Registrant
d/b/a DQ/B of Flying C, New Mexico, together with amendments and
ancillary agreements related thereto
10.34 "Dairy Queen" Store Operating Agreement, dated as of November 18,
1986, between Dairy Queen of Southern Arizona, Inc. and the
Registrant, together with amendments and ancillary agreements
related thereto
10.35 "Dairy Queen" Operating Agreement, dated as of September 1,
1982, between Interstate Dairy Queen Corporation and the
Registrant d/b/a DQ of Bluewater, New Mexico, together with
amendments and ancillary agreements related thereto
10.36 "Dairy Queen" Operating Agreement, dated as of July 29, 1976,
between Richard G. Kassel and G. Leone Kassel and the Registrant,
as amended
10.37 "Dairy Queen" Store Operating License Agreement, dated as of
February 1, 1984, between Dairy Queen of Arizona, Inc. and the
Registrant, together with amendments and ancillary agreements
related thereto
10.38 "Dairy Queen" Operating Agreement dated as of October 30,
1985, between Interstate Dairy Queen Corporation and the
Registrant, as amended
10.39 "Dairy Queen" Operating Agreement, dated as of June 7, 1989,
between Interstate Dairy Queen Corporation and the Registrant
d/b/a "DQ" at Butterfield Station, together with amendments and
ancillary agreements related thereto
10.40 Letter of Agreement, dated as of March 1, 1987, between Stuckey's
Corporation and the Registrant confirming franchise of Benson,
AZ Stuckey's Pecan Shoppe
10.41 Franchise Agreement, dated as of February 22, 1982, between
Stuckey's, Inc. and the Registrant, together with a related
Personal Guaranty and Indemnity
11 Computation of Per Share Earnings
15 Letter on Unaudited Interim Financial Information
16.1 Letter from Arthur Andersen LLP on Change in
Certifying Accountant
16.2 Letter from Ricci & Ricci on Change in Certifying
Accountant
21 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Ricci & Ricci
23.3 Consent of Squire, Sanders & Dempsey
24 Powers of Attorney
99.1 Consent of James A. Clark
99.2 Consent of Brian McCarty
</TABLE>
____________SHARES(1)
BOWLIN OUTDOOR ADVERTISING & TRAVEL
CENTERS INCORPORATED
COMMON STOCK
UNDERWRITING AGREEMENT
__________1996
HD BROUS & CO., INC.
As Representative of the
Several Underwriters
1700 North Central Avenue, Suite 1250
Phoenix, Arizona 85004
Ladies and Gentlemen:
Bowlin Outdoor Advertising & Travel Centers Incorporated, a
Nevada corporation (the "Company"), proposes, subject to the terms and
conditions of this Underwriting Agreement (this "Agreement"), to sell to you
(the "Representative") and the other underwriters listed on Schedule A hereto
(the "Underwriters"), for whom you are acting as Representative, an aggregate of
_______________ shares (the "Firm Shares") of the Company's Common Stock, $.001
par value per share (the "Common Stock"), in the respective amounts set forth
opposite the Underwriters' names in Schedule A hereto. The Company also proposes
to grant to the Underwriters (or, at your option, to you individually and not in
your capacity as Representative) an option (the "Overallotment Option") to
purchase up to an aggregate of ____________ additional shares of Common Stock of
the Company (the "Option Shares") on the terms and conditions set forth below.
The Firm Shares and the Option Shares are herein collectively called the
"Stock". Unless the context otherwise requires, references herein to the
"Company" include Bowlin Outdoor Advertising & Travel Centers Incorporated
together with its subsidiaries described in the Prospectus (hereinafter
defined).
The Company further agrees to sell to you, individually and
not in your capacity as Representative, a five-year option to purchase (the
"Purchase Option"), at a purchase price per share equal to 120% of the initial
public offering price of the Firm Shares, an aggregate of eight
________________________
(1)Plus an option to purchase up to 217,500 [15% of the Firm Shares]
additional shares from the Company to cover over-allotments.
-1-
<PAGE>
and one-half percent (8.5%) of the number of Firm Shares sold hereunder (the
"Purchase Option Stock").
The following terms, when used in this Agreement, shall have
the meanings indicated: "Commission" means the Securities and Exchange
Commission. "Effective Date" means each date that the Registration Statement or
any post-effective amendment or amendments to the Registration Statement became
or become effective. "Exchange Act" means the Securities Exchange Act of 1934,
as amended. "Execution Time" means the date and time that this Agreement is
executed and delivered by the parties hereto. "Preliminary Prospectus" means any
preliminary prospectus referred to in Section 1(a) below with respect to the
offering of the Stock, and any preliminary prospectus included in the
Registration Statement at the Effective Date that omits Rule 430A Information
(as defined below). "Prospectus" means the final prospectus containing the Rule
430A Information. "Registration Statement" means the registration statement
referred to in Section 1(a) below, including exhibits and financial statements
and schedules, in the form in which it has or shall become effective and, if any
post-effective amendment thereto becomes effective before any Closing Date (as
defined in Section 3), shall also mean such registration statement as so amended
on such date. Each of the terms "Preliminary Prospectus", "Prospectus" and
"Registration Statement" also includes documents incorporated therein by
reference. Such terms shall also include Rule 430A Information deemed to be
included therein at the Effective Date, as provided by Rule 430A. "Rule 424" and
"Rule 430A" refer to such rules under the Securities Act of 1933, as amended
(the "Securities Act"). "Rule 430A Information" means information with respect
to the Stock and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A. "Rules"
means the Rules and Regulations of the Commission.
1. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, each Underwriter that:
(a) The Company meets the requirements for the use of Form
SB-2 under the Securities Act, and has filed with the Commission a
Registration Statement, including related preliminary prospectuses, on
Form SB-2 (No. 333-12957) for the registration of the Stock under the
Securities Act. The Company may have filed one or more amendments to
the Registration Statement, including the related Preliminary
Prospectuses, each of which has previously been furnished to you. The
Company will next file with the Commission either, before effectiveness
of the Registration Statement, a further amendment thereto (including
the forms of final prospectuses) or, after effectiveness of the
Registration Statement, final prospectuses in accordance with Rules
430A and 424(b)(1) or (4). As filed, such amendment and forms of final
prospectuses, or such final prospectuses, shall include all Rule 430A
Information and, except to the extent you agree in writing to a
modification shall be in all substantive respects in the form furnished
to you prior to the Execution Time or, to the extent not completed at
the Execution Time, shall contain only such specific additional
information and other
-2-
<PAGE>
changes (beyond that contained in the latest Preliminary Prospectus) as
the Company has advised you in writing, prior to the Execution Time,
will be included or made therein.
(b) Each Preliminary Prospectus, when filed, complied and
conformed in all material respects with the applicable requirements of
the Securities Act and the Rules and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Commission has not issued any order
suspending or preventing the use of any Preliminary Prospectus. On the
Effective Date, the Registration Statement did or will, and when the
Prospectus is first filed (if required) in accordance with Rule 424(b),
and on each Closing Date, the Prospectus (and any supplements thereto)
will, comply and conform in all material respects with the applicable
requirements of the Securities Act and the Rules; on the Effective Date
and each Closing Date, the Registration Statement did not or will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), did not or will not,
and on the date of any filing pursuant to Rule 424(b) and on each
Closing Date, the Prospectus (and any supplements thereto) will not,
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or
warranties as to statements in or omissions from the information
included under the caption "Underwriting" in the Prospectus made in
reliance upon and in conformity with information furnished in writing
to the Company by or on behalf of any Underwriter, directly or through
you, specifically for inclusion in the Registration Statement (which,
without limitation of the foregoing, specifically excludes the last
paragraph of "Underwriting").
(c) The accountants whose report appears in or is
incorporated by reference into the Prospectus are independent
accountants as required by the Securities Act and the Rules. The
financial statements and schedules (including the related notes)
included in the Registration Statement, any Preliminary Prospectus or
the Prospectus, present fairly the financial condition, results of the
operations and cash flows of the entities purported to be shown thereby
at the dates and for the periods indicated and have been prepared in
accordance with the Rules and generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, and all
adjustments thereto necessary for a fair presentation of the results
for such periods have been made. The financial and other information of
the Company set forth in the Prospectus under the captions
-3-
<PAGE>
"Summary Consolidated Financial and Operating Data", "Dilution",
"Capitalization", "Selected Consolidated Financial Data", and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" fairly present, on the basis stated in the
Prospectus, the information included therein.
(d) The Company and each of its subsidiaries (the
"Subsidiaries") have been duly organized and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, with full power and authority
(corporate and other) to own or lease their respective properties and
conduct their businesses as described in the Prospectus, and are duly
qualified to do business and are in good standing in each jurisdiction
in which such qualification is required except for such jurisdictions
in which the failure to so qualify would not have a material adverse
effect on the business, results of operations, prospects, condition
(financial or otherwise) or assets or properties of the Company and the
Subsidiaries, taken as a whole (a "Material Adverse Effect").
(e) The capitalization of the Company as of
________________, 1996 is as set forth under the caption
"Capitalization" in the Prospectus, and the Common Stock conforms to
the description thereof contained under the caption "Description of
Securities" in the Prospectus. The Overallotment Option and the
Purchase Option conform in all respects to statements with respect
thereto contained in the Registration Statement and the Prospectus. The
outstanding shares of Common Stock have been, the Stock (upon delivery
and payment therefor in the manner described in this Agreement) will
be, and the Purchase Option Stock (when issued pursuant to the Purchase
Option) will be, duly authorized, validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership
thereof, and none of the shares of Common Stock have been and neither
the Stock nor the Purchase Option Stock will be issued in violation of
any preemptive or similar rights. There are no preemptive rights,
rights of first refusal or other rights to subscribe for or to
purchase, or any restriction upon the voting or transfer of, any shares
of Common Stock pursuant to the Company's Articles of Incorporation,
Bylaws or other governing documents or any agreement or other
instrument to which the Company is a party or by which it or any of its
properties may be bound. Except as disclosed in the Registration
Statement and the Prospectus and as otherwise previously approved by
you with respect to options granted pursuant to the Company's 1996
Stock Option Plan, there are no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of,
any shares of capital stock of the Company as such relate to the
authorized but unissued shares of capital stock of the Company and the
shares of Common Stock held by the officers and directors of the
Company. All outstanding options granted pursuant to the Company's 1996
Stock Option Plan were granted with exercise prices no less than the
initial offering price to the public of the Stock. All of the
outstanding
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<PAGE>
shares of capital stock of each Subsidiary are owned directly or
indirectly by the Company, free and clear of any claim, lien,
encumbrance or security interest.
(f) No holder of any security of the Company has the
right to have any security owned thereby included in the Registration
Statement, or to demand registration of any security owned thereby,
during the period ending 180 days after the date of this Agreement.
Each director, officer, and existing five percent (5%) stockholder of
the Company has delivered to the Representative such person's
enforceable written agreement that such person will not, for a period
of 180 days after the date of this Agreement, transfer or otherwise
dispose of, or offer or contract to sell (including, without
limitation, a short sale or a sale against the box), offer or otherwise
dispose of, directly or indirectly (except for transfers during such
person's lifetime, or on death or by will or intestacy, to his or her
immediate family or to a family trust; provided that such transferee
shall agree in writing to the restrictions on transfer referred to in
such agreement), whether pursuant to Rule 144, Rule 144A or Regulation
S of the Commission under the Securities Act or otherwise, any Common
Stock or any rights to purchase or acquire Common Stock or any
securities convertible into or exchangeable for Common Stock, without
your prior written consent.
(g) Except as disclosed in the Registration Statement and
the Prospectus, since the most recent date as of which information is
given in the Registration Statement and the Prospectus, (A) neither the
Company nor any of the Subsidiaries have incurred any liability or
obligation, direct or contingent, other than in the ordinary course of
business or entered into any transactions which, individually or in the
aggregate, is material to the Company and the Subsidiaries, taken as a
whole; (B) there has not been any change in the capital stock of the
Company, including but not limited to, any payment or declaration of
any dividends or any other distribution with respect to any shares of
the capital stock of the Company; and (C) there has not been any
material adverse change in the business, results of operations,
prospects, condition (financial or otherwise) or material assets or
properties of the Company and the Subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business and whether or not covered by insurance.
(h) Neither the Company nor any of the Subsidiaries is,
nor with the giving of notice or lapse of time or both would be, in
violation of or in default under, nor will the execution or delivery
hereof or consummation of the transactions contemplated pursuant to
this Agreement and the Purchase Option result in a violation of, or
constitute a default under, or cause acceleration or give any party the
right to cause acceleration of the Company's obligations under its
Articles of Incorporation, Bylaws or other governing documents, or any
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agreement, indenture or other instrument to which the Company or any of
the Subsidiaries is a party or by which it is bound, or to which any of
their properties is subject, nor will the performance by the Company of
its obligations pursuant to this Agreement and the Purchase Option
(assuming compliance with all applicable state securities and Blue Sky
laws) violate any law, rule, administrative regulation or decree of any
court, or any governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries or any of their respective
properties, or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of the Company
or any of the Subsidiaries. Except for permits and similar
authorizations required under the Securities Act and the securities or
Blue Sky laws of certain jurisdictions (such permits and authorizations
having been obtained), no consent, approval, authorization or order of
any court, governmental agency or body, financial institution or other
person or entity is required in connection with the consummation of the
transactions contemplated pursuant to this Agreement and the Purchase
Option. Neither the Company nor any of the Subsidiaries is in violation
of, or in default with respect to, any law, rule, regulation, writ,
order, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, the violation of or
default with respect to which, individually or in the aggregate, would
have a Material Adverse Effect.
(i) The descriptions in the Registration Statement and
the Prospectus of material contracts and other documents are accurate
in all material respects and present fairly the information required to
be disclosed under the Rules, and there are no contracts or other
documents required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement
under the Securities Act or the Rules which have not been so described
or filed as required. Each material contract or other instrument
(however characterized or described) to which the Company is a party or
by which its property or business is or may be bound or affected and to
which reference is made in the Prospectus has been duly and validly
executed by the Company, is in full force and effect in all material
respects and is enforceable against the parties thereto in accordance
with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of
courts in granting equitable remedies; none of such contracts or
instruments has been assigned by the Company and neither the Company
nor, to the best knowledge of the Company, any other party is in
default thereunder, which default would have a Material Adverse Effect,
and, to the best knowledge of the Company, no event has occurred which,
with the lapse of time or the giving of notice, or both, would
constitute a default thereunder, which would have a Material Adverse
Effect. None of the provisions of such contracts or instruments
violates any existing applicable law, rule, regulation, judgment, order
or decree of any governmental agency or court having jurisdiction over
the
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<PAGE>
Company or any of its assets or business, which violation would have a
Material Adverse Effect.
(j) The Company has filed all federal, state, local and
foreign tax returns that are required to be filed or has received valid
extensions with respect thereto and has paid all taxes and all
assessments to the extent that the same have become due. No tax
assessment or deficiency has been made or proposed against the Company,
nor has the Company received any notice of any proposed assessment or
deficiency. The charges, accruals and reserves shown in the financial
statements included in the Registration Statement and the Prospectus in
respect of taxes for all fiscal periods to date are adequate based on
current law. There is no unpaid assessment or proposal by any taxing
authority for additional taxes for which the Company does not have
adequate reserves for any fiscal year referenced in the Registration
Statement and Prospectus.
(k) With such exceptions as would not have a Material
Adverse Effect, (A) the Company and each of the Subsidiaries are in
compliance with all applicable federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants and there are no circumstances currently existing or
reasonably foreseeable that may prevent or interfere with such
compliance, and (B) there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any
chemical, pollutants, contaminants, wastes, toxic substances, petroleum
or petroleum products, that would result in the imposition of liability
on the Company or any Subsidiary.
(l) Except as disclosed in the Registration Statement and
the Prospectus, there is no litigation, arbitration, action, suit,
proceeding or investigation before or by any court or by any public,
regulatory or governmental agency, body or board, domestic or foreign,
pending or, to the Company's knowledge, threatened or contemplated
against, or involving the assets, properties or business of or
otherwise affecting, the Company or any of the Subsidiaries which (A)
if adversely determined, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, or (B)
might prevent the consummation of the transactions contemplated by this
Agreement. The aggregate of all pending legal, governmental and
regulatory proceedings to which the Company or any Subsidiary is a
party or which affect any of its properties and which are not described
in the Registration Statement and the Prospectus, including, without
limitation, ordinary routine litigation incidental to the business of
the Company or any Subsidiary, could not reasonably be expected to have
a Material Adverse Effect.
-7-
<PAGE>
(m) The Company and each of the Subsidiaries hold all
consents, authorizations, approvals, orders, certificates, licenses and
permits of and from, and have made all declarations and filings with,
all federal, state, local and other governmental authorities,
self-regulatory organizations and courts and other tribunals, necessary
to own, lease, license and use their respective properties and assets
and to conduct their respective businesses in the manner described in
the Prospectus, except to the extent that the failure to obtain or file
the same would not have a Material Adverse Effect.
(n) The Company and each of the Subsidiaries own or
possess adequate licenses or other rights to use all patents,
copyrights, trademarks, service marks, trade names, and applications
therefor, and other know-how, proprietary knowledge, and similar
intellectual property (collectively, "Intangibles") necessary for the
conduct of their respective businesses, and as described in the
Registration Statement and the Prospectus. Neither the Company nor any
Subsidiary has received any notice of infringement or conflict with (or
knows of any infringement or conflict with) the asserted rights of
others with respect to the Intangibles nor is it aware of any
infringement by others of the Intangibles.
(o) The Company and each of the Subsidiaries have good
and marketable title in fee simple to all items of real property and
good and valid title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except as
are disclosed in the Registration Statement and the Prospectus or as do
not materially affect the value of such property and do not interfere
with the use made or proposed to be made of such property by the
Company or any of the Subsidiaries. Any real property or buildings held
under lease by the Company or any of the Subsidiaries are held by it
under valid, existing and enforceable leases.
(p) The Company and each of the Subsidiaries have
insurance or indemnity agreements of the types and in the amounts
adequate for their businesses and consistent with insurance or
indemnity coverage maintained by companies of similar size and engaged
in similar businesses, including, but not limited to, general liability
insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against.
(q) No Subsidiary is prohibited, directly or indirectly,
from paying any dividend to the Company, from making any other
distribution on such Subsidiary's capital stock, from repaying to the
Company any loan or advances to such Subsidiary from the Company, or
from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary, except as described in the Prospectus.
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<PAGE>
(r) The Company has not taken and will not take, directly
or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company.
(s) The Stock is authorized for listing on the Nasdaq
National Market System ("NMS") upon official notice of issuance.
(t) All necessary corporate action has been duly and
validly taken by the Company to authorize the execution, delivery and
performance of this Agreement and the Purchase Option. This Agreement
has been duly authorized, executed and delivered by the Company and
constitutes, and the Purchase Option has been duly authorized and when
executed and delivered as contemplated herein will constitute, valid
and binding agreements of the Company, each enforceable against the
Company in accordance with its terms. The Registration Statement and
the filing of the Registration Statement with the Commission have been
duly authorized by and on behalf of the Company, and the Registration
Statement has been duly executed pursuant to such authorization by and
on behalf of the Company.
(u) Except as contemplated by this Agreement or as
disclosed in the Prospectus, no person has the right to any payment
(including, without limitation, any payment in the nature of a finder's
fee) in connection with the sale of the Stock resulting from any acts
of the Company.
(v) Except as disclosed in the Registration Statement
and the Prospectus, no transaction has occurred between or among the
Company or any of the Subsidiaries, on the one hand, and any of its
officers or directors or any affiliate or affiliates of any such
officer or director, on the other hand, that is required to be so
disclosed, including, but not limited to, any outstanding loans,
advances or guaranties of indebtedness by the Company to or for the
benefit of any affiliates of the Company or any of the Subsidiaries, or
any of the officers or directors of the Company, or any family member
of any of them. Except for the loans disclosed in Note (6) to the
Consolidated Financial Statements, any and all such loans shall be paid
off as of the Closing Date for the Firm Shares.
(w) Neither the Company nor any officers, directors,
employees or agents acting on behalf of the Company has at any time
during the last five (5) years (A) made any contributions to any
candidate for political office in violation of law, or failed to
disclose fully any contributions to any candidate for political office
in accordance with any applicable statue, rule, regulation or ordinance
requiring such disclosure, (B) made any payment to any local, state,
federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or allowed by
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<PAGE>
applicable law, (C) made any payment outside the ordinary course of
business to any purchasing or selling agent or person charged with
similar duties of any entity to which the Company sells or from which
the Company or any of the Subsidiaries buys products for the purpose of
influencing such agent or person to buy products from or sell products
to the Company, or (D) engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank
accounts and funds which have been and are reflected in the normally
maintained books and records of the Company. No director or officer has
been or is subject to any legal proceeding or limitation described in
Regulation ss. 228.401 promulgated under the Exchange Act and required
to be disclosed in the Registration Statement pursuant thereto which
has not been so disclosed.
(x) The Company and each of the Subsidiaries maintain a
system of internal accounting controls sufficient to reasonably ensure
that (A) transactions are executed in accordance with management's
general or specific authorization; (B) transactions are recorded as
necessary in order the permit preparation of financial statements in
accordance with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted
only in accordance with management's general or specific authorization;
and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(y) All letters, filings or applications delivered or to
be delivered by the Company or any of its directors or officers to the
Commission or any state securities law administrator in connection
with the issuance and sale of the Stock were, on the dates on which
they were delivered, and will be, on the dates on which they are to be
delivered, true, complete and correct in all material respects.
(z) Any certificates signed by an officer of the Company
and delivered to the Underwriters or to counsel for the Underwriters
shall also be deemed a representation and warranty of the Company to
the Underwriters as to the matters covered thereby as of the date of
such certificate. Any certificate delivered by the Company to its
counsel for purposes of enabling such counsel to render the opinions
referred to in Section 6(g) will also be furnished to the Underwriters
and counsel for the Underwriters and shall be deemed to be additional
representations and warranties by the Company to the Underwriters as to
the matters covered thereby as of the date of such certificate.
2. Purchase and Sale of Securities.
(a) On the basis of the representations, warranties,
covenants and agreements contained in this Agreement, but subject to
the terms and conditions herein set forth, the Company agrees to sell
to the Underwriters, and each
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<PAGE>
Underwriter agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $ _______[reflecting a 7% Gross
Discount] per share (the "Initial Price"), the number of Firm Shares
set forth opposite the name of such Underwriter on Schedule A hereto.
(b) In addition, upon written notice from you to the
Company not more than thirty (30) days after the date of the
Prospectus, and on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the several
Underwriters and each Underwriter agrees, severally and not jointly, to
purchase from the Company the number of Option Shares specified in such
notice at the purchase price per share set forth in Section 2(a) in the
same proportion as the number of Firm Shares set forth opposite such
Underwriter's name in Schedule A hereto bears to the total number of
Firm Shares (subject to adjustment by you to eliminate fractions). The
Option Shares may be purchased by the Underwriters only for the purpose
of covering over-allotments made in connection with the sale of the
Firm Shares. No Option Shares shall be sold or delivered unless the
Firm Shares previously have been, or simultaneously are, sold and
delivered. The right to purchase the Option Shares or any portion
thereof may be surrendered and terminated at any time upon notice by
you to the Company.
(c) On the basis of the representations, warranties,
covenants and agreements contained in this Agreement, but subject to
the terms and conditions herein set forth, the Company agrees to sell
to you for an aggregate price of $100.00 (for your own account and not
as Representative of the several Underwriters), on the First Closing
Date, an option to purchase up to 123,250 shares of Common Stock at a
price per share equal to 120% of the initial offering price to the
public (referred to herein as the "Purchase Option").
(d) The Purchase Option will be exercisable at any time
and from time to time on or after the first anniversary of the date of
this Agreement up to the fifth anniversary hereof. Each Purchase Option
shall be substantially identical to the form of Purchase Option filed
as an exhibit to the Registration Statement.
3. Delivery of and Payment for Stock.
(a) Delivery by the Company of the Firm Shares to you for
the respective accounts of the Underwriters and payment for the Firm
Shares shall be made at 7:00 am., Arizona time, on the third (3rd) full
business day following the first date that Stock is traded (unless
postponed pursuant to Sections 8 or 9 hereof), such time and date of
delivery being referred to herein as the "First Closing Date", at the
offices of HD Brous & Co., Inc., 1700 North Central Avenue, Suite 1250,
Phoenix, Arizona 85004 or such other place as may be agreed upon among
the
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<PAGE>
Representative and the Company. Payment of the purchase price for the
Firm Shares shall be by certified or official bank check or checks or
wire transfer payable to the Company in next day funds. If the
Representative so elects, delivery of the Firm Shares may be made by
credit through full fast transfer to the accounts at The Depositary
Trust Company designated by the Representative.
(b) In the event the Overallotment Option is exercised,
delivery by the Company of the Option Shares to you for the respective
accounts of the Underwriters and payment for the Option Shares shall be
made at the offices of HD Brous & Co., Inc. specified in paragraph (a)
of Section 3 at the time and on the date (which may be the same date
as, but in no event shall be earlier than, the First Closing Date) set
forth in the notice referred to in Section 2(b) hereof (such time and
date of delivery being referred to herein as the "Second Closing Date")
or such other place as may be agreed upon among the Representative and
the Company. Payment of the purchase price for the Option Shares shall
be by certified or official bank check or checks or wire transfer
payable to the Company in next day funds. The First Closing Date and
the Second Closing Date are collectively referred to herein as the
"Closing Date."
(c) Certificates evidencing the Stock shall be registered
in such names and shall be in such denominations as you shall request
at least two full business days prior to the First Closing Date or, in
the case of Option Shares, prior to the Second Closing Date and shall
be made available to you for checking and packaging, at such place as
is designated by you, not later than 9:30 a.m. on the business day
immediately preceding the First Closing Date or, in the case of Option
Shares, the Second Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Stock for sale to the public as set forth in
the Prospectus.
5. Certain Agreements of the Company. The Company agrees with
each Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement, and any amendment thereof, if not effective at
the Execution Time, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule
424(b), the Company will file the Prospectus, properly completed,
pursuant to Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to you of such timely filing. The Company
will promptly advise you (i) when the Registration Statement shall have
become effective, (ii) when any amendment thereof shall have become
effective, (iii) of any request by the Commission for any amendment or
supplement of the Registration
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<PAGE>
Statement or the Prospectus or for any additional information, (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (v) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Stock for sale in any jurisdiction or the
initiation or threatening of such stop order or suspension and, if
issued, to obtain as soon as possible its withdrawal. The Company will
not file any amendment to the Registration Statement or supplement to
the Prospectus without your prior consent, provided that such consent
shall not be unreasonably withheld. The Company will prepare and file
with the Commission, promptly upon your request, any amendment to the
Registration Statement or supplement to the Prospectus that may be
necessary or advisable in connection with the distribution of the Stock
by you, and use its best efforts to cause the same to become effective
as promptly as possible.
(b) The Company shall, during the period of time when a
prospectus relating to the Stock is required to be delivered under the
Securities Act and the Rules, comply with all requirements imposed by
the Securities Act and the Rules so far as is necessary to permit the
continuance of sales of or dealings in the Stock in accordance with the
provisions hereof and of the Prospectus. The Company consents to the
use of the Prospectus or any amendment or supplement thereto by the
several Underwriters and by all dealers to whom the Stock may be sold,
both in connection with the offering or sale of the Stock and for such
period of time thereafter as the Prospectus is required by law to be
delivered in connection therewith. If during such period of time any
event shall occur as a result of which, in the opinion of counsel to
the Company or counsel to the Underwriters, the Prospectus as then
amended or supplemented includes any untrue statement of a material
fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if, in the opinion of counsel to the
Company or counsel to the Underwriters, it shall be necessary to amend
or supplement the Prospectus to comply with the Securities Act or the
Rules or any other applicable law, the Company shall so notify you
promptly and, at its expense, forthwith prepare and duly file with the
Commission an appropriate amendment or supplement to the Prospectus (in
form and substance reasonably satisfactory to you and counsel to the
Underwriters) which shall correct such statement or omission or which
shall effect such compliance, and the Company shall use its best
efforts to have any such amendment or supplement declared effective as
soon as possible.
(c) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its security holders in the manner contemplated by Rule
158(b) of the Securities Act an earnings statement (which need not be
audited) covering a period of at least 12 months
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beginning after the Effective Date complying with the provisions of
Section 11(a) of the Securities Act. For purposes of the preceding
sentence, "Availability Date" means the 45th day after the end of the
fourth fiscal quarter following the fiscal quarter that includes the
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter.
(d) The Company will furnish to you copies of the
Registration Statement (two of which will be signed and will include
all exhibits), each Preliminary Prospectus, the Prospectus and all
amendments and supplements to such documents, in each case as soon as
available and in such quantities as you reasonably request.
(e) The Company will cooperate with the Underwriters and
counsel to the Underwriters to arrange for the qualification of the
Stock for sale under the laws of such jurisdictions as you designate
and will continue such qualifications in effect so long as required for
the distribution of the Stock, except that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process or to subject itself to
taxation for doing business in any jurisdiction.
(f) The Company will cause the Stock to be listed on the
NMS and will comply with all registration, filing and reporting
requirements of the Exchange Act and the NMS that may from time to time
apply to the Company. The Company will use its best efforts to keep the
Stock listed on the NMS for not less than five (5) years, provided,
that such listing shall not be required if the Stock is listed on the
American Stock Exchange or the New York Stock Exchange.
(g) The Company (i) will apply net proceeds from the
offering received by it in the manner set forth under "Use of Proceeds"
in the Prospectus, subject to the qualifications set forth therein, and
in no event shall any proceeds be used to repay any indebtedness to any
officer, director or five (5%) shareholder, or affiliate thereof, and
(ii) will file Form SR in conformity with the requirements of the
Securities Act and the Rules.
(h) The Company shall not file any amendment or
supplement to the Registration Statement or Prospectus at any time
prior to, or during the period ending on the date one year after, the
effective date of the Registration Statement, unless such filing shall
comply with the Securities Act and unless you shall previously have
been advised of such filing and furnished a copy thereof and you
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and counsel to the Underwriters shall not have objected to such filing
within five business days of receipt thereof.
(i) Until five years after the date of this Agreement,
the Company will furnish to you and, upon request, to each of the other
Underwriters, without charge, as soon as available, (i) copies of such
financial statements and other periodic and special reports as the
Company may from time to time distribute generally to the holders of
any class of its capital stock, (ii) copies of each annual or other
report it shall be required to file with the Commission (including the
Report on Form SR required by Rule 463 of the Rules), and (iii) from
time to time, such other information concerning the Company as you, or
such other Underwriters, may reasonably request.
(j) Whether or not this Agreement becomes effective or is
terminated or the sale of the Stock to the Underwriters is consummated,
the Company shall pay or cause to be paid (A) all costs and expenses
(including stock transfer taxes) incurred in connection with the
delivery to the several Underwriters of the Stock and the Purchase
Option Stock, (B) all fees, costs and expenses including, without
limitation, fees and expenses of the Company's accountants and counsel
in connection with the preparation, printing, filing, delivery and
shipping of the Registration Statement (including the financial
statements therein and all amendments and exhibits thereto), each
Preliminary Prospectus as amended or supplemented and the printing,
delivery and shipping of this Agreement and other underwriting
documents, including Underwriters' Questionnaires, Underwriters' Power
of Attorney, Blue Sky Memoranda, Agreements Among Underwriters and
Selected Dealer Agreements and any letters transmitting the offering
material to selling group members (including costs of mailing and
shipment), (C) all costs, filing fees, and expenses in connection with
the registration or qualification of the Stock for offer and sale under
the securities or Blue Sky laws of the various jurisdictions referred
to in Section 5(e) herein, including the fees and disbursements of
counsel to the Underwriters not to exceed $25,000 in connection with
such registration and qualification and the preparation, printing,
distribution and shipment of preliminary, supplementary and final Blue
Sky Memoranda, (D) the filing fee of the National Association of
Securities Dealers, Inc. ("NASD") and the fees and disbursements of
counsel to the Underwriters in connection with and clearance of the
offering of Stock with the NASD, (E) any applicable NMS listing fees,
(F) the cost of printing certificates representing the Stock and the
Purchase Option Stock, (G) the cost and charges of any transfer agent
or registrar, (H) the costs of furnishing (including costs of shipping
and mailing) to you and to the Underwriters of copies of all reports
and information required by Section 5(i) hereof, (I) costs of inclusion
of the Stock for quotation on the NMS, (J) tombstone advertising costs,
(K) all transfer taxes, if any, with respect to the sale and delivery
of the Stock and the Purchase Option Stock by the Company to the
Underwriters, (L) all
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costs associated with the Company's marketing of the Stock, including
any presentation, travel, slides, hotel, charges for meeting rooms
relating to the road show, and other costs of the Company in connection
with the offering, (M) the cost of preparing bound volumes of the
documents relating to the public offering of Common Stock contemplated
hereby, and (N) all other costs and expenses incident to the
performance of its obligations hereunder that are not otherwise
specifically provided for in this Section.
(k) In addition to its other obligations under Section
5(j) hereof, the Company will pay to you, individually and not in your
capacity as Representative, a nonaccountable expense allowance equal to
one-quarter of one percent (.25%) of the initial public offering price
of the Stock to the public. The nonaccountable expense allowance with
respect to the Firm Shares shall be paid to you on the Closing Date and
the nonaccountable expense allowance with respect to the Option Shares
shall be paid to you on the closing of the sale to you of such Option
Shares. The Company has previously paid to you a fee of $10,000 (the
"Deposit") which shall be credited to this nonaccountable expense
allowance. If the sale of the Stock is not completed for any reason,
including your failure to complete the offering contemplated by this
Agreement (except if the Company prevents such completion or if your
failure to complete the offering is the result of the breach by the
Company of any representation, warranty, covenant or agreement
contained in this Agreement), you agree to return the Deposit, less
actual out-of-pocket expenses incurred. If the offering is not
completed because the Company prevents such completion or because of a
breach by the Company of any representations, warranties, covenants or
agreements in this Agreement, upon your delivery to the Company or the
Company's delivery to you of a notice of termination of the offering
contemplated by this Agreement, you shall retain the Deposit, and in
addition, the Company shall pay you for any and all of your expenses,
including legal fees (not to exceed $40,000) incurred in connection
with the offering.
(l) In addition to its other obligations under Section
7(a) hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 7(a) hereof, it will reimburse the
Underwriters on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Company's obligation to reimburse
the Underwriters for such expenses and the possibility that such
payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Company.
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(m) So long as the Company's Common Stock is registered
under the Exchange Act, the Company will maintain a transfer agent and,
if necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for its
Common Stock.
(n) For at least five years after the date of this
Agreement, the Company will use its best efforts to maintain insurance
of the types and in the amounts that it deems adequate for its business
and consistent with insurance coverage maintained by companies of
similar size and engaged in similar businesses, including, but not
limited to, general liability insurance covering all real and personal
property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against.
(o) For a period of six (6) months following the
Effective Time, the Company will not register under the Securities Act,
offer, sell, contract to sell or otherwise dispose of any additional
shares of its Common Stock or any security convertible into or
exchangeable for its Common Stock without your prior written consent,
except issuances by the Company pursuant to the exercise of stock
options granted under the 1996 Stock Option Plan described in the
Prospectus. For a period of one year following the Effective Time, the
Company will not adopt any new stock-based plan or compensation
arrangements or increase the number of shares available for issuance
under its 1996 Stock Option Plan, except with your prior written
consent.
(p) The Company agrees that you (for your own account and
not as the Representative of the several Underwriters) shall have for a
period of two (2) years from the Effective Date the right to purchase
for your account or to sell for the account of the Company, its
Subsidiaries or any of the Company's executive officers and directors
or five percent (5%) stockholders (collectively, the "Affiliates") any
securities with respect to which the Company or any of the Affiliates
may seek a public offering of the Company's securities pursuant to a
registration under the Securities Act or otherwise (including a sale
pursuant to Rule 144 of the Securities Act) or a private offering of
the Company's securities. The Company and the Affiliates will consult
with you with regard to any such offering and will offer you
exclusively the opportunity to purchase, sell, or act as underwriter or
placement agent for the purchase or sale of any such securities on
terms no less favorable to the Company or the Affiliates, as the case
may be, than they can secure elsewhere. If you fail to accept in
writing such proposal for the financing made by the Company or the
Affiliates, as the case may be, within twenty (20) business days (two
(2) business days with respect to proposed sales under Rule 144) after
receipt of a notice containing such proposal, then you shall have no
further claim or right with respect to the financing proposal contained
in such notice. If, thereafter, such proposal is modified in any
material respect, the
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Company or the Affiliates, as the case may be, shall adopt the same
procedure as with respect to the original proposal. If you do not avail
yourself of such opportunity to act as underwriter or placement agent,
you will forfeit any preferential rights for future financings. The
Company and the Affiliates acknowledge that violation of the rights set
forth in this Section 5(p) would cause irreparable harm to you, and
agree that you shall be entitled to injunctive relief to prevent any
violation of the provisions of this Section 5(p). The Company
represents and warrants that no other person or entity has any rights
to participate in any offer, sale or distribution of securities with
respect to which you shall have preferential rights except as provided
in this Section 5(p). You may exercise the right of first refusal
granted pursuant to this Section 5(p) either on your own behalf or
together with another firm or firms designated in writing by you.
(q) The Company agrees that it will use its best efforts,
including the efforts of you if offered, to obtain key person life
insurance on the lives of such persons as you may reasonably designate.
Such key person life insurance will be payable to the Company and the
Company will use its best efforts to keep such insurance in force for a
minimum of period of either three (3) years from the Effective Date of
the Registration Statement or the respective initial terms of the
employment agreements between the Company and such persons, whichever
period is longer.
(r) Commencing prior to the filing of the Registration
Statement and for at least two (2) years after the Effective Date, the
Company will maintain at least three (3) independent directors
reasonably acceptable to you on the Company's board of directors
("Board") if the Board consists of six (6) or less directors (or four
(4) such directors if the Board is comprised of seven (7) to ten (10)
directors). In the event the Board appoints committees thereof, at
least one (1) independent director shall be a member of each such
committee.
(s) If at any time during the ninety (90) day period
after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur
as a result of which in your opinion the market price of the Common
Stock has been or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates a supplement to
or amendment of the Prospectus), the Company will, if reasonably
requested by you, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor,
publication or event.
6. Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Firm Shares and the Option
Shares, as the case may be, at any Closing Date, and the other obligations of
the Underwriters hereunder will be subject
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to the accuracy of the representations and warranties on the part of the
Company, both at the Execution Time and at and as of each Closing Date, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the timely performance by the Company of its obligations hereunder
and to the following additional conditions precedent:
(a) The Registration Statement shall have become
effective (or, if a post-effective amendment is required to be filed
pursuant to Rule 430A under the Act, such post-effective amendment
shall have become effective) not later than 2:00 pm. Arizona time, on
the date of this Agreement or at such later date and time as you may
approve in writing, and at each Closing Date.
(b) No order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus shall have been made or shall
be in effect and no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof shall
have been issued and no proceedings for the issuance of such an order
shall have been initiated or threatened by the Commission or any Blue
Sky or other securities authority of any jurisdiction, and any request
on the part of the Commission or any Blue Sky or other securities
authority of any jurisdiction for additional information (to be
included in the Registration Statement or the Prospectus or otherwise)
shall have been disclosed to you and complied with to the reasonable
satisfaction of you and counsel to the Underwriters.
(c) Neither the Registration Statement nor the Prospectus
shall contain an untrue statement of fact which is material or shall
omit to state a fact which, in your opinion, is material or is required
to be stated therein or is necessary to make the statements therein not
misleading.
(d) At the Execution Time and at each Closing Date, you
shall have received a letter, dated the date of delivery thereof, of
KPMG Peat Marwick LLP addressed to the Company and the Underwriters, in
form and substance satisfactory to you, confirming that they are
independent public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published Rules and
stating in effect that:
(i) In their opinion the financial statements
and schedules examined by them and included in the
Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the related published Rules;
(ii) In their opinion, the amounts under the
headings "Summary Consolidated Financial and Operating Data",
"Dilution",
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"Capitalization", "Selected Consolidated Financial Data",
"Management's Discussion and Analysis of Financial Condition
and Results of Operations", and "Business" included in the
Registration Statement and the Prospectus, to the extent
derived from the audited and unaudited financial statements of
the Company, agree with the corresponding amounts in the
audited and unaudited financial statements of the Company from
which such amounts were derived;
(iii) On the basis of a reading of the amounts
included in the Registration Statement and the Prospectus,
carrying out certain procedures (not constituting an
examination in accordance with generally accepted auditing
standards) consisting of a reading of the latest available
unaudited interim financial statements of the Company and
certain other information, inspection of the minutes of the
meetings of the stockholders and the Board of Directors of the
Company, inquiries of certain officials of the Company who
have responsibility for financial and accounting matters of
the Company as to transactions and events subsequent to the
date of the latest audited financial statements included in
the Registration Statement and the Prospectus and such other
inquiries and procedures as may be specified in such letter,
nothing came to their attention which caused them to believe
that:
A. any unaudited statement of income,
balance sheet, statement of changes in stockholders'
equity or statement of cash flows of the Company is
not in conformity with generally accepted accounting
principles applied on a basis consistent with that
for the audited financial statements as of, and for
the two (2) years ended, January 31, 1996, or that
any such unaudited statements included in the
Registration Statement and the Prospectus do not
comply in all material respects with the applicable
accounting requirements of the Securities Act, except
as permitted by the staff of the Commission;
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<PAGE>
B. any unaudited statement of income data
and balance sheet data of the Company included in the
Registration Statement and the Prospectus do not
agree with the corresponding items in the unaudited
financial statements from which such data and items
were derived, or that such unaudited data and items
were not determined on a basis substantially
consistent with the basis for the corresponding
amounts in the audited financial statements as of,
and for the two (2) years ended, January 31, 1996;
C. as of a specified date not more than five
days prior to the date of delivery of such letter,
there were any changes in the capital stock of the
Company or any increase in the current liabilities
(other than accounts payable and accrued liabilities)
or long-term debt and capital lease obligations of
the Company, or any decreases in working capital or
in net assets or stockholders' equity of the Company,
or any decreases or increases, as the case may be, in
other items specified by you, in each case as
compared with amounts shown on the Company's audited
balance sheet as of January 31, 1996 and unaudited
and pro forma balance sheets as of [July 31], 1996
included in the Registration Statement and the
Prospectus; and
D. for the period from [July 31], 1996 to a
specified date not more than five days prior to the
date of delivery of such letter, there were any
decreases in revenues or decreases in income before
income tax provisions or the total or per share
amounts of net income, or any decreases or increases,
as the case may be, in other items specified by you,
in each case as compared with comparable periods of
corresponding length, except in each case for
increases or decreases which the Registration
Statement and the Prospectus disclose have occurred
or may occur;
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statement
and the Prospectus (in each case to the extent that such
dollar amounts, percentages and other financial information
are derived from the general accounting records of the Company
or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a
reading of such general accounting records and other
procedures specified in such letter and have found such dollar
amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in
such letter.
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(e) You shall have received from KPMG Peat Marwick LLP a
letter addressed to the Company and made available to you for the use
of the Underwriters stating that in planning and performing their audit
of the audited financial statements included or incorporated by
reference in the Registration Statement, they noted no matters
involving the Company's internal controls that they consider to be
material weaknesses.
(f) After the execution and delivery of this Agreement,
there shall not have occurred (i) any material loss to or interference
with the businesses or properties of the Company from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, or, in your reasonable opinion, any material adverse
change, or any development reasonably likely to result in a material
adverse change (including, without limitation, a change in management
or control of the Company) in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company
or its subsidiaries; (ii) if trading in the Stock has been suspended by
the Commission or trading generally on the NMS, New York Stock
Exchange, Inc. or on the American Stock Exchange, Inc. has been
suspended or limited, or minimum or maximum ranges for prices of
securities shall have been fixed, or maximum ranges for prices of
securities have been required, by such exchanges or by order of the
Commission, the National Association of Securities Dealers, Inc. or any
other governmental or regulatory authority; (iii) any banking
moratorium declared by Federal or state bank authorities; (iv) any
domestic or international event or act or occurrence that shall have
materially disrupted, or in your reasonable opinion will in the future
materially disrupt, the securities markets; (v) there shall have
occurred any new outbreak or material escalation of hostilities or
other calamity or crisis the effect of which on the financial markets
of the United States is such as to make it, in your reasonable
judgment, inadvisable or impracticable to proceed with the offering; or
(vi) there shall be such a material adverse change in the general
financial, political or economic conditions or the effect of
international conditions on the financial markets in the United States
as to make it, in your reasonable judgment, inadvisable or
impracticable to market the Stock.
(g) On each Closing Date, you shall have received an
opinion, dated such Closing Date, of Squire, Sanders & Dempsey, counsel
for the Company to the effect that:
(i) The Company and each of the Subsidiaries
have been duly incorporated and each is an existing
corporation in good standing under the laws of its
jurisdiction of incorporation, each with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus, and the Company and each of the
Subsidiaries is duly qualified and in good
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<PAGE>
standing as a foreign corporation in each jurisdiction in
which, to the knowledge of such counsel, the character or
location of its assets or properties (whether owned, leased or
licensed) or the nature or conduct of its business makes such
qualification necessary, except for such jurisdictions in
which the failure to so qualify would not have a Material
Adverse Effect. To the knowledge of such counsel, as of the
date of such opinion, neither the Company nor any of the
Subsidiaries has received any claim or notice from any
official authority in any jurisdiction in which the Company or
any of the Subsidiaries is not qualified to do business in the
effect that the Company or any of the Subsidiaries is required
to be so qualified;
(ii) The Company and each of the Subsidiaries
have all requisite corporate power and authority and, to the
knowledge of such counsel, all necessary Permits of and from
all public, regulatory or governmental officials and bodies
(domestic and foreign), to (A) own, lease, license and operate
their respective assets and properties and conduct their
respective businesses as now being conducted and as described
in the Registration Statement and the Prospectus, and (B)
execute and deliver this Agreement and issue the Purchase
Option, perform its obligations under this Agreement and the
Purchase Option, and issue and sell the Stock and the Purchase
Option Stock. To the knowledge of such counsel, there are no
proceedings pending or threatened, relating to the revocation
or modification of any such Permit nor, to the knowledge of
such counsel after due inquiry, has any event occurred which
allows or which, with notice or lapse of time or both, would
allow) revocation or termination of any such Permit or which
would result in any other impairment of the rights of the
holder of any such Permit;
(iii) Each of this Agreement and the Purchase
Option has been duly and validly authorized, executed and
delivered by or on behalf of the Company and (except as to
rights to indemnity for violations of federal securities laws,
as to which counsel need not express any opinion) constitutes
the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms;
subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies;
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<PAGE>
(iv) All of the issued and outstanding shares of
Common Stock have been, and the Firm Shares and the Option
Shares, if any, to be sold by the Company under this
Agreement, when delivered and paid for in accordance with the
terms of the Underwriting Agreement will be, duly and validly
authorized and issued and fully-paid and nonassessable, with
no personal liability attaching to the ownership thereof, and
to such counsel's knowledge, will not be issued in violation
of or subject to any preemptive rights or other rights to
subscribe for or purchase Common Stock. The authorized, issued
and outstanding capital stock of the Company conforms in all
material respects to all statements in relation thereto
contained in the Registration Statement and the Prospectus.
The form of certificate used to evidence the Stock is in due
and proper form and complies with Nevada law. The Purchase
Option Stock has been duly authorized and reserved for
issuance and, when issued and delivered in accordance with the
terms of the Purchase Option, will be duly and validly issued
and fully-paid and nonassessable, with no personal liability
attaching to the ownership thereof, and to such counsel's
knowledge, will not be issued in violation of or subject to
any preemptive rights or other rights to subscribe for or
purchase Common Stock. The Stock and Purchase Option Stock
have been approved for listing on the NMS. Except as described
in the Registration Statement and the Prospectus, there are no
preemptive rights or other rights to subscribe for or to
purchase, or any restrictions upon the voting or transfer of,
any shares of Common Stock under the Company's Articles of
Incorporation or ByLaws, any statute, rule or regulation, or,
to the knowledge of such counsel, any other agreement, permit,
judgment, decree, order or instrument to which the Company is
a party or by which the Company is bound;
(v) None of (A) the execution, delivery and
performance of this Agreement or the Purchase Option, (B) the
consummation of the transactions contemplated by this
Agreement or the Purchase Option, including, without
limitation, the issuance, sale and delivery of the Firm
Shares, Option Shares or Purchase Option Stock, if any, to be
sold by the Company or (C) compliance with the terms and
provisions of this Agreement and the Purchase Option will (1)
conflict with or result in a breach of any of the terms or
provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) or require consent or waiver under, or result in the
creation or imposition of
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<PAGE>
any lien, charge, encumbrance, security interest, claim or
other restriction of any nature whatsoever upon any property
or assets of the Company, pursuant to the terms of any
indenture, mortgage, deed of trust, note or other agreement,
instrument or Permit of which such counsel is aware and to
which the Company is party or by which the Company or any of
its properties, assets or business thereof may be bound or (2)
violate or conflict with any provisions of the Articles of
Incorporation or Bylaws of the Company, or any judgment,
decree, order, statute, rule or regulation of any court or,
to the knowledge of such counsel, of any Permit public,
governmental or other regulatory agency or body having
jurisdiction over the Company or its properties or assets.
(vi) To the knowledge of such counsel, the Company
is not in breach or violation of any term or provision of its
Articles of Incorporation or Bylaws, or any indenture,
mortgage, deed of trust, note or other agreement or
instrument, or any Permit, judgment, decree, statute, rule or
regulation;
(vii) The Registration Statement, the Preliminary
Prospectus and the Prospectus and each amendment or supplement
thereto (except for the financial statements and schedules and
other financial and statistical data included therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the
Securities Act and the Rules;
(viii) To such counsel's knowledge, all contracts,
agreements and other documents required to be described in or
filed as exhibits to the Registration Statement or the
Prospectus have been so described or filed as exhibits to the
Registration Statement and the Prospectus, or an amendment or
supplement thereto;
(ix) The Registration Statement is effective
under the Securities Act, and any required filing of the
Prospectus or any supplement thereto pursuant to Rule 424(b)
has been made in the manner and within the time period
required by Rule 424(b). To such counsel's knowledge, no order
suspending the effectiveness of the Registration Statement, or
any post-effective amendment thereof, has been issued and no
proceedings therefor have been instituted or are pending or
threatened or contemplated;
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<PAGE>
(x) To such counsel's knowledge, there is no
litigation, arbitration, action, suit or governmental or other
proceeding or investigation before or by any court or before
or by any public, regulatory or governmental agency or body,
domestic or foreign, pending or threatened against, or
involving the assets, properties or business of, the Company
or any of the Subsidiaries which is not properly described in
the Registration Statement and the Prospectus and which (A) is
required to be disclosed in the Registration Statement or the
Prospectus, (B) if adversely determined, could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect or (C) might prevent the consummation of this
Agreement or the Purchase Option;
(xi) To such counsel's knowledge, there is no
person holding any right to require or participate in the
registration under the Securities Act of the Common Stock to
be effected by the Registration Statement, the rights of which
have not been satisfied or waived in their entirety with
respect to such registration;
(xii) To the extent that the statements contained
in the Prospectus under the headings "Risk Factors",
"Business," "Management," "Description of Securities," and
statements contained elsewhere in the Prospectus refer to
opinions of such counsel or matters of law or purport to
summarize the provisions of statutes, regulations, contracts,
agreements or other documents, such statements have been
reviewed by such counsel and are correct in all material
respects (except that such counsel need express no opinion as
to the completeness of such statements);
(xiii) The Company is not, and following the
transactions contemplated by this Agreement will not be,
subject to regulation as an investment company under the
Investment Company Act of 1940, as amended;
(xiv) Such counsel has no reason to believe that
the offer and sale of all securities of the Company made
within the last three years as set forth in Item 26 of the
Registration Statement were not exempt from the registration
requirements of the Securities Act, pursuant to the provisions
set forth in such Item, and from the regulation or
qualification requirements of all relevant state securities
laws.
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<PAGE>
In rendering the foregoing opinion, counsel may state that
such opinion is limited to federal and applicable state law, which
shall include the laws of Arizona and the general corporate laws of
Nevada and New Mexico, and rely, as to matters of fact, upon
certificates of responsible officers of the Company and on certificates
of public officials, and may base its opinion upon such reasonable
investigations and assumptions as shall be set forth in such opinion.
The opinion of such counsel for the Company shall state that such
counsel has participated in conferences with officers and other
representatives of the Company, representatives of the Representatives
and counsel for the Representatives at which the contents of the
Registration Statement and related matters were discussed and, although
such counsel has not independently verified, is not passing upon and
does not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement, no
facts have come to the attention of such counsel that lead it to
believe that the Registration Statement, as of the Effective Date,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus as of the
Closing Date includes an untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need not comment as
to the financial statements and other financial or statistical data
included in the Registration Statement, and the Prospectus or the
exhibits to the Registration Statement).
(h) On each Closing Date, you shall have received from
Snell & Wilmer L.L.P., counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to the incorporation of
the Company, the validity of the Stock, the Registration Statement, the
Prospectus and other related matters as you may require, and the
Company shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters.
(i) On each Closing Date, you shall have received a
certificate, dated such Closing Date, of the President and the
principal financial officer of the Company, in which such officers
shall state that the representations and warranties of the Company in
this Agreement are true and correct on and as of the date of this
Agreement and such Closing Date, that the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or before such Closing Date, that no stop order
suspending the effectiveness of the Registration Statement has been
issued and, to the knowledge of such officers, no proceedings for that
purpose have been instituted or are contemplated by the Commission and
that, after the date of the most recent financial statements in the
Prospectus, there has been no change in the financial
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position or results of operation of the Company and its Subsidiaries
except as set forth in or contemplated by the Prospectus, which would
have a Material Adverse Effect.
(j) On each Closing Date, you shall have received a
letter, dated such Closing Date, of KPMG Peat Marwick LLP that meets
the requirements of subsection (d) of this Section, except that the
specified date referred to in such subsection will not be more than
five days before such Closing Date for purposes of this subsection.
(k) You shall have received an agreement from each
director, officer and 5% stockholder of the Company, in form and
substance reasonably satisfactory to you, that such director, officer
and security holder will not offer, sell, pledge, hypothecate or
otherwise dispose of (including any short sale or sale against the
box), whether publicly, privately pursuant to Rule 144, 144A or
Regulation S, any shares of the Company's Common Stock or any security
convertible into or exchangeable for such Common Stock without your
prior written consent for six (6) months after the Effective Time.
(l) The Purchase Option shall have been issued and sold
to you as provided hereunder.
(m) As of the Effective Date, the Stock shall have been
authorized for quotation on the NMS upon official notice of issuance
and registered under Section 12(g) of the Exchange Act.
The Company will furnish you with such conformed copies of such
opinions, certificates, letters and documents as you reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all respects when and as provided in this Agreement, or if any
of the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
you and your counsel, you may cancel this Agreement and all obligations of the
Underwriters hereunder at, or at any time prior to, any Closing Date. Notice of
such cancellation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the
Securities Act, the Exchange Act or
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otherwise (including, without limitation, all costs of investigating,
disputing or defending any such claim or action or any amount paid in
settlement thereof), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon (i) the breach of any representation or warranty, covenant or
agreement of the Company in any document delivered hereunder (ii) any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related Preliminary Prospectus,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any
untrue statement or alleged untrue statement of a material fact
contained in any application or other document or communication
executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities or
Blue Sky laws thereof or filed with the Commission or any securities
exchange, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iv) any untrue statement or
alleged untrue statement of any material fact contained in any audio or
visual materials used in connection with the marketing of the Stock
produced by the Company, indluding without limitation, slides, videos,
film and tape recordings, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such losses, claims,
damages, liabilities or actions as such expenses are incurred;
provided, however, that the Company will not be liable in any such case
(i) to the extent that any such losses, claims, damages or liabilities
arise out of or are based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from the information
included under the heading "Underwriting" in the Prospectus in reliance
upon and in conformity with written information furnished to the
Company by you or by or on behalf of any Underwriter through you
specifically for inclusion therein; or (ii) with respect to any
Preliminary Prospectus, to the extent that any such losses, claims,
damages or liabilities are asserted by a purchaser of Stock who was not
sent or given by any Underwriter seeking indemnity hereunder a copy of
the Prospectus (as then amended or supplemented), if such Underwriter
was required by law to have delivered such Prospectus to such person at
or prior to the written confirmation of the sale of Stock to such
person, and the Prospectus would have cured the defect giving rise to
such loss, claim, damage or liability.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related Preliminary Prospectus,
or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that any
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<PAGE>
such losses, claims, damages or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement or omission or
alleged omission from the information included under the heading
"Underwriting" in the Prospectus in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
such Underwriter, directly or through you, specifically for use therein
(exclusive of the last paragraph thereof), and will reimburse any legal
or other expenses reasonably incurred by the Company in connection with
investigating or defending any such losses, claims, damages,
liabilities or actions as such expenses are incurred, and provided,
further, that the obligation of each Underwriter to indemnify the
Company (including any controlling person, director or officer thereof)
shall be limited to the discount received by the Underwriter in the
offering.
(c) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect is to be made against the
indemnifying party under subsection (a), or (b) above, notify the
indemnifying party of the commencement thereof, enclosing a copy of all
papers served, but the omission so to notify such indemnifying part of
any such action, suit or proceeding shall not relieve such indemnifying
party from any liability that such indemnifying party may have to any
indemnified party otherwise than under this Section 7 except to the
extent materially prejudiced by such failure. In case any such action
is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and
the approval by the indemnified party of such counsel, the indemnifying
party will not be liable to such indemnified party under this Section
for any legal or other expenses, except as provided below and except
for the reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its counsel in any
such action, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the employment of counsel
by such indemnified party has been authorized in writing by the
indemnifying parties, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the
indemnifying parties and the indemnified party in the conduct of the
defense of such action or that there may be defenses available to the
indemnified party that are not available to the indemnifying party (in
which case the indemnifying parties shall not have the right to direct
the defense of such action on behalf of the indemnified party) or (iii)
the indemnifying parties shall not have employed counsel to assume the
defense of such action within a reasonable time after notice of the
commencement thereof, in
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<PAGE>
each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying parties. An indemnifying party shall not be
liable for any settlement for any action, suit, proceeding or claim
effected without its written consent, which consent shall not be
unreasonably withheld.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for
in subsection 7(a), (b) or (c) above is due in accordance with its
terms but for any reason is held to be unavailable from the Company,
the Company and the Underwriters shall contribute to the aggregate
losses, claims, damages, liabilities and expenses (including, without
limitation, legal and other expenses incurred in connection with, and
any amount paid in settlement of, any action, suit, proceeding or
litigation, or any claim, but after deducting any contribution received
by the Company from persons other than the Underwriters, such as
persons who control the Company within the meaning of the Securities
Act, officers of the Company who signed the Registration Statement and
directors of the Company who may also be liable for the contribution)
to which the Company and one or more of the Underwriters may be subject
in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand, and the Underwriters, on the
other, from the offering of the Stock or, if such allocation is not
permitted by applicable law, then each party shall contribute to
amounts paid or payable to the other parties in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company, on the one hand, and the Underwriters,
on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same
proportion as (a) the total proceeds from the offering (net of
underwriting discounts but before deducting expenses) received by the
Company, as set forth in the table on the cover page of the Prospectus,
bear to (b) the underwriting discounts received by the Underwriters, as
set forth in the table on the cover page of the Prospectus. The
relative fault of the Company, on the one hand, or the Underwriters, on
the other, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
related to information supplied by the Company, on the one hand, or the
Underwriters, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this
Section 7(d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of
this Section 7(d), (i) in no case shall any Underwriter (except as
otherwise agreed among the Underwriters) be liable or
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<PAGE>
responsible for any amount in excess of the underwriting discount
applicable to the Stock purchased by such Underwriter hereunder and
(ii) the Company shall be liable and responsible for any amount in
excess of such underwriting discount; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any
party entitled to contribution will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another
party or parties under this Section 7(d), notify such party or parties
from whom contribution may be sought, but the omission so to notify
such party or parties from whom contribution may be sought shall not
relieve the party or parties from whom contribution may be sought from
any other obligation such party or parties may have hereunder or
otherwise than under this Section 7(d). No party shall be liable for
contribution with respect to any action, suit, proceeding or claim
settled without its written consent, which shall not be unreasonably
withheld. The Underwriters' obligations to make contributions pursuant
to this Section 7(d) are several in proportion to their respective
underwriting commitments and not joint.
(e) The obligations of the Company under this Section
shall be in addition to any liability that the Company may otherwise
have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the
Securities Act or the Exchange Act. The obligations of the Underwriters
under this Section shall be in addition to any liability the respective
Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each person named
as a director nominee in the Prospectus, to each officer of the Company
who has signed the Registration Statement and to each person, if any,
who controls the Company within the meaning of the Securities Act or
the Exchange Act.
(f) It is understood that the indemnifying party shall,
in connection with any one action, suit, or proceeding or separate but
substantially similar or related actions, suits, or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only
one separate firm of attorneys (in addition to any local counsel) at
any time for all indemnified parties not having actual or potential
differing interests among themselves, which firm shall be designated by
a majority of such indemnified parties.
8. Default by the Company.
(a) If the Company shall fail on the First Closing Date
or, if any Option Shares are to be purchased, the Second Closing Date,
as the case may be, to sell
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<PAGE>
and deliver the number of Firm Shares or Option Shares, as the case may
be, which the Company is obligated to sell hereunder, then this
Agreement shall terminate without any liability on the part of any
Underwriter.
(b) In the event of a default by the Company under this
Section 8, the Underwriters shall have the right to postpone the First
Closing Date or, if any Option Shares are to be purchased, the Second
Closing Date, as the case may be, for a period not exceeding seven days
in order to effect any required changes in the Registration Statement
or Prospectus or in any other documents or arrangements.
(c) No action taken pursuant to this Section 8 shall
relieve the Company from any liability, if any, in respect of such
default.
9. Substitution of Underwriters. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Sections 8 or 10 hereof) to
purchase on any Closing Date the shares of Stock agreed to be purchased on such
Closing Date by such Underwriter or Underwriters, you may find one or more
substitute underwriters to purchase such Stock or make such other arrangements
as you may deem advisable or one or more of the remaining Underwriters may agree
to purchase such Stock in such proportions as may be approved by the
Representative, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date:
(a) If the number of shares of Stock to be purchased by
the defaulting Underwriters on such Closing Date shall not exceed 10%
of the Stock that all the Underwriters are obligated to purchase on
such Closing Date, then each of the nondefaulting Underwriters shall be
obligated to purchase such shares on the terms herein set forth in
proportion to their respective obligations hereunder; provided,
however, that in no event shall the maximum number of shares of Stock
that any Underwriter has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 9 by more than one-ninth
of such number of shares without the written consent of such
Underwriter, or
(b) If the number of shares of Stock to be purchased by
the defaulting Underwriters on such Closing Date shall exceed 10% of
the Stock that all the Underwriters are obligated to purchase on such
Closing Date, then the Company shall be entitled to an additional
business day within which it may, but is not obligated to, find one or
more substitute Underwriters reasonably satisfactory to you to purchase
such shares of Stock upon the terms set forth in this Agreement.
In any such case, either you or the Company shall have the right to
postpone the applicable Closing Date for a period of not more than seven
business days in order that necessary changes and arrangements including any
necessary amendments or supplements to the Registration
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<PAGE>
Statement or Prospectus) may be effected by you and the Company, and the Company
agrees to prepare and file promptly any amendment or supplement to the
Registration Statement or the Prospectus which in the opinion of counsel to the
Underwriters may thereby be made necessary. If the number of shares of stock to
be purchased on such Closing Date by such defaulting Underwriter or Underwriters
shall exceed 10% of the shares of Stock that all the Underwriters are obligated
to purchase on such Closing Date, and none of the nondefaulting Underwriters or
the Company shall make arrangements pursuant to this Section 9 within the period
specified for the purchase of the shares of Stock that the defaulting
Underwriters agreed to purchase, this Agreement shall terminate with respect to
the Shares to be purchased on such Closing Date without liability on the part of
any nondefaulting Underwriter to the Company and without liability on the part
of the Company, except in both cases as otherwise provided for in Sections 5(j),
(k) and (l) and, 7, 8 and 11 hereof. The provisions of this Section shall not in
any way affect the liability of any defaulting Underwriter to the Company or the
nondefaulting Underwriters arising out of such default. The term "Underwriter"
as used in this Agreement shall include any party substituted under this Section
9 as if such party had originally been aparty to this Agreement and had been
allocated the aggregate number of (i) such Stock actually purchased by such
party as a result of its original commitment to purchase Stock, plus (ii) Stock
purchased pursuant to this Section 9.
10. Termination. The obligations of the several Underwriters to
purchase the Stock may be terminated at any time prior to any Closing Date by
notice to the Company from the Representative at any time if in the discretion
of the Representative at or before any Closing Date, upon or prior to such date
(i) there shall have occurred any material loss to or interference with the
businesses or properties of the Company from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding, or any material adverse change, or any
development which, in your reasonable opinion, is likely to result in a material
adverse change (including, without limitation, a change in management or control
of the Company) in the condition (financial or otherwise), business, prospects,
net worth or results of operations of the Company or its subsidiaries; (ii)
trading in the Stock has been suspended by the Commission or trading generally
on the NMS, New York Stock Exchange, Inc. or on the American Stock Exchange,
Inc. has been suspended or limited, or minimum or maximum ranges for prices of
securities shall have been fixed, or maximum ranges for prices of securities
have been required, by such exchange or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental or regulatory
authority; (iii) any banking moratorium has been declared by Federal or state
bank authorities; (iv) any domestic or international event or act or occurrence
shall have occurred that shall have materially disrupted, or in your reasonable
opinion will in the future materially disrupt, the securities markets generally;
(v) there shall have occurred any new outbreak or material escalation of
hostilities or other calamity or crises the effect of which on the financial
markets of the United State is such as to make it, in your reasonable judgment,
inadvisable or impracticable to proceed with the offering; or (vi) there shall
be such material adverse change in general financial, political or economic
condition or the effect of international conditions on the financial markets in
the United
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<PAGE>
States, in any such case as to make it, in your reasonable judgment, inadvisable
or impracticable to market the Stock.
11. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers, and the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the Company, or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Stock. If this Agreement is terminated
pursuant to Section 8 or if for any reason the purchase of the Stock by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed pursuant to Sections 5(j), (k) (subject to the
limitations therein) and (l) and the respective obligations of the Company and
the Underwriters pursuant to Sections 7 and 8 shall remain in effect, and if the
Agreement is terminated after the First Closing Date, the representations and
warranties in Section 1 and all obligations under Section 5 shall also remain in
effect. If the purchase of Stock by the Underwriters is not consummated for any
reason (other than a default by the Underwriters), the Company will reimburse
the Underwriters for all out of pocket expenses including, but not limited to,
such costs as telephone calls, courier service, copying, accommodations, travel
and fees and disbursements for legal counsel.
12. Applicable Law; Consent to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Arizona. If any action or proceedings shall have been brought by the Company or
by any of the Underwriters in order to enforce any right or remedy under this
Agreement or relating to or arising out of the transactions contemplated hereby,
the Company and each of the Underwriters hereby consent to, and agree to submit
to, the jurisdiction of the Superior Court of the State of Arizona for the
County of Maricopa and of any United States federal court sitting in the City of
Phoenix, and waive any claim of improper venue or forum non conveniens as to any
such action or proceeding. The Company and each Underwriter hereby irrevocably
agree that process in any such action or proceeding may be served in the manner
provided by Arizona law for service on foreign corporations or other entities.
13. Notices. All communications hereunder will be in writing and,
if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to HD Brous & Co., Inc., 1700 North Central Avenue, Suite 1250,
Phoenix, Arizona 85004, or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at 150 Louisiana N.E., Albuquerque, New Mexico
87108, Attention: President; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and
confirmed to such Underwriter.
14. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives,
successors and the officers and directors and controlling persons referred to in
Section 7, and no other person will have any right or obligation hereunder.
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<PAGE>
15. Representation of Underwriters. You will act for the several
Underwriters in connection with this financing, and any action under this
Agreement taken by you will be binding upon all of the Underwriters.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
BOWLIN OUTDOOR ADVERTISING & TRAVEL
CENTERS INCORPORATED
By: ___________________________________
Michael L. Bowlin
Title: Chairman of the Board, President and Chief
Executive Officer
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<PAGE>
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
HD BROUS & CO., INC.
By:_________________________
Its:___________________________
For itself and for the other
several Underwriters listed in
Schedule A to the foregoing
Agreement
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<PAGE>
SCHEDULE A
Number of
Shares
of Stock
---------
HD Brous & Co., Inc.
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THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS OPTION HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ( THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND SUCH LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH LAWS.
EXERCISABLE ON OR BEFORE
5:00 P.M, ARIZONA TIME,_____, 2001
OPTION TO PURCHASE SHARES
OF COMMON STOCK OF
BOWLIN OUTDOOR ADVERTISING &
TRAVEL CENTERS INCORPORATED
No._____
FOR VALUE RECEIVED, Bowlin Outdoor Advertising & Travel Centers
Incorporated, a corporation organized and existing under the laws of the State
of Nevada (the "Company"), promises to issue in the name of, and sell and
deliver to HD Brous & Company (the "Holder"), a certificate or certificates for
an aggregate of ______ shares (the "Shares") of common stock, $.001 par value
per share, of the Company ("Common Stock"), upon surrender of this Option to
Purchase Shares (the "Option" or "Options") and payment therefor of the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $ ______ per Share. Payment of the Exercise Price shall be made by cashier's
check or wire transfer payable to the Company. This Option shall be exercisable
at any time after _____________ , 1997 and prior to 5:00 P.M., Arizona time, on
_________ , 2001 (the "Exercise Period"), and shall be void thereafter.
The Shares are as described in the Company's Registration Statement
(No. 333-______) dated __________ , 1996 (the "Registration Statement").
1. TRANSFERABILITY AND FORM OF WARRANT.
a. Registration. The Options shall be registered in the name
of the Holder.
b. Transfer. The Options shall be transferable only on the
books of the Company maintained at its principal executive offices upon
surrender thereof for registration of transfer duly endorsed by the Holder or by
its duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. Upon any
registration of transfer, the Company shall execute and deliver a new Option or
Options in appropriate denominations to the person or persons entitled thereto.
<PAGE>
c. Limitations on Transfer of the Options. Subject to the
provisions of Section 3, the Options shall not be sold, transferred, assigned or
hypothecated by the Holder until _________, 1997, except to (i) one or more
persons, each of whom on the date of transfer is an officer or partner of the
Holder or to other underwriters or selling group members, or officers or
partners thereof, participating in the Company's initial public offering of
Common Stock; (ii) a successor to the Holder in a merger or consolidation; (iii)
a purchaser of all or substantially all of the Holder's assets; or (iv) any
person receiving the Options from one or more of the persons listed in this
subsection 1(c) at such person's or persons' death pursuant to will, trust or
the laws of intestate succession. The Options may be divided or combined, upon
request to the Company by the Holder, into a certificate or certificates
representing the right to purchase the same aggregate number of Shares. Unless
the context indicates otherwise, the term "Holder" shall include any transferee
or transferees of the Options pursuant to this subsection 1(c), and the term
"Option" shall include any and all options outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer pursuant to this Agreement.
2. FORM OF OPTIONS. The form of election to purchase Shares shall be
substantially as set forth in Exhibit A attached hereto. The number of Shares
issuable upon exercise of the Options is subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Options shall be
executed on behalf of the Company by its President or by a Vice President, and
attested to by its Secretary or an Assistant Secretary. An Option bearing the
signature of an individual who was at the time the proper officer of the Company
shall bind the Company, notwithstanding that such individual shall have ceased
to hold office prior to the delivery of such Option or did not hold such office
on the date of this Agreement. The Options shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
3. EXCHANGE OF OPTION CERTIFICATES. Any Option certificate may be
exchanged for another certificate or certificates of like tenor entitling the
Holder to purchase a like aggregate number of Shares as the certificate or
certificates surrendered then entitle such Holder to purchase. Any Holder
desiring to exchange an Option certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Options to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Option
certificate as so requested.
4. LEGEND ON OPTIONS. This Option and all replacement Options shall
bear the following legend:
The securities issuable upon the exercise of this Option have
not been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws and may not
be sold, transferred, pledged or otherwise disposed of unless
pursuant to an effective registration statement under the Act
and such laws or pursuant to an exemption from registration
under the Act and such laws.
5. LEGEND ON SHARES. Each certificate for Shares initially issued upon
exercise of an Option, unless at the time of exercise such Shares are registered
under the Securities Act of 1933, as amended (the "Act"), shall bear the
following legends:
2
<PAGE>
The Shares of Common Stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended ("Act"), or any state securities laws and may not be
sold, transferred, pledged or otherwise disposed of unless
pursuant to an effective registration statement under the Act
and such laws or pursuant to an exemption from registration
under the Act and such laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the securities represented thereby) shall also bear the above
legend unless the Company receives an opinion of counsel reasonably acceptable
to the Company that registration or qualification of the securities represented
thereby under the laws referred to therein is not required.
6. TERM OF OPTION; EXERCISE OF OPTION. Subject to the terms of this
Option, the Holder shall have the right, at any time on or before 5:00 p.m.,
Arizona time on ______________, 2001 (the "Expiration Time"), to purchase from
the Company up to the number of Shares which the Holder may at the time be
entitled to purchase pursuant to the terms of this Option, upon surrender to the
Company at its principal executive office, of the certificate evidencing this
Option to be exercised, together with the attached purchase form duly filled in
and signed, and upon payment to the Company of the applicable Exercise Price for
the number of Shares with respect to which such Option is then exercised.
Payment of the aggregate Exercise Price shall be made by cashier's check, wire
transfer or any combination thereof.
Subject to the terms of this Option, upon such surrender of
this Option and payment of the applicable Exercise Price and any applicable
taxes, the Company shall promptly issue and cause to be delivered to the Holder
or to such person or persons as the Holder may designate in writing (subject to
applicable securities laws), a certificate or certificates (in such name or
names as the Holder may designate in writing) for the number of duly authorized,
fully paid and non-assessable whole Shares so purchased upon the exercise of
this Option, and shall deliver to the Holder Common Stock or cash, to the extent
provided in Section 12 hereof, with respect to any fractional Shares otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of such Shares as of the close of business on the
date of the surrender of this Option and payment of the Exercise Price,
notwithstanding that the certificates representing such Shares shall not
actually have been delivered or that the Share and Options transfer books of the
Company shall then be closed. This Option shall be exercisable, at the election
of the Holder, either in full or from time to time in part and, in the event
that any certificate evidencing this Option (or any portion thereof) is
exercised prior to the Expiration Time with respect to less than all of the
Shares specified therein at any time prior to the Expiration Time, a new
certificate of like tenor evidencing the remaining portion of this Option shall
be issued by the Company.
Each person in whose name any certificate for shares of Common
Stock shall be issued shall for all purposes be deemed to have become the holder
of record of the Common Stock represented thereby on the date on which the
Option was surrendered and payment of the purchase price and any applicable
taxes was made, irrespective of the date of issue or delivery of such
certificate. The Company shall not close such Share transfer books at any one
time for a period longer than seven days.
3
<PAGE>
7. PAYMENT OF TAXES. The Company shall pay all transfer, documentary
stamp and similar taxes, if any, attributable to the initial issuance of the
Shares; provided, however, that the Company shall not be required to pay any tax
or taxes which may be payable, (i) with respect to any secondary transfer of
this Option or the Shares or (ii) as a result of the issuance of the Shares to
any person other than the Holder, and the Company shall not be required to issue
or deliver any certificate for any Shares unless and until the person requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have produced evidence that such tax has been paid to the appropriate
taxing authority.
8. LOST, MUTILATED OR MISSING OPTION. In case the certificate or
certificates evidencing this Option shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Holder, issue and deliver in
exchange and substitution for and upon cancellation of the mutilated certificate
or certificates, or in lieu of and substitution for the certificate or
certificates lost, stolen or destroyed, a new Option certificate or certificates
of like tenor and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft
or destruction of such Option and, if requested by the Company, a bond of
indemnity, reasonably satisfactory to the Company in form and amount, and issued
at Holder's cost. Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
9. RESERVATION OF SHARES. The Company has reserved, and shall at all
times so long as this Option remains outstanding, keep reserved, out of its
authorized and unissued capital stock, such number of shares of Common Stock as
shall be subject to purchase under this Option. As a condition precedent to the
taking of any action that would result in the effective purchase price per share
of Common Stock upon the exercise of this Option being less than the par value
per share (if such shares of Common Stock then have a par value), the Company
will take such corporate action as may, in the opinion of its counsel, be
necessary in order that the Company may comply with all of its obligations under
this Agreement with regard to the exercise of this Option.
All shares of Common Stock issued upon exercise of this option
in accordance with the terms of this Option shall be validly authorized and
issued, fully paid and nonassessable, and the Company shall pay all transfer,
documentary stamp and similar taxes in respect of the issue thereof.
10. EXERCISE PRICE. The Exercise Price at which Shares shall be
purchasable upon the exercise of this Option shall be $_____ per Share [120% of
the Initial Public Offering Price]. The Exercise Price is subject to adjustment
pursuant to Section 11 hereof.
11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Option and the Exercise
Price shall be subject to adjustment from time to time after the date hereof
upon the happening of certain events, as follows:
a. Adjustments. The number of Shares purchasable upon the
exercise of this Option shall be subject to adjustment as follows:
(i) In case the Company shall (i) pay a dividend on Common
Stock in Common Stock or securities convertible into, exchangeable for or
otherwise entitling a holder thereof to receive Common Stock, (ii) declare a
dividend payable in cash on its Common Stock and at substantially the
4
<PAGE>
same time offer its shareholders a right to purchase new Common Stock (or
securities convertible into, exchangeable for or other entitling a holder
thereof to receive Common Stock) from the proceeds of such dividend (all Common
Stock so issued shall be deemed to have been issued as a stock dividend), (iii)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iv) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (v) issue by reclassification of
its Common Stock any shares of Common Stock of the Company, the number of shares
of Common Stock issuable upon exercise of the Options immediately prior thereto
shall be adjusted so that the holders of the Options shall be entitled to
receive after the happening of any of the events described above that number and
kind of shares as the holders would have received had such Options been
exercised immediately prior to the happening of such event or any record date
with respect thereto. Any adjustment made pursuant to this subdivision shall
become effective immediately after the close of business on the record date in
the case of a stock dividend and shall become effective immediately after the
close of business on the effective date in the case of a stock split,
subdivision, combination or reclassification.
(ii) In case the Company shall distribute, without receiving
consideration therefor, to all holders of its Common Stock evidences of its
indebtedness, securities other than Common Stock, rights or warrants to
subscribe for securities of the Company or property or assets (including cash),
then in such case, the number of shares of Common Stock thereafter issuable upon
exercise of the Options shall be determined by multiplying the number of shares
of Common Stock theretofore issuable upon exercise of the Options, by a
fraction, of which the numerator shall be the closing bid price if publicly
traded (or fair market value as reasonably determined by the Board of Directors
of the Company, as the case may be) per share of Common Stock on the record date
for such distribution, and of which the denominator shall be the closing bid
price of the Common Stock less the then fair value (as reasonably determined by
the Board of Directors of the Company, whose determination shall be conclusive)
of the portion of the assets, securities or evidences of indebtedness so
distributed per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
distribution.
(iii) Any adjustment in the number of shares of Common Stock
issuable hereunder otherwise required to be made by this Section 11 will not
have to be made if such adjustment would not require an increase or decrease of
one percent (1%) or more in the number of shares of Common Stock issuable upon
exercise of the Option, and when the cumulative net effect of more than one
adjustment shall be to increase or decrease by one percent (1%) or more the
number of shares of Common Stock issuable upon exercise of the Option, such
adjustment in the number of shares of Common Stock issuable hereunder shall
thereupon be given effect.
(iv) Whenever the number of shares of Common Stock issuable
upon the exercise of the Options is adjusted, as herein provided, the Exercise
Price shall be adjusted (to the nearest cent) by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of shares of Common Stock issuable upon the exercise of an Option
immediately prior to such adjustment, and of which the denominator shall be the
number of shares of Common Stock issuable immediately thereafter.
(v) The Company from time to time by action of its Board of
Directors may decrease the Exercise Price by any amount for any period of time
if the period is at least 20 days, the decrease is irrevocable during the period
and the Board of Directors of the Company in its sole
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discretion shall have made a determination that such decrease would be in the
best interests of the Company, which determination shall be conclusive. Whenever
the Exercise Price is decreased pursuant to the preceding sentence, the Company
shall mail to holders of record of the Options a notice of the decrease at least
15 days prior to the date the decreased Exercise Price takes effect, and such
notice shall state the decreased Exercise Price and the period it will be in
effect.
b. Mergers, Etc.. In the case of any (i) consolidation or
merger of the Company into any entity (other than a consolidation or merger that
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), (ii) sale, transfer, lease
or conveyance of all or substantially all of the assets of the Company as an
entirety or substantially as an entirety, or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value, or from par value to no par value), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
holder of Options then outstanding shall have the right thereafter to exercise
such Option only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of shares of Common
Stock of the Company for which such Options could have been exercised
immediately prior to such consolidation, merger, sale, transfer, capital
reorganization or reclassification, assuming such holder of Common Stock of the
Company (A) is not an entity with which the Company consolidated or into which
the Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("constituent entity"), or an affiliate of
a constituent entity, and (B) failed to exercise his or her rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger, sale
or transfer by other than a constituent entity or an affiliate thereof and in
respect of which such rights or election shall not have been exercised
("non-electing share"), then for the purpose of this Section 11(b) the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). If necessary, appropriate adjustment shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of the holders of Options, to the end that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of the shares. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, capital reorganizations and reclassifications. The Company shall not
effect any such consolidation, merger, sale or transfer unless prior to or
simultaneously with the consummation thereof the successor company or entity (if
other than the Company) resulting from such consolidation, merger, sale or
transfer shall assume, by written instrument, the obligation to deliver to the
holders of Options such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to receive under this
Section 11(b).
c. Notice. Upon the happening of any event requiring an
adjustment of the Option purchase price hereunder, the Company shall forthwith
give written notice thereof to the registered Holder of each Option, stating the
adjusted Exercise Price and the adjusted number of shares of Common Stock
purchasable upon the exercise thereof resulting from such event, and setting
forth in reasonable detail the method of calculation.
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d. Statement on Option. Irrespective of any adjustments in the
Exercise Price or the number or kind of shares purchasable upon the exercise of
this Option, this Option certificate or certificates hereafter issued may
continue to express the same price and number and kind of shares as are stated
in this Option.
12. FRACTIONAL SHARES. Any fractional shares of Common Stock issuable
upon exercise of the Options shall be rounded to the nearest whole share or, at
the election of the Company, the Company shall pay the holder thereof an amount
in cash equal to the closing bid price if publicly traded (or fair market value
as reasonably determined by the Board of Directors, as the case may be) of the
fraction thereof. Whether or not fractional shares are issuable upon exercise
shall be determined on the basis of the total number of Options the holder is at
the time exercising and the number of shares of Common Stock issuable upon such
exercise.
13. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDER. Nothing contained in
this Option shall be construed as conferring upon the Holder or its transferees
any rights as a stockholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a stockholder with respect to any
meeting of stockholders for the election of directors of the Company or any
other matter. If, however, at any time prior to the expiration of the Exercise
Period and prior to the exercise of this Option, any of the following events
shall occur:
(a) any action which would require an adjustment pursuant to
Section 11(a); or
(b) a dissolution, liquidation or winding up of the Company or
any consolidation, merger or sale of its property, assets and business as an
entirety or substantially as an entirety;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Holder at least 10 days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to any relevant dividend, distribution, subscription
rights or other rights or for the effective date of any dissolution, liquidation
or winding up or any merger, consolidation, or sale of all or substantially all
assets, but failure to mail or receive such notice or any defect therein or in
the mailing thereof shall not affect the validity of any such action taken. Such
notice shall specify such record date or the effective date, as the case may be.
14. REGISTRATION RIGHTS
(a) Piggyback Registration. Whenever during the seven-year
period commencing on __________, 1996 and ending on __________ 2003, the Company
proposes to file with the Securities and Exchange Commission (the "Commission")
on behalf of the Company or any other stockholder a registration statement under
the Act, with respect to any equity security (as defined in Section 3(a)(10) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other
than a registration statement approved by the Board of Directors on Form S-4 or
S-8, or such amended or alternative form for Form S-4 or S-8 as the Commission
may from time to time require, the Company shall in each case no less than
twenty (20) days prior to filing notify Holder and include in such Registration
Statement any or all of the Shares as Holder may request within fifteen (15)
days after the Company's giving of such notice, subject to the conditions set
forth herein; provided that if the underwriter (if any) managing the offering
determines that, because of marketing factors, all of the Shares requested to be
registered by the Holder may not be included in the offering, then the Holder
shall participate in the registration pro rata based on the number of Shares
which Holder has requested to be so registered.
(b) Demand Registration. In addition to the rights set forth
in subsection 13(a) hereof, during the period commencing on __________ , 1997
and ending on __________ 2001, the Company shall,
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within 60 days after written request (the "Request") of the Holder, or by a
person or persons holding (or having the right to acquire by virtue of holding
the Option) at least 50% of the shares of Common Stock which have been (or may
be) issued upon exercise of the Option, prepare and file at its own expense a
Registration Statement with the Commission and appropriate Blue Sky authorities
sufficient to permit the public offering of the Shares; provided, however, that
the Company shall only be obligated to file two such Registration Statements
under this subsection 14(b).
(c) Registration Procedures. If, pursuant to subsections 14(a)
or 14(b) hereof, the Company is required to include any Shares in a registration
statement proposed to be filed, the Company will within 60 days: (i) prepare and
file such registration statement under the Act on an appropriate form and use
its best efforts to cause such registration statement to become effective; (ii)
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Act and the Exchange Act with
respect to the offer of the securities covered by such registration statement
during the period required for distribution of such securities; (iii) furnish to
the holder of such Shares such number of copies of such registration statement
and all amendments thereto and of such prospectus (including each preliminary,
amended or supplemental prospectus) as such holders may reasonably request in
order to facilitate the sale or transfer of the securities covered by such
registration statement; (iv) use its best efforts to register or qualify the
securities covered by any such registration statement in such jurisdictions as
such holders may reasonably request; (v) use its best efforts to furnish, at the
request of Holder, on the date that such Shares are delivered to the
underwriters for sale pursuant to such registration or, if such Shares are not
being sold through underwriters, on the date such registration statement becomes
effective, (1) an opinion, dated such date, in a form customary to such
transactions, of the independent counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any, and to
Holder making such request, reasonably acceptable in form and substance to such
underwriter and Holder and (2) a letter, dated such date, from the independent
certified public accountants of the Company, in a form customary to such
transactions, addressed to the underwriters, if any, and Holder, stating that
they are independent certified public accountants within the meaning of the Act
and that in the opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or the
prospectus, or any amendment or supplement thereto (including, in each case,
documents incorporated by reference thereto), comply as to form in all material
respects with the applicable accounting requirements of the Act; such opinion of
counsel shall additionally cover such other legal matters with respect to the
registration statement and the Company as the underwriters, if any, or Holder
may reasonably request; and such letter from the independent certified public
accountants shall additionally cover such other financial matters (including
information as to the period ending not more than five (5) business days prior
to the date of such letter) with respect to the registration statement and the
Company as the underwriters, if any, or Holder may reasonably request; (vi) use
its best efforts to keep such registration and qualification effective until all
exercises, sales and distributions contemplated by the requests made pursuant to
subsection 14(a) and 14(b) hereof shall have been completed, but not in any
event for a period in excess of nine (9) months unless the Company is eligible
to use Form S-3 or an equivalent form; and (vii) pay all expenses incurred by
Holder and the Company in complying with this subsection 11(c) (other than fees
and disbursements of counsel for Holder and any underwriting discounts or
commissions applicable to the Shares sold by the Holder), including without
limitation (1) all registration and filing fees; (2) all printing expenses; (3)
all fees and disbursements of counsel and independent public accountants for the
Company; (4) all Blue Sky fees and expenses (including fees and expenses of
counsel in connection with Blue Sky qualifications and surveys); and (5) the
entire expense of any special audits incident to or required by any such
registration. The foregoing notwithstanding, Holder shall be responsible for any
of the
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foregoing expenses incurred in connection with Holder's second demand for a
registration pursuant to subsection 14(b). In connection with any registration
by the Company pursuant to subsections 14(a) or 14(b) hereof, Holder agrees to
(i) execute such underwriting agreements and related documents as reasonably
requested by the Company or the managing underwriter, if any, and (ii) provide
such information as is necessary to be included in the registration statement.
15. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless Holder,
the directors and officers of Holder and each person, if any, who controls
(within the meaning of the Act), Holder (a "Control Person") against any losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Act or any other statute or common law or
otherwise, and to reimburse them, from time to time upon request, for any legal
or other expenses reasonably incurred by them in connection with investigating
any claims and defending any actions, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any preliminary or final registration statement or prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any case to the extent that any such loss,
claim, damages or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
preliminary or final registration statement or prospectus or such amendment or
supplement thereto (1) in reliance and in conformity with written information by
or on behalf of Holder specifically for use in the preparation thereof, or (2)
in any preliminary prospectus to the extent that any such loss, claim, damage or
liability results from the fact that securities covered thereby were sold to a
person to whom there was not sent or given prior to the written confirmation of
such sale a copy of the prospectus in the form filed with the Commission
pursuant to Rule 424(b) which corrected any such misstatement or omission if
sufficient copies of such prospectus had theretofore been delivered to Holder.
(b) In the case of each offering registered pursuant to
Section 14, Holder will indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls (within the meaning
of the Act) the Company to the same extent as set forth in Section 15(a) but
only if such statement or omission was made in reliance upon and in conformity
with written information furnished by or on behalf of Holder for use in the
preparation of such preliminary or final registration statement or prospectus or
such amendment or supplement thereto, provided, however, that the obligation of
any Holder to indemnify the Company under the provisions of this paragraph 15(b)
shall be limited to the amount received by the Holder upon the sale to the
public of the Shares;
(c) Each party indemnified under this Section 14 shall,
promptly after receipt of notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party of the commencement thereof. The omission so to notify
the indemnifying party shall not relieve the indemnifying party from any
liability which it may have to any indemnified party under this Section 14
unless the indemnifying party was prejudiced by such omission, and in no event
shall relieve the indemnifying party from any liability to the indemnified party
which the indemnifying party may otherwise have.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and, to the extent
that it may wish, jointly with any other indemnifying party
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<PAGE>
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party hereunder for any legal or other expense subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation (unless such indemnified party reasonably
objects to such assumption on the grounds that there may be defenses available
to it which are different from or in addition to the defenses available to such
indemnifying party, in which event the indemnified party shall be reimbursed by
the indemnifying party for the expenses incurred in connection with retaining
separate legal counsel). An indemnifying party shall not be liable for any
settlement of an action or claim effected without its consent, unless its
consent is unreasonably withheld.
(e) If recovery is not available under the foregoing
indemnification provisions for any reason or reasons other than as specified
therein, any party entitled to indemnification by the terms thereof shall
nevertheless be entitled to contribution with respect to any losses, claims,
damages, liabilities or expenses with respect to which it would be entitled to
such indemnification but for such reason or reasons. In determining the amount
of contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Holder and the Company agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capital allocation.
16. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees
that prior to the expiration of this Option by exercise or by its term:
(a) The Company will not by amendment of its Articles of
Incorporation or through reorganization, consolidation, merger, dissolution, or
sale of assets, or by any other act or omission, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by the Company, but will at all times in good
faith take such action as may be necessary or appropriate to carry out the
provisions of this Option and to protect the rights of the Holder hereunder;
(b) The Company shall at all times reserve and keep available,
out of its authorized and unissued capital stock, solely for the purpose of
providing for the exercise, forthwith upon the request of the Holder of the
Option then outstanding and in effect, such number of shares of Common Stock as
shall, from time to time, be sufficient for the exercise of the Option. The
Company shall, from time to time, in accordance with the laws of the State of
Nevada, increase the authorized amount of its capital stock, if at any time the
number of shares of Common Stock remaining unissued and unreserved for other
purposes shall not be sufficient to permit the exercise of the Options then
outstanding and in effect;
(c) The Company represents, warrants, covenants and agrees
that all Shares that may be issued upon the exercise of the rights represented
by this Option will, upon issuance, be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof (other than taxes in respect of any transfer contemporaneously
with such issue).
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17. MAILING OF NOTICES, etc. All notices and other communications from
the Company to the Holder of this Option shall be mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, to the
Holder, at the address set forth in the records of the Company, or to such other
address furnished to the Company in writing from time to time by the Holder of
this Option. All notices from the Holder of this Option to the Company shall be
mailed to the Company at 150 Louisiana N.E., Albuquerque, New Mexico 87108,
Attention: President.
18. GOVERNING LAW. This Option will be deemed to have been made and
delivered in Phoenix, Arizona, and will be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of Arizona. Assuming the parties are not able to resolve
disputes arising under this Option, the Company (a) agrees that any legal suit,
action or proceeding arising out of or relating to this Option will be
instituted exclusively in the United States District Court for the State of
Arizona; (b) waives any objection which the Company may have now or hereafter to
the venue of any such suit, action or proceeding, and (c) irrevocably consents
to the jurisdiction of the United States District Court for the State of Arizona
in any such suit, action or proceeding. The Company further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the United States District Court for the State of
Arizona and agrees that service of process upon the Company mailed by certified
mail to the Company's address will be deemed in every respect effective service
of process upon the Company in any suit, action or proceeding.
19. ENTIRE AGREEMENT AND MODIFICATION. The Company and the Holder of
this Option hereby represent and warrant that this Option is intended to and
does contain and embody all of the understandings and agreements, both written
and oral, of the parties hereto with respect to the subject matter of this
Option, and that there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of
this Option shall be in any way invalidated, empowered or affected. A
modification or waiver of any of the terms, conditions or provisions of this
Option shall be effective only if made in writing and executed with the same
formality as this Option.
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IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
executed this Option on this ______ day of ____________, 1996.
ATTEST: BOWLIN OUTDOOR ADVERTISING & TRAVEL
CENTERS INCORPORATED, a Nevada corporation
___________________________ By: _____________________________________
Secretary Michael L. Bowlin
Its: President
(CORPORATE SEAL)
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EXHIBIT A
---------
FORM OF EXERCISE
The undersigned hereby irrevocably elects to exercise the purchase
rights represented by this Option for, and to purchase thereunder, ________
Shares of Common Stock of Bowlin Outdoor Advertising & Travel Centers
Incorporated, a Nevada corporation, and herewith tenders in payment for such
securities a cashier's check or wire transfer payable to the order of Bowlin
Outdoor Advertising & Travel Centers Incorporated in the amount of $___________
all in accordance with the terms hereof. The undersigned requests that a
certificate for such Shares be issued in the name of and delivered to:
------------------------------------------------------------------
(Print Name)
------------------------------------------------------------------
(Address)
------------------------------------------------------------------
(Taxpayer Identification Number)
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee) This Option to purchase __________
Shares of Common Stock of Bowlin Outdoor Advertising & Travel Centers
Incorporated, a Nevada corporation (the "Company"), together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
_________________________ attorney, to transfer the Option on the books of the
Company, with full power of substitution in the premises.
Dated:________________________ ______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Option)
September 27, 1996
Mr. Michael L. Bowlin
c/o Bowlin's Incorporated
150 Louisiana N.E.
Albuquerque, New Mexico 87108
Re: Employment Agreement
Dear Mr. Bowlin:
Bowlin's Incorporated, a New Mexico corporation (the
"Corporation"), recognizes that your contribution to the growth and success of
the Corporation has been substantial and desires to assure the Corporation of
your continued employment. The Corporation understands that you desire to
continue to serve the Corporation on the terms set forth in this letter (the
"Agreement"). In consideration of the promises hereafter set forth, the
Corporation and you agree as follows:
1. Employment. The Corporation agrees to continue
your employment, and you agree to continue to serve the Corporation, subject to
the terms and conditions set forth herein.
2. Term of Agreement. This Agreement will commence on
the Effective Date (as defined in Subsection 12(c)) and shall have a perpetual
term of five (5) years, such that on any given date, this Agreement will have a
remaining term of five (5) years from such date.
3. Position and Duties. During the term of this
Agreement, you shall serve as Chairman of the Board, President and Chief
Executive Officer of the Corporation. As such, you shall fulfill the duties and
responsibilities of Chairman of the Board, President and Chief Executive Officer
as they exist as of the date hereof. You agree to devote your time, skill and
attention to the business of the Corporation during normal business hours to the
extent necessary to discharge the duties and responsibilities assigned to you
hereunder. If the Corporation believes you have breached your responsibilities
and/or duties under this Section 3, it must deliver to you a written notice
specifically identifying the manner in which the Corporation believes that you
have failed to substantially perform your duties and/or carry out your
responsibilities. The Corporation shall grant you thirty (30) days from the date
you receive such notice to cure such deficiency and resume performance of your
responsibilities and/or duties.
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 2
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4. Compensation.
a. Base Salary. You shall receive a minimum
base salary ("Base Salary") of no less than $195,000 per year, which shall be
reviewed at least annually by the Board of Directors (the "Board"), or by a
Compensation Committee of the Board, if one has been appointed by the Board (the
"Committee"), and shall be increased at the discretion of the Board; provided,
however, that at a minimum, your Base Salary shall be increased each year,
commencing twelve (12) months from the Effective Date (as defined in Subsection
12(c)) of this Agreement, by an amount equal to the Base Salary multiplied by
the increase in the national Consumer Price Index from the preceding year. Any
increase in your Base Salary or other compensation shall in no way limit or
reduce any other obligation of the Corporation hereunder, and once established
at an increased rate, your Base Salary shall not thereafter be reduced. After
withholding and other required deductions, your Base Salary shall be paid in
equal installments in accordance with the policies of the Corporation as may be
established from time to time. Any reference herein to the Board shall, where
appropriate, encompass the Committee, if one has been appointed.
b. Bonuses. You shall be eligible to receive
bonuses from time to time in accordance with any bonus plan adopted by the
Board, in such amounts as shall be determined by the Board.
c. Expenses. During the term of your
employment hereunder, you shall be entitled to prompt reimbursement for all
ordinary and necessary business expenses incurred by you in furtherance of the
Corporation's business and in accordance with the policies and procedures of the
Corporation, as amended from time to time.
d. Benefits. You shall be entitled to
receive a package of benefits that includes all of the programs, plans and
perquisites currently provided to you by the Corporation as they may exist from
time to time.
5. Termination. You shall be entitled to the benefits
provided in Subsection 6(d) hereof upon termination of your employment during
the term of this Agreement unless such termination is (i) because of your
Disability (as hereafter defined), (ii) by the Corporation for Cause (as
hereafter defined), or (iii) by you other than for Good Reason (as hereafter
defined).
a. Disability. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after the Corporation
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 3
- --------------------------------------------------------------------------------
gives you written notice of termination you shall not have returned to the
full-time performance of your duties, the Corporation may terminate your
employment for "Disability."
b. Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (i) your conviction of a
felony that substantially impairs your ability to perform your duties with the
Corporation, or (ii) your willful failure to cure, or commence curing and
diligently pursue thereafter, a specified deficiency in the performance of your
duties and/or responsibilities within the thirty (30) day period described in
Section 3 hereof.
c. Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, any one or more of the
following:
(1) the assignment to you of any
duties which you determine in good faith to be inconsistent with, or a reduction
of powers or functions associated with, your position, duties, responsibilities
and status with the Corporation, a change in your reporting responsibilities or
in the conditions of your employment, or improper intervention in your ability
to perform the duties and responsibilities that have been assigned to you under
this Agreement, except in connection with your termination of employment by the
Corporation for Cause or for Disability. If you resign your employment with the
Corporation within sixty (60) days after a Change of Control (as defined in
Subsection 12(b)) of the Corporation for reasons specified in this Subsection
5(c)(1), it shall be deemed to be a determination made in good faith;
(2) a reduction by the Corporation
in your Base Salary as in effect on the date hereof or as the same shall be
increased as provided herein;
(3) the failure of the Corporation
to cause any successor to expressly assume and agree to perform this Agreement
pursuant to Subsection 8(a) hereof;
(4) any purported termination by the
Corporation of your employment that is not effected by a Notice of Termination
(as defined in Subsection 12(d)) pursuant to Subsection 5(d) hereof and/or for
grounds not constituting Cause.
d. Notice of Termination. Any termination by
the Corporation for Cause or by you for Good Reason shall be communicated by
Notice of Termination to the other party hereto.
e. Date of Termination. "Date of
Termination" shall mean the date specified in the Notice of Termination, where
required, or in any other case the date upon which you cease to perform services
for the Corporation; provided that if within thirty (30) days
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 4
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after any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date finally determined to be
the Date of Termination, either by mutual written agreement of the parties or by
a final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or the time for appeal therefrom having expired and no appeal
having been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Corporation will continue to pay you your full compensation in effect when such
notice was given (including, but not limited to, Base Salary) and continue you
as a participant in all compensation, benefit and insurance plans in which you
were a participant when such notice was given until the dispute is finally
resolved in accordance with this Subsection 5(e). Amounts paid under this
Subsection 5(e) are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
6. Compensation Upon Termination or During
Disability. Upon termination of your employment or during a period of Disability
you shall be entitled to the applicable benefits set forth below:
a. During any period in which you fail to
perform your full- time duties with the Corporation as a result of incapacity
due to physical or mental illness, you shall (i) receive your Base Salary at the
rate in effect at commencement of any such period until your employment is
terminated pursuant to Subsection 5(a) hereof; and (ii) at the option of the
Corporation, receive either (A) lump sum payment equal to two (2) years of your
Base Salary in effect on the date your employment is terminated plus an amount
equal to all bonuses paid to you during the two (2) years preceding the date
your employment is terminated pursuant to Section 5(a) hereof (the "Disability
Amount"), or (B) payment of the Disability Amount in twenty fourt (24) equal
monthly installments commencing one month from such termination date.
Thereafter, your benefits shall be determined in accordance with the
Corporation's retirement, insurance and other applicable programs and plans then
in effect. Anything in this Subsection 6(a) to the contrary notwithstanding, any
payments of Base Salary under this Agreement for any period during which you
receive payment under any short or long-term disability plans for which premiums
are paid by the Corporation shall be reduced by the amount of such disability
payments.
b. If your employment shall be terminated by
the Corporation for Cause or by you other than for Good Reason, the Corporation
shall pay you your full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given or on the Date of
Termination if no Notice of Termination is required hereunder, together
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 5
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with accrued vacation pay, if any, and the Corporation shall have no further
obligation to you under this Agreement.
c. If your employment terminates by reason
of your death, your benefits shall be determined in accordance with the
Corporation's survivors' benefits, insurance and other applicable programs and
plans then in effect and all benefits payable under this Agreement shall cease.
d. If your employment is terminated (i) by
the Corporation other than for Cause or Disability or (ii) by you for Good
Reason, then you shall be entitled to the following benefits:
(1) the Corporation shall pay you
your full Base Salary together with any bonuses that have accrued but have not
been paid through the Date of Termination at the rate in effect at the time
Notice of Termination is given, or the Date of Termination where no Notice of
Termination is required;
(2) in lieu of any further salary
payment to you for periods subsequent to the Date of Termination, the
Corporation shall, at its option; either (i) pay you a lump sum payment equal to
the sum of five (5) years of your annual Base Salary as in effect immediately
prior to the occurrence of the circumstances giving rise to your termination
plus an amount equal to all bonuses paid to you in addition to your Base Salary
in the five-year period preceding the Date of Termination (the "Severance
Amount"), or (ii) pay you the Severance Amount in sixty (60) equal monthly
installments commencing one month following the Date of Termination.
(3) the Corporation shall maintain
in full force and effect for your continued benefit and the benefit of your
eligible dependents and beneficiaries, until the first to occur of (i) your
attainment of alternative employment or (ii) five (5) years from the Date of
Termination, the employee benefits under the Corporation's benefit plans that
you or they were eligible to receive immediately prior to the Date of
Termination, subject to the terms and conditions of such benefit plans; provided
that your continued participation or the participation of such eligible
dependents or beneficiaries is possible under the general terms and provisions
of such benefit plans. In the event that your participation or the participation
of such eligible dependents or beneficiaries in any such benefit plan is barred,
the Corporation shall arrange to provide you and such eligible dependents or
beneficiaries with benefits substantially similar to those to which you and such
eligible dependents or beneficiaries are entitled under such benefit plans for
the period stated above. At the end of the period of coverage, you shall have
the option to have assigned to you, at no cost and with no apportionment of
prepaid premiums, any assignable insurance policy owned by the Corporation and
relating specifically to you; and
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 6
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(4) notwithstanding any term to the
contrary in any options or warrants to purchase Common Stock of the Corporation
which have been granted to you by the Corporation, or in any agreement or plan
relating thereto, any such options or warrants shall become immediately
exercisable and shall remain exercisable for the longer of (A) one (1) year or
(B) the then remaining unexpired term of such options or warrants.
e. The payments provided for in Subsections
(6)(d)(1) and (2) shall be made by the Corporation to you not later than the
fifth day following the "Date of Termination."
f. You shall not be required to mitigate the
amount of any payment provided for in this Section 6, including but not limited
to, seeking other employment, nor shall the amount of any payment provided for
in this Section 6 be reduced by any compensation earned by you as a result of
employment by another employer after the Date of Termination, or otherwise.
7. Personal Guarantees. Upon termination of your
employment hereunder, whether with or without Cause or Good Reason, or upon your
death or Disability, the Corporation shall indemnify you from all claims, costs
and expenses related to personal guarantees of any leases, loans, debts,
obligations, or similar instruments, which you have undertaken with respect to
the Corporation. In addition, the Corporation shall use its best efforts to
secure the release of all such personal guarantees.
8. Successors; Binding Agreement.
a. The Corporation shall cause any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Corporation or of
any division or subsidiary thereof employing you, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent to which the
Corporation would be required to perform this Agreement had no such succession
taken place. Failure by the Corporation to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation in the same amount and on the
same terms as you would be entitled hereunder had you terminated your employment
for Good Reason after a Change of Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 7
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b. This Agreement shall inure to the benefit
of and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no designee, to your estate.
9. Indemnification.
a. The Corporation is aware that upon the
occurrence of a Change of Control, the Board or a shareholder of the Corporation
may then cause or attempt to cause the Corporation to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may take, or attempt to take, other actions to deny
you the benefits intended under this Agreement. In these circumstances, the
purposes of this Agreement would be frustrated. It is the intent of the
Corporation that you should not be required to incur the expenses associated
with the enforcement of your rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to you hereunder, nor should you be
bound to negotiate any settlement of your rights hereunder under threat of
incurring such expenses. Accordingly, if following a Change of Control it
appears to you that the Corporation has failed to comply with any of its
obligations under this Agreement or if the Corporation or any other person takes
any action to declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to recover from
you the benefits intended to be provided to you hereunder, then, provided that
you have complied with all of your obligations under this Agreement, the
Corporation shall indemnify you for all legal costs and fees (including without
limitation, attorneys' fees, retainers, court costs, charges for transcripts,
fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage and delivery service fees, and all
other out-of-pocket expenses) incurred by you in defending or asserting your
rights under this Agreement after a Change of Control of the Corporation. The
Corporation hereby irrevocably authorizes you from time to time to retain
counsel of your choice at the expense of the Corporation to represent you in
connection with the initiation or defense of any litigation or other legal
action, whether by or against the Corporation or any director, officer,
shareholder or other person, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Corporation and such counsel,
the Corporation irrevocably consents to your entering into an attorney-client
relationship with such counsel, and in that connection the Corporation and you
agree that a confidential relationship shall exist between you and such counsel.
The reasonable fees and expenses of counsel selected by you pursuant hereto
shall be paid or reimbursed to you by the Corporation on a regular,
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 8
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periodic basis upon presentation by you of a statement or statements prepared by
such counsel is accordance with its customary practices.
b. The Corporation further agrees to pay
pre-judgment interest on any money judgment obtained by you calculated at the
prime interest rate established by Bank of America National Trust and Savings
Association (or another comparable national financial institution if no prime
interest rate is available from Bank of America) in effect from time to time
from the date that payments to you should have been made under this Agreement
until the date that such payments are made; provided, however, that the
Corporation shall use the prime interest rate first published by Bank of America
National Trust and Savings Association (or another comparable national financial
institution if no prime interest rate is available from Bank of America) in a
calendar month to compute interest payable with respect to any period during
such calendar month.
10. Payment Obligations Absolute; Amendment. The
Corporation's obligation to pay you the amounts provided for hereunder shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against you or anyone else. All
amounts payable by the Corporation hereunder shall be paid without notice or
demand. Except as expressly provided herein, the Corporation waives all rights
which it may now have or may hereafter have conferred upon it, by statute or
otherwise, to amend, terminate, cancel or rescind this Agreement in whole or in
part. Each and every payment made hereunder by the Corporation shall be final
and the Corporation shall not seek to recover all or any part of any such
payment from you or from whomsoever may be entitled thereto, for any reason
whatsoever.
11. Notices. All notices hereunder shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid:
If to the Corporation, to: Bowlin's Incorporated
150 Louisiana NE
Albuquerque, NM 87108
If to you, to: Mr. Michael L. Bowlin
---------------------
---------------------
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 9
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Either party may change the address to which notices are to be sent to it by
giving ten (10) days written notice of such change of address to the other party
in the manner above provided for giving notice. If delivered in person, then
such notice shall be effective immediately; if mailed, then seventy-two (72)
hours after deposit, postage prepaid.
12. Definitions. For the purposes of this Agreement:
a. The term "Corporation" shall include any
corporate successor to the business presently conducted by Bowlin's
Incorporated. All references to Corporation or "Corporate" policies, procedures,
employees, benefits, criteria or standards shall include all subsidiaries and
businesses of Bowlin's Incorporated.
b. The term "Change of Control" shall mean
the occurrence of any of the following events:
(1) an event required to be reported
by the Corporation by Item 1 of Form 8-K under Section 13 or 15(d) of the
Securities Exchange Act of 1934 filed pursuant to Rule 13a-11 or Rule 15d-11
thereunder;
(2) all or substantially all of the
assets of the Corporation are sold, transferred, leased or exchanged to one or
more persons, or the Corporation consolidates or merges with another corporation
unless the Corporation or a subsidiary of the Corporation is the continuing or
surviving corporation following the merger or consolidation; or
(3) the business or subsidiary for
which your services are principally performed is sold or otherwise disposed of
by the Corporation.
c. The term "Effective Date" shall mean the
date this Agreement is accepted and signed by you.
d. The term "Notice of Termination" shall
mean a written notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
13. Waiver; Modification. No provision of this
Agreement may be waived, modified, discharged or amended except by an instrument
in writing signed by you and such officer as may be specifically designated by
the Board. No term or condition of this
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 10
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Agreement shall be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement, except by written
instrument by the party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for the
future or as to any other term or condition. The failure of either party to
insist, in any one or more instances, upon strict performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any right granted hereunder or the future performance of any
such term, covenant or condition, but the obligations of either party with
respect thereto shall continue in full force and effect.
14. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New Mexico.
15. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
16. Severability. If any term or provision of this
Agreement or the application hereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. The parties shall negotiate
in good faith to modify the provisions found to be invalid or unenforceable to
preserve each party's anticipated benefits thereunder.
17. Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not be a part of or control
or affect the meaning of this Agreement.
18. Payroll and Withholding Taxes. All payments to be
made or benefits to be provided hereunder by the Corporation shall be subject to
reduction for any applicable payroll-related or withholding taxes.
19. Entire Agreement. This Agreement supersedes any
and all other oral or written agreements heretofore made relating to your Base
Salary, expense reimbursement, benefits and severance and constitutes the entire
agreement of the parties relating to the subject matter hereof; provided that,
except as specifically provided herein, this Agreement shall not
<PAGE>
Mr. Michael L. Bowlin
September 27, 1996
Page 11
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supersede or limit in any way or affect any rights you may have under any other
of the Corporation's employee benefit plans, programs or arrangements
(including, without limitation, employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974).
20. Assignment. This Agreement and the rights,
interest and benefits shall not be assigned, transferred, pledged or
hypothecated in any way and shall not be subject to execution, attachment or
similar process. Any attempt by you to assign, transfer, pledge or hypothecate
or make any other disposition of this Agreement or of such rights, interests and
benefits contrary to the foregoing provision or the levy of any attachment or
similar process thereupon, shall be null and void and without effect and shall
relieve the Corporation of any and all liability hereunder.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
BOWLIN'S INCORPORATED
By:_______________________________
Name:_____________________________
(Please Print)
Title:____________________________
(Please Print)
Agreed and accepted this
27th day of September, 1996.
By:/s/ Michael L. Bowlin
--------------------------------
Michael L. Bowlin
September 27, 1996
Mr. C. Christopher Bess
c/o Bowlin's Incorporated
150 Louisiana N.E.
Albuquerque, New Mexico 87108
Re: Employment Agreement
Dear Mr. Bess:
Bowlin's Incorporated, a New Mexico corporation (the
"Corporation"), recognizes that your contribution to the growth and success of
the Corporation has been substantial and desires to assure the Corporation of
your continued employment. The Corporation understands that you desire to
continue to serve the Corporation on the terms set forth in this letter (the
"Agreement"). In consideration of the promises hereafter set forth, the
Corporation and you agree as follows:
1. Employment. The Corporation agrees to continue
your employment, and you agree to continue to serve the Corporation, subject to
the terms and conditions set forth herein.
2. Term of Agreement. This Agreement will commence on
the Effective Date (as defined in Subsection 12(c)) and shall have a perpetual
term of five (5) years, such that on any given date, this Agreement will have a
remaining term of five (5) years from such date.
3. Position and Duties. During the term of this
Agreement, you shall serve as Executive Vice President and Chief Operating
Officer of the Corporation. As such, you shall fulfill the duties and
responsibilities of Executive Vice President and Chief Operating Officer as they
exist as of the date hereof. You agree to devote your time, skill and attention
to the business of the Corporation during normal business hours to the extent
necessary to discharge the duties and responsibilities assigned to you
hereunder. If the Corporation believes you have breached your responsibilities
and/or duties under this Section 3, it must deliver to you a written notice
specifically identifying the manner in which the Corporation believes that you
have failed to substantially perform your duties and/or carry out your
responsibilities. The Corporation shall grant you thirty (30) days from the date
you receive such notice to cure such deficiency and resume performance of your
responsibilities and/or duties.
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 2
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4. Compensation.
a. Base Salary. You shall receive a minimum
base salary ("Base Salary") of no less than $145,000 per year, which shall be
reviewed at least annually by the Board of Directors (the "Board"), or by a
Compensation Committee of the Board, if one has been appointed by the Board (the
"Committee"), and shall be increased at the discretion of the Board; provided,
however, that at a minimum, your Base Salary shall be increased each year,
commencing twelve (12) months from the Effective Date (as defined in Subsection
12(c)) of this Agreement, by an amount equal to the Base Salary multiplied by
the increase in the national Consumer Price Index from the preceding year. Any
increase in your Base Salary or other compensation shall in no way limit or
reduce any other obligation of the Corporation hereunder, and once established
at an increased rate, your Base Salary shall not thereafter be reduced. After
withholding and other required deductions, your Base Salary shall be paid in
equal installments in accordance with the policies of the Corporation as may be
established from time to time. Any reference herein to the Board shall, where
appropriate, encompass the Committee, if one has been appointed.
b. Bonuses. You shall be eligible to receive
bonuses from time to time in accordance with any bonus plan adopted by the
Board, in such amounts as shall be determined by the Board.
c. Expenses. During the term of your
employment hereunder, you shall be entitled to prompt reimbursement for all
ordinary and necessary business expenses incurred by you in furtherance of the
Corporation's business and in accordance with the policies and procedures of the
Corporation, as amended from time to time.
d. Benefits. You shall be entitled to
receive a package of benefits that includes all of the programs, plans and
perquisites currently provided to you by the Corporation as they may exist from
time to time.
5. Termination. You shall be entitled to the benefits
provided in Subsection 6(d) hereof upon termination of your employment during
the term of this Agreement unless such termination is (i) because of your
Disability (as hereafter defined), (ii) by the Corporation for Cause (as
hereafter defined), or (iii) by you other than for Good Reason (as hereafter
defined).
a. Disability. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after the Corporation
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 3
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gives you written notice of termination you shall not have returned to the
full-time performance of your duties, the Corporation may terminate your
employment for "Disability."
b. Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (i) your conviction of a
felony that substantially impairs your ability to perform your duties with the
Corporation, or (ii) your willful failure to cure, or commence curing and
diligently pursue thereafter, a specified deficiency in the performance of your
duties and/or responsibilities within the thirty (30) day period described in
Section 3 hereof.
c. Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, any one or more of the
following:
(1) the assignment to you of any
duties which you determine in good faith to be inconsistent with, or a reduction
of powers or functions associated with, your position, duties, responsibilities
and status with the Corporation, a change in your reporting responsibilities or
in the conditions of your employment, or improper intervention in your ability
to perform the duties and responsibilities that have been assigned to you under
this Agreement, except in connection with your termination of employment by the
Corporation for Cause or for Disability. If you resign your employment with the
Corporation within sixty (60) days after a Change of Control (as defined in
Subsection 12(b)) of the Corporation for reasons specified in this Subsection
5(c)(1), it shall be deemed to be a determination made in good faith;
(2) a reduction by the Corporation
in your Base Salary as in effect on the date hereof or as the same shall be
increased as provided herein;
(3) the failure of the Corporation
to cause any successor to expressly assume and agree to perform this Agreement
pursuant to Subsection 8(a) hereof;
(4) any purported termination by the
Corporation of your employment that is not effected by a Notice of Termination
(as defined in Subsection 12(d)) pursuant to Subsection 5(d) hereof and/or for
grounds not constituting Cause.
d. Notice of Termination. Any termination by
the Corporation for Cause or by you for Good Reason shall be communicated by
Notice of Termination to the other party hereto.
e. Date of Termination. "Date of
Termination" shall mean the date specified in the Notice of Termination, where
required, or in any other case the date upon which you cease to perform services
for the Corporation; provided that if within thirty (30) days
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 4
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after any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date finally determined to be
the Date of Termination, either by mutual written agreement of the parties or by
a final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or the time for appeal therefrom having expired and no appeal
having been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Corporation will continue to pay you your full compensation in effect when such
notice was given (including, but not limited to, Base Salary) and continue you
as a participant in all compensation, benefit and insurance plans in which you
were a participant when such notice was given until the dispute is finally
resolved in accordance with this Subsection 5(e). Amounts paid under this
Subsection 5(e) are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
6. Compensation Upon Termination or During
Disability. Upon termination of your employment or during a period of Disability
you shall be entitled to the applicable benefits set forth below:
a. During any period in which you fail to
perform your full- time duties with the Corporation as a result of incapacity
due to physical or mental illness, you shall (i) receive your Base Salary at the
rate in effect at commencement of any such period until your employment is
terminated pursuant to Subsection 5(a) hereof; and (ii) at the otpion of the
Corporation, receive either (A) lump sum payment equal to two (2) years of your
Base Salary in effect on the date your employment is terminated, plus an amount
equal to all bonuses paid to you during the two (2) years preceding the date
your employment is terminated pursuant to Section 5(a) hereof (the "Disability
Amount"), or (B) payment of the Disability Amount in twenty four (24) equal
monthly installments commencing one month from such termination date.
Thereafter, your benefits shall be determined in accordance with the
Corporation's retirement, insurance and other applicable programs and plans then
in effect. Anything in this Subsection 6(a) to the contrary notwithstanding, any
payments of Base Salary under this Agreement for any period during which you
receive payment under any short or long-term disability plans for which premiums
are paid by the Corporation shall be reduced by the amount of such disability
payments.
b. If your employment shall be terminated by
the Corporation for Cause or by you other than for Good Reason, the Corporation
shall pay you your full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given or on the Date of
Termination if no Notice of Termination is required hereunder, together
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 5
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with accrued vacation pay, if any, and the Corporation shall have no further
obligation to you under this Agreement.
c. If your employment terminates by reason
of your death, your benefits shall be determined in accordance with the
Corporation's survivors' benefits, insurance and other applicable programs and
plans then in effect and all benefits payable under this Agreement shall cease.
d. If your employment is terminated (i) by
the Corporation other than for Cause or Disability or (ii) by you for Good
Reason, then you shall be entitled to the following benefits:
(1) the Corporation shall pay you
your full Base Salary together with any bonuses that have accrued but have not
been paid through the Date of Termination at the rate in effect at the time
Notice of Termination is given, or the Date of Termination where no Notice of
Termination is required;
(2) in lieu of any further salary
payment to you for periods subsequent to the Date of Termination, the
Corporation shall, at its option, either (i) pay you a lump sum payment equal to
the sum of five (5) years of your annual Base Salary as in effect immediately
prior to the occurrence of the circumstances giving rise to your termination
plus an amount equal to all bonuses paid to you in addition to your Base Salary
in the five-year period preceding the Date of Termination (the "Severance
Amount"), or (ii) pay you the Severance Amount in sixty (60) equal monthly
installments commencing one month following the Date of Termination.
(3) the Corporation shall maintain
in full force and effect for your continued benefit and the benefit of your
eligible dependents and beneficiaries, until the first to occur of (i) your
attainment of alternative employment or (ii) five (5) years from the Date of
Termination, the employee benefits under the Corporation's benefit plans that
you or they were eligible to receive immediately prior to the Date of
Termination, subject to the terms and conditions of such benefit plans; provided
that your continued participation or the participation of such eligible
dependents or beneficiaries is possible under the general terms and provisions
of such benefit plans. In the event that your participation or the participation
of such eligible dependents or beneficiaries in any such benefit plan is barred,
the Corporation shall arrange to provide you and such eligible dependents or
beneficiaries with benefits substantially similar to those to which you and such
eligible dependents or beneficiaries are entitled under such benefit plans for
the period stated above. At the end of the period of coverage, you shall have
the option to have assigned to you, at no cost and with no apportionment of
prepaid premiums, any assignable insurance policy owned by the Corporation and
relating specifically to you; and
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 6
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(4) notwithstanding any term to the
contrary in any options or warrants to purchase Common Stock of the Corporation
which have been granted to you by the Corporation, or in any agreement or plan
relating thereto, any such options or warrants shall become immediately
exercisable and shall remain exercisable for the longer of (A) one (1) year or
(B) the then remaining unexpired term of such options or warrants.
e. The payments provided for in Subsections
(6)(d)(1) and (2) shall be made by the Corporation to you not later than the
fifth day following the "Date of Termination."
f. You shall not be required to mitigate the
amount of any payment provided for in this Section 6, including but not limited
to, seeking other employment, nor shall the amount of any payment provided for
in this Section 6 be reduced by any compensation earned by you as a result of
employment by another employer after the Date of Termination, or otherwise.
7. Personal Guarantees. Upon termination of your
employment hereunder, whether with or without Cause or Good Reason, or upon your
death or Disability, the Corporation shall indemnify you from all claims, costs
and expenses related to personal guarantees of any leases, loans, debts,
obligations, or similar instruments, which you have undertaken with respect to
the Corporation. In addition, the Corporation shall use its best efforts to
secure the release of all such personal guarantees.
8. Successors; Binding Agreement.
a. The Corporation shall cause any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Corporation or of
any division or subsidiary thereof employing you, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent to which the
Corporation would be required to perform this Agreement had no such succession
taken place. Failure by the Corporation to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation in the same amount and on the
same terms as you would be entitled hereunder had you terminated your employment
for Good Reason after a Change of Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 7
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b. This Agreement shall inure to the benefit
of and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no designee, to your estate.
9. Indemnification.
a. The Corporation is aware that upon the
occurrence of a Change of Control, the Board or a shareholder of the Corporation
may then cause or attempt to cause the Corporation to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may take, or attempt to take, other actions to deny
you the benefits intended under this Agreement. In these circumstances, the
purposes of this Agreement would be frustrated. It is the intent of the
Corporation that you should not be required to incur the expenses associated
with the enforcement of your rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to you hereunder, nor should you be
bound to negotiate any settlement of your rights hereunder under threat of
incurring such expenses. Accordingly, if following a Change of Control it
appears to you that the Corporation has failed to comply with any of its
obligations under this Agreement or if the Corporation or any other person takes
any action to declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to recover from
you the benefits intended to be provided to you hereunder, then, provided that
you have complied with all of your obligations under this Agreement, the
Corporation shall indemnify you for all legal costs and fees (including without
limitation, attorneys' fees, retainers, court costs, charges for transcripts,
fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage and delivery service fees, and all
other out-of-pocket expenses) incurred by you in defending or asserting your
rights under this Agreement after a Change of Control of the Corporation. The
Corporation hereby irrevocably authorizes you from time to time to retain
counsel of your choice at the expense of the Corporation to represent you in
connection with the initiation or defense of any litigation or other legal
action, whether by or against the Corporation or any director, officer,
shareholder or other person, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Corporation and such counsel,
the Corporation irrevocably consents to your entering into an attorney-client
relationship with such counsel, and in that connection the Corporation and you
agree that a confidential relationship shall exist between you and such counsel.
The reasonable fees and expenses of counsel selected by you pursuant hereto
shall be paid or reimbursed to you by the Corporation on a regular,
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 8
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periodic basis upon presentation by you of a statement or statements prepared by
such counsel is accordance with its customary practices.
b. The Corporation further agrees to pay
pre-judgment interest on any money judgment obtained by you calculated at the
prime interest rate established by Bank of America National Trust and Savings
Association (or another comparable national financial institution if no prime
interest rate is available from Bank of America) in effect from time to time
from the date that payments to you should have been made under this Agreement
until the date that such payments are made; provided, however, that the
Corporation shall use the prime interest rate first published by Bank of America
National Trust and Savings Association (or another comparable national financial
institution if no prime interest rate is available from Bank of America) in a
calendar month to compute interest payable with respect to any period during
such calendar month.
10. Payment Obligations Absolute; Amendment. The
Corporation's obligation to pay you the amounts provided for hereunder shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against you or anyone else. All
amounts payable by the Corporation hereunder shall be paid without notice or
demand. Except as expressly provided herein, the Corporation waives all rights
which it may now have or may hereafter have conferred upon it, by statute or
otherwise, to amend, terminate, cancel or rescind this Agreement in whole or in
part. Each and every payment made hereunder by the Corporation shall be final
and the Corporation shall not seek to recover all or any part of any such
payment from you or from whomsoever may be entitled thereto, for any reason
whatsoever.
11. Notices. All notices hereunder shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid:
If to the Corporation, to: Bowlin's Incorporated
150 Louisiana NE
Albuquerque, NM 87108
If to you, to: Mr. C. Christopher Bess
-----------------------
-----------------------
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 9
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Either party may change the address to which notices are to be sent to it by
giving ten (10) days written notice of such change of address to the other party
in the manner above provided for giving notice. If delivered in person, then
such notice shall be effective immediately; if mailed, then seventy-two (72)
hours after deposit, postage prepaid.
12. Definitions. For the purposes of this Agreement:
a. The term "Corporation" shall include any
corporate successor to the business presently conducted by Bowlin's
Incorporated. All references to Corporation or "Corporate" policies, procedures,
employees, benefits, criteria or standards shall include all subsidiaries and
businesses of Bowlin's Incorporated.
b. The term "Change of Control" shall mean
the occurrence of any of the following events:
(1) an event required to be reported
by the Corporation by Item 1 of Form 8-K under Section 13 or 15(d) of the
Securities Exchange Act of 1934 filed pursuant to Rule 13a-11 or Rule 15d-11
thereunder;
(2) all or substantially all of the
assets of the Corporation are sold, transferred, leased or exchanged to one or
more persons, or the Corporation consolidates or merges with another corporation
unless the Corporation or a subsidiary of the Corporation is the continuing or
surviving corporation following the merger or consolidation; or
(3) the business or subsidiary for
which your services are principally performed is sold or otherwise disposed of
by the Corporation.
c. The term "Effective Date" shall mean the
date this Agreement is accepted and signed by you.
d. The term "Notice of Termination" shall
mean a written notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
13. Waiver; Modification. No provision of this
Agreement may be waived, modified, discharged or amended except by an instrument
in writing signed by you and such officer as may be specifically designated by
the Board. No term or condition of this
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 10
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Agreement shall be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement, except by written
instrument by the party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for the
future or as to any other term or condition. The failure of either party to
insist, in any one or more instances, upon strict performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any right granted hereunder or the future performance of any
such term, covenant or condition, but the obligations of either party with
respect thereto shall continue in full force and effect.
14. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New Mexico.
15. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
16. Severability. If any term or provision of this
Agreement or the application hereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. The parties shall negotiate
in good faith to modify the provisions found to be invalid or unenforceable to
preserve each party's anticipated benefits thereunder.
17. Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not be a part of or control
or affect the meaning of this Agreement.
18. Payroll and Withholding Taxes. All payments to be
made or benefits to be provided hereunder by the Corporation shall be subject to
reduction for any applicable payroll-related or withholding taxes.
19. Entire Agreement. This Agreement supersedes any
and all other oral or written agreements heretofore made relating to your Base
Salary, expense reimbursement, benefits and severance and constitutes the entire
agreement of the parties relating to the subject matter hereof; provided that,
except as specifically provided herein, this Agreement shall not
<PAGE>
Mr. Christopher Bess
September 27, 1996
Page 11
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supersede or limit in any way or affect any rights you may have under any other
of the Corporation's employee benefit plans, programs or arrangements
(including, without limitation, employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974).
20. Assignment. This Agreement and the rights,
interest and benefits shall not be assigned, transferred, pledged or
hypothecated in any way and shall not be subject to execution, attachment or
similar process. Any attempt by you to assign, transfer, pledge or hypothecate
or make any other disposition of this Agreement or of such rights, interests and
benefits contrary to the foregoing provision or the levy of any attachment or
similar process thereupon, shall be null and void and without effect and shall
relieve the Corporation of any and all liability hereunder.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
BOWLIN'S INCORPORATED
By:________________________________
Name:______________________________
(Please Print)
Title:_____________________________
(Please Print)
Agreed and accepted this
27th day of September, 1996.
By:/s/ C. Christopher Bell
---------------------------------
C. Christopher Bess
LOAN AGREEMENT
--------------
This Loan Agreement dated effective January 31, 1995, is by and between
Bowlins, Incorporated (individually and collectively the "Borrower"), and FIRST
SECURITY BANX OF NEW MEXICO, N.A. ("Bank"), a national banking association.
RECITALS.
- ---------
1. Borrower has applied to the Bank for * loan(s) as follows:
LOAN A. $765,000 Real Estate Loan.
LOAN B. $35,000 Equipment Loan.
2. The Bank is willing to make the Loan(s) on the terms and conditions set
forth in this Agreement.
3. The Borrower and the Bank intend and agree to be bound by the terms of
this Agreement.
AGREEMENT.
- ----------
In consideration of the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the Borrower and the
Bank agree:
SECTION 1 - DEFINITIONS.
- ------------------------
As used in this Agreement, the following terms shall have the respective
meanings indicated:
1.01 Agreement means this Loan Agreement.
1.02 Bank means First Security Bank of New Mexico, N.A. and its successors
and assigns.
1.03 Borrower means the undersigned borrower(s) and all successors and
assigns.
1.04 Borrower's Resolutions means, if Borrower is a corporation, the
resolutions duly adopted by the Board of Directors of the Borrower authorizing
and consenting to the Loan and to the execution and delivery of the Loan
Documents. The Borrower's Resolutions may be evidenced by the Resolution in a
form acceptable to the Bank.
1.05 Business Day means a day when the Bank is open for business.
1.06 Closing Date means effective January 31, 1995.
1.07 Collateral means all collateral, liens, assignments, mortgages,
security interests, and other rights, presently in connection with the Loans, or
hereafter, created or signed by or in favor of Borrower to the Bank in order to
secure performance and/or repayment of the Loans.
<PAGE>
1.08 Collateral Documents means any and all documents executed by or on
behalf of the Borrower, any Guarantor, or any party having any right, title or
interest in any Collateral which evidences, grants, creates, assigns, or
perfects any interest in the Collateral in favor of Bank.
1.09 Governmental Authority means the United States of America; the State
of New Mexico; any political subdivision of any of the foregoing and any agency,
department, commission, board, bureau or instrumentality of any of them which
now or hereafter exercises jurisdiction over the Borrower.
1.10 Guarantor means M. L. Bowlin.
1.11 Loans means the loans from the Bank to the Borrower as described in
Section 2, evidenced by the Notes and advanced by the Bank pursuant to the terms
of this Agreement and the other Loan Documents.
1.12 Loan Document(s) means this Agreement, the Notes, all Collateral
Documents, and all other liens, lien interests, and instruments executed in
connection with or as security for the payment of the Loans or for performance
of the Borrower's Obligations under this Agreement, or for both such payment and
performance and all renewals, extensions, modifications and amendments of any of
the foregoing.
1.13 Loan Fees means the fees charged by the Bank in connection with the
Loans, in addition to the expenses described in Paragraph 3.07.
1.14 Note(s) collectively means the following promissory notes executed and
delivered by the Borrower together with all extensions, amendments, modif
ications, revisions, replacements, and substitutions thereof permitted by the
Bank:
(a) $765,000 real estate loan in the form attached as Exhibit 1.14(a);
and
(b) $35,000 equipment loan in the form attached as Exhibit 1.14(b).
1.15 Obligations means all obligations of the Borrower:
(a) To pay the principal of, and interest on, each Note and any
Renewal Note in accordance with their respective terms, now
existing or existing in the future, and to satisfy all of its
other liabilities to the Bank whether hereunder or otherwise,
whether now existing or hereafter incurred, matured or unmatured,
direct or contingent, joint or several, including any extensions,
modifications, renewals thereof and substitutions therefor;
(b) To repay to the Bank all amounts advanced by the Bank hereunder or
otherwise on behalf of the Borrower, including, but without
limitation, advances for Loan Fees, principal or interest payments
to prior secured parties or lienholders, or for taxes or levies;
and
2
<PAGE>
(c) To reimburse the Bank, on demand, for all of the Bank's expenses
and costs, including the reasonable fees and expenses of its
counsel, in connection with the administration, amendment,
modification or enforcement of the Loan Documents and any
documents evidencing or relating to a Renewal Note, including,
without limitation, any proceeding brought or threatened to
enforce payment of any of the Obligations.
1.16 Organizational Documents means:
(a) If Borrower is a corporation, copies of the current Articles of
Incorporation and Bylaws of the Borrower and all amendments, and
evidence satisfactory to the Bank that the Borrower is a
corporation in good standing in the State of New Mexico; and
(b) If Borrower is a partnership or other business entity, copies of
the organizational documents and evidence satisfactory to the Bank
that Borrower is a bona fide business entity.
1.17 Person means any individual, partnership, corporation or other
business entity or organization.
1.18 Renewal Note means any promissory note executed and delivered by the
Borrower to the Bank in connection with a renewal, extension, modification,
amendment, revision, replacement or substitution of one or both Notes in
accordance with the terms of this Agreement.
SECTION 2 - THE LOANS.
- ----------------------
2.01 General Terms.
(a) LOAN A. The maximum principal amount of Loan A shall be $765,000.
The loan shall be:
*A term loan with no right to borrow repaid principal.
LOAN B. The maximum principal amount of Loan B shall be
$35,000.00. The loan shall be:
*A term loan with no right to borrow repaid principal.
(b) Borrower's obligation to repay the Loans shall be evidenced by the
Notes, any Renewal Note, and the other Loan Documents, all of
which Borrower shall execute and deliver to the Bank before it may
receive any Loan proceeds.
(c) Bank shall not advance on Loan A more than 85% of the current
appraised value of the Collateral at any time.
3
<PAGE>
2.02 Security for Payaent and Performance. The Collateral is given to
secure Loan A and B and is and will be used as security for any and all other
indebtedness of Borrower to the Bank, whether now existing or hereaf ter
arising. Repayment and performance of the Obligations is secured by the
Collateral Documents, including, but not limited to the following:
Loan A. First REM on land and building located at 136 and 150
Louisiana Blvd., N. E. Albuquerque, New Mexico, 87108. Assignment
of Leases and Rents.
Loan B. First lien on all furniture and equipment located at 136
and 150 Louisiana Blvd., N. E., Albuquerque, New Mexico, 87108.
2.03 Right of Set-off. Collateral includes the Bank's right of setoff
against any balance or share belonging to Borrower of any deposit or other
account with the Bank, notwithstanding any other security for the Loans.
2.04 Collateral; Deficiency. All security held by the Bank under the terms
of this Agreement and the other Loan Documents shall be available as Collateral
for the Loans and may be applied to satisfy the Borrower's Obligations and to
otherwise perform its duties and obligations under the Loan Documents. The
Borrower shall remain liable for any deficiency remaining after such
application.
2.05 Interest on the Notes. Interest shall accrue at the rate specified in
the Notes. The Bank may, at its option, calculate and charge interest as though
each payment is made on the payment due date with principal reductions effective
as of the date of receipt.
2.06 Repayment of the Notes. Each Note shall be due and payable on the
dates specified in the Note and in accordance with the terms thereof. All
payments shall be paid directly to the Bank in immediately available funds.
After written notice of default and a 30 day cure period, the Bank may charge
any deposit account of Borrower for all or any part of the Obligations due or
declared due. The records maintained by the Bank shall be deemed to be evidence
of the date of an amount of each payment on the Note and the other Obligations.
Payments may be applied to any Note(s) in such amounts and in such order or
priority as the Bank deems necessary.
2.07 Guaranty. The Loan(s) will be guaranteed by the Guarantor(s) named in
Paragraph 1.10 in a form acceptable to Bank, to be attached as Exhibit 2.07.
2.08 Loan Fees. The Borrower shall pay the following Loan Fees:
Loan A. None.
Loan B. None.
2.09 Authorized Persons. Michael Bowlin or C. C. Bess is authorized to make
a written or oral request to Bank to advance funds under this Agreement. Any
advance made pursuant to such written or oral request is irrebuttable presumed
to be made for Borrower's benefit. Bank shall make disbursements on the Loan(s)
to Borrower for the account of Borrower unless Borrower directs otherwise in
writing.
4
<PAGE>
SECTION 3 - REPRESENTATIONS AND AFFIRMATIVE COVENANTS.
- ------------------------------------------------------
The Borrower represents, warrants, covenants and agrees that:
3.01 Status. The Borrower is a duly organized and validly existing
corporation, partnership or other business entity, in good standing and duly
authorized to carry on its business in the State of New Mexico as now conducted
and to enter into and perform its obligations under this Agreement and each of
the Loan Documents.
3.02 Maintenance of Status. The Borrower will maintain its existence as a
business entity which is duly authorized to do business in the State of New
Mexico, will comply with all statutes and rules and regulations applicable to
its organization and existence and its business in New Mexico or elsewhere, and
will maintain its properties and other assets in good condition.
3.03 Due Authorization. The execution, delivery and performance by the
Borrower of the Loan Documents have been duly authorized by all necessary
corporate action by the Borrower and its Board of Directors.
3.04 Validity and Binding Effect. The Loan Documents have been duly and
validly executed, issued and delivered by the Borrower and constitute valid and
legally binding obligations of the Borrower, enforceable in accordance with
their terms except as may be limited by bankruptcy, insolvency, reorganization
or other similar laws related to or affecting enforcement of creditors' rights.
3.05 Compliance. The execution and delivery by the Borrower of the Loan
Documents and compliance by the Borrower with the terms thereof will not
violate:
(a) Any law or regulation, including but not limited to any securities
law or regulation;
(b) Borrower's Organizational Documents; or
(c) Any other instrument or agreement binding upon the Borrower.
3.06 Impositions. The Borrower will comply with all legal requirements and
will pay all taxes, assessments, governmental charges and other obligations
which, if unpaid, might become a lien against the Collateral and the Borrower's
other property, except liabilities being contested in good faith and against
which, if requested by the Bank, the Borrower will set up reserves to satisfy
such obligations as they become due.
3.07 Expenses and Loan Fees. The Borrower will pay any and all fees, costs
and expenses, of whatever kind and nature, including but not limited to
attorneys' fees, title insurance premiums, surveys, environmental audits,
appraisal fees, recording fees, and filing fees, incurred by Bank in connection
with the origination of the two subject loans (whether or not the Loans are
advanced) and all shall be borne and paid by Borrower on demand by Bank and
until so paid constitute part of the Obligations of Borrower secured by the Loan
Documents and the Collateral, and shall accrue interest at the Note rate or, if
applicable, at the default rate. Borrower hereby authorizes Bank to
5
<PAGE>
make advances on the Loan (s) , if available, to pay such costs and expenses if
Bank, in its sole discretion, chooses to do so.
3.08 Accuracy of Representations. No certificate, statement, document,
financial or other information delivered by or on behalf of Borrower to the Bank
in connection herewith or in connection with the Loans contains any untrue
statement of a material fact or fails to state any material fact necessary to
keep such information from being misleading. Borrower represents and warrants
all financial and other information hereafter furnished to the Bank will be
materially accurate and complete and acknowledges that such information will be
submitted to the Bank with the intent that the Bank will rely upon such
information.
3.09 Financial and Other Information. The Borrower shall deliver to the
Bank the following financial and other information:
(a) Financial Statements.
Within one hundred twenty (120) days after the end of each fiscal
year, annual financial statements acceptable to the Bank,
including balance sheet, statement of income, notes thereto, and
any other financial information reasonably requested by Bank. The
statements shall be audited (Initial;
(b) Semi-annual Information.
Within sixty (60) days after the end of the second fiscal quarter,
Borrower's internally prepared balance sheet and statement of
income. Such internally prepared information shall be prepared and
conform with generally accepted accounting principles,
consistently applied, with certification that such information is
materially true, accurate, and complete to the best knowledge of
the person preparing such information and the President of
Borrower.
(c) Financial Information on Guarantors.
Borrower shall obtain and furnish annually, in form acceptable to
the Bank, a financial statement of each Guarantor. Additionally,
Borrower shall furnish to the Bank annually the individual federal
income tax return, with all schedules, of each Guarantor.
(d) Additional Information.
Borrower shall provide such additional financial and other
information about the Borrower and its business activities, and
any other guarantor which the Bank shall reasonably require during
the term of these Loans.
3.10 Collateral Title, Liens. Borrower shall, at its own expense, take any
and all actions necessary to remove any encumbrances or clouds upon title to the
Collateral, except those agreed to in writing by the Bank; and Borrower shall
keep the Collateral free and clear of such encumbrances or clouds upon title,
except those agreed to in writing by the Bank.
6
<PAGE>
3.11 Solvency. The Borrower is solvent, and there are no proceedings
pending or threatened against it which could materially adversely affect its
financial condition or its ability to timely perform all Obligations, nor are
there any governmental or any judicial proceedings of any kind pending or
threatened against it except as disclosed to the Bank in writing prior to
closing.
3.12 Collateral Free and Clear. The Collateral is free and clear of any
adverse liens, restrictions or limitations including any restriction from
transfer except those that have been disclosed to the Bank in writing prior to
closing.
3.13 Notice to Bank of Adverse Claims. The Borrower will promptly notify
the Bank of:
(a) Any litigation or any claim or controversy which might be the
subject of litigation against the Borrower affecting any of the
Collateral, if such litigation or potential litigation might, in
the event of an unfavorable outcome, have a material adverse
effect on such entity's financial condition or on the Bank's lien
or security interest in the Collateral or might cause an Event of
Default;
(b) Any material adverse change in the financial condition or business
of the Borrower;
(c) Any other matter which in the opinion of the Borrower might
materially adversely affect the financial condition of the
Borrower; and/or
(d) The occurrence of any Event of Default.
3.14 Limitations on Borrower; Prohibitions. During the term of the Loans,
including the term of any Renewal Note:
(a) Borrower will notify the Bank in writing of any change in the
offices of the President,, or any other executive officer of
Borrower, within three (3) business days following the date of any
such change.
3.15 Records. The Borrower will keep accurate records, in accordance with
generally accepted accounting principles, of all its transactions so that at any
time, and from time to time, its true and complete financial condition may be
readily determined and, at the Bank's reasonable request, make such records
available for the Bank's inspection and permit the Bank to make and retain
copies thereof.
3.16 Payment of Wages. The Borrower shall pay all wages and payroll taxes
(federal, state and local) as they become due and shall comply with all
applicable federal, state and local labor laws.
3.17 Further Assurances. Throughout the term of the Loans, Borrower and any
guarantor shall take whatever action is deemed by the Bank to be necessary to
preserve and/or protect the Banks lien on the Collateral, including, without
limitation, executing additional documents.
7
<PAGE>
3.18 No Assignment. Neither the Loans or the proceeds nor the
Borrower's rights under the Loan Documents may be assigned by the Borrower
without the Bank's prior written consent. Any such assignment without such
consent shall be void.
SECTION 4 - CLOSING CONDITIONS.
- -------------------------------
4.01 Conditions Precedent to Closing. The Bank shall not be obligated to
close the Loans unless all of the following conditions shall be satisfied at the
time of such advance, or current compliance with such condition shall have been
waived in writing by the Bank and unless all warranties were substantially true,
correct and accurate at the time made and remain so through closing;
(a) The Loan Documents and Other Items. The Bank shall have received
original, properly executed Loan Documents and other documents or
items, including:
(1) This Agreement;
(2) The Note(s);
(3) The Collateral Documents described in Section 2.02;
(4) The Guaranty(s).
(b) No Default. There shall be no Event of Default under any Loan
Document.
(c) No Potential Default. No event shall have occurred which, with
notice or lapse of time or both, would constitute an Event of
Default under any Loan Document, unless such potential default
shall have been cured to the satisfaction of Bank prior to the
ripening of such potential default into actual default.
(d) Fulfillment of Conditions. The Borrower shall have satisfied all
conditions for the advance and the Borrower shall be in current
compliance with all of its covenants, agreements and obligations
under any Loan Document.
SECTION 5 - DEFAULT AND REMEDIES.
- ---------------------------------
5.01 Events of Default. The occurrence, whether voluntary or involuntary or
arising by operation of law, or as a result of a judicial or governmental action
or otherwise, of any Event of Default, as defined in the Notes, including any
Renewal Note, any Collateral Documents or the failure to observe or perform any
duty, obligation, warranty, requirement, condition, limitation, or restriction
in this Agreement, any Note, or any event of default under any other indenture,
Agreement, or undertaking between the Borrower and the Bank or between the
Borrower and any lender other than the Bank, shall constitute an Event of
Default under this Agreement.
8
<PAGE>
If any payment required by these Notes is not made within ten (10) days of
written notice, or if any non-mandatory default as described in any security
agreement, assignment, pledge agreement, real estate mortgage, or assignment of
rents or leases which provide security for the loans is not cured within thirty
(30) days of written notice, the unpaid balance of these Notes, and any other
liabilities of the maker to the holder, direct or indirect, absolute or
contingent, now or heretofore existing or hereafter arising (all hereinafter
called "Obligations") shall become immediately due and payable at the option of
the holder, without notice or demand. Written notice shall be by certified mail
and shall be deemed received when deposited, postage prepaid, in the United
States mail.
SECTION 6 - MISCELLANEOUS.
- --------------------------
6.01 Execution and Form of Documents. Each written instrument required by
this Agreement or any of the other Loan Documents to be furnished to the Bank
shall be duly executed by the person or persons specified (or where no
particular person is specified, by such person as the Bank shall require), duly
acknowledged where required by the Bank and, in the case of affidavits and
similar sworn instruments, duly sworn to and subscribed before a notary public
duly authorized to act in the premises by Governmental Authority; shall be
furnished to the Bank in one or more copies as required by the Bank; shall be in
such form and of such substance as shall be effective, in the judgment of the
Bank, to accomplish the results intended by such instrument; and shall in all
respects be in form and substance satisfactory to the Bank and to its legal
counsel.
6.02 Form of Evidence of Facts. Where evidence of the existence or
nonexistence of any fact is required by this Agreement or any of the other Loan
Documents to be furnished to the Bank, such evidence shall in all respects be in
form and substance satisfactory to the Bank, and the duty to furnish such
evidence shall not be considered satisfied until the Bank shall have
acknowledged, in writing, that it is satisfied; provided that, if the Bank fails
to so acknowledge within sixty (60) days after receipt of such evidence, it
shall be deemed to be satisfied.
6.03 Severability. If any item, term or provision contained in the Loan
Documents is in conf lict, or may hereafter be held to be in conflict with the
laws of the United States or the State of New Mexico, as applicable, or any
political subdivision of any of them, then only the documents containing such
provision shall be affected and it shall be affected only as to such particular
item, term or provision and shall in all other respects remain in full force and
effect.
6.04 No Waiver. No course of dealing between the Bank and the Borrower or
any guarantor, or any delay on the part of the Bank in exercising any rights
hereunder or under the Loan Documents shall operate as a waiver of any rights of
the Bank, except to the extent, if any, expressly waived in writing by the Bank.
6.05 Survival. All covenants, agreements, representations and warranties
made by the Borrower in the Loan Documents and in any certificates or other
documents or instruments delivered pursuant to this Agreement shall survive the
making by the Bank of the Loans and the execution and delivery of the Loan
Documents, and shall continue in full force and effect until the Obligations are
paid in full.
9
<PAGE>
6.06 Notices. Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by hand delivery,
facsimile transmission, delivery by commercial courier or by depositing the same
in the United States Mail (certified), postage prepaid, addressed to the
respective parties as follows:
If to the Borrower: Bowlins, Incorporated
150 Louisiana Blvd., N. E.
Albuquerque, New Mexico 87108
Attention: Michael L. Bowlin, President
If to the Bank: First Security Bank of New Mexico, N.A.
Post Office Box 1305
Albuquerque, New Mexico 87103-1305
Attention: James J. Bertram, Vice President
6.08 Modification. This Agreement shall not be changed orally or by course
of conduct or dealing but shall be changed only by agreement in writing signed
by all parties hereto.
6.09 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which, when so executed and delivered, shall be
an original, but such counterparts shall together constitute one and the same
instrument.
6.10 Binding Effect. This Agreement shall be binding upon the Bank, the
Borrower and its successors, assigns, heirs and personal representatives.
6.11 No Partnership or Joint Venture. Notwithstanding anything to the
contrary in the Loan Documents, and notwithstanding any action the Bank takes
pursuant to the Loan Documents, the Bank and the Borrower shall not be deemed to
be engaged in a partnership or joint venture, nor shall the Bank be deemed to be
an agent or principal of the Borrower.
6.12 Assignment by the Bank. The Loan Documents,, and the Loans
contemplated thereby, may be placed, participated, assigned and/or serviced by
the Bank and/or its successors and assigns, and in connection with any of the
foregoing, the Bank may receive servicing, brokerage or other fees. Any such
placement, participation, assignment or servicing shall be at the Bank's sole
option; and the Bank and its successors and assigns shall have no obligations to
disclose to the Borrower the receipt, or contemplated receipt, of any such fees,
nor shall the Borrower have any claim or right to the same.
6.13 Relation to Other Documents. The provisions of this Agreement are not
intended to supersede the provisions of the other Loan Documents, but should be
construed as supplemental thereto. However, except as specifically provided
herein, if there is any inconsistency between the provisions of this Agreement
and the other Loan Documents, it is intended that this Agreement shall be
controlling.
6.14 Jurisdiction. Borrower hereby irrevocably agrees that any legal action
or proceedings against the Borrower with respect to this Agreement may be
brought in the courts of the State of New Mexico or in the U.S. District Court
for the District of New Mexico. Borrower hereby consents and attorns to the
jurisdiction of such courts and further
10
<PAGE>
consents to the personal jurisdiction of any court located within Bernalillo
County, New Mexico, with respect to any lawsuit to enforce the obligations of
Borrower under this Agreement. This provision shall not limit the right of the
Bank to bring such action or proceedings against the Borrower in the courts of
such other states or jurisdictions where the Borrower may be subject to
jurisdiction.
6.15 Governing Law. This Agreement and the Loan Documents have been
negotiated, executed and delivered solely within the State of New Mexico. The
rights and obligations of the parties under this Agreement and under each of the
Loan Documents shall be governed by and construed and interpreted in accordance
with the laws of the State of New Mexico.
6.16 18 U.S.C S1014. Borrower represents and warrants that it is aware of
and, through duly authorized officers and/or directors, has read and understand
the provisions of 18 U.S.C. 1014 which provide generally:
Whoever knowingly makes any false statement or report, or
willfully overvalues any land, property or security, for the
purpose of influencing in any way, the action of... any
institution the accounts of which are insured by the Federal
Deposit Insurance corporation... upon any application, advance,
discount, purchase, purchase agreement, repurchase agreement,
commitment, or loan, or any change or extension of any of the
same, by renewal, deferment of action or otherwise, or the
acceptance, release, or substitution of security therefor, shall
be fined not more than $1,000,000 or imprisoned not more than 30
years or both.
6.17 N.M.S.A. S58-6-5. Borrower represents and warrants that it is aware of
and through its duly authorized officers and/or authorized representatives, has
read and understands the provisions of N.M.S.A. S58-6-5 which provides:
"A contract, promise or commitment to loan money or to grant,
extend or renew credit or any modification thereof, in an amount
greater than twenty-five thousand dollars ($25,000), not
primarily for personal, family or household purposes, made by a
financial institution shall not be enforceable unless in writing
and signed by the party to be charged or that party's authorized
representative...."
6.18 Indemnity. Borrower hereby agrees to indemnify and hold harmless Bank,
its directors, officers and employees from any and all liability, expense,
costs, charges or assessments, including attorneys' fees and expenses, with
respect to hazardous or toxic substances or waste handling, disposal, storage,
repairs or cleanup, whether incurred or imposed pursuant to local, state or
federal law. Borrower also agrees to indemnify and hold harmless Bank, its
directors, officers and employees from and against any and all liability,
expense, damage, demands, claims and lawsuits, including attorneys' fees and
expenses, arising out of this Agreement or the other Loan Document(s) or in
connection therewith, unless arising from Bank's willful misconduct.
11
<PAGE>
This Agreement was executed on the dates indicated; it is effective as
of January 31, 1995.
BANK: FIRST SECURITY BANK OF NEW MEXICO, N.A.
- ----
By: /s/ James J. Bertram
---------------------------------------
James J. Bertram, Vice President
Executed on: 1-30-95
--------------------------------
BORROWER: BOWLINS, INCORPORATED
- --------
By: /s/ M. L. Bowlin
---------------------------------------
M. L. Bowlin, President
Executed on: 1-30-95
--------------------------------
GUARANTOR: /s/ M. L. Bowlin
---------------------------------------
M. L. Bowlin
Executed on: 1-30-95
--------------------------------
12
<PAGE>
Exhibit 1. 14 (a)
(Page 1 of 2)
FIRST SECURITY BANK
Promissory Note
$765,000.00 January 31 1995
Albuquerque, New Mexico
FOR VALUE RECEIVED, BOWLINS, INCORPORATED ("Maker") promises to pay to
the order of FIRST SECURITY BANK, at its offices in Albuquerque, New Mexico
Seven Hundred Sixty Five Thousand Dollars ($765,000.00), plus interest, payable
in monthly payments beginning February 28, 1995 and continuing on the last day
of each month thereafter through December 29, 1999. Monthly payments shall be
Six Thousand Eight Hundred Eighty Three Dollars ($6,883.00) for the first twelve
(12) months and adjusted annually thereafter at the January payment based on an
initial 20-year amortization. The entire balance, including all principal and
accrued interest shall be due and payable in full January 29, 2000.
This loan bears interest from the date hereof until maturity at a
floating rate equal to First Security Bank's prime plus 1/2% per annum, with
adjustments in the rate to be made on the same day as each change in the rate.
First Security Bank's "prime rate" is its announced rate of interest
used as a reference point from which it may calculate the cost of credit to
customers. It is subject to change from time to time. First security Bank may
make loans bearing interest above, at, or below its prime rate. Interest will be
calculated on the basis of a 360-day year. The Bank may, at its option,
calculate and charge interest as though each payment is made on the payment due
date with principal reductions effective as of the day of receipt. If the rate
of interest to be charged by the Bank hereunder is tied to or based on a rate of
interest announced or published by a party other than the Bank (the "Index") and
such party ceases to announce or publish the Index, the Bank, by notice to
maker, may substitute for the Index a rate of interest established from time to
time by a commercial bank located in New York, New York whose interest rate has
historically been comparable to the Index. If the maturity date of this Note is
stated to be due on a Saturday, Sunday, or a public holiday, or the equivalent
for banks generally under the laws of the State of New Mexico, the maturity date
shall be the next succeeding day the Bank is open for business, and such
extension of time shall in such case be included in the computation of the
payment of interest. In the event of default in payment at the time due, or in
the event of acceleration, the unpaid balance shall bear interest at the Prime
Rate, plus 5%. The makers, endorsers, and sureties hereof hereby severally waive
protest, presentment demand, and notice of protest and non-payment in case this
Note (or any payment due hereunder) is not paid when due, and they agree to any
renewal of this Note or to
<PAGE>
Exhibit 1. 14 (a)
(Page 2 of 2)
any extension, acceleration, or postponement of the time of payment, or any
other indulgence, to any substitution, exchange or release of collateral, and to
the addition or release of any party or person primarily or secondarily liable
without prejudice to the holder or notice to makers, endorsers, and sureties.
If this Note is payable in more than one payment, a late charge of
$15.00 will be charged for any payment which is not paid within 10 days of its
due date.
If any payment required by this Note is not made within ten (10) days
of written notice, or if any non-mandatory default as described in any security
agreement, assignment, pledge agreement, real estate mortgage, or assignment of
rents or leases which provide security for this loan is not cured within thirty
(30) days of written notice, the unpaid balance of this Note, and any other
liabilities of the makers to the holder, direct or indirect, absolute or
contingent, now or heretofore existing or hereafter arising (all hereinafter
called "Obligations") shall become immediately due and payable at the option of
the holder, without notice or demand. Written notice shall be by certified mail
and shall be deemed received when deposited, postage prepaid, in the United
States mail. The undersigned will pay on demand all costs of collection,
including reasonable costs and attorneys' fees incurred or paid by the holder in
attempting to enforce payment of this Note.
Any deposits and checking, savings, or any other types of accounts or
other sums at any time credited by or due from the holder to any maker,
endorser, or surety hereof and any securities or other property of any maker,
endorser, or surety hereof in the possession of the holder may at all times be
held and treated as collateral security for the payment of any and all
obligations. The holder may, without notice to the makers, endorsers and
sureties, apply or set off such deposits or other sums against such Obligations
at any time when due and payable even if due only by reason of acceleration
regardless of any security for this loan.
MAKER: BOWLINS, INCORPORATED
- -----
By:______________________________
Michael L. Bowlin
2
<PAGE>
Exhibit 1. 14 (b)
(Page 1 of 2)
FIRST SECURITY BANK
Promissory Note
$35,000.00 January 31, 1995
Albuquerque, Now Mexico
FOR VALUE RECEIVED, BOWLINS, INCORPORATED ("Maker") promises to pay to
the order of FIRST SECURITY BANK, at its offices in Albuquerque, New Mexico
Thirty Five Thousand Dollars ($35,000.00), plus interest, payable in monthly
payments beginning February 28, 1995 and continuing on the last day of each
month thereafter through December 29, 2001. Monthly payments shall be Five
Hundred Sixty Three Dollars ($563.00) for the first twelve (12) months and
adjusted annually thereafter at the January payment based on a seven (7) year
amortization. The entire balance, including all principal and accrued interest
shall be due and payable in full January 29, 2002.
This loan bears interest from the date hereof until maturity at a
floating rate equal to First Security Bank's prime plus 1/2% per annum, with
adjustments in the rate to be made on the same day as each change in the rate.
First Security Bank's "prime rate" is its announced rate of interest
used as a reference point from which it may calculate the cost of credit to
customers. It is subject to change from time to time. First Security Bank may
make loans bearing interest above, at, or below its prime rate. Interest will be
calculated on the basis of a 360-day year. The Bank may, at its option,
calculate and charge interest as though each payment is made on the payment due
date with principal reductions effective as of the day of receipt. If the rate
of interest to be charged by the Bank hereunder is tied to or based on a rate of
interest announced or published by a party other than the Bank (the "Index") and
such party ceases to announce or publish the Index, the Bank, by notice to
maker, may substitute for the Index a rate of interest established from time to
time by a commercial bank located in New York, New York whose interest rate has
historically been comparable to the Index. If the maturity date of this Note is
stated to be due on a Saturday, Sunday, or a public holiday, or the equivalent
for banks generally under the laws of the State of New Mexico, the maturity date
shall be the next succeeding day the Bank is open for business, and such
extension of time shall in such case be included in the computation of the
payment of interest. In the event of default in payment at the time due, or in
the event of acceleration, the unpaid balance shall bear interest at the Prime
Rate, plus 5%. The makers, endorsers, and sureties hereof hereby severally waive
protest, presentment, demand, and notice of protest and non-payment in case this
Note (or any payment due hereunder) is not paid when due, and they agree to any
renewal of this Note or to
<PAGE>
Exhibit 1. 14 (b)
(Page 2 of 2)
any extension, acceleration, or postponement Of the time of payment, or any
other indulgence, to any substitution, exchange or release of collateral, and to
the addition or release of any party or person primarily or secondarily liable
without prejudice to the holder or notice to makers, endorsers, and sureties.
If this Note is payable in more than one payment, a late charge of
$15.00 will be charged for any payment which is not paid within 10 days of its
due date.
If any payment required by this Note is not made within ton (10) days
of written notice, or if any non-mandatory default as described in any security
agreement, assignment, pledge agreement, real estate mortgage, or assignment of
rents or leases which provide security for this loan is not cured within thirty
(30) days of written notice, the unpaid balance of this Note, and any other
liabilities of the makers to the holder, direct or indirect, absolute or
contingent, now or heretofore existing or hereafter arising (all hereinafter
called "Obligations") shall become immediately due and payable at the option of
the holder, without notice or demand. Written notice shall be by certified mail
and shall be deemed received when deposited, postage prepaid, in the United
States mail. The undersigned will pay on demand all costs of collection,
including reasonable costs and attorneys' fees incurred or paid by the holder in
attempting to enforce payment of this Note.
Any deposits and checking, savings, or any other types of accounts or
other sums at any time credited by or due f rom the holder to any maker,
endorser, or surety hereof and any securities or other property of any maker,
endorser, or surety hereof in the possession of the holder may at all times be
held and treated as collateral security for the payment of any and all
obligations. The holder may, without notice to the makers, endorsers and
sureties, apply or set off such deposits or other sums against such Obligations
at any time when due and payable even if due only by reason of acceleration
regardless of any security for this loan.
MAKER: BOWLINS, INCORPORATED
- -----
By:_________________________
Michael L. Bowlin
2
LOAN AGREEMENT
This Loan Agreement dated effective May 16, 1995, is by and between
Bowlin's, Incorporated (individually and collectively the "Borrower") , and
FIRST SECURITY BANK OF NEW MEXICO, N.A. ("Bank") , a national banking
association.
RECITALS.
- ---------
1. Borrower has applied to the Bank for two loans as follows:
LOAN A. $900,000 Real Estate Loan.
LOAN B. $150,000 Revolving Line of Credit Loan.
2. The Bank is willing to make the Loans on the terms and conditions
set forth in this Agreement.
3. The Borrower and the Bank intend and agree to be bound by the terms
of this Agreement.
AGREEMENT.
- ----------
In consideration of the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the Borrower and the
Bank agree:
SECTION I - DEFINITIONS.
- ------------------------
As used in this Agreement, the following terms shall have the respective
meanings indicated:
1.01 Agreement means this Loan Agreement.
1.02 Bank means First Security Bank of New Mexico, N.A and its successors
and assigns.
1.03 Borrower means the undersigned borrower(s) and all successors and
assigns.
1.04 Borrower's Resolutions means, if Borrower is a corporation, the
resolutions duly adopted by the Board of Directors of the Borrower authorizing
and consenting to the Loan and to the execution and delivery of the Loan
Documents. The Borrower's Resolutions may be evidenced by the Resolution in a
form acceptable to the Bank.
1.05 Business Day means a day when the Bank is open for business.
1.06 Closing Date means effective May 16, 1995.
1.07 Collateral means all collateral, liens, assignments, mortgages,
security interests, and other rights, presently in connection with the loans, or
hereafter, created or signed by or in favor of Borrower to the Bank in order to
secure performance and/or repayment of the Loans.
<PAGE>
1.08 Collateral Documents means any and all documents executed by or on
behalf of the Borrower, any Guarantor, or any party having any right, title or
interest in any Collateral which evidences, grants, creates, assigns, or
perfects any interest in the Collateral in favor of Bank.
1.09 Governmental Authority means the United States of America; the State of
New Mexico; any political subdivision of any of the foregoing and any agency,
department, commission, board, bureau or instrumentality of any of them which
now or hereafter exercises jurisdiction over the Borrower.
1.10 Guarantor means M. L. Bowlin.
1.11 Loans means the loans from the Bank to the Borrower as described in
Section 2, evidenced by the Notes and advanced by the Bank pursuant to the terms
of this Agreement and the other Loan Documents.
1.12 Loan Document(s) means this Agreement, the Notes, all Collateral
Documents, and all other liens, lien interests, and instruments executed in
connection with or as security for the payment of the Loans or for performance
of the Borrowers Obligations under this Agreement, or for both such payment and
performance and all renewals, ex-tensions, modifications and amendments of any
of the foregoing.
1.13 Loan Fees means the fees charged by the Bank in connection with the
Loans, in addition to the expenses described in Paragraph 3.07.
1.14 Note(s) collectively means the following promissory notes executed and
delivered by the Borrower together with all extensions, amendments,
modifications, revisions, replacements, and substitutions thereof permitted by
the Bank:
(a) $900,000 Real Estate Loan in the form attached as Exhibit
1.14(a); and
(b) $150,000 Revolving Line of Credit loan in the form
attached as Exhibit 1.14(b).
1.15 Obligations means all obligations of the Borrower:
(a) To pay the principal of, and interest on, each Note and
any Renewal Note in accordance with their respective
terms, now existing or existing in the future, and to
satisfy all of its other liabilities to the Bank whether
hereunder or otherwise, whether now existing or hereafter
incurred, matured or unmatured, direct or contingent,
joint or several, including any extensions,
modifications, renewals thereof and substitutions
therefor;
(b) To repay to the Bank all amounts advanced by the Bank
hereunder or otherwise on behalf of the Borrower,
including, but without limitation, advances for Loan
Fees, principal or interest payments 'to prior secured
parties or lien holders, or for taxes or levies; and
2
<PAGE>
(c) To reimburse the Bank, on demand, for all of the Bank's
expenses and costs, including the reasonable fees and
expenses of its counsel, in connection with the
administration, amendment, modification or enforcement of
the Loan Documents and any documents evidencing or
relating to a Renewal Note, including, without
limitation, any proceeding brought- or threatened to
enforce payment of any of the Obligations.
1.16 Organizational Documents means:
(a) If Borrower is a corporation, copies of the current
Articles of Incorporation and Bylaws of the Borrower and
all amendments, and evidence satisfactory to the Bank
that the Borrower is a corporation in good standing in
the State of. New Mexico; and
(b) If Borrower is a partnership or other business entity,
copies of the organizational documents and evidence
satisfactory to the Bank that Borrower is a bona fide
business entity.
1.17 Person means any individual, partnership, corporation or other business
entity or organization.
1.18 Renewal Note means any promissory note executed and delivered by the
Borrower to the Bank in connection with a renewal, extension, modification,
amendment, revision, replacement or substitution of one or both Notes in
accordance with the terms of this Agreement.
SECTION 2 - THE LOANS.
- ----------------------
2.01 General Terms.
(a) LOAN A. The maximum principal amount of Loan A shall be
$900,000. The loan shall be:
A non-revolving/draw loan with funds to be advanced over
a period of time (with no right to reborrow repaid
principal).
LOAN B. The maximum principal amount of Loan B shall be
$150,000. The loan shall be:
A revolving line under which the Borrower may borrow,
repay, and reborrow up to the maximum principal amount at
any time or from time to time from the date of this
Agreement to and including May 31, 1996, or the
termination of the obligation of the Bank pursuant to
Section 5, whichever is earlier.
(b) Borrower's obligation to repay the Loans shall be
evidenced by the Notes, any Renewal Note, and the other
Loan Documents, all of which Borrower shall execute and
deliver to the Bank before it may receive any Loan
proceeds.
(c) Bank shall not advance on Loan A more than 70% of the
current appraised value of the Collateral real estate at
any time.
3
<PAGE>
2.02 Security for Payment and Performance. The Collateral is given to secure
Loan A and B and is and will be used as security for any and all other
indebtedness of Borrower to the Bank, whether now existing or here after
arising. Repayment and performance of the Obligations is secured by the
Collateral Documents, including, but not limited to the following:
Loan A. First real estate mortgage on land and building known as
the Flying C Ranch located approximately 16 miles east of Clines
Corners, NM; all furniture, fixtures, and equipment now owned or
hereafter acquired, located at the Flying C Ranch facility;
Assignment of Leases and Rents.
Loan B. Unsecured.
2.03 Right of Set-off. Collateral includes the Bank's right of set off
against any balance or share belonging to Borrower of any deposit or other
account with the Bank, notwithstanding any other security for the Loans.
2.04 Collateral; Deficiency. All security held by the Bank under the terms
of this Agreement and the other Loan Documents shall be available as Collateral
for the Loans and may be applied to satisfy the Borrower's Obligations and to
otherwise perform its duties and obligations under the Loan Documents. The
Borrower shall remain liable for any deficiency remaining after such
application.
2.05 Interest on the Notes. Interest shall accrue at the rate specified in
the Notes. The Bank may, at its option, calculate and charge interest as though
each payment is made on the payment due date with principal reductions effective
as of the date of receipt.
2.06 Repayment of the Notes. Each Note shall be due and payable on the dates
specified in the Note and in accordance with the terms thereof. All payments
shall be paid directly to the Bank in immediately available funds. After written
notice of default and a 30 day cure period, the Bank may charge any deposit
account of Borrower for all or any part of the obligations due or declared due.
The records maintained by the Bank shall be deemed to be evidence of the date of
an amount of each payment on the Note and the other Obligations. Payments may be
applied to any Note(s) in such amounts and in such order or priority as the Bank
deems necessary.
2.07 Guaranty. The Loan(s) will be guaranteed by the Guarantor(s) named in
Paragraph 1.10 in a form acceptable to Bank, to be attached as Exhibit 2.07.
2.08 Loan Fees. The Borrower shall pay -the following Loan Fees:
Loan A. None.
Loan B. None.
2.09 Authorized Persons. Michael Bowlin or C. C. Bess is authorized to make
a written or oral request to Bank to advance funds under this Agreement. Any
advance made pursuant to such written or oral request is irrebuttable presumed
to be made for Borrower's benefit. Bank shall
4
<PAGE>
make disbursements on the Loan(s) to Borrower for the account of Borrower unless
Borrower directs otherwise in writing.
SECTION 3 - REPRESENTATIONS AND AFFIRMATIVE COVENANTS.
- ------------------------------------------------------
The Borrower represents, warrants, covenants and agrees that:
3.01 Status. The Borrower is a duly organized and validly existing
corporation, partnership or other business entity, in good standing and duly
authorized to carry on its business in the State of New Mexico as now conducted
and to enter into and perform its obligations under this Agreement and each of
the Loan Documents.
3.02 Maintenance of Status. The Borrower will maintain its existence as a
business entity which is duly authorized to do business in the State of New
Mexico, will comply with all statutes and rules and regulations applicable to
its organization and existence and its business in New Mexico or elsewhere, and
will maintain its properties and other assets in good condition.
3.03 Due Authorization. The execution, delivery and performance by the
Borrower of the Loan Documents have been duly authorized by all necessary
corporate action by the Borrower and its Board of Directors.
3.04 Validity and Binding Effect. The Loan Documents have been duly and
validly executed, issued and delivered by the Borrower and constitute valid and
legally binding obligations of the Borrower, enforceable in accordance with
their terms except as may be limited by bankruptcy, insolvency, reorganization
or other similar laws related to or affecting enforcement of creditors' rights.
3.05 Compliance. The execution and delivery by the Borrower of the Loan
Documents and compliance by the Borrower with -the terms thereof will not
violate:
(a) Any law or regulation, including but not limited to any
securities law or regulation;
(b) Borrower's Organizational Documents; or
(c) Any other instrument or agreement binding upon the
Borrower.
3.06 Impositions. The Borrower will comply with all legal requirements and
will pay all taxes, assessments, governmental charges and other obligations
which, if unpaid, might become a lien against the Collateral and the Borrower's
other property, except liabilities being contested in good faith and against
which, if requested by the Bank, the Borrower will set up reserves to satisfy
such obligations as they become due.
3.07 Expenses and Loan Fees. The Borrower will pay any and all fees, costs
and expenses, of whatever kind and nature, including but not limited to
attorneys' fees, title insurance premiums, surveys, environmental audits,
appraisal fees, recording fees, and filing fees, incurred by Bank in connection
with the origination of the two subject loans (whether or not the Loans are
advanced) and all shall be borne and paid by Borrower on demand by Bank and
until so paid constitute part of the obligations of
5
<PAGE>
Borrower secured by the Loan Documents and the Collateral, and shall accrue
interest at the Note irate or, if applicable, at the default rate. Borrower
hereby authorizes Bank to make advances on the Loan(s), if available, to pay
such costs and expenses if Bank, in its sole discretion, chooses to do so.
3.08 Accuracy of Representations. No certificate, statement, document,
financial or other information delivered by or, on behalf of Borrower to the
Bank in connection herewith or in connection with the Loans contains any untrue
statement of a material fact or falls to state any material fact necessary to
keep such information from being misleading. Borrower represents and warrants
all financial and other information hereafter furnished to the Bank will be
materially accurate and complete and acknowledges that such information will be
submitted to the Bank with the intent that the Bank will rely upon such
information.
3.09 Financial and Other Information. The Borrower shall deliver to the Bank
the following financial and other information:
(a) Financial Statements.
Within one hundred twenty (120) days after the end of each
fiscal year, annual financial statements accept-able to the
Bank, including balance sheet, statement of income, notes
thereto, and any other financial information reason requested
by Bank. The statements shall be audited. (Initials)
(b) Semi-annual Information.
Within sixty (60) days after the end of the second fiscal
quarter, Borrower's internally prepared balance sheet and
statement of income. Such internally prepared information shall
be prepared and conform with generally accepted accounting
principles, consistently applied, with certification that such
information is materially true, accurate, and complete to the
best knowledge of the person preparing such information and the
President of Borrower.
(c) Financial Information on Guarantors.
Borrower shall obtain and furnish annually, in form acceptable
to the Bank, a financial statement of each Guarantor.
Additionally, Borrower shall furnish to the Bank annually the
individual federal income tax return, with all schedules, of
each Guarantor.
(d) Underground storage Tank Information
Borrower will provide -the Bank with all documentation related
to the removal of underground storage tanks at the Flying C
Ranch facility. The information will include but not be limited
to the "Closure Certificate" issued by the New Mexico EID.
6
<PAGE>
(e) Additional Information.
Borrower shall provide such additional financial and other
information about the Borrower and its business activities, and
any other guarantor which the Bank shall reasonably require
during the term of these loans.
3.10 Collateral Title, Liens. Borrower shall, at its own expense, take any
and all actions necessary to remove any encumbrances or clouds upon title to the
Collateral, except those agreed to in writing by the Bank; and Borrower shall
keep the Collateral free and clear of such encumbrances or clouds upon title,
except those agreed to in writing by the Bank.
3.11 Solvency. The Borrower is solvent, and there are no proceedings.
pending or threatened against it which could materially adversely affect its
financial condition or its ability to timely perform all Obligations, nor are
there any governmental or any judicial proceedings of any kind pending or
threatened against it except as disclosed to the Bank in writing prior to
closing.
3.12 Collateral Free and Clear. The Collateral is free and clear of any
adverse liens, restrictions or limitations including any restriction from
transfer except those that have been disclosed to the Bank in writing prior to
closing.
3.13 Notice to Bank of Adverse Claims. The Borrower will promptly notify the
Bank of:
(a) Any litigation or any claim or controversy which might be the
subject of litigation against the Borrower affecting any of the
Collateral, if such litigation or potential litigation might,
in the event of an unfavorable outcome, have a material adverse
effect on such entity's financial condition or on the Bank's
lien or security interest in the Collateral or might cause an
Event of Default;
(b) Any material adverse change in the financial condition or
business of the Borrower;
(c) Any other matter which in the opinion of the Borrower might
materially adversely affect the financial condition of the
Borrower; and/or
(d) The occurrence of any Event of Default.
3.14 Limitations on Borrower; Prohibitions. During the term of the Loans,
including the term of any Renewal Note:
(a) Borrower will notify the Bank in writing of any change in the
offices of the President, or any other executive officer of
Borrower, within three (3) business days following the date of
any such change.
3.15 Records. The Borrower will keep accurate records, in accordance with
generally accepted accounting principles, of all its transactions so that at any
time, and from time to time, its true and complete
7
<PAGE>
financial condition may be readily determined and, at the Bank's reasonable
request, make such records available for the Bank's inspection and permit the
Bank to make and retain copies thereof.
3.16 Payment of Wages. The Borrower shall pay all wages and payroll taxes
(federal, state and local) as they become due and shall comply with all
applicable federal, state and local labor laws.
3.17 Further Assurances. Throughout the term of the Loans, Borrower and any
guarantor shall take whatever action is deemed by the Bank to be necessary to
preserve and/or protect the Bank's lien on the Collateral, including, without
limitation, executing additional documents.
3.18 No Assignment. Neither the Loans or the proceeds nor the
Borrower's rights under the Loan Documents may be assigned by the Borrower
without the Bank's prior written consent. Any such assignment without such
consent shall be void.
SECTION 4 - CLOSING CONDITIONS.
- -------------------------------
4.01 Conditions Precedent to Closing. The Bank shall not be obligated to
close the Loans unless all of the following conditions shall be satisfied at the
time of such advance, or current compliance with such condition shall have been
waived in writing by the Bank and unless all warranties were substantially true,
correct and accurate at the time made and remain so through closing;
(a) The Loan Documents and other items. The Bank shall have
received original, properly executed Loan Documents and
other documents or items, including:
(1) This Agreement;
(2) The Note(s);
(3) The Collateral Documents described in section 2.02;
(4) The Guaranty(s).
(b) No Default. There shall be no Event of Default under any
Loan Document.
(c) No Potential Default. No event shall have occurred which,
with notice or lapse of time or both, would constitute an
Event of Default under any Loan Document, unless such
potential default shall have been cured to the
satisfaction of Bank prior to the ripening of such
potential default into actual default.
(d) Fulfillment of Conditions. The Borrower shall have
satisfied all conditions for the advance and the Borrower
shall be in current compliance with all of its covenants,
agreements and obligations under any Loan Document.
8
<PAGE>
SECTION 5 - DEFAULT AND REMEDIES.
- ---------------------------------
5.01 Events of Default. The occurrence, whether voluntary or involuntary or
arising by operation of law, or as a result of a judicial or governmental action
or otherwise, of any Event of Default, as defined in the Notes, including any
Renewal Note, any Collateral Documents or the failure to observe or perform any
duty, obligation, warranty, requirement, condition, limitation, or restriction
in this Agreement, any Note, or any event of default under any other indenture,
Agreement, or undertaking between the Borrower and the Bank or between the
Borrower and any lender other than the Bank, shall constitute an Event of
Default under this Agreement.
If any payment required by these Notes is not made within ten (10) days of
written notice, or if any non-mandatory default as described in any. security
agreement, assignment, pledge agreement, real estate mortgage, or assignment of
rents or leases which provide security for the loans is not cured within thirty
(30) days of written notice, 'the unpaid balance of these Notes, and any other
liabilities of the maker to the holder, direct or indirect, absolute or
contingent, now or heretofore existing or hereafter arising (all hereinafter
called "Obligations") shall become immediately due and payable at the option of
the holder, without notice or demand. Written notice shall be by certified mail
and shall be deemed received when deposited, postage prepaid, in the United
States mail.
SECTION 6 - MISCELLANEOUS.
- --------------------------
6.01 Execution and Form of Documents. Each written instrument required by
this Agreement or any of the other Loan Documents to be furnished to the Bank
shall be duly executed by the person or persons specified (or where no
particular person is specified, by such person as the Bank shall require), duly
acknowledged where required by the Bank and, in the case of affidavits and
similar sworn instruments, duly sworn to and subscribed before a notary public
duly authorized to act in the premises by Governmental Authority; shall be
furnished to the Bank in one or more copies as required by the Bank; shall be in
such form and of such substance as shall be effective, in the judgment of the
Bank, to accomplish the results intended by such instrument; and shall in all
respects be in form and substance satisfactory to the Bank and to its legal
counsel.
6.02 Form of Evidence of Facts. Where evidence of the existence or
nonexistence of any fact is required by this Agreement or any of the other ]Loan
Documents to be furnished to the Bank, such evidence shall in all respects be in
form and substance satisfactory to the Bank, and the duty to furnish such
evidence shall not be considered satisfied until the Bank shall have
acknowledged, in writing, that it is satisfied; provided that, if the Bank fails
to so acknowledge within sixty (60) days after receipt of such evidence, it
shall be deemed to be satisfied.
6.03 Severability. If any item, term or provision contained in the Loan
Documents is in conflict, or may hereafter be held to be in conflict with the
laws of the United States or the State of New Mexico, as applicable, or any
political subdivision of any of them, then only the documents containing such
provision shall be affected and it shall be affected only as to such particular
item, term or provision and shall in all other respects remain in full force and
effect.
9
<PAGE>
6.04 No Waiver. No course of dealing between the Bank and the Borrower or
any guarantor, or any delay on the part of the Bank in exercising any rights
hereunder or under the Loan Documents shall operate as a waiver of any rights
of the Bank, except to the extent, if any, expressly waived in writing by the
Bank.
6.05 Survival. All covenants, agreements, representations and warranties
made by the Borrower in the Loan Documents and in any certificates or other
documents or instruments delivered pursuant to this Agreement shall survive the
making by the Bank of the Loans and the execution and delivery of the Loan
Documents, and shall continue in full force and effect until the obligations are
paid in full.
6.06 Notices. Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by hand. delivery,
facsimile transmission, delivery by commercial courier or by depositing the same
in the United States Mail (certified), postage prepaid, addressed to the
respective parties as follows:
If to the Borrower: Bowlins, Incorporated
150 Louisiana Blvd., N. E.
Albuquerque, New Mexico 87108
Attention: Michael L. Bowlin, President
If to the Bank: First Security Bank of New Mexico, N.A.
Post Office Box 1305
Albuquerque, New Mexico 87103-1305
Attention: James J. Bertram, Vice President
6.08 Modification. This Agreement shall not be changed orally or by course
of conduct or dealing but shall be changed only by agreement in writing signed
by all parties hereto.
6.09 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which, when so executed and delivered, shall be
an original, but such counterparts shall together constitute one and the same
instrument.
6.10 Binding Effect. This Agreement shall be binding upon the Bank, the
Borrower and its successors, assigns, heirs and personal representatives.
6.11 No Partnership or Joint Venture. Notwithstanding anything to the
contrary in the Loan Documents, and notwithstanding any action the Bank takes
pursuant to 'the ]Loan Documents, the Bank and the Borrower shall not be deemed
to be engaged in a partnership or joint venture, nor shall the Bank be deemed to
be an agent or principal of the Borrower.
6.12 Assignment by the Bank. The Loan Documents, and the Loans contemplated
thereby, may be placed, participated, assigned and/or serviced by the Bank
and/or its successors and assigns, and in connection with any of the foregoing,
the Bank may receive servicing, brokerage or other fees. Any such placement,
participation, assignment or servicing shall be at the Bank's sole option; and
the Bank and its successors and assigns shall have no obligations to disclose to
the Borrower the receipt, or contemplated receipt, of any such fees, nor shall
the Borrower have any claim or right to the same.
10
<PAGE>
6.13 Relation to Other Documents. The provisions of this Agreement are not
intended to supersede the provisions of the other Loan Documents, but should be
construed as supplemental thereto. However, except as specifically provided
herein, if there is any inconsistency between the provisions of this Agreement
and the other Loan Documents, it is intended that this Agreement shall be
controlling.
6.14 Jurisdiction. Borrower hereby irrevocably agrees that any legal action
or proceedings against the Borrower with respect to this Agreement may be
brought in the courts of the State of New Mexico or in the U.S. District Court
for the District of New Mexico. Borrower hereby consents and attorns to the
jurisdiction of such courts and further consents to the personal jurisdiction of
any court located within Bernalillo County, New Mexico, with respect to any
lawsuit to enforce the obligations of Borrower under this Agreement. This
provision shall, not limit the right of the Bank to bring such action or
proceedings against the Borrower in the courts of such other states or
jurisdictions where the Borrower may be subject to jurisdiction.
6.15 Governing Law. This Agreement and the Loan Documents have been
negotiated, executed and delivered solely within the State of New Mexico. The
rights and obligations of the parties under this Agreement and under each of the
Loan Documents shall be governed by and construed and interpreted in accordance
with the laws of the State of New Mexico.
6.16 18 U.S.C Ss 1014. Borrower represents and warrants that it is aware of
and, through duly authorized officers and/or directors, has read and understand
the provisions of 18 U.S.C. S1014 which provide generally:
Whoever knowingly makes any false statement or report, or
willfully overvalues any land, property or security, for the
purpose of influencing in any way, the action of... any
institution the accounts of which are insured by the Federal
Deposit Insurance Corporation... upon any application, advance,
discount, purchase, purchase agreement, repurchase agreement,
commitment, or loan, or any change or extension of any of the
same, by renewal, deferment of action or otherwise, or the
acceptance, release, or substitution of security therefor, shall
be fined not more than $1,000,000 or imprisoned not more than 30
years or both.
6.17 N.M.S.A. Ss 58-6-5. Borrower represents and warrants that it is aware
of and through its duly authorized officers and/or authorized representatives,
has read and understands the provisions of N.M.S.A. Ss 58-6-5 which provides:
"A contract, promise or commitment to loan money or to grant,
extend or renew credit or any modification thereof, in an amount
greater than twenty-five thousand dollars ($25, 000), not
primarily for personal, family or household purposes, made by a
financial institution shall not be enforceable unless in writing
and signed by the party to be charged or that party's authorized
representative.... "
6.18 Indemnity. Borrower hereby agrees to indemnify and hold harmless Bank,
its directors, officers and employees from any and all liability, expense,
costs, charges or assessments, including attorneys'
11
<PAGE>
fees and expenses, with respect to hazardous or toxic substances or waste
handling, disposal, storage, repairs or cleanup, whether incurred or imposed
pursuant to local, state or federal law. Borrower also agrees to indemnify and
hold harmless Bank, its directors, officers and employees from and against any
and all liability, expense, damage, demands, claims and lawsuits, including
attorneys' fees and expenses, arising out of this Agreement or the other Loan
Document(s) or in connection therewith, unless arising from Bank's willful
misconduct.
This Agreement was executed on the dates indicated; it is effective as of May
16, 1995.
BANK: FIRST SECURITY BANK OF NEW MEXICO, N.A.
- ----
By: /s/ James J. Bertram
--------------------------------
James J. Bertram, Vice President
Executed on: 5-16-95
BORROWER: BOWLINS, INCORPORATED
- --------
By: /s/ M. L. Bowlin
--------------------------------
M. L. Bowlin, President
Executed on: 5-16-95
GUARANTOR: /s/ M. L. Bowlin
- --------- --------------------------------
M. L. Bowlin
Executed on: 5-16-95
12
FIRST SECURITY BANK
Promissory Note
(Multiple Advance)
$900,000.00 May 16, 1995
Albuquerque, New Mexico
FOR VALUE RECEIVED, BOWLIN'S INCORPORATED ("Maker") Promises to pay to
the order of FIRST SECURITY BANK OF NEW MEXICO, N.A., at its offices in
Albuquerque, New Mexico Nine Hundred Thousand Dollars ($900,000.00), plus
interest, payable in monthly payments beginning June 30, 1995 and continuing on
the last day of each month thereafter. Monthly payments for June 30, 1995
through April 30, 1996 shall be $8,614.00. Beginning with the May 31, 1996
payment, the monthly payment will be adjusted annually to an amount, including
accrued interest, sufficient to amortize the remaining principal balance based
upon an initial 20 year amortization. The entire balance, including all
principal and accrued interest shall be due and payable in full May 30, 2000.
Advances on this Note may be made in one or more draws; advances shall
not exceed the aggregate principal amount of $900,000.00.
This loan bears interest from the date hereof until maturity at a
floating rate equal to First Security Bank's prime plus 1% per annum, with
adjustments in the rate to be made on the same day as each change in the rate.
First Security Bank's "prime rate" is its announced rate of interest
used as a reference point from which it may calculate the cost of credit to
customers. It is subject to change from time to time. First Security Bank may
make loans bearing interest above, at, or below its prime rate. Interest will be
calculated on the basis of a 360 day year. The Bank may, at its option,
calculate and charge interest as though each payment is made on the payment due
date with principal reductions effective as of the day of receipt. If the rate
of interest: to be charged by the Bank hereunder is tied to or based on a rate
of interest announced or published by a party other than the Bank (the "Index")
and such party ceases to announce or publish the Index, the Bank, by notice to
maker, may substitute for the Index a irate of interest established from time to
time by a commercial bank located in New York, New York whose interest irate has
historically been comparable to the index. If the maturity date of this Note is
stated to be due on a Saturday, Sunday, or a public holiday, or the equivalent
for banks generally under the laws of the State of New Mexico, the maturity date
shall be the next succeeding day the Bank is open for business, and such
extension of time shall in such case be included in the computation of the
payment of interest. In the event of default in payment at the time due, OIC in
the event of acceleration, the unpaid balance shall bear interest at the Prime
<PAGE>
Rate, plus 5%. The makers, endorsers, and sureties hereof hereby severally waive
protest, presentment, demand, and notice of protest and non-payment in case this
Note (or any payment due hereunder) is not paid when due, and they agree to any
renewal of this Note or to any extension, acceleration, or postponement of the
time of payment, or any other indulgence, to any substitution, exchange or
:release of collateral, and to the addition or release of any party or person
primarily or secondarily liable without prejudice to the holder or notice to
makers, endorsers, and sureties.
If this Note is payable in more than one payment, a late charge of
$15.00 will be charged for any payment which is not paid within ten (10) days of
its due date.
If any payment required by this Note is not made within Ten (10) days
of written notice, or if any non-mandatory default as described in any security
agreement, assignment, pledge agreement, real estate mortgage, or assignment of
rents or leases which provide security f or this loan is not cured within thirty
(30) days of written notice, the unpaid balance of this Note, and any other
liabilities of the makers to the holder, direct or indirect, absolute or
contingent, now or heretofore existing or hereafter arising (all hereinafter
called "Obligations") shall become immediately due and payable at the option of
the holder, without notice or demand. Written notice shall be by certified mail
and shall be deemed received when deposited, postage prepaid, in the United
States mail. The undersigned will pay on demand all costs of collection,
including reasonable costs and attorneys fees incurred or paid by the holder in
attempting to enforce payment of this Note.
Any deposits and checking, savings, or any other types of accounts or
other sums at any time credited by or due from the holder to any maker,
endorser, or surety hereof and any securities or other property of any maker,
endorser, or surety hereof in the possession of the holder may at all times be
held and treated as collateral security f or the payment of any and all
obligations. The holder may, without notice to the makers, endorsers and
sureties, apply or set of f such deposits or other sums against such obligations
at any time when due and payable even if due only by reason of acceleration
regardless of any security for this loan.
MAKER: BOWLIN'S INCORPORATED
By: /s/ Michael L. Bowlin
-----------------------------------
Michael L. Bowlin, President
2
FIRST Revolving Promissory Note
SECURITY
BANK
Loan No.0014079-9009
PRINCIPAL AMOUNT: $ 150,000.00 Date: June 01, 1996
BORROWER: Bowlin's Incorporated, a New Mexico corporation
ADDRESS: 136 Louisiana Blvd. NE, Albuquerque, NM 87108
For value received, the undersigned Borrower promises to pay to First Security
Bank of New Mexico, N.A. ("First Security") , or to its order, the total
principal amount outstanding on this Revolving Promissory Note ("Note") together
with interest as stated below, in lawful money of the United States of America.
INTEREST: Interest on the outstanding principal balance shall be calculated on
the following basis until paid:
Variable Rate: 1.000 percentage points above the "Index" (as
hereinafter defined) per annum until paid, representing a total
annual rate of 9.250 % as of the date of this Note. The Index may
change from time to time, and the interest payable on this Note
will continue to fluctuate at the same increment above the index as
stated above. Any changes in the interest rate under this Note
shall become effective without prior notice, on the date on which
the index changes.
For purposes of this Note, "Index" shall mean the "Prime Rate" of
First Security. The First Security Prime Rate shall mean that rate
of interest announced from time to time by First Security as the
"Prime Rate" and is a reference point from which the cost of credit
to customers may be calculated. The Prime Rate is subject to change
from time to time. Prime Rate shall not mean the best or lowest
rate and First Security may make loans at, below or above the Prime
Rate.
The actual interest to be charged under this Note shall be calculated daily on
the outstanding balance on a 360-day year. Should the rate of interest as
calculated, exceed that allowed by law, the applicable rate of interest will be
the maximum rate of interest lawfully allowed. The principal amount outstanding
on which the interest rate shall be charged shall be determined from First
Security's records, which shall at all time be conclusive.
PAYMENT SCHEDULE: Accrued interest on this Note shall be paid MONTHLY, beginning
July 01, 1996 and continuing on the 1st day of each month thereafter. The entire
balance of outstanding principal and accrued but unpaid interest shall be due
and payable on June 01, 1997. Payments shall be made at First Security's
Albuquerque Office at 40 First Plaza, Albuquerque, New Mexico 87102, or at such
other place as the holder or assignee of this Note may designate. Payments will
be applied first to accrued interest with the remainder (if any) applied to
principal. This Note is a revolving promissory note and evidences a revolving
line of credit whose outstanding principal balance shall not exceed the
principal amount stated above at any one time. The amount outstanding on this
Note at any specific time shall be the total amount advanced by First Security
less the amount of principal payments made from time to time, plus any interest
accrued but then unpaid.
ADVANCES: Borrower agrees that any and all advances made hereunder shall be for
Borrower's benefit whether or not said advances are deposited to Borrower's
account, and that persons other than the undersigned Borrower may have authority
to draw against such account. Advances may be made hereunder at the oral or
written request of Nina Pratz, or M.L. Bowlin, or C.C. Bess who is (are) hereby
authorized to request advances until written notice of revocation of this
authority is received by First Security from Borrower. Advances shall be made to
Borrower or for the account of Borrower unless Borrower directs otherwise in
writing.
If Borrower fails to make any scheduled payment on this Note when due, or
otherwise defaults in any other obligations imposed by this Note or by any loan
agreement, any document securing this Note, or any other document executed in
connection with this Note, First Security, at its option, may declare
immediately due and payable all amounts then outstanding on this Note and any
other liabilities of the Borrower to First Security, direct or indirect,
absolute or contingent, now existing or hereafter arising. Borrower shall pay
all costs and expenses incurred by First Security or by any other holder of this
Note incurred in connection with any failure to pay or other default of
Borrower, including attorneys' fees, collection costs, costs incurred to protect
any collateral, court costs and costs on appeal, including, without limitation,
all such fees and costs incurred before the commencement of a proceeding to
collect this Note, during any such proceeding, during any bankruptcy or
insolvency proceeding, and during any appeal.
If First Security has not received the full amount of any payment by the end of
fifteen (15) calendar days after the date due, including the balance due at
maturity, Borrower will pay a late charge to First Security in the amount of
five percent (5%) of the overdue payment of principal and interest. Borrower
hereby agrees to pay the late charge promptly, but only once on each late
payment. In addition to any late charges that may be assessed as herein
provided, the outstanding balance of this Note after a default in payment of
principal and/or interest or any part thereof, including but not limited to a
default in making the final payment due at maturity, or a default as defined in
any loan agreement, any document securing this Note, or any other document
executed in connection with this Note, shall accrue interest from the date of
the default at the rate equal to four (4) percentage points per annum in excess
of the interest rate charged if this Note were not in default. If First Security
shall waive in writing or permit a cure of such default, the interest rate shall
revert to the non-default rate from and after such waiver or completion of such
cure.
This Note is to be construed under the laws of the State of New Mexico.
The makers, sureties, guarantors, and endorsers of this Note jointly and
severally waive presentment for payment, protest, notice of protest, and notice
of nonpayment of this Note, and consent that this Note or any payment due under
this Note may be extended or renewed without prior demand or notice, and further
consent to the release of any collateral or part thereof or any surety or
guarantor, with or without substitution.
For all terms hereunder and as dictated by the actual signatory or signatories
hereto, references to the singular shall include the plural and references to
the male gender shall include the female gender as well as the neuter. In
particular, "Borrower" shall include "Borrowers" if the undersigned is more than
one party or entity. In the event that there are multiple signatories, all
obligations hereunder are joint and several.
BORROWER:
Bowlin's Incorporated, a New Mexico corporation
/s/ Michael L. Bowlin
- ----------------------------------------
M.L. Bowlin, President
REVISION AGREEMENT
To: FIRST SECURITY BANK OF NEW MEXICO, N.A., f/k/a FIRST NATIONAL BANK IN
ALBUQUERQUE ALBUQUERQUE, NEW MEXICO
This Revision Agreement refers to a certain loan evidenced by a promissory note
("the Note") dated FEBRUARY 12, 1987, executed by Bowlin's Incorporated, a New
Mexico corporation (the "Borrower"). The total principal amount of the Note is
NINE HUNDRED THOUSAND AND NO/100 Dollars ($ 900,000.00), upon which interest is
paid to May 16, 1995. The Note is secured by a [ x] real estate mortgage, [ ]
deed of trust (the "Mortgage") executed by the Borrower and recorded in Book
253, page(s) 1403-1408, records of Torrance County, New Mexico. The Borrower
hereby requests that you accept payment of the Note as follows:
TO RENEW AND EXTEND THE PROMISSORY NOTE AND MORTGAGE AND ANY RENEWALS
AND/OR EXTENSIONS THEREOF AS FOLLOWS:
The Bank has agreed to make an additional advance as contemplated by this
encumbrance all of which together are evidenced by the note attached here to as
schedule "A".
In further consideration this revision, the indebtedness evidenced by the Note
is hereby acknowledged and admitted, and the Borrower jointly, severally, and
unconditionally promises and agrees to pay the Note with interest thereon within
the time and in the manner above provided, together with attorneys' fees, cost
of collection, and any other sums secured by the Mortgage. In the event of
default in the payment of any installment of principal or interest as either
becomes due as herein provided or other event of default contained in any loan
document, the entire unpaid balance of principal and interest shall, at the
option of the holder of the Date, become due and payable without notice. In
further consideration of this revision, presentment of the Note, demand for
payment, protest, notice of protest, notice of dishonor, and notice of
non-payment are hereby waived.
Any and all security for the indebtedness of the Borrower and the which is held
by you, including the Mortgage, may be enforced by you concurrently or
independently in such order as you may determine; and with reference to any such
security in addition to the Mortgage, you may, without consent of or notice to
any of the undersigned, exchange, substitute, or release such security without
affecting the liability of any of the undersigned, and you may release any one
or more parties hereto or to the Note, or permit the liability of said party or
parties to terminate, without affecting the liability of any other party or
parties.
This agreement is a revision only, and not a novation; and except as herein
provided, all of the terms and conditions of the Mortgage shall remain in full
force and effect.
Date: May 16, 1995
Bowlin's Incorporated
A New Mexico corporation
/s/ Michael L. Bowlin
- ---------------------------------------------- ----------------------------
By: M. L. Bowlin, President Borrower-Mortgagor
- --------------------------------------------- -----------------------------
ACKNOWLEDGEMENTS AND ACCEPTANCE ON REVERSE
<PAGE>
State of New Mexico
County of ______________________
This instrument was acknowledged before me on __________________________, 19___.
By _____________________________________________________________________________
________________________________________________________________________________
My commission expires: ____________________________________
Notary Public
State of New Mexico
County of Bernalillo
this instrument was acknowledged before me on May 16th, 1995.
By M.L. Bowlin, President
of Bowlin's Incorporate A New Mexico Corporation.
On behalf of the corporation.
My commission expires: /s/ Nina J. Poatz
------------------------------------
February 7, 1996 Notary Public
State of New Mexico
County of ______________________
this instrument was acknowledged before me on __________________________, 19___.
By _____________________________________________________________________________
of ____________________________________________________________________________.
On behalf of the partnership.
My commission expires: ____________________________________
Notary Public
State of New Mexico
County of ______________________
this instrument was acknowledged before me on __________________________, 19___.
By _____________________________________________________________________________
of_____________________________________________________________________________.
My commission expires: ____________________________________
Notary Public
ACCEPTED: FIRST SECURITY BANK OF NEW MEXICO, N.A.
BY: ____________________________________________
James J. Bertram, Vice President
PROMISSORY NOTE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Loan date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,700,000.00 02-05-1996 01-29-2006 50028953 090 434 53868 MP/49
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
References In the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or Item.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Borrower: BOWLIN'S INCORPORATED Lender: Norwest Bank new Mexico, National Association
136 LOUISIANA NE Eldorado Business Banking
ALBUQUERQUE, NM 87108 P.O. Box 1081
11199 Montgomery NE
Albuquerque, NM 87103-1081
================================================================================
</TABLE>
<TABLE>
<S> <C> <C>
Principal Amount: $1,700,000.00 Initial Rate: 9.250% Date of Note: February 5, 1996
</TABLE>
PROMISE TO PAY. BOWLIN'S INCORPORATED ("Borrower") promises to pay to Norwest
Bank New Mexico, National Association ("Lender"), or order, in lawful money of
the United States of America, the principal amount of One Million Seven Hundred
Thousand & 00/100 Dollars ($1,700,000.00), together with Interest on the unpaid
principal balance from February 5, 1996, until paid In full.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in 120 payments of $21,723.61 each payment.
Borrower's first payment is due February 29, 1996, and all subsequent payments
are due on the same day of each month after that. Borrower's final payment will
be due on January 29, 2006, and will be for all principal and all accrued
Interest not yet paid. Payments Include principal and Interest. Interest on this
Note is computed on a 365/365 simple Interest basis; that is, by applying the
ratio of the annual Interest rate over the number of days in a year (366 during
leap years), multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid Interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an Independent Index which is the NORWEST BANK
MINNESOTA, N.A. BASE LENDING RATE (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute Index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The Interest rate change will not occur more often than
each QUARTER. The Index currently Is 8.250% per annum. The Interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.000
percentage point over the Index resulting in an Initial rate of 9.250% per
annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. Whenever increases occur
in the interest rate, Lender, at its option, may do one or more of the
following: (a) increase Borrower's payments to ensure Borrower's loan will pay
off by its original final maturity date, (b) Increase Borrower's payments to
cover accruing interest, (c) increase the number of Borrower's payments, and (d)
continue Borrower's payments at the same amount and Increase Borrower's final
payment.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender In writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due and may result in Borrower
making fewer payments.
LATE PAYMENTS. If any payment is not received by Lender within five calendar
days after the payment is due as provided in this Note (the "Due Date"), then
additional Interest will accrue beginning on the sixth calendar day on the
entire unpaid principal balance at the rate of three percent (3%) per year (the
"Additional Interest") until all past-due payments and any Additional Interest
are paid In full. All payments received more than 5 calendar days after the Due
Date will be applied first to past due Interest and principal, then to current
Interest and current principal, and then to cost of collection.
APPLICATION OF REGULAR PAYMENTS. Notwithstanding any provision of this Note to
the contrary, any regularly scheduled Installment payment of principal and
Interest which is received before the due date of such payment, or which is
received within 5 calendar days after the due date, will be applied to Interest
and to principal as if such payment were received on the due date.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes Insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or Insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
Interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described In this default section occurs with respect to
any guarantor of this Note. (h) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, and after Lender has notified Borrower of said
Default and if such Default shall not be remedied within 15 days after such
notification then, Lender may declare the entire unpaid principal balance on
this Note and all accrued unpaid Interest immediately due, without notice, and
then Borrower will pay that amount. Upon default, Including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable interest rate on this Note to 6.000 percentage points
over the Index. The Interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.
This Note has been delivered to Lender and accepted by Lender in the State of
New Mexico. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Bernalillo County, the State of New
Mexico This Note shall be governed by and construed In accordance with the laws
of the State of New Mexico.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
Interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts.
COLLATERAL. This Note is secured by, in addition to any other collateral, a
Mortgage dated February 5, 1996, from Borrower to Lender on real property
located in LUNA County, State of New Mexico, and a Deed of Trust dated February
5, 1996, to a trustee in favor of Lender on real property located in COCHISE
County, State of Arizona, all the terms and conditions of which are hereby
Incorporated and made a part of this Note.
FINANCIAL STATEMENTS. I agree to provide to you, upon request, any financial
statements or information you may deem necessary. I warrant that all financial
statements and information I provide to you are or will be accurate, correct and
complete.
ARBITRATION. Lender and Borrower agree that, except for "Core Proceedings" under
the United States Bankruptcy Code, all disputes, claims and controversies
between them, whether individual, joint, or class in nature, arising from this
Note or otherwise, including, without limitation, contract and tort disputes,
shall be arbitrated pursuant to the Commercial Arbitration rules of the American
Arbitration Association (the "AAA"), upon request of other party. No act to take
or dispose of any collateral securing this Note shall constitute a waiver of
this arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the uniform
Commercial Code.
Any disputes, claims or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any collateral
securing this Note, including any claim to rescind, reform or otherwise modify
any agreement relating to the Collateral securing this Note, shall also be
arbitrated, provided however that no arbitrator shall have the right or the
power to enjoin or restrain any act of any party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing in this Note shall preclude any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel, waiver,
laches and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of an
action for these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation and enforcement of this arbitration provision.
Any arbitration hereunder shall be conducted before one arbitrator who shall be
an attorney who has practiced in the area of commercial law for at least ten
(10) years or a retired judge at the District Court or an appelate court level,
the parties to the dispute or their representatives shall obtain from
<PAGE>
02-05-1996 PROMISSORY NOTE Page 2
Loan No. 50028953 (Continued)
================================================================================
AAA a list of persons meeting the criteria outlined above and the parties shall
select the person In the manner, established by the AAA.
In any arbitration hereunder: (1) the arbitrator shall decide (by documents only
or with a hearing, at the arbitrator's discretion) any pro-hearing motions which
are substantially similar to pro-hearing motions to dismiss for failure to state
a claim or motions for summary adjudication; (2) discovery shall be permitted,
but shall be limited as provided In the Now Mexico Rules of Civil Procedure,
with all discovery to be completed no later than 20 days before the hearing date
and within 180 days of the commencement of arbitration proceedings; and any
requests for an extension of the discovery periods. or any discovery disputes
shall be subject to final determination by the arbitrator; and (3) the
arbitrator shall award costs and expenses of the arbitration proceeding in
accordance with the Lender's Rights provisions of this Note.
RATE CAP. Effective February 5, 1996 through February 29, 2001, under no
circumstances will the interest rate on this Note be more than (except for any
higher default rate shown above) the lesser of 10.00% per annum.
LOAN AGREEMENTS. This note is subject to that certain Business Loan Agreement
dated 02/05/96 and any renewals, replacements or extentions thereof.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fall to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
BOWLIN'S INCORPORATED
By:/s/ MICHAEL L. BOWLIN
-----------------------------------------
MICHAEL L. BOWLIN, PRESIDENT
================================================================================
Variable Rate. Installment. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.20b(c)
1998 CFI ProServices, Inc. All rights reserved. [NM-D20 E3.20 P3.20 BOWLINS 1.LN
C10.OVL]
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Initials
<S> <C> <C> <C> <C> <C> <C>
$1,700.000.00 02-05-1996 01-29-2006 50028953 090 434 53868
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do rot limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Borrower: BOWLIN'S INCORPORATED LENDER: Norwest Bank New Mexico, National Association
136 LOUISIANA NE Eldorado Business Banking
ALBUQUERQUE, NM 87108 P. O. Box 1081
11199 Montgomery NE
Albuquerque, NM 87103-1082
=================================================================================================
</TABLE>
THIS BUSINESS LOAN AGREEMENT between BOWLIN'S INCORPORATED ("Borrower") and
Norwest Bank New Mexico, National Association ("Lender") Is made and executed on
the following terms arid conditions. Borrower has received prior commercial
loans from Lender or has applied to Lender for a commercial loan or loans and
other financial accommodations, including those which may be described on any
exhibit or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth In this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of February 5, 1996, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing,
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Business
Loan Agreement from time to time.
Borrower. The word "Borrower" means BOWLIN'S INCORPORATED. The word
"Borrower" also includes, as applicable. all subsidiaries and affiliates
of Borrower as provided below In the paragraph tilled "Subsidiaries and
Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in
the form of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
ERISA. The word "ERISA' means the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all
Borrowers granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise; whether
recovery upon such Indebtedness may be or hereafter may become barred by
any statute of limitations; and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.
Lender. The word "Lender" means Norwest Bank New Mexico, National
Association, its successors and assigns.
Loan. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, it any, evidencing Borrower's Loan obligations
in favor of Lender, as well as any substitute, replacement or
refinancing note or notes therefor.
Permitted Liens. The words 'Permitted Liens" mean; (a) liens and
security interests securing Indebtedness owed by Borrower to Lender; (b)
liens for taxes, assessments, or similar charges either not yet due or
being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are riot yet
delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (1) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of
Borrower's assets.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust. factor's lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d)
evidence of insurance as required below; and (a) any other documents
required under this Agreement or by Lender or its counsel, including
without limitation any guaranties described below.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the related documents, and such other authorizations and other documents
and instruments as Lender or its counsel, in their sole discretion, may
require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges and other, expenses which are then due and payable as
specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower covenants and warrants to
Lender, as of the date of this Agreement, as of the date of
<PAGE>
02-05-1996 BUSINESS LOAN AGREEMENT Page 2
Loan No 50028953 (Continued)
================================================================================
disbursement of Loan proceeds, as of the date of any renewal, extension
or modification of any Loan, and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of New Mexico
and is validly existing and in good standing in all states in which
Borrower is doing business. Borrower has the full power and authority to
own its properties and to transact the businesses in which it is
presently engaged or presently proposes to engage. Borrower also is duly
qualified as a foreign corporation and is in good standing in all states
in which the failure to so qualify would have a material adverse effect
on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental body;
and do not conflict with, result in a violation of, or constitute a
default under (a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding
upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered will
constitute, legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," " disposal," "release," and "threatened release," as used in
this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. Section 6901, et seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the foregoing. Borrower
authorizes Lender and its agents to enter upon the properties to make
such inspections and tests Lender may deem appropriate to determine
compliance of the properties with this Section of the Agreement. Any
inspections or tests as Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and (b)
agrees to indemnify and hold harmless Lender against any and all claims,
losses, liabilities, damages, penalties, and expenses which Lender may
directly or indirectly sustain or suffer resulting from a breach of this
section of the Agreement, or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring
prior to Borrower's ownership or interest in the properties, whether or
not the same was or should have been known to Borrower. The provisions
of this section of the Agreement, including the obligation to indemnify,
shall survive the payment of the indebtedness and the termination or
expiration of this Agreement and shall not be affected by Lender's
acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes)against Borrower is pending or threatened, and no other event has
occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other events,
if any, that have been disclosed to and acknowledged by Lender in
writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
Lend Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are legally
enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or Initiated steps to do so, and (iii) no steps have been taken to
terminate any such plan.
Location of Borrower's Offices and Records. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 136 LOUISIANA NE, ALBUQUERQUE,
NM 87108. Unless Borrower has designated otherwise in writing this
location is also the office or offices where Borrower keeps its records
concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in making the above referenced
Loan to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and shall
remain in full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which
could materially affect the financial condition of Borrower or the
financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to Examine and audit Borrower's books and records at
all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in
no event later than one hundred fifty (150) days after the end of each
fiscal year, Borrower's balance sheet and income statement for the year
ended, audited by a certified public accountant satisfactory to Lender,
and , as soon as available, but in no even later than forty five (45)
days after the end of each fiscal quarter, Borrower's balance sheet and
profit and loss statement for the period ended, prepared and certified
as correct to the best knowledge and belief by Borrower's chief
financial officer or other officer or person acceptable to Lender. All
financial reports required to be provided under this Agreement shall be
prepared in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true
and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages and
with insurance companies reasonably acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the policies
or certificates of insurance in form satisfactory to Lender, including
<PAGE>
02-05-1996 BUSINESS LOAN AGREEMENT Page 3
Loan No 50028953 (Continued)
================================================================================
stipulations that coverages will not be cancelled or diminished without
at least ten (10) days' prior written notice to Lender. Each insurance
policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or
default of Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest
for the Loans, Borrower will provide Lender with such loss payable or
other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the properties insured; (a) the then current property values
on the basis of which insurance has been obtained, and the manner of
determining those values; and (f) the expiration date of the policy. In
addition, upon request of Lender, (however not more often than
annually), Borrower will have an independent appraiser satisfactory to
Lender determine, as, applicable, the actual cash value or replacement
cost of any Collateral. The cost of such appraisal shall be paid by the
Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and in
the amount and by the guarantor named below:
Guarantor Amount
--------- ------
MICHAEL L. BOWLIN $3,700,000.00
Other Agreements. Comply with all terms and and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
Indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any of
Borrower's properties, income, or profits. Provided however, Borrower
will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same
shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with generally accepted accounting practices. Borrower,
upon demand of Lender, will furnish to Lender evidence of payment of the
assessments, taxes, charges. levies. liens and claims arid will
authorize the appropriate governmental official to deliver to Lender at
any time a written statement of any assessments, taxes, charges, levies,
liens and claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in a
timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under this
Agreement or under any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner and in compliance with all
applicable federal, state and municipal laws, ordinances, rules and
regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans
With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee
benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts, and
records and to make copies and memoranda of Borrower's books, accounts,
and records. It Borrower now or at any time hereafter maintains any
records (including without limitation computer generated records and
computer software programs for the generation of such records) in the
possession of a third party, Borrower, upon request of Lender, shall
notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement are
true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of Default
exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or omission
on its part or on the part of any third party, on property owned and/or
occupied by Borrower. any environmental activity where damage may result
to the environment, unless such environmental activity is pursuant to
and in compliance with the conditions of a permit issued by the
appropriate federal, state or local governmental authorities; shall
furnish to Lender promptly and in any event within thirty (30) days
after receipt thereof a copy of any notice, summons, lien, citation.
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or
omission on Borrower's part in connection with any environmental
activity whether or not there is damage to the environment and/or other
natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, *see Incur Indebtedness paragraph listed below.
Continuity of Operations. (a) Engage In any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the
shareholders to pay income taxes and make estimated income tax payments
to satisfy their liabilities under federal and state law which arise
solely from their status as Shareholders of a Subchapter S corporation
because of their ownership of shares of stock of Borrower, or alter or
amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surely or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan: (d) any, Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deemss itself insecure, even
though no Event of Default shall have occurred.
REPORTS. Borrower will provide Lender with quarterly Borrowing Base Certificates
on signs and quarterly listing of signs. The Borrowing Base will be subject to
65% Loan to Value based on Gross Income Multiplier method less debt listed as
Loan II.
INCURING DEBT. Borrower must obtain prior written approval from Lender to incur
debt if the new debt will create a debt to net worth ratio in excess of 2.5 : 1.
RATIOS. Borrower will maintain a minimum debt coverage ratio of 1.2 : 1.
HAZARDOUS SUBSTANCE CONTINUED. Lender acknowledges that Borrower in the normal
course of business stores and uses gasoline, diesel fuel, motor oil, paint, and
distillates on the properties.
ADDITIONAL INSURANCE. Borrower will maintain environmental protection insurance
for the life of the loans on the properties where underground storage tanks are
in use.
<PAGE>
02-05-1996 BUSINESS LOAN AGREEMENT Page 4
Loan No 50028953 (Continued)
================================================================================
FINANCIAL RECORDS CONTINUED. A six month internal statement a of 7/31/96 and
then quarterly thereafter beginning 10/31/96.
Borrower will provide Lender with annual personal financial statements and tax
returns on Michael Bowlin.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on the indebtedness against any and all such
accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement.
Default on indebtedness. Failure of Borrower to make any payment when
due on the Loans.
Other Defaults. Failure of borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
Default in Favor of Third Parties. Should borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
interest) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Grantor of any of the indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, and after
lender has notified Borrower of said default and if such default shall not be
remedied within 15 days after such notification then, except where otherwise
provided in this Agreement of the Related Documents, all commitments and
obligations of Lender under this Agreement or the Related Documents or any other
agreement immediately will terminate and, at Lender's option, all indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of New Mexico. If there is a lawsuit, Borrower
agrees upon Lender's request to submit to the jurisdiction of the courts
of Bernaillio County, the State of New Mexico This Agreement shall be
governed by and construed in accordance with the laws of the State of
New Mexico.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any rights
to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices o sale of participation
interest, as well as all notices of any repurchase of such participation
Interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of
such interests in the Loans and will have all the rights granted under
the participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees
that either Lender or such purchaser may enforce Borrower's obligation
under the Loans irrespective of the failure or insolvency of any holder
of any interest in the Loans. Borrower further agrees that the purchaser
of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification
and collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, and Borrower will pay that
amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, specifically, by certified return receipt mail
addressed to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, If there is more
than one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes , Borrower agrees to keep Lender informed
at all time of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid
and enforceable.
Subsidiaries and Affiliates of Borrower. to the extent the context of
any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used herein shall include all subsidiaries and affiliates of
Borrower. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or
other financial accommodation to any subsidiary or affiliate of
Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure
to the benefit of Lender, its successors and assigns. Borrower shall
not, however, have the right to assign its rights under this Agreement
or any interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be considered
to have been relied upon by Lender and will survive the making of the
Loan and delivery to Lender of the Related Documents, regardless of any
investigation made by Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by
<PAGE>
02-05-1996 BUSINESS LOAN AGREEMENT Page 5
Loan No. 50028953 (Continued)
================================================================================
Lender. No delay or omission on the part of Lender, in exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this Agreement.
No prior waiver by Lender, nor any course of dealing between Lender and
Borrower, or between Lender and any Grantor, shall constitute a waiver
of any of Lender's rights or of any obligation, of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in
any instance shall not constitute continuing consent in subsequent
instances where such consent is required, and in all cases such consent
may be granted or withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
FEBRUARY 5, 1996.
BORROWER:
BOWLIN'S INCORPORATED
BY /s/ MICHAEL L. BOWLIN
--------------------------------
MICHAEL L. BOWLIN, PRESIDENT
LENDER:
Norwest Bank New Mexico, National Association
By /s/ SIGNATURE ILLEGIBLE
--------------------------------
Authorized Officer
================================================================================
LASER PRO, Reg. U.S. Pat, & T.M. Off., Ver. 3.20b(c) 1996 CFI ProServices, Inc,
All rights reserved. [NM-C40 E3.20 F3.20 P3.20 BOWLINS1.1.N C10.OVL]
<TABLE>
PROMISSORY NOTE
<CAPTION>
- ---------------- -------------- ------------- -------------- -------------- -------------- -------------- -------------- ----------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,000,000.00 02-05-1996 02-15-2003 50028955 030 211 53868 MP/49 Initials
- ---------------- -------------- ------------- -------------- -------------- -------------- -------------- -------------- ----------
References in the shaded area are for lender's use only and do not limit the applicability of this document to any particular
loan or item.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Borrower: BOWLIN'S INCORPORATED Lender: Norwest Bank New Mexico, National Association
136 LOUISIANA NE Eldorado Business Banking
ALBUQUERQUE, NM 87108 P. O. Box 1081
11199 Montgomery NE
Albuquerque, NM 87103-1081
========================================================================================
</TABLE>
<TABLE>
<S> <C> <C>
Principal Amount: $1,000,000.00 Initial Rate: 9.250% Date of Note: February 5, 1996
</TABLE>
PROMISE TO PAY. BOWLIN'S INCORPORATED ("Borrower") promises to pay to Norwest
Bank New Mexico, National Association ("Lender"), or order, In lawful money of
the United States of America, the principal amount of One Million & 00/100
Dollars ($1,000,000.00), together with Interest on the unpaid principal balance
from February 5, 1996, until paid In full.
PAYMENT. Subject to any payment changes resulting from changes In the Index,
Borrower will pay this loan in 84 payments of $16,252.18 each payment.
Borrower's first payment Is due March 15, 1996, and all subsequent payments are
due on the same day of each month after that. Borrower's final payment will be
due on February 15, 2003, and will be for all principal and all accrued interest
not yet paid. Payments include principal and interest. Interest on this Note is
computed on a 365/365 simple interest basis; that is, by applying the ratio of
the annual interest rate over the number of days in a year (366 during leap
years), multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the NORWEST BANK
MINNESOTA, N. A. BASE LENDING RATE (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each QUARTER. The Index currently Is 8.250% per annum. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.000
percentage point over the Index, resulting in an Initial rate of 9.250% per
annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. Whenever increases occur
in the interest rate, Lender, at its option, may do one or more of the
following: (a) increase Borrower's payments to ensure Borrower's loan will pay
off by its original final maturity date, (b) increase Borrower's payments to
cover accruing interest, (c) increase the number of Borrower's payments, and (d)
continue Borrower's payments at the same amount and increase Borrower's final
payment.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender In writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due an may result in Borrower
making fewer payments.
LATE PAYMENTS. If any payment is not received by Lender within five calendar
days after the payment is due as provided in this Note (the "Due Date"), then
additional interest will accrue beginning on the sixth calendar day on the
entire unpaid principal balance at the rate of three percent (3%) per year (the
"Additional Interest") until all past-due payments and any Additional Interest
are paid in full. All payments received more than 5 calendar days after the Due
Date will be applied first to past due interest and principal, then to current
interest and current principal, and then to cost of collection.
APPLICATION OF REGULAR PAYMENTS. Notwithstanding any provision of this Note to
the contrary, any regularly scheduled installment payment of principal and
interest which is received before the due date of such payment, or which is
received within 5 calendar days after the due date, will be applied to interest
and to principal as if such payment were received on the due date.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver Is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(a) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (g) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, If permitted under
applicable law, increase the variable interest rate on this Note to 6.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender In the State of New Mexico. If there Is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Bernalillo County, the State of New Mexico This Note shall be governed
by and construed In accordance with the laws of the State of New Mexico.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts.
FINANCIAL STATEMENTS. I agree to provide to you, upon request, any financial
statements or information you may deem necessary. I warrant that all financial
statements and information I provide to you are or will be accurate, correct and
complete.
ARBITRATION. Lender and Borrower agree that, except for "Core Proceedings' under
the United States Bankruptcy Code, all disputes, claims and controversies
between them, whether individual, joint, or class in nature, arising from this
Note or otherwise, including, without limitation, contract and tort disputes,
shall be arbitrated pursuant to the Commercial Arbitration rules of the American
Arbitration Association (the "AAA"), upon request of either party. No act to
take or dispose of any collateral securing this Note shall constitute a waiver
of this arbitration agreement or be prohibited by this arbitration agreement.
This includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, Including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the uniform
Commercial Code.
Any disputes, claims or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any collateral
securing this Note, including any claim to rescind, reform or otherwise modify
any agreement relating to the collateral securing this Note, shall also be
arbitrated, provided however that no arbitrator shall have the right or the
power to enjoin or restrain any act of any party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing in this Note shall preclude any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel, waiver,
latches and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of an
action for these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation and enforcement of this arbitration provision.
Any arbitration hereunder shall be conducted before one arbitrator who shall be
an attorney who has practiced in the area of commercial law for at least ten
(10) years or a retired judge at the District Court or an appellate court level.
The parties to the dispute or their representatives shall obtain from AAA a list
of persons meeting the criteria outlined above and the parties shall select the
person in the manner established by the AAA.
In any arbitration hereunder: (1) the arbitrator shall decide (by documents only
or with a hearing, at the arbitrator's discretion) any pre-hearing motions which
are substantially similar to pre-hearing motions to dismiss for failure to state
a claim or motions for summary adjudication; (2) discovery shall be permitted,
but shall be limited as provided in the New Mexico Rules of Civil Procedure,
with all discovery to tie completed no later than 20 days before the hearing
date and within 180 days of the commencement of arbitration proceedings; and any
requests for an extension of the discovery periods, or
02-05-1996 PROMISSORY NOTE Page 2
Loan No. 50028955 (Continued)
================================================================================
<PAGE>
any discovery disputes shall be subject to final determination by the
arbitrator; and (3) the arbitrator shall award costs and expenses of the
arbitration proceeding in accordance with the Lender's Rights provisions of this
Note.
RATE CAP. Effective February 5, 1996 through March 15, 2001, under no
circumstances will the interest rate on this Note be more than (except for any
higher default rate shown above) the lesser of 10.00% per annum.
LOAN AGREEMENT. This note is subject to that certain Business Loan Agreement
dated 02/05/96 and any renewals, replacements, or extensions thereof.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary to Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIO TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISION OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
BOWLIN'S INCORPORATED
By: /s/ MICHAEL L. BOWLIN
--------------------------------------
MICHAEL L. BOWLIN, PRESIDENT
================================================================================
Variable Rate. Installment. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.3.20b (c)
1996 CFI ProService, Inc. All rights reserved.
[NM-D20E3.20P3.20BOWLINS2.LNC10.OVL]
<TABLE>
PROMISSORY NOTE
<CAPTION>
- --------------- -------------- -------------- -------------- -------------- -------------- -------------- ------------ -------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$1,000,000.00 02-05-1996 06-15-1997 50028954 030 211 53868 MP/49
- --------------- -------------- -------------- -------------- -------------- -------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Borrower: BOWLIN'S INCORPORATED Lender: Norwest Bank New Mexico, National Association
136 LOUISIANA NE Eldorado Business Banking
ALBUQUERQUE, NM 87108 P.O. Box 1 08 1
11199 Montgomery NE
Albuquerque, NM 87103-1081
</TABLE>
================================================================================
<TABLE>
<S> <C> <C>
Principal Amount: $1,000,000.00 Initial Rate: 9.250% Date of Note: February 5, 1996
</TABLE>
PROMISE TO PAY. BOWLIN'S INCORPORATED ("Borrower") promises to pay to Norwest
Bank New Mexico, National Association ("Lender"), or order, In lawful money of
the United States of America, the principal amount of One Million & 00/100
Dollars ($1,000,000.00) or so much as I" may be outstanding, together with
Interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid Interest on June 16, 1997. In addition, Borrower will
pay regular monthly payments of accrued unpaid Interest beginning Match 15,
1996, and all subsequent Interest payments are due on the same day of each month
after that. Interest on this Note is computed on a 365/365 simple interest
basis; that Is, by applying the ratio of the annual interest rate over the
number of days in a year (366 during leap years), multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable by law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the NORWEST BANK
MINNESOTA, N. A. BASE LENDING RATE (the 'Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each QUARTER. The Index currently Is 8.250% per annum. The Interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.000
percentage point over the Index, resulting In an Initial rate of 9.250% per
annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees arid other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
LATE PAYMENTS. If any payment is not received by Lender within five calendar
days after the payment is due as provided in this Note (the 'Due Date'), then
additional interest will accrue beginning on the sixth calendar day on the
entire unpaid principal balance at the rate of three percent (3%) per year (the
'Additional Interest') until all past-due payments and any Additional Interest
are paid in full. 411 payments received more than 5 calendar days after the Due
Date will be applied first to past due interest and principal. then to current
interest and current principal, and then to cost of collection.
APPLICATION OF REGULAR PAYMENTS. Notwithstanding any provision of this Note to
the contrary, any regularly scheduled installment payment of principal and
interest which is received before the due date of such payment, or which is
received within 5 calendar days after the due date, will be applied to interest
and to principal as if such payment were received on the due date.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(a) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (g) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at Its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 6.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender In the State of New Mexico. If there Is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Bernalillo County, the State of New Mexico This Note shall be governed
by and construed In accordance with the laws of the State of New Mexico.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested either orally or in writing
by Borrower or as provided in this paragraph. Lender may, but need not, require
that all oral requests be confirmed in writing. All communications,
instructions, or directions by telephone or otherwise to Lender are to be
directed to Lender's office shown above. The following party or parties are
authorized as provided in this paragraph to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: MICHAEL L. BOWLIN, PRESIDENT;
and CHRIS BESS, EXEC VP. THERE IS A $1,000.00 MINIMUM ADVANCE REQUIREMENT FOR
THIS NOTE. ALL ADVANCES MUST BE CALLED IN PRIOR TO 2:OOPM MST FOR SAME DAY
CREDIT. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender.
LOAN AGREEMENTS. This loan is subject to that certain Business Loan Agreement
dated 02/05/96.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
<PAGE>
02-05-1996 PROMISSORY NOTE Page 2
Loan No 50028954 (Continued)
================================================================================
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
BOWLIN'S INCORPORATE
By /s/ MICHAEL L. BOWLIN
----------------------------------------
MICHAEL L. BOWLIN, PRESIDENT
================================================================================
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.20b
(c ) 1996 CFI Pro Services Inc., All rights reserved. [NM-D20E3.20 P3.20
BOWLINS3.LNC10.0VL]
ASSIGNMENT OF LEASE
-------------------
GEORGIA, DODGE COUNTY.
FOR VALUE RECEIVED, Pecan Shoppe of Edgewood, Inc., a Corporation of
the State of Georgia, with principal offices located at 203 Jessup Street,
Eastman, Georgia 31023, hereby transfers and assigns unto BOWLIN'S, INC., a
corporation of the State of New Mexico, with offices located at 136 Louisiana
NE, Albuquerque, New Mexico 87108, that certain lease agreement entered into
between Clara May Bassett and Stuckey's, Inc., in November, 1966, which is
recorded in the office of the County Clerk of Santa Fe County, New Mexico, in
Book 245, pages 498-509, which lease agreement was on January 15, 1968
transferred by Stuckey's, Inc. to Taylor C. Jordan, which transfer was recorded
in said Clerk's Office in Book 257, pages 745-747, and which lease agreement was
on March 25, 1968 transferred by Taylor C. Jordan to Pecan Shoppe of Edgewood,
Inc., which assignment is recorded in said Clerk's Office in Book 257, pages
741-744, together with all of the rights, title and leasehold interest of Pecan
Shoppe of Edgewood Inc., in and to said lease agreement, said lease agreement
being on the following property in Santa Fe County, New Mexico, to-wit:
A certain tract of land situate in Section 28, T10N, R7E, N.M.P.M.,
being a portion of the Bassett Ranch, Santa Fe County, New Mexico,
said tract located at the Southwest corner of the interchange of
New U.S. Highway 66 and State Road No. 344 (New Mexico State
Highway Project 1-040-4(8) 185), Edgewood, New Mexico, and
described More particularly as follows:
<PAGE>
Beginning at the northwest corner of said tract, a point on the
south right of way line of the south ramp of said interchange, a
point whence the northwest corner of said Section 28, T10N, R7E,
N.M.P.M., a U.S.L.O. Monument (stone), in place, bears
N65(Degree)55'W, 5,347.80 feet distance. Thence S57(Degree)20'E,
350.0 feet along the south right of way line of said south ramp of
said interchange to the northeast corner of said tract, and a point
of intersection with the west right of way line of State Road No.
344. Thence S0(Degree)20'W, 216.0 feet along the west right of way
line of State Road No. 344 to the southeast corner of said tract.
Thence N65(Degree)20'W, 435.60 feet to the southwest corner of said
tract. Thence N24(Degree)40'E, 245.50 feet to the northwest corner
of said tract, and the point of beginning.
Contains: 1.96 acres, more or less.
Bounded: On the north by new U.S. Highway 66 (New Mexico Project
No. 1-040-4(g) 185). On the east by State Road No. 344 On the south
and west by land of the Bassett Ranch, Santa Fe County, New Mexico.
The undersigned, Bowlin's, Inc., hereby accepts the assignment and
transfer of said lease, agrees to discharge and perform all of the duties and
obligations of Stuckey's, Inc., in and to said lease, and of Taylor C. Jordan
and Pecan Shoppe of Edgewood, Inc., in and under said lease and the assignments
thereof, including the payment of all rents provided for therein, agrees to
indemnify and save harmless Stuckey's, Inc., Taylor C. Jordan and Pecan Shoppe
of Edgewood, Inc., from any obligations or liabilities under said lease.
IN WITNESS WHEREOF, Pecan Shoppe of Edgewood, Inc. and Bowlin's,
Inc., each acting by and through their duly authorized officers, have hereunto
set their hands and affixed their seals, this the 12th day of July, 1982.
PECAN SHOPPE OF EDGEWOOD, INC. (SEAL)
BY /s/ Signature illegible (SEAL)
--------------------------
PRESIDENT
(CORPORATE SEAL) ATTEST /s/ Signature illegible (SEAL)
------------------------
SECRETARY
BOWLIN'S, INC. (SEAL)
BY /s/ Signature illegible (SEAL)
---------------------------
EXECUTIVE VICE PRESIDENT
ATTEST /s/ Sue E. Brown (SEAL)
--------------------------
SECRETARY
<PAGE>
STATE OF NEW MEXICO )
) ss
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me on this 12th day of
July, 1982, by TAYLOR C. JORDAN, the President of PECAN SHOPPE OF EDGEWOOD INC.,
a Georgia,, corporation, on behalf of said corporation.
/s/ Nina J. Pratz
-----------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: 6/3/83
-----------
(N.P. SEAL)
STATE OF NEW MEXICO
COUNTY OF BERNALILLO
The foregoing instrument was acknowledged before me, on this 12th day
of July, 1982, by M.L. Bowlin, the Executive Vice-President of BOWLIN'S, INC., a
New Mexico corporation, on behalf of said corporation.
/s/ Nina J. Pratz
-----------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: 6/30/83
------------
(N. P. SEAL)
[COUNTY RECORDER'S SEAL]
<PAGE>
ADDENDUM TO LEASE AGREEMENT
---------------------------
GEORGIA, DODGE COUNTY.
THIS ADDENDUM to a Lease Agreement, made and entered into between CLARA
MAY BASSETT and STUCKEY'S, INC., dated November 22nd, 1966 as to lands in Santa
Fe County, New Mexico, which Addendum is dated this the 13th day of April, 1982,
and is entered into between BASSETT DEVELOPMENT CORPORATION, a corporation of
the State of New Mexico, with offices located at 12108 Vienna, N.E.,
Albuquerque, New Mexico, 87111, hereinafter referred to as first party, and
PECAN SHOPPE OF EDGEWOOD, INC., a Georgia corporation, with principal offices
located at Eastman, Dodge County, Georgia, hereinafter referred to as the second
party,
WITNESSESS
WHEREAS, Clara May Bassett entered into a lease agreement with
Stuckey's, Inc., dated November 22nd, 1966, which lease agreement has been
recorded in the Office of the County Clerk of the County of Santa Fe, State of
New Mexico, in Book No. 245, Pages 498-509;
WHEREAS, Clara May Bassett, the lessor in said lease agreement, has
transferred said lease agreement to Bassett Development Corporation as indicated
by a Certificate of Transfer dated January 28, 1977 and a warranty deed dated
August 26, 1972 and recorded in said Clerk's Office Book 293, Pages 766-768;
WHEREAS, Stuckey's, Inc. has transferred and assigned its leasehold
interest in and to said lease to Taylor C. Jordan by an assignment dated January
15, 1968 which is recorded in said Clerk's Office in Book 257, Pages 745-747;
<PAGE>
WHEREAS, the said Taylor C. Jordan has transferred and assigned said
lease agreement unto Pecan Shoppe of Edgewood, Inc., in an assignment dated
March 25, 1968 and recorded in said Clerk's Office in Book 257, Pages 741-744;
WHEREAS, the business operated on lands described in said lease
agreement is owned and operated by Pecan Shoppe of Edgewood, Inc., the second
party and all rents accruing on said lease agreement are paid by Pecan Shoppe of
Edgewood, Inc., and Pecan Shoppe of Edgewood, Inc. is performing all of the
obligations of Stuckey's Inc. under said lease agreement.
NOW, THEREFORE, in consideration of the premises, the parties do hereby
agree as follows:
1. The second party does hereby assume and agrees with the first party
to perform all of the obligations of Stuckey's, Inc. as set forth in
said lease agreement.
2. The first party, in consideration of the assumption of all duties
and obligations of Stuckey's, Inc., by Pecan Shoppe of Edgewood, Inc.,
does hereby release Stuckey's, Inc. from any liability or obligations
in said lease agreement.
3. The parties do further agree to delete from said lease agreement
Paragraph 8 thereof and in lieu thereof insert the following new
Paragraph 8 in said lease agreement, to-wit:
"8. LESSEE'S OR SECOND PARTY'S DEFAULT: LEASE TERMINATION:
-------------------------------------------------------
Should the second party at any time during the term of this lease or
any extension hereof fail or refuse to pay the rent due hereunder,
after a 30-day written notice by registered or certified mail addressed
to the President of Pecan Shoppe of Edgewood, Inc. at 302 Jessup
Street, Eastman, Georgia 31023, or elsewhere as directed by second
party, or should second party in any manner fail to commence the
correction of any violation of the terms and conditions of this lease
or of the
<PAGE>
obligations to be performed hereunder, after a 30-day written notice by
registered or certified mail to the President of Pecan Shoppe of
Edgewood, Inc., at 302 Jessup Street, Eastman, Georgia 31023, or
elsewhere. an directed by second party, then the first party may, at
its election, declare the term ended, enter and retake the premises
with or without process, and expel any occupants. First party will have
an express landlord's lien for past due rents on the property of the
occupant located in the premises, whether or not exempt from execution,
which lien is additional to any liens provided by law, and which may be
foreclosed by public sale after notice. The failure of the first party
to terminate this lease for any uncured default will not be a waiver of
any right to terminate this lease for any prior or subsequent uncured
default provided the same notice is given as provided for here-in
above. In no event shall this lease be deemed an asset of the second
party after adjudication in bankruptcy. The second party shall pay all
costs and expenses, including an attorney fee not to exceed fifteen
percent of the past due rents, that shall arise from enforcing this
lease."
4. At any time whenever the words "First Party" is used in this
Addendum the same shall be synonymous with and have the same meaning as
the word "Lessor" in said lease agreement and whenever the words
"Second Party" is used in this Addendum the same shall be synonymous
with and have the same meaning as the word "Lessee" in said lease
agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and
affixed their seals on the day and year first above written ,each acting by and
through its duly authorized officers.
BASSETT DEVELOPMENT CORPORATION (SEAL)
BY /s/ Signature illegible (SEAL)
----------------------------
PRESIDENT
ATTEST /s/ Signature illegible (SEAL)
-----------------------
SECRETARY
(CORPORATE SEAL)
PECAN SHOPPE OF EDGEWOOD, INC. (SEAL)
BY /s/ Signature illegible (SEAL)
---------------------------
PRESIDENT
ATTEST /s/ Signature illegible (SEAL)
-------------------------
(CORPORATE SEAL) SECRETARY
STATE OF NEW MEXICO ) SS
COUNTY OF SANTA FE )
The foregoing instrument was acknowledge before me on this 30th day of
April, 1982, by [name illegible], the President of BASSETT DEVELOPMENT
CORPORATION, a New Mexico Corporation, on behalf of said Corporation.
/s/ Signature illegible
---------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: 3-9-83
-----------
(N. P. SEAL)
STATE OF GEORGIA ) SS
COUNTY OF DODGE )
The foregoing instrument was acknowledged before me, on this 30th day
of April, 1982, by TAYLOR C. JORDAN, the President of PECAN SHOPPE OF EDGEWOOD,
INC., a Georgia Corporation, on behalf of said Corporation.
/s/ Signature illegible
------------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: Aug. 15, 1985
---------------
<PAGE>
(N. P. SEAL)
L E A S E
---------
Clara May Bassett, a widow, (hereinafter called Lessor) and Stuckey's,
Inc. (hereinafter called Lessee), agree that:
1. Premises: Lessor leases to Lessee the following property in Santa Fe
County, New Mexico (hereinafter called the Premises):
A certain tract of land situate in Section 28, T1ON, R7E, N.M.P.M.,
being a portion of the Bassett Ranch, Santa Fe County, New Mexico,
said tract located at the southwest corner of the interchange of
New U. S. Highway 66 and State Road No. 344 (New Mexico State
Highway Project 1-040-4(8) 185) , Edgewood, New Mexico, and
described more particularly as follows:
Beginning at the northwest corner of said tract, a point on the
south right of way line of the south ramp, of said interchange, a
point whence the northwest corner of said Section 28, T1ON, R7E,
N.M.P.M, a U.S.L.O. Monument (stone), in place, bears
N65(Degree)55'W, 5,347.80 feet distant. Thence S57(Degree)20'E,
350.0 feet, along the south right of way line of said south ramp of
said interchange to the northeast corner of said tract, and a point
of intersection with the west right of way line of State Road No.
344. Thence SO(Degree)2O'W, 216.0 feet along the west right of way
line of State Road No. 344 to the southeast corner of said tract.
Thence N65(Degree)20'W, 435.60 feet to the southwest corner of said
tract. Thence N24(Degree)40'E, 245.50 feet to the northwest corner
of said tract, and the point of beginning.
Contains: 1.96 acres, more or less
Bounded: On the north by new U. S. Highway 66 New Mexico Project
No. 1-040-4(8)185). On the east by State Road No. 344. On the south
and west by land of the Bassett Ranch, Santa Fe County, New Mexico.
2. Primary Term and Rent: The primary term of this lease will be
[Confidential treatment has been requested] beginning on the date hereof. Lessee
will pay Lessor a monthly rental of [Confidential treatment has been requested]
per month which will be
<PAGE>
payable in advance by, the 10th day of each month, said rent to begin on the
earliest of the following:
a. When new Highway 66 (Interstate 40) shall be open to public
travel past the above-described premises
b. When improvement construction is started by Lessee or its
assigns
c. One year from the date of this instrument, provided however,
that until the occurrence of the first of the above conditions Lessee will pay
Lessor 25% of the stipulated rental per month from and after the date of this
instrument and until the occurrence of any of the above; this period of time to
run against the [Confidential treatment has been requested] term of the lease.
The rent for the first month shall be prorated on a per diem basis for any
period less than one month and likewise any short period at the end of this
lease or any extended term hereof shall be prorated on a per diem basis.
3. Option to Renew: If Lessee is not in default hereunder, it shall
have the following options to renew this lease on the same terms and conditions
except as hereinafter provided, to-wit.
a. At the end of the initial [Confidential treatment has been
requested] term this lease will be automatically renewed for an additional term
of [Confidential treatment has been requested] at the rate of [Confidential
treatment has been requested] per month unless the Lessee, or its assigns, shall
give notice in writing to the Lessor at least sixty days prior to the end of the
initial term that said lease is not to be so renewed.
b. Provided this lease is renewed at the end of the primary
[Confidential treatment has been requested] term and provided Lessee is not in
default hereunder at the end of the first renewal as provided here in above this
lease will automatically be renewed for an additional [Confidential treatment
has been requested] period at the rate of [Confidential treatment has been
requested] per month unless the Lessee or its assigns, shall give a written
notice to the Lessor at least 60 days prior to the end of the first renewed term
that said lease is not to be so renewed.
c. Provided this lease is renewed at the end of the primary term of
[Confidential treatment has been requested], the first renewal of [Confidential
treatment has been requested] and the second renewal of [Confidential treatment
has been requested] as provided above, said lease shall be automatically renewed
for an additional [Confidential treatment has been requested] period at
[Confidential treatment has been requested] per month, unless the Lessee, or its
assigns, shall give a written notice to the Lessor at least sixty days prior to
the end of the third renewed term that said lease is not to be so renewed.
<PAGE>
No renewal will be allowed after the third renewal term, of
[Confidential treatment has been requested] years from this date. Termination of
this lease or failure to exercise any option to renew this lease will terminate
all un-exercised options to renew this lease.
4. Taxes and Charges: Lessee shall pay and discharge before
delinquency all real and personal property taxes and assessments levied or
assessed against the premises and improvements thereon by any governmental
authority or district, and all charges for water, electricity, gas, telephone,
sewers, power, rubbish removal, and other public utilities. Any such payment or
installments thereof required to be made with respect to any period prior or
subsequent to the term of this lease shall be prorated as necessary between
Lessor and Lessee. Lessee may at its expense contest any such tax, assessment,
or charges.
5. Fire Insurance: Lessee will at all time maintain in force a
policy of fire insurance, with standard extended coverage endorsement, insuring
improvements erected upon the, premises against damage or destruction from risks
covered by such type of policy. The amount of such policy will equal at least
eighty per cent of the net sound insurable value of the improvements. Such
policy will name Lessor and Lessee as insureds, as their interests may appear,
and may contain a lender's loss payable endorsement in favor of any financial
institution which may furnish financing for improvements on the premises as
provided in paragraph 11. All funds paid to Lessor and Lessee by the insurance
carrier as a result of any loss will be immediately paid to Lessee and shall be
used exclusively by Lessee in the repair of restoration of the improvements, or
the construction of any new improvements, pursuant to paragraph 9 except that if
destruction is more than 50% in the last 3 years of a renewal term, Lessee may
elect to terminate this lease and pay Lessor all insurance proceeds. Lessee will
furnish Lessor a certificate or duplicate policy of such insurance.
During any period that the leasehold improvements are destroyed by
fire, storm, or other casualties, the rents due and payable hereunder shall
abate in proportion to the business use which Lessee, or its assigns, can make
of said leased premises. The lessee shall proceed promptly to restore or replace
any damaged or destroyed leasehold improvements. Upon completion of such
restoration or repairs, full rent shall recommence.
<PAGE>
6. Liability Insurance: Lessee will at all times during the term of
this lease maintain in force an insurance policy which will name Lessor and
Lessee as insureds against all liability resulting from injury to or death or
any person or persons and damage to property in or about the premises, the
liability under such insurance not to be less than $200,000.00 for any one
person, $500,000.00 for any one accident, and $25,000.00 for property damage.
Lessee will furnish Lessor a certificate or duplicate policy of such insurance.
Lessee will maintain in force all employees' compensation insurance on its
employees required under the applicable Workman's Compensation Act.
7. Lessor's Access to Premises: Lessor will have free access to the
premises at all reasonable times for the purpose of examining the same or
inspecting the condition thereof, to exhibit the premises to Lessor's
prospective purchasers or mortgagors of the premises, to determine if Lessee is
performing its agreements in this lease, and to post such reasonable notices as
Lessor may desire to protect the rights of Lessor, including, but not by way of
limitations, notices of non-responsibility for lien claims.
8. Lessee's Default: Lease Termination: Should the Lessee at any
time during the term of this lease or any extension hereof, fail or refuse to
pay the rent due hereunder, after a thirty day written notice by registered mail
or certified mail addressed to the president of Stuckey's, Inc., Eastman,
Georgia with a copy thereof by certified or registered mail to any assignee or
sublessee, of the Lessee or should the Lessee in any manner fail to commence the
correction of any violation of the terms and conditions of this lease or of the
obligations to be performed hereunder, after a thirty day written notice by
registered registered or certified mail to the President of Stuckey's Inc.
Eastman, Georgia, with a copy thereof by, registered or certified mail to any
assignee or sublessee or Lessee, then the Lessor may, at its election, declare
the term ended, enter and retake the premises with or without process, and expel
any occupants. Lessor will have an express landlord's lien for past due rents on
the property of the occupant located in the premises, whether or not exempt from
execution, which lien is additional to any liens provided by law, and which may
be foreclosed by public sale after notice. The failure of the Lessor to
terminate this lease for any uncured default will not be a waiver of any right
to terminate the lease for any prior or subsequent uncured default provided the
same notice is given as provided for herein-above. In no event shall this lease
be deemed an asset of the Lessee after adjudication in bankruptcy. The Lessee
shall pay all costs and
<PAGE>
expenses, including an attorney fee not to exceed fifteen percent of the past
due rents, that shall arise from enforcing this lease.
9. Improvement and Repair of Premises: Lessee may construct
improvements on the premises, may alter or modify any part thereof and may
demolish all or any part thereof. If Lessee demolishes any improvements, Lessee
will, within 60 days after completion of such demolition, commence construction
on the premises of new improvements which, when completed, shall have a
replacement value in excess of the value, on the date of demolition, of the
improvements demolished, which construction will be continue diligently to
completion. All construction, repair, alteration, modification and demolition
will be done in compliance with applicable building ordinance and laws.
<PAGE>
Lessee shall pay all costs, expenses and liabilities arising out of or in any
way connected with any improvements, demolition, alterations, or additions made
by it and shall hold harmless and indemnify Lessor from or against any such
costs, expenses and liabilities, including liability which might arise from any
liens. Lessor shall not be obligated to make any improvements, alterations or
repairs whatsoever in or about said premises and Lessor sha11 not be liable or
accountable for any damages to said premises or any property located thereon.
Lessee will at its expense keep all improvements on the premises in good
condition and repair; acts of God, reasonable use, wear and tear and
depreciation excepted, subject to Lessee's right to demolish improvements and
erect new improvements on the premises.
10. Lessor's Liability: Lessor shall not be liable for any damage
to the premises, or to any part thereof, or to any property therein, caused by
leakage from the roof of the premises or by bursting, leakage or overflowing of
any, waste pipes, water pipes, tanks, drains, or stationary washstands, or by
reasons of any damage whatsoever caused by water, gas or electricity from any
source whatsoever. Lessor shall not be liable for any injury or damage, either
to person or property, arising from any cause whatsoever, which shall occur in
any manner on or about the said demised premises unless such injury or damage
shall be due to the negligence of Lessor or Lessor's agents, and Lessee agrees
to indemnify and save harmless Lessor from every and all liability and claims
for damages arising out of any cause whatsoever and occurring in any manner on
or about the premises, except such damage as occurs from the negligence of
Lessor or his agent.
11. Holding Over: If Lessee holds over after expiration or
termination of the lease term it will be considered a forcible entry and
detainer, with rental payable for the period of such holding over as though a
tenancy from month to month has been created at the monthly rental payable just
preceding the period of holding over. Holding over will be subject to all the
terms of the lease, but will not be construed an a renewal of this lease.
12. Surrender of Premises: At the end of the lease term, or any
extension, Lessee will
<PAGE>
surrender the premises to Lessor in as good order and condition as when the same
were entered upon by the Lessee, loss by fire, or unavoidable accidents or
ordinary wear, excepted. Lessee will remove from the premises all shelving,
movable furniture, and trade fixtures, including snack bar equipment; if Lessee
desires that such shelving, furniture, and trade fixtures be left in or upon the
premises in lieu of restoring the original condition or a portion thereof, the
same may be done upon obtaining written approval of the Lessor.
13. Assignment, Subletting and Use: It is contemplated by the
parties hereto that lessee will cause to be constructed at its own expense a
Stuckey's Pecan Shoppe on the demised premises , it is agreed that the said land
and building and all improvements thereon or any part thereof may be sublet by
the Lessee in this lease and all the rights of the Lessee hereunder may be
assigned, provided that the Lessee shall not be released from the payment of the
rent provided for herein. It being further contemplated that Lessee, or its
assigns, may wish to finance the leasehold improvements to be placed upon said
premises, it is hereby agreed between the parties that Lessee or its assigns may
subject its interest in this lease, together with any leasehold improvements to
a security interest to be given by Lessee or its assigns to a financial
institution. Lessor does, however, agree that the holder or any such security
interest in this lease or upon the leasehold improvements may on foreclosure
seize the leasehold improvements and take over the interest of Lessee in this
lease, provided that said secured party shall perform all obligations called for
herein to be performed by the lessee, including but not by way of limitation the
payment of rent, the payment of taxes and the insuring of leasehold
improvements.
Lessor covenants that the Lessee or its assign, on payment of all
of the aforesaid rent payments in the performance of all covenants herein
contained shall and may peacefully and quietly have, hold and enjoy the said
demised premises for the term aforesaid, or if options are exercised, for the
extended term pursuant to the options hereinafter granted and the said Lessor,
or its assigns, shall have the right to operate on said premises a Stuckey's
Pecan Shoppe or other lawful business.
Lessor may transfer its interest under this lease without the
consent of the Lessee.
<PAGE>
14. Eminent Domain: In the event any proceedings in eminent domain
for public or quasi-public use with respect to the premises or the improvements
thereof, the rights of the parties shall be as follows:
a. Entire Premises Taken:
If the entire premises and improvements erected by Lessee are
taken, Lessee shall be entitled to receive out of the award an amount equal to
the fair market value of Lessee's lease and the fair market value of the use of
the improvements and non-removable fixtures for the remainder of the of the
lease on the date of taking. Lessor shall be entitled to receive al1 the
remainder of the award. As of the date of taking, Lessor and Lessee shall have
no further liability to each other pursuant to this lease.
b. Part of Premises Taken:
If only a portion of the premises is taken, or a portion of the
premises and improvements is taken, then the monthly rent due pursuant to this
lease shall be reduced by an amount which shall bear the same relation to the
total monthly rent specified in this lease to be paid as the fair market value
of the portion of the premises or improvements taken shall bear to the total
fair market value of entire premises, but excluding the value of the
improvements, for the use to which the premises are being devoted on the date of
taking. If the taking should render the premises unsuitable for the continuance
of Lessee's business on the premises, then Lessee may terminate this lease.
Lessee shall be entitled to receive out of the award an amount equal to the fair
market value of the use of the improvements taken, plus the fair market value of
the use of such portion of the premises and/or improvement for the remainder of
the term of the lease.
c. Use and Possession Taken
If only the use and possession of the premises and improvements are
taken for all or a portion of the remainder of the term of the lease, Lessee
shall be entitled to receive the entire award, but shall continue to pay to
Lessor the rent due to Lessor pursuant to this lease during such period of
taking. If the taking should render the premises unsuitable for the continuance
of Lessee's business on the premises, then Lessee may terminate the lease. If
the use and possession are taken for a period extending beyond the
<PAGE>
expiration date of the term of the lease, the award shall be divided between
Lessor and Lessee. Lessee shall be entitled to receive that part of the award
which shall bear the same relation to the total award as the remaining number of
days of the term of the lease shall bear to the total number of days of such use
and possession by the condemnor.
15. Binding Effect and Governing Law: This lease will inure to, and
be binding upon, the parties, their successors assigns, fiduciaries,
transferees, sublessees, heirs, executors, and administrators, will be governed
by the laws of New Mexico, and constitutes the entire agreement of the parties.
16. Notices: Notices will be deemed given when mailed prepaid,
certified, or registered mail, return receipt requested, to Lessor at P. 0. Box
406, Edgewood, New Mexico, and to Lessee at P.O. Box 301, Eastman, Georgia, or
such other address as may be furnished from time to time.
Done November 22nd, 1966.
Lessee Lessor
------ ------
STUCKEY'S INC.
By /s/ Signature illegible By /s/ Clara May Bassett
-------------------------- ---------------------------
Its President Clara May Bassett, a widow
-------------------------
ATTEST:
/s/ Signature illegible
- ----------------------------
Its Asst. Secretary
-------------------------
State of New Mexico )
) Ss
County of Bernalillo )
The foregoing instrument was acknowledged before me this 22nd day
of November, 1966, by Clara May Bassett, a widow.
My Commission Expires: 11-16-69 /s/ Signature illegible
------------- --------------------------
Notary Public
<PAGE>
State of Georgia )
) Ss
County of Dodge )
The foregoing instrument was acknowledged before me this 8th day
of December, 1966, by W. S. Stuckey, the President of STUCKEY'S, INC., a
Delaware corporation an behalf of such corporation.
My Commission Expires: March 13, 1976 /s/ Signature illegible
------------------ -----------------------
Notary Public
LEASE
-----
This LEASE, made this 12 day of January, 1987, between JANET PRINCE,
hereinafter called the OWNER, and BOWLIN'S, !NC., a New Mexico corporation,
hereinafter called the LESSEE.
I.
DESCRIPTION OF PROPERTY AND RENTS
----------- -- -------- --- -----
A. The OWNER does hereby lease to the LESSEE for commercial and/or
retail purposes, the premises described below:
Township 15 South, Range 22 East
-------- -- ------ ----- -- ----
That portion of Lots 5, 6, 7, 8, and the Sl/2 NW1/4 SEl/4,
Section 36, Township 15 South, Range 22 East, G&SRB&M, all
more precisely described as follows: "Beginning at the
Southeast corner of said Section, thence West and along the
South line of said Section approximately 3168.73 feet to a
point of intersection with the East-bound construction center
line of the Benson-Steins Pass Interstate Highway as shown on
Arizona Highway Department Right-of-Way Map A-2T-366; thence
North-Easterly and along said East-bound construction center
line to a point of intersection with the East line of said
Section thence South and along the East line of said Section,
1802.96 feet to the point of beginning, and containing 64.84
acres, more or less."
The property includes the four buildings which constitute the business
and museum premises and any museum items and fixtures having not been previously
returned to the OWNER. The OWNER and LESSEE acknowledge that the property is
1
<PAGE>
currently being surveyed and further agree that a legal description from the
survey currently underway will be the proper description of the property for the
purposes of this lease and will be attached to the lease as Amendment A when
said survey is complete.
B. The OWNER does hereby acknowledge that the land on the opposite side
of the above described interchange (North) is under State Lease Number C-24961,
dated February 16, 1978, for future development into a Recreational Vehicle
Park. OWNER acknowledges and LESSEE agrees to pay OWNER the exact amount due the
State of Arizona under this lease each year for OWNER and LESSEE'S mutual
benefit by having no competition across the interchange. State Lease Number
C-24961 is to be attached and made a part hereof as Exhibit A.
C. OWNER hereby acknowledges and grants LESSEE the permission and right
to construct a new fifth building on the above described premises. OWNER hereby
acknowledges that LESSEE has been granted a Dairy Queen franchise for the above
described location and that said new building will be for the specific purpose
of operating a Dairy Queen-Brazier Restaurant. LESSEE agrees to construct said
new building according to all pertinent and controlling building codes and
ordinances of the State of Arizona and Cochise County and to specifications,
approved by International Dairy Queen. Hereinafter in this document FOOD SALES
will refer to sales of Dairy Queen authorized products sold through this new
2
<PAGE>
facility.
II.
TERM OF LEASE
---- -- -----
The term of this lease shall be [Confidential treatment requested],
both dates inclusive, unless sooner terminated as herein provided. This lease
shall not hamper negotiation of a new lease between OWNER and LESSEE to terms
mutually agreeable for a new lease at the termination of this lease.
III.
MINIMUM RENT AND PERCENTAGE RENT
------- ---- --- ---------- ----
A. The minimum rent for the above described lease property is
[Confidential treatment requested] payable annually by LESSEE, monthly in
advance in equal installments of [Confidential treatment requested] each. The
payments are due on the first day of every month during the term. In addition to
the minimum rent, LESSEE shall pay, for each lease year, additional rent based
upon a percentage of LESSEE'S [Confidential treatment requested] from the leased
property as hereinafter set forth. The term [Confidential treatment requested]
which are subject to the sales tax imposed under Arizona State Law.
B. Total annual rental based on [Confidential treatment requested] and
subject
3
<PAGE>
to the minimum rental specified above shall be calculated as follows:
(1) [Confidential treatment requested] percent of the
first [Confidential treatment requested] of annual
[Confidential treatment requested]. This [Confidential
treatment requested] is the guaranteed annual rent
addressed in above paragraph (A) and establishes
[Confidential treatment requested] as the base above
which the following percentage rents are calculated.
(2) In addition to the minimum rent described above,
LESSEE shall pay OWNER [Confidential treatment
requested] of all [Confidential treatment requested]
made in excess of [Confidential treatment requested]
annually except as provided for in paragraph (3)
below.
(3) Food Sales: It is hereby agreed by OWNER and LESSEE to
establish 1985 as the base period year for food sales.
1985 annual food sales made by LESSEE were
[Confidential treatment requested]. Using the above
established period for food sales, and because OWNER
acknowledges that LESSEE must pay percentage rent to
International Dairy Queen for the franchise, then food
sales percentage rent shall be calculated as follows:
If total annual [Confidential treatment requested]
exceed [Confidential treatment requested] then the
percentage rent on food sales made in excess of
[Confidential treatment requested] annually shall be
[Confidential treatment requested]
Payments of estimated percentage rents in excess of the minimum rent
shall be paid on the 15th day of each month beginning with the month of
September, 1986 which shall be the
4
<PAGE>
percentage rent for August, 1986. Said payments shall be computed at the end of
each month as follows:
[Confidential treatment requested] of the amount of
[Confidential treatment requested] for that month in excess of
[Confidential treatment requested].
C. Petroleum Products Rent:
Minimum rent paid to OWNER on the existing Chevron Station
shall be [Confidential treatment requested] per month due on
the first of each month. Percentage rent shall be paid based
upon [Confidential treatment requested] per gallon of gasoline
pumped. LESSEE shall prepare a reconciliation of gallonage
pumped annually at the same time percentage rents are
reconciled and compute and pay to OWNER any percentage due
OWNER above the [Confidential treatment requested] annual
minimum rent.
D. On August 15 of each year beginning with August 15, 1987, the total
annual rent for the twelve month period, August 1 through July 31 each year,
shall be recomputed pursuant to paragraphs (A), (B), and (C) of this section. If
the LESSEE shall have paid a total of rents which are in excess of the
recomputed rents, then the OWNER shall return to the LESSEE the surplus of the
collected rents over the recomputed rents or shall allow a credit of such
surplus toward the subsequent year's percentage rent. In no event shall an
amount less than the minimum annual rental be paid. Should the LESSEE have paid
a total of rents in an amount which is less than the recomputed rents, then the
LESSEE shall
5
<PAGE>
pay to the OWNER such deficiency on September lst of the applicable year.
IV.
RENT ABATEMENT
---- ---------
If at any time the entrance to the property is closed more than three
days due to circumstances beyond LESSEE'S control. such as highway construction
or other third-party activities beyond LESSEE'S control, the rent shall abate
for the period involved.
V.
PROPERTY TAXES
-------- -----
The LESSEE shall pay any increases in the taxes assessed and levied
against the leased property above the amount of [Confidential treatment
requested] during the term of this lease, whether the increase in taxation
results from a higher tax rate or an increase in the assessed valuation of the
leased property, or both.
LESSEE shall pay all property taxes levied against the LESSEE'S
personal property, merchandise, cars, trucks, service stations, and mobile
structures placed upon the premises by LESSEE.
VI.
USE AND EXCLUSIVE USE
--- --- --------- ---
The LESSEE shall use and occupy the leased premises for the purpose of
operating a business engaged in the sale of goods and services including, but
not limited to: curios, jewelry, gifts, petroleum products amusement fees, food
and
6
<PAGE>
other related activities.
The OWNER shall not lease any portion of the above described property
for any purpose whatever, without specific consent of LESSEE. The OWNER shall
not permit any person except the LESSEE, its agents, or servants to sell or
exchange on such property any article whatsoever without specific written
consent and permission from LESSEE.
VII.
REPAIRS
-------
A. OWNER shall maintain the exterior walls, foundation, and plumbing
mains outside the building, except that there shall be no responsibility to
repair damage caused to the same by the LESSEE, its agents or patrons. As a
condition precedent to any liability from the OWNER to the LESSEE for failure so
to do, the LESSEE must first notify the OWNER in writing of the alleged defect
and the OWNER shall have ten days thereafter in which to make repairs, if
necessary, to the said exterior walls, foundation and plumbing outside the
building.
B. The LESSEE shall, at its cost, keep and maintain said premises, the
appurtenances and improvements (including the plumbing inside the building and
the roof of the building) in good repair and in sanitary condition, and shall
promptly repair all damage caused to said leased premises by the LESSEE its
agents or patrons.
7
<PAGE>
VIII.
LESSEE'S RIGHT TO ALTER AND IMPROVE
-------- ----- -- ----- --- -------
LESSEE shall have the right to make changes, alterations, or additions
to the buildings located on the leased property or to construct improvements on
the leased property.
A. Any permanent improvement to the leased property or any part thereof
during the term of this lease shall at once become the absolute property of the
OWNER without payment of any kind therefor. However, any equipment, tanks and
pumps added to the OWNER's property by the third party (namely an oil company)
shall not be permanent and shall remain the property of said oil company.
B. Any permanent improvement made will be adequately insured
immediately by LESSEE once improvement or addition is completed.
C. Any mobile structures including, but not limited to, mobile homes,
fixtures, cars, trucks and personal property shall be removed by LESSEE Upon
termination of this lease and ownership of same shall remain with LESSEE.
IX.
UTILITIES
---------
LESSEE shall pay all charges for gas, electricity, water, and telephone
used or supplied in connection with the leased property, and shall indemnify the
OWNER against any liability or damages on such accounts.
8
<PAGE>
X.
DEFAULT
-------
Any one or more of the following occurrences shall be deemed a default
by LESSEE at the time of such occurrence:
(1) When LESSEE fails to pay any installment of rent when due or
fails to fulfill or perform any of the other agreements or
provisions of this lease, which are the obligation of the
LESSEE, and LESSEE'S failure to perform continues for a
period of thirty days after OWNER shall have demanded in
writing by Certified Return Receipt mail for performance
thereof;
(2) When LESSEE is adjudicated a bankrupt or makes an assignment
for benefit of creditors;
(3) When LESSEE'S interest in this lease is levied on or attached
in any action against LESSEE and such levy or attachment is
not vacated within sixty (60) days thereafter.
If any one or more of the above occurs, the OWNER may elect any of the
following remedies without prejudice to any other rights or remedies which might
otherwise be available to OWNER:
(1) Bring appropriate action against LESSEE to enforce the
agreements and provisions of this lease, and to compel the
LESSEE to abide by the same.
(2) Terminate this lease, and in such even OWNER may rightfully
re-enter the leased premises without notice or demand, and
repossess the same or recover possession thereof, as if such
premises were held by forcible detainer; or,
9
<PAGE>
(3) Pursue, in connection with the foregoing or separately, any
other right or remedy provided by law.
XI.
OWNER'S RIGHT OF ACCESS
------- ----- -- ------
The OWNER may enter the leased property, at any reasonable time, for
the purpose of inspecting the leased property or performing any work which the
OWNER deems necessary to maintain property interests.
XII.
FIRE OR OTHER DESTRUCTION OF PREMISES
---- -- ----- ----------- -- --------
A. In case of damage to or destruction of any building on the leased
property or of the machinery fixtures, and equipment (except movable trade
fixtures, furniture, and furnishings) used in the operation and maintenance
thereof, by fire or otherwise, whether or not insured under the standard fire
insurance policy with approved standard extended coverage endorsement applicable
to the leased property, the LESSEE will, at such time and upon the conditions
hereinafter set forth, restorer repair, replace, rebuild, or alter the same as
nearly as possible to the condition such property was in immediately prior to
such damage or destruction. Such restoration, repair, replacement, rebuilding,
or alteration shall be commenced as soon as practicable and, after such work has
been commenced, it shall be prosecuted with reasonable diligence.
B. All insurance money received by the OWNER on account
10
<PAGE>
of such damage or destruction, less the cost, if any, of such recovery, shall be
deposited in escrow by the OWNER and shall be applied by the OWNER to the
payment of the cost of such restoration, repair, replacement, rebuilding, or
alteration (the "work"), including expenditures made for temporary repairs or
for the protection of property pending the completion of permanent restoration,
repair, replacement, rebuilding, or alteration to the leased property, and shall
be paid out, as hereinafter provided, from time to time, as such work
progresses, upon the written request of the LESSEE which shall be accompanied by
the following:
(1) A certificate of the architect or engineer in charge of the
work (the certificate), dated not more than 30 days prior to
such request, setting forth that the sum then requested
either has been paid by the LESSEE or is justly due to
contractors, subcontractors, materialmen, engineers,
architects, or other persons (whose names and addresses
shall be stated), who have rendered services or furnished
materials for certain work. The certificate shall give a
brief description of such services and materials, shall list
the several amounts so paid or due to each of such persons,
shall state the fair value of the work at the date of the
requisition, and shall state that no part of such
expenditures has been or is being made the basis for any
other request for payment. The certificate shall state also
that except for the amounts listed therein, there is no
outstanding indebtedness known to such architect or
engineer, after due inquiry, which is then due for labor,
wages, materials, supplies,
11
<PAGE>
or services in connection with such work which, if unpaid,
might become the basis of a vendor's, mechanic's, laborer's,
materialman's, or similar lien upon such work or upon the
leased property.
(2)An affidavit sworn to by the LESSEE that all materials and
all property constituting the work described in such
certificate of the architect or engineer are free and clear
of all security interests, liens, charges, or encumbrances,
except encumbrances, if any, securing indebtedness due to
persons specified in such certificate which are to be
discharged upon payment of such indebtedness.
C. Upon compliance with the foregoing provisions of subparagraph (B),
the OWNER shall, out of such insurance money previously deposited in escrow, on
request of the LESSEE, pay to the persons named in such certificate the
respective amounts stated to be due to them, or shall pay to the LESSEE the
amount stated to have been paid by the LESSEE; provided, however, that such
payments shall not exceed in amount the fair value of the relevant work as
stated in the certificate. If the insurance money in the hands of the OWNER
exceeds the amount required to pay the cost of such work, the OWNER shall be
entitled to retain such excess. In the event that the insurance proceeds do not
satisfy the total cost of restoration, repair, replacement, rebuilding or
alteration, the LESSEE shall pay any costs in excess of the insurance proceeds
received which are necessary to satisfy such costs.
D. If there is a substantial interference with the
12
<PAGE>
operation of the LESEE'S business in the leased property requiring the LESSEE to
temporarily close its business to the public, the minimum rental shall be
equitably apportioned or abated for the duration of such repairs in proportion
to the extent to which there is interference with the operation of the LESSEE'S
business.
XIII.
INDEMNIFICATION
---------------
LESSEE agrees to indemnify and hold OWNER harmless from any loss,
damage, or liability occasioned by, or arising from any default hereunder, or
negligent act on the part of the LESSEE, its agent or employee; LESSEE further
agrees to indemnify and hold OW14ER harmless from any loss, damage or liability
occasioned by, or arising from any negligent act on the part of the OWNER, its
agent or employee.
XIV.
INSURANCE
---------
A. LESSEE agrees to provide at its cost and to keep current a standard
form of liability policy insuring the OWNER and LESSEE from public liability in
limits of THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($300,000.00) / FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($500,000.00). LESSEE shall provide the OWNER with
satisfactory proof of the existence of said policy upon request from OWNER.
LESSEE agrees to name the OWNER as additional insured on all, applicable
liability insurance policies.
13
<PAGE>
B. LESSEE agrees to carry fire/lightning insurance, extended coverage
and vandalism insurance, on the above described premises at LESSEE'S sole and
total expense. OWNER shall be the named insured on all such policies. All
building values shall be agreed upon in writing by and between OWNER and LESSEE
annually to ensure that OWNER feels adequate insurance is in effect on the
subject property. Adequate insurance coverage is contemplated being carried to
avoid invoking the eighty (80) percent co-insurance clause uniformly enforced by
insurance companies if a loss occurs on underinsured property.
XV.
EMINENT DOMAIN
------- ------
If the leased property or any part thereof, is taken by eminent domain
such that the property is rendered unusable for LESSEE'S commercial purposes,
this lease shall expire on the date when the leased property shall so be taken
and the rent shall be apportioned to that date.
XVI.
RIGHT TO SUBLET
----- -- ------
LESSEE shall have the right to sublet to a third party (oil company)
space for LESSEE'S sale of additional petroleum products if such oil company
supplier is available from time to time during the term of this lease. LESSEE
may sublet all or a portion of the leased property for the remainder of the term
with the approval of the OWNER, which approval OWNER
14
<PAGE>
shall not unreasonably withhold, provided that the business or occupation of the
sublessee is not extra-hazardous or illegal. The LESSEE shall remain primarily
liable for the payment of the rent herein reserved and for the performance of
all the terms of this lease required to be performed by the LESSEE.
XVII.
RIGHT OF FIRST REFUSAL
----- -- ----- -------
OWNER hereby grants LESSEE the Right of First Refusal as defined below:
A. This Right of First Refusal shall continue so long as LESSEE shall
be current in i ts payments of rental sums due as provided in this lease and
performing all the terms and conditions stated therein to be kept and performed.
B. LESSEE has the right to purchase the real property and personal
property described in said lease under the following terms and conditions:
(1) This right refers to all the OWNER controlled land area
and buildings occupied by "The Thing" and its signs,
including non-contiguous land east of the property on the
north side of Interstate 10.
(2) If OWNER shall receive a bona fide offer to purchase the
said area of land and buildings occupied by "The Thing",
and being that real property and improvement described
herein, OWNER shall thereupon deliver to LESSEE a copy of
said offer and the said LESSEE shall have thirty (30) days
in which to meet said offer and to make an equivalent
offer to purchase.
15
<PAGE>
(3) If OWNER shall receive a bona fide offer to purchase which
LESSEE shall not meet nor make (after receipt of notice
from OWNER) and which OWNER does not accept, then this
"First Refusal" shall continue in full force and effect
according to the provisions hereof. However, if LESSEE
does not meet nor make an offer communicated to it by
OWNER and OWNER accepts the offer made by a third party,
then this "First Refusal" shall terminate.
(4) Any sale by OWNER will be subject to this lease dated
August 1, 1986.
XVIII.
MUTUAL RELEASE OF LIABILITY TO
------ ------- -- --------- --
EXTENT OF SPECIFIC INSURANCE COVERAGE
------ -- -------- --------- --------
Except as provided in Article XII, the OWNER and the LESSEE and all
parties claiming under them hereby mutually release and discharge each other
from all claims and liabilities arising from or caused by any hazard covered by
insurance in connection with property on, or activities conducted on the leased
property, regardless of the cause of the damage or loss.
XIX.
SIGNS
-----
LESSEE shall maintain and pay for all painting, repairs and sign
rentals for the numerous signs advertising the leased premises. It is understood
that all. signs are the exclusive property of LESSEE and OWNER hereby assigns
all signs, sign locations, and any income derived therefrom during any term of
this lease to LESSEE.
16
<PAGE>
XX.
NOTICE
------
Any notice under this lease must be in writing and must be sent by
Registered or Certified, Return Receipt mail to the last address of the party to
whom the notice is to be given, as designated by such party in writing. The date
of the notice is the date of mailing same. The OWNER hereby designates her
address as 6826 Campfield Road, Baltimore, Maryland, 21207. The LESSEE hereby
designates its address as 136 Louisiana NE, Albuquerque, New Mexico, 87108.
XXI.
TERMINATION OF PREVIOUS LEASE
----------- -- -------- -----
Upon the execution and delivery of this lease, that certain lease dated
December 18, 1978, between the parties hereto affecting the property hereby
leased, is canceled and neither party shall have any further rights or
obligations thereunder.
XXII.
ATTORNEY'S FEES AND COSTS
---------- ---- --- -----
In the event suit is brought to enforce the provisions hereof, the
prevailing party shall be entitled to recover its attorney's fees and costs
incurred therein.
XXIII.
LEASE TERM, EXECUTION DATE
----- ----- --------- ----
AND MINIMUM RENT RECEIPT
--- ------- ---- -------
OWNER and LESSEE acknowledge and agree that this lease
17
<PAGE>
term began on August 1, 1986 although executed this 12 day of January, 1987.
OWNER also acknowledges receipt of LESSEE's checks to bring minimum monthly rent
payments current from August 1, 1986 through December 31, 1986 consistent with
Article III "MINIMUM RENT AND PERCENTAGE RENT".
XXIV.
RELEASE OF SELLER UPON SALE
------- -- ------ ---- ----
The term OWNER as used in this lease, means only the owner for the time
being of the leased property, so that in the event of any sale of the leased
property, after LESSEE did not meet any bona fide offer of a third party
described in Article XVII "RIGHT OF FIRST REFUSAL", the seller shall be and
hereby is entirely relieved of all obligations of the OWNER hereunder. Without
further agreement between the parties or between either of the parties and any
purchaser of the leased property, such purchaser shall be deemed to have assumed
all obligations of the OWNER under this lease, and any sale shall be made
subject to the terms of this lease.
18
<PAGE>
XXV.
BINDING EFFECT
------- ------
This lease shall apply to and bind the heirs, executors, administrators
and assigns of the respective parties hereto.
LESSOR: /s/ Janet Prince
----------------------------------
JANET PRINCE/OWNER
LESSEE: /s/ C. C. Bess
----------------------------------
BOWLIN'S INCORPORATED by
Executive Vice President
ATTEST:
- ---------------------------------------
Secretary, BOWLIN'S INC.
STATE OF Maryland )
)SS.
County of Baltimore )
SUBSCRIBED AND SWORN To before me this 12 day of January, 1987, by
JANET PRINCE.
My Commission Expires:
7-1-90
- -----------------------
/s/ Signature Illegible
-----------------------------------------
NOTARY PUBLIC
19
<PAGE>
STATE OF NEW MEXICO )
)Ss.
County of Bernallillo )
SUBSCRIBED AND SWORN TO before me this 16th day of January, 1987, by
C.C. BESS, Executive Vice President of BOWLIN'S, INCORPORATED.
My Commission Expires:
5/31/87 /s/ William J. McCabe
- ---------------------- ------------------------------
NOTARY PUBLIC
20
ARIZONA
STATE LAND DEPARTMENT
1624 WEST ADAMS
PHOENIX, ARIZONA 85007
GOVERNOR OFFICE OF STATE LAND COMMISSIONER
Date JAN 27, 1987
[ BOWLINIS INC.
[ 136 LOUISIANA, N. E.
[ ALBUQUERQUE, NM 87108
[
Lease/Permit No. 03-821
NOTICE OF ASSIGNMENT OF LEASE OR PERMIT DOCUMENT
Enclosed is your original lease/permit document (S) which has been transferred
by the State Land Department, as requested in your application.
This original document is for your records. It is recommended that you store it
in a safe place.
If you have any questions, contact the State Land Department at (602) 255-4632.
Thank You,
STATE LAND DEPARTMENT
11/84
Transmittal #3
<PAGE>
Lease No. 03-821
STATE LAND DEPARTMENT
STATE OF ARIZONA
COMMERCIAL LEASE
THIS INDENTURE, made and entered into this.. 21st ... day of ...
September.., 1986, by and between the State of Arizona, hereinafter called the
lessor, and ...CARDON CORPORATION.., an Arizona corporation, ... Tempe.., State
of ..Arizona, hereinafter called the lessee:
WITNESSETH, that the State Land Commissioner, by virtue of the
authority vested in him by law, and in consideration of the application
heretofore made, and the covenants and agreements of this lease, hereinafter set
forth, has this day leased to the said lessee the State Land, as hereinafter
described, subject to any and all indebtedness that may be known to be due or
that may be proven to be due hereafter.
TO HAVE AND TO HOLD the same for the period ending the .. 20th... day
..September.., 1996, and subject to the conditions and reservations elsewhere
set forth herein. The lessee agrees to pay as rental therefor an amount to be
determined by the State Land Commissioner each year by an appraisal made by him,
or his duly authorized agent, as provided by law. The rental so fixed by the
State Land Commissioner will be due and payable annually in advance.
That it is further understood and agreed that this lease is issued for the
purpose of: Traveler' Services-candy and gift shop with parking area.
IT IS HEREBY COVENANTED AND AGREED by both parties hereto that this
lease is issued subject to all the provisions and requirements thereto, which
are found in the various Acts of the Legislature of the State of Arizona, the
same as though they, were fully set forth herein.
IT IS HEREBY FURTHER COVENANTED AND AGREED that all of the covenants,
conditions and agreements, included in this lease, shall be, become and are a
part of the lease, the same as though set forth in full over the signatures of
the contracting parties hereto.
NOTICE TO ANYONE DEALING WITH THIS DOCUMENT
This document merely authorizes pursuit of
its stated purposes; its existence does not
constitute a finding by the Land Department
that the purposes may be pursued profitably.
<PAGE>
IN WITNESS WHEREOF, the Arizona State Land Commissioner, by virtue of
the powers vested in him by law, has caused these presents to be executed by
said lessor, at Phoenix, Arizona, on the day and year first above written, and
the said lessee has hereunto affixed his signature at the place and on the day
and year as set forth herein.
STATE OF ARIZONA, LESSOR
By -Pat L. Ryan-
(signature of the State Land Commissioner)
(SEAL)
Signed in the County of .. MARICOPA.., State of Arizona, on the 29th day of
December, 1986.
CARDON CORPORATION
-Terry Trudler-
(signature of the Vice President of Cardon Corp.)
This lease is
issued in duplicate
<PAGE>
SUPPLEMENTAL CONDITIONS
(A) The lessee will not sub-let or assign the land herein described or
this lease without the written consent of the State Land Commissioner, first
obtained, and will, upon the expiration of the lease, surrender peaceable
possession of the said land.
(B) The lessee will not permit any loss, nor commit or cause any waste
in, to or upon said land; nor cut or remove nor allow to be cut or removed any
timber or standing trees that may be upon said land, save and except only such
as may be necessary for the improvement of said land, (and then only with the
written consent of the State Land Commissioner) or for fuel for the domestic use
of said lessee; provided that nothing herein shall be construed to permit the
cutting of saw timber for any purpose.
(C) That the lessor excepts and reserves out of the grant hereby made,
all oils, gases, coal, ores, limestone, minerals, fossils, and fertilizers of
every name And description that may be found in or upon the land herein
described, or any part thereof.
(D) The lands herein described are subject to the execution by lessor
of drilling permits and leases for the purpose of prospecting for, and the
extraction of, oil and/or gases.
(E) That the lessor also reserves the right, as provided by law, to
grant to the United States rights-of-way and easements over, across or upon the
lands embraced in this lease for canals, reservoirs, dams, power or irrigating
plants or works, railroads, tramways, transmission lines or other purposes, for
irrigation works in connection with any government reclamation project.
(F) That if at any time after the execution of this lease, it is shown
to the satisfaction of the State Land Commissioner, that there has been fraud or
collusion upon the part of the lessee to obtain or hold this lease at a less
rental than its value, or through such fraud and collusion a former lessee of
said land has been allowed to escape payment of the rental due for the use of
said land by the former lessee, this lease shall be null and void, at the option
of the State Land Commissioner, insofar as it relates to the land affected by
said fraud or collusion.
(G) That if at any time after the execution of this lease it is shown
to the satisfaction of the State Land Commissioner that the lessee herein has
misrepresented, by implication or otherwise, the value of the improvements
placed upon the land herein embraced by a former lessee, or any other person or
persons and the lessee herein not being the owner of said improvements at the
time of the execution of this lease, this lease shall be null and void, at the
option of the State Land Commissioner, insofar as it relates to the land upon
which said improvements are situated.
(H) If the lessee should fail to pay the agreed rental when due, or
fail to keep the covenants and agreements herein set forth, the State Land
Commissioner, at his option, may cancel said lease or declare the same forfeited
in the manner provided by law.
(1) That the State of Arizona shall be forever wholly absolved from any
liability for damages which might result to the lessee herein on account of this
lease having been forfeited for nonpayment of rentals due thereunder prior to
the expiration of the full time for which it is issued.
(J) 1, is understood by the lessee that the establishment of any water
right, or rights, shall be by and for the State of Arizona, and that no claim
thereto shall be made by said lessee; such rights shall attach to and become
appurtenant to the said land.
(K) If the lessee desires to place improvement on the land described
herein the approval of the State Land Commissioner must first be obtained. That
the lessee will, on or before the first day of July of each year during the term
herein specified, rile with lessor a sworn statement setting forth therein the
character of improvements constructed on said determined premises and the actual
cash value thereof.
<PAGE>
SUPPLEMENTAL CONDITIONS
(cont.)
(L) That said lessee shall have the right to remove from said demised
premises, at the end of the term herein specified or upon the earlier
termination thereof, all buildings, structures or improvements of whatever
nature placed by it on said premises. Such right to be exercised within thirty
(30) days from the date of the end of such term or earlier termination thereof.
(M) That said lessee shall give lessor thirty (30) days notice in
writing in advance of the abandonment of said premises or termination of these
presents.
(N) The terms, conditions and covenants of this lease are subject to
present laws relating to state lands and the rights of both lessor and lessee
hereunder are each and all subject to such modifications as may be consistent
with such amendments, revisions or impels of existing laws as may hereafter be
made and no provisions of this lease shall create any vested right in the lessee
herein.
(0) Any improvements placed on this commercial lease must conform to
existing Laws and Ordinances relative to commercial construction and maintenance
in the area where this land is located. Approval granted by regulatory
authorities will accompany application to place improvements when filed with the
State Land Department.
(P) That the lessor also reserves the right to grant rights-of-way and
casements over, across, or upon the lands embraced in this lease for public
highways, railroads, tramways, telephone, telegraph, transmission lines, pipe
lines, irrigation works, flood control, drainage works, logging and other
purposes, and this lease is issued subject to all existing rights-of-ways.
(Q) Lessee shall notify the Lessor in writing of the number of any
license issued by the State Tax Commission of Arizona to Lessee, any Sub-Lessee,
Concessionaire or Assignee, and the name in which issued; Lessee, any
Sub-Lessee, Concessionaire or Assignee does hereby consent to the examination of
any such returns filed with the State Tax Commission by Lessee, any Sub-Lessee,
Concessionaire or Assignee.
(R) Lessee and each Sub-Tenant, Concessionaire or Assignee shall at all
times keep and maintain an accounting system and books of accounts and records
satisfactory to Lessor. Lessee shall, at all times during business hours, have
access to such records at the place where the same are kept, for the purpose of
inspecting and auditing the same.
(S) Within 60 days after request is made by Lessor, Lessee shall rile
with Lessor a statement of the total gross sales made for the period therein
specified; unless otherwise directed by Lessor, this report may be made by
filing with the Lessor the requested information on the form used by the State
Tax Commission of Arizona (Form ST-1. (1-68) at present) "Combined
Transaction-Privilege (sales) Tax, Education Excise Tax, and Special Excise Tax
for Education Return."
(T) Improvements made on or to the site, without the written consent of
the Lessor as required by Arizona Revised Statutes, Section 37-321, shall
constitute a breach of this lease and subject this lease to cancellation by
Lessor.
(U) All buildings and structures shall be of new construction, and no
buildings or structures shall be moved from any other location onto the leased
premises without the prior written approval of Lessor.
(V) Gas, electric, power, telephone, water, sewer, cable television and
other utility or service lines of every nature whatsoever shall be placed and
kept underground (except to the extent, if any, such underground placement may
be prohibited by law) unless Lessor otherwise approves in writing.
(W) Prior to the approval of any application to place improvements on
the leased premises, the Lessee shall file with Lessor plans and specifications
(including but not limited to grading and landscape plans) showing the nature,
location, approximate costs, quality of proposed materials, size, area, height,
color, shape and design of the proposed
<PAGE>
improvements; the Lessor may also require a perimeter survey of the leased
premises, upon which shall be shown the location of the completed improvements.
<PAGE>
If the removal of plants protected under the Arizona Native plant law is
necessary to enjoy the privilege of this document, the permittee hereunder must
previously acquire the written permission of the Arizona State Land Department
and Arizona Commission of Agriculture and Horticulture to remove those plants.
The lease may be amended from time to time by mutual agreement of the parties
hereto, provided that the lessor deems such amendment to be in the best
interests of the State of Arizona.
The lessee acknowledges that lessee has not been induced to enter into this
lease agreement by any promises from the State Land Department or any of its
personnel that the premises being leased herein will be offered for sale at any
time.
Lessee agrees and understands that all uses of the land not expressly authorized
or permitted by this lease are expressly prohibited.
In any action arising out of this lease, the prevailing party is entitled to
recover reasonable attorneys' fees in addition to the amount of any judgment,
costs and other expenses as determined by the court. In the case of the lessor,
reasonable attorneys' fees shall be calculated at the reasonable market value
for such services when rendered by private Counsel notwithstanding that it is
represented by the Arizona Attorney General's Office or other salaried counsel.
The Lessee agrees to indemnify, hold and save Lessor harmless against all loss,
damage, liability, expense, costs and charges incident to or resulting in any
way from any injuries to person or damage to property caused by or resulting
from the use, condition or occupation of the land.
CONDEMNATION
If at any time during the duration of this lease the whole or any part of the
leased premises shall be taken by direct sale, lease, institutional taking or
acquisition in any manner through condemnation proceedings or otherwise, for any
quasi-public or public purpose by any person, private or public corporation, or
any governmental agency having authority to exercise the power of eminent domain
or condemnation proceedings pursuant to any law, general, special or otherwise.
this lease shall expire on the date when the leased property shall be so taken
or acquired except that in the event of a partial taking the lease may continue
in full force and effect for those lands not taken, however, the lessee shall
have no compensable right or interest in the real property being condemned and
shall have no compensable right or interest in severance damages which may
accrue to the remaining lease property not acquired by condemnation proceedings.
Rent paid or to be paid by lessee shall be apportioned as of the date of such
taking and rent for any remaining land under the lease after the taking shall be
reduced proportionately to the acreage remaining under the lease to the lessee.
The State Land Department shall be entitled to and shall receive any and all
awards, including severance damage to remaining State lands, that may be made
for any eminent domain or condemnation proceedings concerning the land which is
the subject of this lease, except that lessee shall have the right to receive
any and all awards or payments made for any buildings or other improvements
lawfully placed on the subject property by the lessee with the approval of the
State Land Department.
Notice of State Authority to Cancel this Contract:
A. The State may cancel any contract, without penalty or further obligation,
made after September 4, 1978, by the State or any of its departments or agencies
if any person significantly involved in initiating, negotiating, securing,
drafting or creating the contract on behalf of the State or any of its
departments or agencies is, at any time while the contract or any extension of
the contract is in effect, an employee of any other party to the contract in any
capacity or a consultant to any other party of the contract with respect to the
subject matter of the contract.
B. The cancellation shall be effective when written notice from the Governor is
received by all other parties to the contract unless the notice specifies a
later time.
<PAGE>
DESCRIPTION OF LAND LEASED CONTAINED IN LEASE SUPPLEMENT ATTACHED HERETO MADE A
PART HEREOF
STATE OF ARIZONA
LAND DEPARTMENT
11/1//86 CARDON CORPORATION 030082100
5002 S ASH AVENUE
TEMPE AZ 85282
L 0 C A T I 0 N DESCRIPTION ACRES BEGINNING WITH FUND
02 02 17 .0 S 21.0 E M&B IN LOT 4 & SWNW 16.82 B1 030 04
02 02 17.0 S 21.0 E WATER USE CHARGE 0.00 B1 030 21
TOTAL ACREAGE
16.82
LESSER SIGNATURE DATE
CARSON CORPORATION 12/29/86
- -Tey Trudler-
(signature)
COMMISSIONER DATE
- -Pat L. Ryan for SLC- 12/24/86
(signature)
<PAGE>
OTHER TERMS
-----------
03-821
1. "CPI" shall mean the Consumer Price Index, U.S. City Average for all
Urban consumers--All Items (1967 equals 100) for the pertinent month,
issued by the Bureau of Labor Statistics of the U.S. Department of
Labor. If the CPI shall hereafter be converted to a different standard
reference base or otherwise revised, adjustments of rent based upon the
CPI shall be made with the use of such conversion factor, formula or
table for converting the CPI as may be published by the Bureau of Labor
Statistics, or if said Bureau shall not publish the same, then with the
use of such conversion factor, formula or table as may be published by
any nationally recognized publisher of similar statistical information.
If the CPI shall cease to be published, there shall be substituted
therefor such index as Lessor selects as a reasonable substitute.
2. Lessee shall pay rent to lessor for the use and occupancy of the
premises during the term of this lease without offset or deduction
except as provided hereafter and, without notice or demand, at the times
and in the amounts as follows:
The annual rent shall be due every year on the anniversary of the
commencement date as follows: Rent for the first year shall be $5,576
per year.
3. The land value shall be adjusted each lease year by the Consumer Price
Index but shall never be less than the previous lease year's rent.
4. Lessor shall adjust the land value by reappraisal at the end of the
fifth year for rental rate charges in order to reflect changes in
general. economic conditions.
5. Lessee shall pay a penalty of five percent (5%) of any amount
delinquent, and shall pay daily interest on delinquent amount plus
penalty for the rate by the Arizona State Treasurer, according to law.
6. Lessee shall make application to place improvements on the leased
premises and have Department approval of such application prior to any
construction activities.
7. Any improvements placed upon the leased premises without prior written
permission of the Land Department, shall be forfeited and become
property of the State.
8. Lessee shall adhere to all rules, regulations, ordinances, and building
codes as promulgated by local jurisdictions and any applicable State
agencies.
<PAGE>
9. Insurance and Indemnity:
------------------------
9.1 Lessor shall not be liable at any time for any loss, damage or
injury to the property or person of any person at any time, occasioned
by or arising out of (i) any act, activity or omission of lessee, its
agents, servants, employees, subleases, concessionaires, or of anyone
holding under lessee; and (ii) the occupancy or use of the leased
premises or any part thereof by or under lessee.
9.2 Notwithstanding anything to the contrary contained herein and
irrespective of any insurance carried by lessee for the benefit of
lessor under the provisions of this Article, lessee expressly agrees to
protect and does hereby indemnify and hold lessor and the premises
harmless from any and all damages or liabilities at any time occasioned
by or arising out of (i) any act, activity or omission of lessee, its
agents, servants, employees, subleases, concessionaires, or of anyone
holding under lessee; (ii) the occupancy or use of the premises or any
part thereof by or under lessee; and (iii) any wrongful or negligent
act, activity or omission of lessor, its agents, servants or employees,
it being the specific intent of the parties to indemnify the State of
Arizona for any and all losses, claims, judgments and attorney's fees
arising out of the contract even if they result from lessor's own
negligence or wrongdoing.
9.3 Lessee, at its expense, shall at all times during the term and any
extension maintain in full force a policy or policies of comprehensive
liability insurance, including property damage, written by one or more
responsible insurance companies licensed to do business in the State of
Arizona, which insure lessee and lessor against liability for injury to
persons and property and death of any person or persons occurring in, on
or about the premises, or arising out of lessee's maintenance, use and
occupancy thereof. All public liability and personal property damage
policies shall contain a provision that lessor, named as an additional
insured, shall be entitled to recovery under the policies for any loss
occasioned to it, its servants, agents and employees by reason of the
negligence or wrongdoing of lessee, its servants, agents, employees,
subleases, concessionaires. Further, the policies shall provide that
their coverage is primary over any other insurance coverage available to
the lessor, its servants, agents and employees. All policies of
insurance delivered to lessor must contain a provision that the company
writing the policy shall give to lessor thirty (30) days notice in
writing in advance of any cancellation or lapse, or the effective date
of any reduction in the amounts of insurance.
9.4 The insurance shall afford protection to the limit of not less than
Five Hundred Thousand Dollars ($500,000.00) in respect to injury to or
death of one person; one Million Dollars ($1,000,000.00) in respect of
any one occurrence; and One Hundred Thousand Dollars ($100,000.00) with
respect to property damage.
<PAGE>
9.5 Notwithstanding anything to the contrary in this Article, lessee's
obligations to carry the insurance provided for herein may be brought
within the coverage of a so-called blanket policy or policies of
insurance maintained by lessee ' provided, however, that the coverage
afforded lessor will not be reduced by reason of the use of such blanket
policy of insurance.
9.6 Copies of all the executed policies of insurance or certificates
thereof shall be delivered to lessor prior to lessee's occupancy of the
premises.
<PAGE>
ADDITIONAL CONDITION FOR A WATER WELL
03-00821
It is agreed and understood by Lessee that withdrawal of groundwater is subject
to all of the limitations resulting from the opinion of Arizona Supreme Court in
Farmers Investment Company v. Pima Mining Company, et al, June 19, 1974, Ariz. ,
- -------------------------------------------------
523 P d 487, and should any such withdrawal of ground water be limited or
restricted in any lawful manner that Lessee shall have no recourse against the
Arizona State Land Commissioner, the Arizona State Land Department or any of its
respective officers, agents, servants or employees from any damage arising from
such limitation or restriction of groundwater/withdrawal from the premises
subject to lease.
Further, Lessee agrees to save, hold harmless, and indemnify the State of
Arizona, the Arizona State Land Commissioner, the Arizona State Land Department
and its officers, agents, employees and servants from any and all claims, costs,
damages, expenses, or charges arising out of, incidental to, or resulting in any
way from this agreement, including any liabilities arising from the action or
failure to act by the State of Arizona, the Arizona State Land Commissioner, the
Arizona State Land Department and its officers, agents, servants and employees.
<PAGE>
ASSIGNMENT OF LEASE
Phoenix, Arizona January 23, 1987
The application of CARDON CORPORATION ...
for permission to assign Lease No 03-821 and the application of ROBERT L.
BECKETT and. JOD I E BECKETT for the assumption of said Lease, having been duly
considered this 23rd day of January, 1987 and without waiver of State rights
which may exist against the lease assigned, and with this consent not to be
construed as initiating any new rights in assignee of lease, consent is hereby
given for the assignment applied for and it is ordered that the said Lease No
03-821 and all rights thereunder are here by transferred to the said ROBERT L.
BECKET AND JODIE B. BECKET
By -BETTT J. DANIELS-
(signature)
For The State Land Commissioner
================================================================================
ASSIGNMENT OF LEASE
Phoenix, Arizona January 23, 1987
The application of ROBERT L. BECKETT AND JODIE B. BECKETT
for permission to assign Lease No. 03-821 and the application of BOWLIN'S
INCORPORATED a New Mexico corporation for the assumption of said Lease, having
been duly considered this 23rd day of January, 1987 and without waiver of State
rights which may exist against the lease assigned, and with this consent not to
be construed as initiating any new rights in assignee of lease, consent is
hereby given for the assignment applied for and it is ordered that the said
lease No. 03-821 and all rights thereunder be and are hereby transferred to the
said
BOWLIN'S INCORPORATED, a New Mexico corporation
136 Louisiana, NE
Albuquerque, NM 87108
By -BETTT J. DANIELS-
(signature)
For The State Land Commissioner
COMMISSIONER OF PUBLIC LANDS
NEW MEXICO STATE LAND OFFICE
STATE OF NEW MEXICO
BUSINESS LEASE
LEASE NO. BL-599
THIS LEASE, dated MARCH 16, 1995, is made and entered into by and
between the Commissioner of Public Lands, hereinafter referred to as "Lessor",
and BOWLIN'S INCORPORATED, 136 LOUISIANA N.E., ALBUQUERQUE, NEW MEXICO 87108,
hereinafter referred to as "Lessee."
Lessor and Lessee agree and covenant as follows:
1. LEASE. For and in consideration of and subject to the terms,
conditions, covenants and reservations contained herein, Lessor leases to Lessee
the following described tract of land, hereinafter referred to as the "leased
premises":
TRACT #1 (STUCKEY'S PECAN SHOPPE)
A tract of land lying within the South part of the SE1/4SE1/4 of
Section 5, Township 24 South, Range 11 West, N.M.P.M., more
particularly described as follows: Beginning at a point which bears
N.89(Degree)2'W., 797.35 feet and North N.8(Degree)22'W., 187.58 feet
from SE corner of said Section 5; thence N.8(Degree)22'W., along
easterly right of way line of connection between Interstate Highway 10
and State Road 418 a distance of 276.31 feet to a fence brace post
marked with a tack on top; thence N.78(Degree)14'E., along southerly
right of way line of Interstate Highway 10 across ramp 535.79 feet;
thence S.8(Degree)22'E., parallel to westerly boundary line of this
tract 470.48 feet; thence N.8(Degree)38'W., along northerly right of
way line of State Road 418 a distance of 461.07 feet; thence
N.48(Degree)55'W., along northeasterly right of way line of State Road
418 a distance of 121.22 feet to point of beginning. Said tract of land
contains 5.00 acres, more or less, and corners are marked by steel rods
unless noted otherwise.
TRACT #2 (PARKING AREA)
A tract of land lying in the south part of the S1/2SE1/4 of Section 5,
Township 24 South, Range 11 West, N.M.P.M., more particularly described
as follows: Beginning at a point which bears N.89(Degree)02'W., 949.48
feet and N.8(Degree)22'E., 106.57 feet from SE corner of said Section
5; thence N.89(Degree)26'W., along northerly right of way line of State
Road 418 a distance of 757.18 feet; thence N.8(Degree)22'W., 250.66
feet; thence N.84(Degree)23'E., along southerly right of way line of
Interstate Highway 10 access ramp 748.86 feet to a fence brace post
marked with a tack on top; thence S.8(Degree)22'E., along westerly
right of way line of connection between Interstate Highway 10 and State
Road 418 and parallel to the westerly line of the tract a distance of
331.70
1
<PAGE>
feet to point of beginning. Said tract of land contains 5.00 acres,
more or less, and corners are marked by steel rods unless noted
otherwise.
The rights granted herein are subject to all valid existing rights in the leased
premises.
2. RESERVATIONS. Lessor reserves the right to execute leases for
the exploration, development and production of geothermal resources, oil and
gas, sand, gravel, coal, shale, clay, building stone or materials, potassium,
sodium, phosphorus, salt or any other minerals or deposits of whatsoever kind
located in, under or upon the leased premises and all rights of access, ingress
and egress through or across the leased premises that are necessary or
convenient to such exploration, development or production. Lessor further
reserves the right to grant rights-of-way and easements over, upon, or across
the leased premises for public highways, railroads, tramways, telephone,
telegraph and power lines, irrigation works, sewer lines, drainage ditches,
mining, logging, and for other purposes.
3. TERM. The term of this lease shall begin on the date of this
lease and end at midnight on MARCH 15, 2000, unless terminated or canceled
earlier as herein provided. Nothing contained herein shall limit the right of
Lessor to sell the leased premises during the lease term.
4. RENT. Lessee shall pay to Lessor as rent f or the leased
premises and for the rights and privileges granted hereunder $4,500.00 lst.
year, $5,500.00 2nd. year, $6,500.00 3rd. year, $7,500.00 4th. year, $7,500-00
5th. year, due and payable in advance on or before the 15th day of MARCH each
year during the term of this lease. Time is of the essence in the performance of
this agreement. Interest on delinquent rent payments shall accrue from the date
the payment becomes due at the rate of one percent a month or any fraction of a
month.
5. PERMITTED USE. Lessee shall use the leased premises for the sole
and exclusive purpose of RETAIL CURIO SHOP/CAFE//GAS SERVICE STATTON/PARKING
FACILITY. No other uses shall be permitted.
6. IMPROVEMENTS. Lessee may place the following improvements on the
leased premises:
BUILDING HOUSING CAFE/CURIO SHOP
4-BAY GAS SERVICE STALL UNDER CANOPY
WATER WELL/PUMP/STORAGE TANK
OCCUPIED MOBILE HOME/WITH HOOK-UP'S
FENCING/PAVING/GRAVELED AREAS
No other improvements shall be placed on the leased premises without the prior
amendment of this lease pursuant to Paragraph 18 hereof to permit such
improvement placement. Lessee shall maintain and protect from waste and trespass
all improvements placed on the leased premises. In the event improvements other
2
<PAGE>
than those authorized herein are placed on the leased premises, Lessor may
either declare title to such improvements in Lessor without payment of
compensation to Lessee or Lessor may order the removal of such improvements and
the restoration of the leased premises to their condition existing prior to the
placement of said improvements at Lessee's expense. The foregoing rights of
Lessor shall be cumulative to Lessor's right to cancel this lease as herein
provided.
7. LIEN. To secure the payment of any rent amount that becomes due,
and to satisfy all reasonable costs incurred by Lessor in recovering said rent
amount, Lessor shall have a first and prior lien on any and all improvements,
fixtures and equipment placed on the leased premises.
8. IMPROVEMENT REMOVAL AND RECLAMATION. Upon relinquishment or
termination of this lease without re-lease to Lessee, or upon Lessor's
cancellation of this lease as provided herein, Lessee shall remove all
improvements placed on the leased premises pursuant to the terms hereof and
shall restore the leased premises to their condition existing prior to the
placement of said improvements; provided, however, if any rent amount is due and
unpaid at the time of lease cancellation or termination, Lessee shall remove
improvements and restore the leased premises as herein provided only at such
time, in such manner and under such conditions as Lessor may in writing demand.
9. RELINQUISHMENT. Lessee, if not in default under this lease, may
at any time relinquish the, lease to Lessor and be relieved of further
obligations under the lease, provided, however, such relinquishment shall not be
valid or effective until approved in writing by Lessor. Relinquishment shall be
made on a form prescribed by Lessor and shall be accompanied by the required
relinquishment fee. Upon relinquishment Lessee shall not be entitled to the
refund of any rent previously paid.
10. ASSIGNMENT. Lessee shall not assign this lease, any part
thereof, or assign any improvements located on the leased premises without the
prior amendment of this lease pursuant to Paragraph 18 hereof to permit such
assignment. Any lease assignment without lease amendment shall be null and void.
Lessor may condition such lease amendment upon an increase in the rent amount
and the modification or addition of other lease provisions.
11. SUBLEASE. Lessee shall not sublease the rights granted
hereunder, any part thereof, any portion of the leased premises or any
improvements located on the leased premises without the prior amendment of this
lease pursuant to Paragraph 18 hereof to permit such sublease. Any sublease
without lease amendment shall be null and void. Lessor may condition such lease
amendment upon an increase in the rent amount and the modification or addition
of other lease provisions. A sublease is hereby defined as any transaction or
arrangement whereby Lessee grants to another or shares with another rights,
interests or privileges conveyed to Lessee by this lease.
3
<PAGE>
12. DEFAULT AND CANCELLATION. Upon Lessee's violation of any of the
terms, conditions or covenants contained herein, including the failure to pay
the rent when due, Lessor may cancel this lease after providing Lessee thirty
days notice of the default by registered mail. The mailing of such notice as
herein provided shall constitute notice of Lessor's intention to cancel the
lease and no proof of receipt of such notice shall be necessary in order for
Lessor to enter lease cancellation thirty days after the mailing of the notice
if Lessee has not cured the default to Lessor's satisfaction within said thirty
day period. Lessee agrees that if a court of competent jurisdiction determines
that Lessee has breached any of the terms, conditions or covenants of this
lease, Lessee shall pay the costs incurred by Lessor in litigating the default,
including reasonable attorney fees.
13. WAIVER. No employee or agent of, Lessor has the power, right or
authority to orally waive any of the terms, conditions or covenants hereof and
no waiver by Lessor of any of the terms, conditions or covenants hereof shall be
effective unless in writing and executed by Lessor. Lessor's waiver of Lessee's
breach or default of any of the terms, conditions or covenants hereof shall not
constitute or be construed as a waiver of any other or subsequent breach or
default by Lessee. The failure of Lessor to enforce at any time any of the
terms, conditions or covenants hereof or to exercise any option herein provided,
or to require at any time performance by Lessee of any of the terms, conditions
or covenants hereof shall not constitute or be construed to be a waiver of such
terms, conditions or covenants, nor shall it affect the validity of this lease
or any part thereof, or Lessor's right to thereafter enforce each and every such
term, condition and covenant.
14. COMPLIANCE WITH LAWS. Lessee shall fully comply with all laws,
regulations, rules, ordinances and requirements, applicable to the leased
premises or to Lessee's operations thereon, including Section 19-6-5, NMSA 1978,
requiring Lessee to protect the leased premises from waste and trespass, all
current New Mexico State Land Office Rules and Regulations and those that may be
hereafter promulgated.
15. WAIVER, RELEASE AND PROTECTION OF THE I.EASED PREMISES. Lessee
is leasing the leased premises based on Lessee's own inspection and
investigation of and judgment regarding the leased premises. Lessor makes no
warranties or representations of any kind or nature with regard to the leased
premises or with regard to this transaction.
Lessee agrees to comply with all federal, state and local laws, regulations and
policy, including but not limited to measures addressed to environmental
protection, which have been or may be enacted or promulgated. Such governmental
agencies shall not be deemed third party beneficiaries under this lease.
Lessee's compliance with all laws, regulations and policy shall be at its own
expense.
If accidental discharge, release, spill, or fire or any other
4
<PAGE>
event having environmental consequence occurs, Lessee agrees to provide
immediate notice to Lessor and in addition is required to provide notice to
Lessor at the same time and in the same manner as Lessee is required to provide
notice to the federal, state or local agency having responsibility for enforcing
compliance with environmental laws, regulations and policy. Lessee agrees that,
upon request by Lessor, Lessor shall have access to all reports, documents, test
data and all other materials provided by Lessee to or received by Lessee from a
governmental agency having responsibility for enforcing compliance with
environmental or other laws.
In the event Lessor is required to incur any cost or expense to enforce the
provisions of this lease, including but not limited to consultants, engineers,
soil, air or water sampling and attorneys, fees and costs, Lessee shall be
liable for and reimburse Commissioner for said costs and expenses.
16. INDEMNIFICATION AND HOLD HARMLESS. Lessee shall hold harmless,
indemnify and defend the State of New Mexico, Lessor and Lessor's employees,
agents, and contractors, in both their official and individual capacities, from
any and all liabilities, claims, losses, damages, or expenses, including but not
limited to reasonable attorneys, fees, loss of land value, third party claims,
penalties or removal, remedial or restoration costs arising out of, alleged to
arise out of or indirectly connected with a) the operations hereunder of Lessee
or Lessee's employees, agents, contractors or invitees, b) the activities of
third parties on the leased premises, whether with or without Lessee's knowledge
or consent. This provision, Lease Paragraph 16, shall survive the termination,
cancellation or relinquishment of this Lease, and any cause of action of Lessor
to enforce this provision shall not be deemed to accrue until Lessor's actual
discovery of said liability, claim, loss, damage, or expense.
17. SCOPE OF AGREEMENT. This lease incorporates all the agreements,
covenants and understandings between Lessor and Lessee concerning the subject
matter hereof and all such agreements, covenants and understandings are merged
into this written lease. No prior agreement or understanding between Lessor and
Lessee shall be valid or enforceable unless expressly embodied in this lease.
18. AMENDMENT. This lease shall not be altered, changed or amended
except by an instrument executed by both Lessor and Lessee.
19. APPLICABLE LAW. This lease shall be governed by the laws of the
State of New Mexico.
20. SUCCESSORS IN INTEREST. All the terms, conditions and covenants
of this lease and all amendments thereto shall extend to and bind the heirs,
successors and assigns of Lessee and Lessor.
21. RE-LEASE. At the expiration of the term of this lease, Lessee
may re-lease the leased premises provided Lessor
5
<PAGE>
has determined to offer the leased premises for the same uses as permitted
herein, Lessee is not in default under this lease, Lessee agrees to the terms
offered by Lessor, and Lessee has bettered any offer to lease the leased
premises made by a third party.
22. HOLDING OVER. If Lessee enters upon the leased premises after
the termination or cancellation of this lease for any purpose, the rent due
Lessor for such entry shall be $200.00 for each day or any part of a day.
Nothing contained herein shall be construed as the grant to Lessee of the right
to enter the leased premises for any purpose after the termination or
cancellation of this lease without the prior written consent of Lessor.
Executed in duplicate.
/s/ M.L. Bowlin
- ------------------------- -----------------------------------
LESSEE LESSEE
/s/ Ray Powell Harry N. Relkin, Asst. Commissioner
-----------------------------------
RAY POWELL, M.S., D.V.M.
COMMISSIONER OF PUBLIC LANDS
6
<PAGE>
FOR A CORPORATION OR INCORPORATED ASSOCIATION
State of New Mexico )
----------------------
County of Bernalillo )
----------------------
The foregoing instrument was acknowledged before me this
28th day of December, 1995 by M. L. Bowlin,
- ---- ------------ -- -------------
(name of officer)
President of Bowlin's Incorporated,
- ------------------ -----------------------------------
(name of corporation acknowledging)
a New Mexico corporation, on behalf of the corporation.
-----------------------------------
(state or county of incorporation)
/s/ Signature Illegible
-------------------------------------------
Notary Public
My commission expires:
5/31/99
- --------------------------
FOR A NATURAL PERSON ACTING IN HIS OWN RIGHT
State of ______________________________________)
County of ____________________________________)
The foregoing instrument was acknowledged before me this
_____ day of ______________, 19___ by ______________________________________
(name or names of person
______________________________________
or persons acknowledging)
-----------------------------------------
Notary Public
My commission expires:
- ------------------------
CARPENTER, CROUT & OLMSTED
Attorneys at Law
Coronado Building, 141 Palace Avenue
Post Office Box 669
Santa Fe, New Mexico 87504-0669
Richard N. Carpenter Stephen J. Lauer Telephone (505)982-4611
Charles D. Olnisied Lindsaj, A. Lovejoy, Jr. Facsimile (505)988-2987
Michael R. Conieau Patricia J. Turner
Larry D. Maldegen Richard S. Mackenzie Harry L. Bigbee
Michael W. Brennan Joseph E. Manges Donnan Stephenson
Sunny J. Nixon Candace Kern Retired Partners
William p. Templeman Rebecca Dempsey
C. Mott Wooley Paula A. Johnson G. Stanley Crout
Jon J. Indall Grey W. Handy Deceased Partner
April 24, 1990
Bill McCabe
Bowlins Inc.
136 Louisiana, N.E.
Albuquerque, New Mexico 87108
Re: Assignment of Roundy Lease
Dear Bill:
Enclosed please find a copy of the recorded assignment of lease from
Ina Jean Roudy to Homestake Mining Company. This refers to the leased premises
commonly known as the Bluewater Interchange on Interstate Highway I-40.
The title company is recording the lease assignment and I will send you
a copy when I receive the original with the recording information.
Yours very truly,
/s/ Jon J. Indall
Jon J. Indall
JJI/sal
Enclosure
<PAGE>
033248
ASSIGNNIENT, TRANSFER, AND CONVEYANCE
For consideration paid, the receipt and adequacy of which is hereby
acknowledged, Ina Jean Roundy, a widow, individually, and as Personal
'Representative of the Estate of Elbert Leon Roundy, also known as Elbert L.
Roundy ("Assignor"), hereby grants, transfers, and assigns to Homestake Mining
Company of California, a California corporation, having its principal place of
business at 650 California Street, San Francisco, California 94103, all of
Assignor's right, title, benefit, and interest as Lessor in and to that certain
Lease, made and entered into June 3, 1974, as supplemented and amended, by and
between Elbert Roundy and Ina Jean Roundy, his wife, ,is Lessors and Bowlin's,
Inc., Lessors (hereinafter the "Lease").
The Lease consists of real property situate in Cibola County, New
Mexico, commonly known as the Bluewater Interchange on Interstate Highway 1-40,
approximately ten (10) miles west of Grants, New Mexico, and more Particularly
described as follows:
Comprising 19.8541 acres of land in SWI/4 Section 14, T12N, R11W,
N.M.P.M Cibolo County, New Mexico, and comprising all of said Section
lying Southwesterly from U.S. Highway 66 and Easterly from Interstate
Highway 1-40, and more particularly described from New Mexico State
Highway Commission Right-of-Way Maps as follows:
Beginning at the Easternmost corner of the parcel herein described,
the point of intersection of the Southwesterly Right-of-Way line of
said U.S. Highway 66 with the South line of said Section 14, whence
the Southwest corner thereof bears N. 89' 28, W., along said Section
Line, 2055.16 feet distant;
Running from said beginning point N. 89' 28, W. along said Section
Line, 1534.18 feet to the intersection of said line with the Easterly
Right-of-Way line of said Interstate Highway 1-40 as the same is
shown and designated on New Mexico State Highway Commission
Right-of-Way Map for Project no. I-040-2(4)70;
Deed Book 3
Page 8907
<PAGE>
Thence Northerly and to the right following a curve in said right-of
way line having a radius of 601.53 feet and a central angle of 55
14,17" (the chord of said are being N. 180 46, 51" E., 557.7' feet),
distance measured along the arc or 579.93 feet to end of curve;
Thence N. 46' 24, E., along the Southeasterly line of NMSR 56, 633.21
feet to its intersection with the Southwesterly line of said U.S.
Highway 66;
Thence. S. 43' 36, E., along said U.S. Highway 66 Right-of-Way line
781.80 feet to a point of curve;
Thence Southeasterly and to the right following a curve in said
Right-of-Way having a radius of 5656.58 feet and a central angle of
5' 17, (the chord of said arc being S. 40' 57, 30" E., 521.42 feet),
a distance measured along the arc of 521.60 feet to end of curve;
Thence S. 38' 18, E., continuing along said Right-of-Way line, 24.29
feet to tile point of beginning;
Containing 19.8541 acre! more or less, and subject to casements of
record.
AND:
A tract of land situated within the Northwest quarter of Section 23, T12N, R11W,
N.M.P.M., Cibola County, New Mexico, and being more particularly described -is
follows:
From the point of beginning, being the Southern-most comer of said
tract, and also being a point on the Easterly Right-of-Way line of
Interstate Highway I-40, the Southwest corner of Section 23, a
two-inch pipe, bears S. '33' 00, 08" W. and is 3,830.94 feet distant.
Then from the above said point of beginning, N. 410 29, 59" W. along
said Right-of-Way line a distance of 1,366.14 feet to a point of
curve; then Northwesterly and to the right along a curve of radius
1,994.57 feet. an arc length of 525.60 feet to a point of tangency;
then N. 260 22, 18" W. along said Right-of-Way), line distance of
534.38 feet to a point of curve: then Northwesterly and to the right
along a curve of radius 601.53 feet" an arc length of 186.55 feet;
then leaving said Right-of-Way line, S. 89' 52, 47" E., a distance of
53.76 feet; then S. 200 37, 28" E., distance of 491.49 feet; then S.
270 07, 00" W., a distance of 13.10 feet; then S. 44' 54, 16" E., -,i
distance of 809.40 feet; then S. 011, 42, 25" W., a distance of
193.31 feet; then S. 61' 16, 32" E., a distance of 260.46 feet; then
S. 460 06, 00" E., a distance of 299.51 feet; then S. 430 02, 14" E.,
a distance of 498.72 feet; then S. 220 58, 39" W., a distance of
174.46 feet; then S. 42' 17, 34" W., a distance of 13.10 feet to the
point and place of beginning and containing in area of 6.9137 acres,
more or less.
Deed Book 3
Page 8908
<PAGE>
Assignor warrants:
(a) She is the sole owner of the lease herein assigned and of all the
leasehold rights which the lease purports to create, with full right to convey
the same.
(b) The lease is now unencumbered, valid, and in full force and effect
in accordance with its terms.
(c) Lessee is not in default under any of the terms, conditions, or
covenants of the lease.
IN WITNESS WHEREOF, Assignor has set her hand and seal this 21 day of
March, 1990.
/s/ Ina Jean Roundy
-----------------------
Ina Jean Roundy,
also know as Jean Roundy, a
widow, individually and as
Personal Representative of the
Estate of Elbert Leon Roundy,
also known as Bert Roundy,
deceased
Deed Book 3
Page 8909
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW MEXICO )
) ss.
COUNTY OF CIBOLA )
The foregoing instrument was acknowledged before me this 21st day of
March, 1990 by Ina Jean Roundy, individually and as the fully qualified and
acting Personal Representative of the Estate of Elbert Leon Roundy, also know as
Bert Roundy, deceased.
OFFICIAL SEAL
Signature: /s/ DAVE ZERWAS
----------------------------
NOTARY PUBLIC DAVE ZERWAS
NOTARY PUBLIC NEW MEXICO
Notary Bond Filed with Secretary of State
My Commission expires:
10/15/90
- -----------------------
Deed Book 3
Page 8910
<PAGE>
AMENDMENT TO LEASE
------------------
This amendment is made this day 28th of February 1983, by and between
ELBERT ROUNDY and INA JEAN ROUNDY, husband and wife, Parties of the First Part
and BOWLIN'S, INC., Box 1137, Deming, New Mexico, Party of the Second Part.
R E C I T A L S:
----------------
Whereas, Parties of the First Part and Party of the Second Party
entered into a certain lease dated June 3, 1974, for the premises briefly
described as follows, to wit:
Comprising 19.8541 acres of land in Southwest 1/4 Section
1-4, Township 12 North,, Range 11 West, N.M.P.M., and
comprising all of said Section lying Southwesterly from U.S.
Highway 66 and Easterly from U.S. Highway I-40.
Whereas, the Parties have further amended said lease by amendment
dated November 17, 1977, and an addendum dated March 2, 1979; and,
Whereas, Parties of the First Part desire to obtain a franchise from
a national food franchiser for operation at the demised premises; and,
Whereas, should Party of the Second Part obtain a franchise from a
national food franchisor, certain improvement will of necessity be made on the
premises; and,
Whereas, the Party of the Second Part expects that the addition of a
national food franchise operation on the premises will increase sales in all
areas of Party of the Second Part's business.
Therefore, in consideration of the mutual covenants contained herein,
the Parties agree that the lease dated June 3, 1974, by and between the Parties
of the First Part and Party of the Second Part, may be, and hereby is amended as
follows:
1. In the event that Party of the Second Part obtains a franchise
from a national food franchiser for a restaurant operation at the demised
premises within the next 12 months, and as result of obtaining said franchise,
Party of the First Part makes improvements on the premises with a value
approximating [Confidential treatment requested], then the rental due to Parties
of the First Part, shall be amended to provide that the amount payable on the
gross receipts from the sale of food only shall be reduced to [Confidential
treatment requested] on [Confidential treatment requested] in excess of
[Confidential treatment requested]. The rental due and payable on the first
[Confidential treatment requested] of gross sales from receipts from the sale of
food and all other items shall remain as provided in the basic lease.
2. When making its rental payments, Party of the Second Part shall
provide Parties of the First Part a monthly report of [Confidential treatment
requested] broken down to show the [Confidential treatment requested] from
report shall be in addition to all other reports and records required to be
made, compiled, and retained by Party of the Second Part.
3. Parties of the First Party and Party of the Second Party hereby
ratify and confirm the lease of June 3. 1974, as it has been amended to date
with the amendments contained herein.
IN WITNESS WHEREOF, the Parties have executed this agreement the day
and year first written above.
<PAGE>
BOWLIN'S INC.
By: /s/ M.L. Bowlin, Exec. Vice-President
-----------------------------------------
Michael L. Bowlin, Exec. Vice President
/s/ Elbert L. Roundy
-----------------------------------------
ELBERT ROUNDY
/s/ Ina Jean Roundy
-----------------------------------------
INA JEAN ROUNDY
A C K N O W L E D G M E N T
---------------------------
STATE OF NEW MEXICO )
) SS.
COUNTY CIBOLA )
-------------
The foregoing instrument was acknowledged before me this 28t day of
February 1983, by ELBERT ROUNDY and INA JEAN ROUNDY.
/s/ Signature illegible
-----------------------
NOTARY PUBLIC
My Commission Expires:
May 24, 1984
STATE OF NEW MEXICO )
) SS.
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledge before me this 28th day of
February, 1983, by M.L. Bowlin Exec. Vice-President of BOWLIN'S, INC., a New
Mexico corporation, on behalf of said corporation.
/s/ Signature illegible
-----------------------
NOTARY PUBLIC
My Commission Expires:
May 24, 1984
<PAGE>
ADDENDUM TO LEASE
-----------------
THIS ADDENDUM to that certain lease dated June 3, 1974, hereinafter
called the "basic lease," is entered into this 2nd day of March 2, 1979, by and
between ELBERT ROUNDY and INA JEAN, individually ROUNDY, HIS WIFE, designated
Parties of the First Part therein, and Bowlin's, Inc., a corporation, designated
as party of the Second Part, therein.
RECITALS
--------
1. That the First Parties desire to permit Party of the Second Part
to conduct and operate a "self-serve" type gasoline service station on the
premises described in the basic lease for the dispensing and sale of gasoline
products, subject to the ownership by third persons not parties hereto of such
material and equipment required thereby, and subject further to the payment of
rentals as hereinafter provided. Both parties agree that rent on the existing
Texaco gasoline sales remains s stated in the "basic lease".
NOW, THEREFORE, in consideration of the mutual convenience
hereinafter contained the parties are as follows:
1. That parties of the First Part hereby consent that Second Party
may operate on the demised premises ad "self-serve" type service station for the
dispensing and sale of gasoline products, and Second Party may further install,
or have installed, on the demised premises, at no expense to First Parties, such
material and equipment, including but not limited to, underground storage tanks,
that may be required for the operation of such business; provided, however, that
third persons not parties to the basic lease or this Addendum may own such
material, equipment and inventory prior to sale, and First Parties agree to
subordinate their interest in any such material, equipment and inventor as
provided by the basic lease to the ownership interest Of such third parties.
2. Second Party agrees to pay as rental for the foregoing, upon the
installation of any such "self-serve" operation, in addition to the rental
provided in the basic lease, the sum of [Confidential treatment requested] per
month, or [Confidential treatment requested] per gallon on the total sales of
gasoline products by such "self-serve" operation, whichever amount is the
greater.
Second Party shall provide to First Parties on a monthly basis on or
before the 15th day of each month, such documentation as may be required to
establish the total sales of such gasoline products for the previous month,
thereupon pay to First Parties any excess rental due in addition to the
[Confidential treatment requested] minimum rental paid for that month, it being
the intent of the parties that Second Party shall pay to First Party each month
the sum of [Confidential treatment requested] for the current month, plus any
excess due as a result of sales for the previous month.
3. Second Party shall make available for use by First Party for the
period during which Second Party owns or controls sign permits, the following
Second Party signs located adjacent to Interstate 40:
(A) The existing lead Second Party sign located approximately
3/4 of a mile East of the Bluewater interchange on Interstate 40, with New
Mexico permit number 3406, at a rental of [Confidential treatment requested] per
month to be paid to Second Party by First Party in advance monthly.
(B) Two existing Second Party signs located within three (3)
miles west of the Bluewater interchange on Interstate 40 (to be mutually agreed
to by both Parties prior to use by First Party) at a rental of [Confidential
treatment requested] per month per sign to be paid to Second Party by First
Party in advance monthly.
Further, First Party shall repaint the signs to its specifications, and
Second Party shall renew the permits and maintain the sign structure. First
Party shall give written notification to Second Party (P. O. Box 25607,
Albuquerque, New Mexico 87125) at least thirty (30) days prior to using or
repainting said signs, or prior to terminating the use of said signs. In the
event the use of the signs set forth above is terminated by any federal, state,
or local governmental agency due to conditions beyond Second Parties control,
then paragraph three (3) of this addendum shall terminate.
<PAGE>
In witness whereof the parties have hereto set their hands the day and
year first above written.
/s/ Signature illegible
-----------------------
ELBERT ROUNDY
/s/ Ina Jean Roundy
-------------------
INA JEAN ROUNDY
First Parties
BOWLIN'S, INC.
BY /s/ C.C. Bess
----------------
Vice President
ATTEST:
/s/ William J. McCabe
- ---------------------
Asst. Secretary
SEAL
State of New Mexico )
) ss
County of Valencia )
The foregoing instrument was acknowledged before this 2nd day of March,
1979, by Albert Roundy and Ina Jean Roundy his wife.
/s/ Signature illegible
-----------------------
Notary Public
My Commission Expires:
May 24, 1980
- ----------------------
<PAGE>
State of New Mexico )
) Ss
County of Bernalillo )
The foregoing instrument was acknowledged before me this 2nd day of
March 1979, by C. C. Bess, Vice President, of Bowlin's, Inc. a New Mexico
Corporation, on behalf of said corporation.
\
/s/ Nina J. Pratz
----------------------
Notary Public
My Commission Expires: June 30, 1979
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT is made this 17th day of November 1977, by and between
ELBERT ROUNDY and INA JEAN ROUNDY, his wife, Box 3812 Bluewater, New Mexico,
hereinafter called lessor, and BOWLIN'S, INC., Box 1137, Deming, New Mexico,
hereinafter called lessee.
R E C I T A L S:
1. Lessor and lessee entered into a Lease on June 3, 1974, for premises
briefly described as follows: "Comprising 19.841 acres of land in SW1/4 Section
14, Township 12 North, Range 11 West, N.M.P.M., and comprising all of said
Section lying Southwesterly from U.S. Highway 66 and Easterly from U.S. Highway
1-40." The demised property is more fully described in the basic Lease between
the parties which is attached hereto as Exhibit "A" and made a part hereof by
reference.
2. It is the desire of the parties to amend the description of the
premises demised by the Lease.
3. The parties acknowledge that adequate consideration exists for this
amendment, and it is their desire that all remaining provisions, including the
rental amount, contained in the above described Lease shall remain unchanged.
IN CONSIDERATION OF THE MUTUAL COVENANTS contained herein, the parties
agree as follows:
1. The description of the demised premises contained in the Lease
attached hereto as Exhibit "A" shall be amended to describe the premises as
follows:
Comprising 19.8541 acres of land in SW 1/4 Section 14,
Township 12 North, Range 11 West, N.M.P.M., and comprising all
of said Section lying Southwesterly from U.S. Highway 66 and
Easterly from U.S. Highway 1-40, and more particularly
described from New Mexico State Highway Commission
Right-of-Way Maps as follows;
STATE OF NEW MEXICO
COUNTY OF VALENCIA
This instrument was filed for record on JAN 16 1978 at 9:19
o'clock AM. Record in Vol. 253 of records of said County Follo
2251
JOHNNY TORRES, County Clerk MHS,
Deputy Clerk
Fee 6.00 Rec. #1590
BOOK 253 PAGE 2251
<PAGE>
Beginning at the Easternmost corner of the parcel herein
described, the point of intersection of the Southwesterly
Right-of-Way line of said U.S. Highway 66 with the South Line
of said Section 14, whence the Southwest Corner thereof bears
N.89028'W., along said Section Line, 2055.16 feet distant;
Running, from said beginning point N. 89028'W. along said
Section Line, 1534.18 feet to the intersection of said line
with the Easterly Right-of-Way line of said U. S. Highway 1-40
as the same is shown and designated on New Mexico State
Highway Commission Right-of-Way Map for Project No.
I-040-2(4)70;
Thence Northerly and to the right following a curve in said
Right-of-Way line having a radius of 601.53 feet and a central
angle of 55014'17" (the chord of said arc being N.,
18046'51"E., 557.73 feet) a distance measured along the arc of
579.93 feet to the end of curve;
Thence N. 46024'E., along the Southeasterly line of NMSR 56,
633.21 feet to its intersection with the Southwesterly line of
said U.S. Highway 66;
Thence S. 43 0 36'E., along said Highway 66 Right-of-Way line
781.80 feet to a point of curve;
Thence Southeasterly and to the right following a curve in
said Right of Way having a_rad:Liis of 5656.58 feet and a
central angle of 5'17' (the chord of said arc being
S.40057130"E., 521-42 feet) a distance measured along the arc
of 521.60 feet to end of curve;
Thence S.38 0 18'E., continuing along said Right-of-Way line,
24.29 feet to the point of beginning;
Containing 19.8541 acres, more or less, and subject to
easements of record.
and the following additional property:
A tract of land situated within the northwest quarter of
Section 23, T.12N., R11W., N.M.P.M., Valencia County, New
Mexico., and being more particularly described as follows:
From the point of beginning, being the southern most corner of
said tract, and also being a point on the easterly right of
way line of Interstate 40, the southwest corner of Section 23,
a two inch pipe, bears S.33 00'08"W. and is 3,830-94 feet
distant. Then from the above said point of beginning,
N.41029'59"W. a-long said right of way line a distance of
1,366-34 feet to a point of curve; then north-
-2-
BOOK 253 PAGE 2252
<PAGE>
westerly and to the right along a curve of radius 1,994.57
feet an arc length of 525.60 feet to a point of tangency; then
N.26 22'l8"W. along said right of way line distance of 534.38
feet to a point of curve; then northwesterly and to the right
along a curve of radius 601.53 feet an are length of 186.55
feet; then leaving said right of way line, S.89 52'47"E. a
distance of 53.76 feet; then S.20037'28"E. a distance of
491.49 feet; then S.27007'00"W. a distance of 13.10 feet; then
S.44054'1'E. a distance of 809.4 feet; then
S.01 42'25"W. a distance of 198.31 feet; then
S.61016'32"E. a distance of 260.46 feet; then
S.46006'00"E. a distance of 299.51 feet; then
S.43002'14"E. a distance of 498.72 feet; then
S.22058;39"W. a distance of 174.46 feet; then
S.42017'34"W. a distance of 13.10 feet to the point and place
of beginning and containing an area of 6.9137 acres, more or
less.
2. It is specifically agreed that lessee shall not be liable for the
payment of any additional rental amounts for the additional property leased as
stipulated herein.
3. Lessor hereby adopts, ratifies and confirms the Lease as it is hereby
amended, and demises to lessee all of the land above described and referred to,
subject to and under the terms and conditions of the Lease as amended.
4. These provisions shall extend to and be binding on the heirs, legal
representatives, successors and assigns of both parties hereto.
5. This amended description shall be incorporated into the basic Lease and
all other terms of the basic Lease shall remain in full force and effect.,
unaltered and unchanged by this subsequent agreement.
IN WITNESS WHEREOF, the parties have executed this agreement the day and
year first above written.
BOWLIN'S, INC.
By /s/ Michael L. Bowlin /s/ Elbert Roundy
------------------------------ ------------------------------
ELBERT ROUNDY
/s/ Ina Jean Roundy
-------------------------------
INA JEAN ROUNDY
-3-
BOOK 253 PAGE 2253
<PAGE>
ACKNOWLEDGMENT FOR NATURAL PERSONS
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me this 17th day of NOVEMBER,
1977, by Elbert Roundy and Ina Jean Roundy.
/s/ Clifford C. Bess
---------------------
Notary Public
My Commission Expires:
May 24, 1980
- ----------------------
ACKNOWLEDGEMENT FOR CORPORATION
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me this 17th day of
NOVEMBER, 1977, by M.L. Bowlin, Ex. V. Pres of BOWLIN'S INC., a New Mexico
corporation, on behalf of said corporation.
/s/ Clifford C. Bess
--------------------
Notary Public
My Commission Expires:
May 24, 1980
- ----------------------
BOOK 253 PAGE 2254
<PAGE>
31006
L E A S E
---------
THIS INDENTURE, Made and entered into this 3rd of June, A. D. 1974, by and
between ELBERT ROUNDY and IVA JEAN ROUNDY his wife, Box 38, Bluewater, New
Mexico, Parties of the First Part and BOWLINIS, INC., Box 1137, Deming, New
Mexico, Party of the Second Part,
WITNESSETH:
That the First Parties, for and in consideration of the covenants and agreements
herein agreed to be kept and performed by the second party, have demised and
leased, and do hereby demise and lease unto the second party, all of the
hereinafter described real property, together with appurtenances thereon,
situate in Valencia County, State of New Mexico, at the Bluewater Interchange on
I-40 Highway, and warrants that said premises be free and clear of any liens and
encumbrances that would interfere in any way with the peaceful use and occupancy
by the second party during the term or terms hereof; approximately ten (10)
miles west of Grants, New Mexico, and more particularly described as follows,
to-wit:
Comprising 19.8541 acres of land in SW 1/4 Section 14,
Township 12 North, Range 11 West, N.M.P.M., and comprising all
of said Section lying Southwesterly from U.S. Highway 66 and
Easterly from U.S. Highway I-40, and more particularly
described from New Mexico State Highway Commission
Right-of-Way Maps as follows:
Beginning at the Easternmost corner of the parcel herein
described, the point of intersection of the Southwesterly
Right-of-Way line of said U.S. Highway 66 with the South Line
of said Section 14, whence the Southwest Corner thereof bears
N. 89028'W., along said Section Line, 2055.16 feet distant;
Running from said beginning-point N. 89028'W. along said
Section Line 1534.18 feet to the intersection of said line
with the Easterly Right-of-Way line of said U. S. Highway I-40
as the same is shown and
I.M. SMALLEY
ATTORNEY AT LAW
109 EAST SPRUCE
P.O. BOX 879
DEMING, NEW MEXICO 88030
<PAGE>
designated on New Mexico State Highway Commission Right-of-Way
Map for Project No. I-040-2(4)70;
Thence Northerly and to the right following a curve in said
Right-of-Way line having a radius of 601.53 feet and a central
angle of 55014'17" (the chord of said arc being N.
18046'51"E., 557.73 feet) a distance measured along the arc of
579.93 feet to end of curve;
Thence N. 46024'E., along the Southeasterly line of NMSR 56,
633.21 feet to its intersection with the Southwesterly line of
said U.S. Highway 66;
Thence S. 43036'E., along said Highway 66 Right-of-Way line
781.80 feet to a point of curve;
Thence Southeasterly and to the right following a curve in
said Right of Way having a radius of 5656.58 feet and a
central angle of 5017' (the chord of said arc being
S.40057'30"E., 521.42 feet) a distance measured along the arc
of 521.60 feet to end of curve;
Thence S.38018'E., continuing along said Right-of-Way line,
24.29 feet to the point of beginning;
Containing 19.8541 acres, more or less, and subject to
easements of record.
TO HAVE AND TO HOLD the above described premises unto the said second party
for a period of [Confidential treatment requested] from [Confidential treatment
requested].
It is understood and agreed that the said second party shall have one
option for a [Confidential treatment requested] renewal of the said Lease, upon
written notice given by the second party that it desires to exercise the option
for an additional term of [Confidential treatment requested], nine (9) months
prior to the expiration date of the original term.
And the said second party, in consideration of the demising and leasing of
the aforesaid real property and appurtenances, does hereby covenant and agree to
and with the first parties as follows:
1. To pay to the first parties as rental [Confidential treatment requested]
derived upon the premises from any source for fifteen (15) years, and
[Confidential treatment requested] derived upon the premises from any source for
the remainder of the Lease.
The rental shall be paid in monthly installments beginning September 1,
1974, or as soon as second party commences business, and monthly thereafter.
Payments shall be made on the 15th day of each month beginning with the month of
October, 1974, on the gross sales and services made upon the premises during the
calendar month prior to the said date. in the event of default in payment of the
rental, the said second party shall correct the same within sixty (60) days
after receipt of written notice of default.
2. It is understood and agreed that the term "gross sales" shall mean all
receipts from the conduct of all business upon the leased property, including,
without being limited to, the gross sales of merchandise at or supplied from the
leased property, whether sold for cash or on a charge or credit basis, all
charges for the rendition of services on or supplied from the leased property,
and all sales and business of any licensees or concessionaires operating upon
the leased property. Amounts attributable to sales originally made upon the
leased property and to services originally contracted for upon the leased
property shall be included in gross sales even though payment of the bill for
such sales or services is transferred to another location for collection, or
deliveries pursuant to such sales or performance of such services are effected
outside of the leased property. Amounts attributable to merchandise delivered or
services performed upon the leased property, though contracted for elsewhere,
shall be included in gross sales.
3. The second party shall maintain with respect to the business transacted
in or from the leased property, the same books and records as may from time to
time during the term of this Lease be generally kept with respect to other
stores of the second party Such books and records will be maintained at the
second party's main office and will be preserved for the same length of time as
may be the general practice employed with respect to such other stores. Such
books and records in any event shall be maintained according to good accounting
practice and shall contain
<PAGE>
sufficient information to permit a calculation of gross sales. The first parties
shall have the right to examine during regular business hours at the main
accounting office of the second party, all books and records of the second party
in any way pertaining to business transacted in or from the leased property. The
first parties may also examine at the leased property such sales reports or
other records as may be maintained by the second party with respect to gross
sales.
4. If upon any examination by the first parties of the books or records of
the second party an error shall be revealed in favor of the first parties which
results in there being due to the first parties additional percentage rental in
excess of $100, then the reasonable cost of such examination shall be paid by
the second party to the first parties.
5. Nothing contained in this Lease shall be construed as creating a
partnership or joint venture between the first parties and the second party or
between the first parties and any other party, or cause the first parties to be
responsible in any way for the debts or obligations of the second party or any
other party.
6. It is understood and agreed that by virtue of an agreement entered into
by and between Elbert J. Roundy and Iva Jean Roundy and Bowlin's, Inc., dated
October 21, 1973, the said Bowlin's, Inc. paid the first parties herein the sum
of [Confidential treatment requested], which, according to the terms of the
contract would be consideration in any such lease, purchase, or sales agreement
between the parties. That it is the intention of the second parties herein, to
apply the sum of [Confidential treatment requested] heretofore paid under the
October 21, 1973, contract to the rental as it may accrue under this Lease.
7. Second party agrees to construct a building to be erected on the leased
premises by HOM-CO. INC., of Albuquerque, New Mexico, said building to be built
according to second party's specifications and design, and detailed in a
contract between the first parties and HOM-CO. INC., costing in the approximate
amount of $62,000.00, plus site work, service station facilities, paving and
installation of a pump, motor and connections on existing water well on the
premises, the total cost of which would be in the approximate amount of
$100,000.00, all of which shall be at the cost of the said second party. second
party hereby assumes and agrees to perform the obligations of first parties in
their contract with HOM-CO. INC. And in consideration of the second party's
assuming the HOM-CO. INC. contract and the payment thereof, the first parties do
hereby agree to give the second party an option to purchase all real or personal
property, and other improvements and appurtenances, including the building
erected under the HOM-CO. contract at second party's expense, for the total
option price of rive Hundred Thousand Dollars ($500,000,00) on or before the
expiration date of this Lease or any extension thereof.
It is anticipated by the parties that the aforementioned HOM-CO. contract
provides for a metal building with a concrete foundation and floor, and in the
event that the said above mentioned option is not exercised by the second party
under the terms of said option, the said second party shall have the right to
remove the metal building erected under the HOM-CO contract, and all that part
thereof above or on the concrete foundations, and upon demand made, the second
party will remove the concrete foundations and restore the ground surface to its
original condition.
8. Second party shall carry all fire and windstorm insurance on the said
building, together with public liability and property damage insurance on the
area occupied by service station or outside facilities and on the contents of
the building.
In the event there is replacement of any equipment or furniture and
fixtures, the same shall be at the cost of the second party when caused through
normal wear and tear on the equipment.
9. Second party, in addition to the rent provided for herein, shall pay all
taxes and assessments upon the leased property, and upon the buildings and
improvements thereon assessed during the term of the Lease. Receipts showing
such payments shall be furnished to first parties annually.
10. Should first parties, during the term of this Lease, elect to sell or
lease other land owned by first parties on either side of Interstate I-40, the
description of which is not included in this Lease, at or near the Bluewater
Interchange, first parties Shall give written notice containing the legal
description, intended use of the land and type of business considered, intended,
<PAGE>
or proposed, if known, to the second party, and if the said first parties have a
bona fide offer, the said second party shall have ninety (90) days after written
notice containing the above information, to meet the said bona fide offer and
purchase the said property described therein.
If the second party takes no action to accept or reject the said offer to
purchase, the first parties shall then be free to sell or lease any or all of
the said real property contained in the said notice.
11. The second party shall have the right, subject to the laws of the State
of New Mexico, to erect and attach any outdoor signs or advertising pertinent to
the business operated and conducted by the second party. it is further
understood and agreed that any land owned by the said first parties on either
side of the Interstate 1-40 at or near the Bluewater Interchange, shall be
considered contiguous to the premises, and said second party shall have the
unlimited and exclusive rights for the use of the first parties' lands that
border cited I-40 Highway on both sides, and any such advertising or signs that
the second party may erect on these lands shall be considered on premises
subject to first parties' right to sell or lease as hereinbefore provided.
Only the second party shall have the right to remove said signs at any
time. However, first parties may require said signs to be relocated on the
premises, if those signs interfere with the first parties' normal agricultural
pursuits. In addition the right to any and all use of the backs of the said
signs and any income derived from this use shall be paid to the second party and
included in the annual sales on which percentage rents are paid.
12. Should the second party not use or develop all of the leased property
described herein within five (5) years from date hereof, the portion of the said
property not used or developed may be deleted from the legal descriptions of
this Lease. In connection with the words "use" or "development", the meaning
thereof is that either the direct or indirect use or development of the
described property whereby the second party shall have or derive a benefit
therefrom. Further, should, for the period for one (1) year, second party fail
to operate its business or businesses on the leased property, this Lease shall
automatically terminate.
13. Second party shall not assign, mortgage or encumber this Lease, not
sublet or permit the leased property or any part thereof to be used by others
without the prior written consent of first parties. The consent of first parties
to assignment or subletting shall not be construed to relieve assignee, or
second part from obtaining the consent, in writing, of first parties to any
further assignment or subletting.
14. This agreement shall be binding upon the heirs, executors,
administrators and assigns of the respective parties hereto.
IN WITNESS WHEREOF, the said parties have hereunto set their hands and seals in
triplicate the day and year first above written.
/s/ Elbert Roundy
------------------------
Elbert Roundy
/s/ Ina Jean Roundy
------------------------
STATE OF NEW MEXICO Ina Jean Roundy
COUNTY OF VALENCIA
This instrument was filed for record on
September 18 1974 at 4:20 o'clock PM.
Record Vol. 244 of records of said County
Follo 3354 3361-A
Pat I. Heth, County Clerk
(Patsy Vega), Deputy Clerk
Fee 9.75 Rec. #16941
BOWLIN'S INC.
By /s/ Signature illegible
--------------------------
President
ATTEST:
/s/ M.L. Bowlin
- ---------------------
Secretary Second Party
SEAL
<PAGE>
STATE OF NEW MEXICO )
) ss.
County of Bernalillo )
The foregoing intstrument was acknowledged before me this 11th day of June,
A.D. 1974 by Elbert Roundy and Ina Jean Roundy, his wife.
/s/ Signature illegible
-----------------------
Notary Public
My Commission Expires
April 10, 1978
- ---------------------
STATE OF NEW MEXICO )
) ss.
County of Bernalillo )
The foregoing instrument was acknowledged before me this 12 day of June,
A.D. 1974, by Claude M. Bowlin, President of Bowlin's, Inc., a New Mexico
corporation, on behalf of said corporation.
/s/ Clifford C. Bess
-----------------------
Notary Public
My Commission Expires
May 24, 1976
- ---------------------
I.M. SMALLEY
ATTORNEY AT LAW
109 EAST SPRUCE
P.O. BOX 879
DEMING, NEW MEXICO, 88030
ADDENDUM TO LEASE
This addendum is to that certain lease dated June 23, 1989 by and between Rex
Kipp, Jr. as his sole and separate property and estate, as lessor; and Bowlin's
Incorporated, a New Mexico Corporation, hereinafter designated as lessee, and
shall be effective as of January 1, 1992.
1. Paragraph I. Term and Rentals.
The term is hereby extended from [Confidential treatment requested]. This
extended term is granted by lessor in consideration of the extensive remodeling
and additions being constructed at the lease site during 1992 by lessee.
Paragraph I. Subparagraph (A)
In consideration or lessees expenditures to improve petroleum sales by adding
more gasoline pumps, a new island, all new fiberglass piping, a new driveway,
and a new lighted canopy, lessor agrees to change the rent from [Confidential
treatment requested] to the following:
A. [Confidential treatment requested] other than gasoline will
remain unchanged.
B. Gasoline sales will have rent paid as follows:
[Confidential treatment requested]
Paragraph XIII. Purchase of Gasoline and Oil Products to be Sold:
Lessor acknowledges lessor owns control of E.J. Short Oil Co. and agrees that
E.J. Short Co. will modify the rack price now in place to be as follows: El Paso
Chevron rack price [Confidential treatment requested]. It is understood that
freight will be added to rack price at the prevailing common carrier S.C.C. or
I.C.C. rate tariffs.
Both parties agree that this addendum becomes effective January 1, 1992, even
though it is to be executed at a later date in 1992.
WITNESS OUR HANDS this 8th day of June A.D. 1992
<PAGE>
LESSOR:
/s/ Rex Kipp, Jr.
-----------------
REX KIPP, JR.
LESSEE
ATTEST:
/s/ William J. McCabe By: /s/ Signature illegible
- --------------------- ----------------------------
Asst. Secretary BOWLINS INCORPORATED
Executive Vice President
<PAGE>
THE STATE OF NEW MEXICO )
COUNTY OF HIDALGO )
BEFORE ME, the undersigned authority, on this day personally appeared,
REX KIPP, JR., known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 8th day of June , A.D.
1992.
/s/ Signature illegible
-----------------------
Notary Public
My Commission Expires:
10/29/92
- ---------------------
THE STATE OF NEW MEXICO )
COUNTY OF BERNALILLO )
BEFORE ME, the undersigned authority, on this day personally appeared
C.C. Bess, Executive Vice President, of Bowlin's, Incorporated, a New Mexico
corporation, known to me personally and officially to be the person whose name
is subscribed to the foregoing instrument, and acknowledged to me that he
executed the same for the Purposes and consideration therein expressed, as the
act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 8th day of June , A.D.
1992.
/s/ Signature illegible
-----------------------
Notary Public
My Commission expires:
10/29/92
- ---------------------
<PAGE>
THE STATE OF NEW MEXICO
COUNTY OF HIDALGO
LEASE AGREEMENT
This LEASE AGREEMENT entered into by and between REX KIPP, JR. as his sole and
separate property and estate, as Lessor; and BOWLIN'S INCORPORATED, a New Mexico
corporation, hereinafter designated as Lessee-, shall be effective as of January
1, 1993.
WITNESSETH:
-----------
I.
TERM AND RENTALS: This Lease becomes effective immediately upon the
'expiration of that certain Lease dated December 30, 1977 signed by then Lessor
(Predecessors in interest namely John Muir Kipp, Rex Kipp Jr. and William Marble
Kipp) and Lessee on the demised premises from January 1, 1978 to December 31,
1992. Lessor for and in consideration of the covenants and agreements herein
mentioned to be kept and performed by Lessee and its successors in interest, has
demised and leased to said Lessee that certain tract of land in Grant County,
New Mexico, located in the area described as follows:
A tract of land in the NW 1/4 SE 1/4, Section 19, T 24 S, R 15 W,
N.M.P.M., Grant County, New Mexico, described as follows:
Beginning at the Southeast corner, whence the Southeast corner of said
Section 19, bears S 53 degrees 43' 30" E, 2602, 41 ft. dist.; thence N
55 degrees 01' W, 253.58 ft. to the Southwest corner; thence N 34
degrees 59' E, 357.58 ft. to the Northwest corner, a point on the
South line of Interstate 10 Frontage Road Right-of-way; thence
Easterly, along the South line of said right-of-way on an 11,559.20
ft. radius curve to the left, 253.91 ft. to the Northeast corner;
thence S 34 degrees 59' W, 345.03 ft. to the place of beginning,
containing 2.042 acres, more or less.
All as is more fully described in Exhibit "A" attached hereto.
TO HAVE AND TO HOLD the above described premises with the appurtenances
unto the said Lessee and its successors in interest, from the 1st day of
January, 1993 for, during and until the [Confidential treatment requested], with
the right of Lessee to cancel
<PAGE>
this Lease with thirty (30) days' notice to Lessors at any time during its term.
If there are no significant sales as hereinafter set forth for six (6)
consecutive months, Lessor can cancel this Lease by giving thirty (30) days'
written notice of such intention to Lessee.
Lessee, in consideration of the Lease of the premises aforesaid by
Lessor to Lessee, does covenant and agree with the said Lessor his heirs,
executors, administrators and assigns, to pay Lessor as rent for the above
described premises as follows:
(A) [Confidential treatment requested] of all gross sales, payable on
tile 15th day of the month following the month wherein all of tile gross sales
have been reported, with no minimum of gross sales required, said gross sales
being the only rental to be paid under this Lease.
(B) Lessors shall have the right to audit the books during the regular
business hours is well as have access to New Mexico sales tax reports from the
sales made on the demised premises.
(C) Lessee shall use the above described premises for any legal purpose
whatsoever, especially those uses commonly exercised by Lessee in connection
with the operation of trading post , gift and souvenir shop or other business
commonly associated therewith..
(D) Lessor agrees that Lessor will not operate any type of competitive
business similar to Lessee's on any of Lessors adjacent properties at the Separ
Interchange on 1-10 M.P. 42 New Mexico.
II.
RECREATIONAL VEHICLE PARK - USE AND RENTALS: Lessor agrees to give
Lessee the right to lease two (2) tracts of land for the construction and
development of a recreational vehicle park, and the further right that Lessee
may fence the said two tracts if necessary. Said two tracts of land are to be
used by Lessee for this purpose only and not on an exclusive basis. Lessee
agrees to pay Lessors [Confidential treatment requested] of all gross sales
received from
<PAGE>
this business. Lessee agrees to keep the park in a tidy state, removing all
trash that may accumulate on said land. Said two tracts of land are being leased
on a non-exclusive basis and if Lessor desires to use any portion of the below
described premises Lessor may do so in any manner whatsoever and for any use
whatsoever. Any permanent improvements that are placed on said two tracts of
land, including barbed wire fence, will become the property of Lessor and will
not be removed when this Lease expires. Lessee shall retain the right to remove
any non-permanent dwellings such as mobile homes and non-permanent improvements,
equipment and fixtures that have not been permanently attached to the ground.
Any signs that have been placed on said two tracts of land shall be protected
under Article XII herein. If said improvements such as water lines, picnic
tables or other improvements which may be placed on the land by the Lessee are
later found to be in the way, Lessor may at Lessor's expense remove and relocate
same in order to make such use of the land that Lessor desire. The dates of said
recreational vehicle park Lease shall be the same as the Lease dates in
Paragraph I of this Lease and said land being situated on a strip of land
beginning oil the Northwest side of the (demised premises described in Paragraph
I of this Lease and extending the distance of one and one-half (I 1/2) miles in
'a Northwesterly direction adjacent and contiguous to the Southwest right-of-way
line on Interstate 10. The second tract of land being situated Southwest of the
Southern Pacific well for approximately three (3) miles between tile Northeast
Interstate 10 right-of-way line and tile Southern Pacific Railroad right-of-way
line in a Southeasterly direction. Lessor does not warrant that Lessor owns all
of the land heretofore described for use as the recreational vehicle park; it
being unsurveyed.
TITLE TO PERMANENT IMPROVEMENTS: Lessee hereby waives title to all
improvements, such as recreational vehicle park fences and sewer and water
lines, but shall retain title to the old original Continental Divide Trading
Post building with the right to remove the
<PAGE>
same upon termination of this Lease or any renewal hereof, and Lessee shall also
have the right to remove any non-permanent type of homes for employee housing
placed on the premises.
RESTRICTION ON ASSIGNMENT: This Lease shall not be assigned,
transferred, or any portion of the demised premises sublet, without the written
consent of Lessor first had and obtained. However, in connection with Lessee's
usual business operation, Lessee shall have the right to arrange for the
establishment of any display or operation on said demised premises, on a
commission basis, so long as Lessee exercises control thereover and remains
fully responsible to Lessor herein. If any portion of the premises is subleased
out on a commission basis, three (3%) percent of the gross sales from the
subleased operation shall be included as a part of the rentals due Lessor (not
three (3%) per cent of the subleased rentals paid by sublessee to the Lessee).
V.
TAXES: Lessor will pay all normal real estate taxes on all buildings
and Lessee will pay any increases on such taxes during the term of this Lease.
VI.
WATER: Lessee shall have the right to use water on said demised
premises from what is known as Lessors' "Leased S. P. Well" on lands located
North of Separ Interchange provided Lessee maintains the pump thereon together
with the water system and shall maintain water lines from well to point and
place of use. Lessor is to be furnished adequate water for Lessors' livestock at
no expense except the maintenance of Lessors' own water line. All water pipes in
the ground at termination of this Lease shall remain in place. Lessee is not
obligated to drill a water well, but if for any reason Lessee does develop a
water well on said demised premises Lessee shall continue to furnish adequate
water for Lessors' range livestock on the same basis that it has heretofore been
used by Lessor without cost provided Lessor install and maintain their own water
line from well to point and place of use. In the event the Southern Pacific
Railroad cancels
<PAGE>
the Lease on the S.P. Well leased by lessor the agreement of Lessor to furnish
Lessee with water shall likewise terminate but Lessee shall have the right to
drill and develop a water well on said demised premises, subject to the
conditions mentioned above, provided, however, that anything herein to the
contrary notwithstanding, Lessor shall not be bound to furnish Lessee with
water, especially in the event said S.P. Well Lease is canceled or modified.
Lessee shall furnish water to Bar T service station for the duration of this
Lease. Lessor will pay one-half (1/2) of all repairs and replacement of any pump
and Lessee shall pay the electricity costs for operating said pump. Lessees have
title to the present equipment and any future equipment put on the well.
VII.
DESIGNATION OF PLACE TO RECEIVE RENTS OR OTHER NOTICES UNDER THIS LEASE: Lessee
shall send all rent payments to Rex Kipp, Jr., Box P, Lordsburg, New Mexico
88045, or whatever address Lessor may designate in writing.
VIII.
EMINENT DOMAIN: In the event the demised premises or any part thereof
is taken for public or quasi-public purposes by condemnation, lessee shall leave
no claim to nor still Lessee be entitled to any portion of any award with regard
to the real property (land) for damages or otherwise, all right to any such
award being hereby assigned to Lessor. In the event only a part of the demised
premises is so taken, Lessee shall have the Tight and option to cancel this
Lease for the remainder of the demised term in the event Lessee also determines
that said taking materially interferes with Lessee's business, or said parties
may Mutually agree upon a continuance of said Lease on terms mutually agreeable.
IX.
INDEMNIFICATION OF LESSOR AGAINST LIENS: Lessee covenants that it will ,
at all times prior to the termination of this Lease and the delivery to the
Lessor of possession of said
<PAGE>
demised premises, pay and discharge and indemnify the Lessor against any and all
liens and charges of any and every nature and kind which may at any time be
established against said land and improvements or any part thereof as a
consequence, direct or indirect, of any act or omission of Lessee or as a
consequence, direct or indirect, of any act or omission of Lessee or as a
consequence direct or indirect, of the existence of Lessee's interest under this
Lease; any: and all loss, cost, damage, or expense sustained by Lessor
(including any attorney's fees and expenses of Lessor) on account of or through
the use of the land or any part thereof by Lessee or by any other person
whomsoever, for any purpose inconsistent with the provisions of this Lease or
arising out of or directly or indirectly due to any failure of Lessee in any
respect to promptly and faithfully satisfy its obligations under this Lease.
X.
INDEMNITY OF LESSOR BY LESSEE AGAINST LOSS: Lessee covenants to
indemnify and hold and save harmless Lessor against any and all claims arising
from tile conduct or management of or from any work or thing whatsoever done in
or about tile demised premises or any building or structure thereof or the
equipment thereof during said demised term or arising from any act or negligence
of Lessee or any of its agents, contractors, patrons or employees, or arising
from any accident, injury, or damage whatsoever caused to any person or persons
or to the property of any person, persons; corporation or corporations occurring
during said term on, in or about the demised premises and from and against all
cost, counsel fees, expenses, and liabilities incurred in or about any such
claim or any action or proceeding being brought against Lessor by reason of any
such claim, the Lessee, on notice from the Lessor shall resist or defend such
action or proceeding by counsel satisfactory to Lessor.
XI.
<PAGE>
FORFEITURE PROVISION: This Lease is made on the condition that Lessee
shall perform all of the covenants and agreements herein set forth to be
performed by it. If at any time there be default on the part of Lessee in the
payment of rent, taxes, assessments or other charges and payments by it to be
made, or either or them or any part thereof, or if there shall be default on the
part of Lessee in the performance or observance of any of the remaining
covenants or agreements thereof by it to be observed and performed, and such
default shall continue for a period of thirty (30) days after written notice by
certified mail of such default being given by Lessor to Lessor shall at any time
thereafter without demand have full right, at their election, on fifteen (15)
days' written notice by certified mail to Lessee, to enter upon the demised
premises and take immediate possession thereof. In addition, Lessor may bring
suit for, and collect all rents, taxes, assessments, the time of such entry this
Lease and all rights herein granted shall become void to all intents payments or
other charges which shall have accrued by or to the time of such entry. From and
purposes whatsoever, and all improvements made on said premises shall be
forfeited to Lessor without compensation therefor to Lessee. In addition to the
other rights in this Paragraph Lessor shall have the right to sue Lessee for
damages, if Lessee fails to pay any rent required under this Lease.
XII.
SIGNS: As a further consideration herein, Lessor does hereby grant unto
Lessee the right to install signs advertising Lessee's business on said demised
premises and on other lands presently owned by Lessor along said Interstate 10
East and West from the Separ Interchange, provided, however, that said signs
shall be installed in full compliance with the laws of the State of New Mexico
and on locations agreeable to Lessor and that Lessee assumes full responsibility
for any injury caused thereby. Upon termination of this Lease, signs and sign
permits will remain tile property of Lessee with Lessee having the right to sell
the same and with the right of first
<PAGE>
refusal to be offered Lessor. If Lessor accepts said offer, Lessee agrees to
execute any and all documents necessary to transfer the permits to Lessor. If
any sign or signs are damaged, replaced or retired, all excess materials and
trash will be retrieved in order that the premises will remain in good
condition.
XIII.
PURCHASE OF GASOLINE AND OIL PRODUCTS TO BE SOLD: Lessee agrees to purchase
gasoline and oil products sold or used on the premises from ERNEST J. SHORT &
SON, INCORPORATED, as long as this corporation is competitive in its prices. In
the case of a shortage of these products and said corporation cannot deliver
said products, purchases can be made on a temporary basis from others.
XIV.
BINDING ON SUCCESSORS: The covenants and contained herein shall apply
and ensure to the benefit of and be binding upon the parties hereto, and upon
their respective successors in interest and legal representatives.
WITNESS OUR HANDS this 23rd day of June , A.D. 1989.
LESSOR:
/s/ Rex Kipp, Jr.
-----------------------
REX KIPP, JR.
LESSEE:
ATTEST:
By: /s/ C.C. Bess
---------------------
/s/ William J. McCabe BOWLIN'S INCORPORATED
- ------------------------- Executive Vice President
Asst. Secretary
<PAGE>
THE STATE OF NEW MEXICO )
COUNTY OF HIDALGO )
BEFORE ME, the undersigned authority, on this day personally appeared,
REX KIPP, JR., known to me to be tile person whose name is subscribed to the
foregoing instrument, and acknowledged to me that lie executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this day 23rd day of June, A.D.
1989.
/s/ Signature illegible
-----------------------
Notary Public
My Commission Expires:
10/29/92
<PAGE>
THE STATE OF NEW MEXICO )
COUNTY OF BERNALILLO )
BEFORE ME, the undersigned authority, on this day personally appeared
C.C. Bess, Executive Vice President, of Bowlin's, Incorporated, a New Mexico
corporation, known to me personally and officially to be tile person whose name
is subscribed to the foregoing instrument, and acknowledged to me that lie
executed the sai-ne for the purposes and consideration therein expressed, as the
act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 5th day of July A.D. 1989.
/s/ Signature illegible
-----------------------
Notary Public
My commission expires:
9 /19/91
- ---------------------
<PAGE>
Memorandum of, Lease
Parties: Bowlin's Incorporated, a New Mexico corporation (Lessee);
and Rex Kipp, JR. (Lessor)
Effective Date: June 23, 1989
1. Description. This is a Memorandum of an unrecorded lease (lease)
executed between Lessor and Lessee on June 23, 1989 for the lease of the
property described as:
A tract of land in the NW 1/4 SE 1/4, Section 19 T 24 S, R 15 W, N.M.P.M., Grant
County, New Mexico, described as follows:
Beginning at the Southeast comer, whence the Southeast comer of said Section 19,
bears S 53 degrees 43' 30" E. 2602, 41 ft. dist.; thence N 55 degrees 01' W.
253.58 ft. to the Southwest comer; thence N 34 degrees 59' E. 357.58 ft. to the
Northwest comer, a point on the South line of Interstate 10 @ frontage Road
Right-of-way on an 11,559.20 ft. radius curve to the left, 253.91 ft. to the
Northeast comer; thence S 34 degrees 59' W, 345.03 ft. to the place of
beginning, containing 2.042 acres, more or less-, and also
A strip of land beginning on the Northwest side of the above referenced premises
and extending one and one-half (I 1/2) miles in a Northwesterly direction
adjacent and contiguous to the Southwest right-of-way line on Interstate 10, and
also
A second tract of land approximately 3 miles long and situated Southeast of the
Southern Pacific well between the Northeast Interstate 10 right-of-way line and
the Southern Pacific Railroad right-of-way line in a Southeasterly direction.
2. Term, The term of the Lease shall begin on January 1. 1993 and shall end on
December 3 1. 2002.
3 . This memorandum is not a complete summary of the terms and conditions of the
Lease. In the event of a conflict between the Lease and this memorandum, the
Lease shall control.
BOWLIN'S INCORPORATED, /s/ Rex Kipp, Jr.
a New Mexico Corporation -------------------
Rex Kipp, Jr.
/s/ C.C. Bess Lessor
- ----------------------------
C.C. Bess
Executive Vice President
<PAGE>
STATE OF NEW MEXICO )
) SS.
County of Bernalillo )
SUBSCRIBED AND SWORN TO before me this 1st day of August, 1989 by Rex
Kipp, Jr.
/s/ William J. McCabe
---------------------
Notary Public
My Commission expires:
5/31/91
- -----------------------
STATE OF NEW MEXICO )
) ss.
County of Bernalillo )
SUBSCRIBED AND SWORN TO before me this 1st day of August , 1989 by C.C. Bess,
Executive Vice President of Bowlin's Incorporated.
/s/ William J. McCabe
---------------------
Notary Public
My commission expires:
5/31/91
- ----------------------
LEASE
-----
THIS INDENTURE, made this 29th day of September, 1983, between J.T.
Turner and Idra M. Turner, husband and wife, hereinafter called the LESSOR, and
BOWLIN'S INC., a New Mexico Corporation, hereinafter called the LESSEE.
DESCRIPTION OF PROPERTY
-----------------------
The LESSOR does hereby demise and let unto the LESSEE for commercial or
retail purposes, the premises described below:
A certain tract of land situated within the Northwest 1/4 of Section 27,
T1ON, R7E, N.M.P.M., Santa Fe County, New Mexico (said Tract is also
referred to and comprising portion of Lot numbered one (1), Block
numbered (2), of the unrecorded plot of Carl's Subdivision to the County
of Santa Fe, New Mexico), and being more particularly described by metes
and bounds survey as follows:
Beginning at the Southwest corner of the parcel herein described, which
is a point bearing S 57020'00" E, 89.95 feet distance from the
intersection of the Northerly right-of-way line of U.S. Interstate 40
(Frontage Road) and the Easterly right-of-way line of New Mexico State
Highway 344; thence,
N 32(Degree)40'00" E, 50.00 feet distance to the most Northerly point of
said parcel "Be'; thence,
S 57(Degree)20'00" E, 136.46 feet distance to the Northeast corner of
the parcel herein described (a point on an existing fence line bearing
in a Northerly direction); thence,
S 07(Degree)25'00" W, 55.31 feet distance to the Southeast corner of the
parcel' herein described, a point on the Northerly right-of-way line of
aforementioned U.S. Interstate 40 (Frontage Road); thence,
N 57(Degree)20100" W, 160.05 feet distance along said right-of-way line
of U.S. Inter- state 40 (Frontage Road) to the place of beginning and
containing 7412.625 square feet (0.170 acres), more or less.
And, beginning at the Southwest corner of the parcel herein described
which is a point bearing S 86(Degree)24'44" E, 102.93 feet distance from
the intersection of the Northerly right-of-way line of U.S. Interstate
40 (Frontage Road) and the Easterly right-of-way line of New Mexico
State Highway 344; thence,
N 32(Degree)40'00" E, 90-00 feet distance to the most Northerly' point
of said parcel "c"; thence,
S 57(Degree)20'00" E, 93.99 feet distance to the Northeast corner of the
parcel herein described (a point on an existing fence line bearing in a
Northerly direction); thence,
S 07(Degree)25'00" W, 99.51 feet distance to the Southeast corner of the
parcel herein described (a point on an existing fence line bearing in a
Northerly direction); thence,
N 57(Degree)20'00" W, 136.46 feet distance to the point and place of
beginning, and containing 10,370.025 square feet (0.238 acres), more or
less.
And, further described in the attached survey map Exhibit "A".
The property includes one building which constitutes the business
premises, a small detached storage building and the paved parking area.
TERM OF LEASE
-------------
A. The term of this lease shall be [Confidential treatment has been
requested] both dates inclusive, unless sooner terminated as herein provided.
<PAGE>
B. The term of this lease may be extended, at the Option of the LESSEE,
for three (3) successive periods of five (5) years. Each such period of five
years being herein sometimes referred to as an extended term as follows:
First Extended Term: [Confidential treatment has been requested]
Second Extended Term: [Confidential treatment has been requested]
Third Extended Term: [Confidential treatment has been requested]
Such option to extend shall be exercised by the LESSEE by giving written notice
to LESSOR by Certified Return Receipt mail not less than one hundred eighty
(180) days prior to the expiration of the then existing term.
C. Each extended term shall be upon the same terms, convenants, and
conditions, with the same annual rent payable, as provided in this lease for the
initial term. Payment of all additional rent and other charges required to be
made by the LESSEE as provided in this lease for the initial term shall continue
to be made during each of such extended terms. The LESSEE shall not be permitted
to extend this lease beyond the third extended term. However, this lease shall
not hamper negotiation of a new lease between LESSORS and LESSEE to terms
mutually agreeable for a new lease at the termination of the third extended
term. Any termination of this lease during the initial term or during any
extended term shall terminate all rights of extension hereunder.
MINIMUM RENT, PERCENTAGE RENT AND GROSS RECIEPTS DEFINED
--------------------------------------------------------
A. The minimum rent for the above described lease property is
[Confidential treatment has been requested] annually payable by LESSEE monthly
in advance in equal installments of [Confidential treatment has been requested]
each on the first day of every month during the term. In addition to the minimum
rent, LESSEE shall pay in each year additional rent based upon a percentage of
the LESSEE'S gross receipts from the leased property all as hereinafter set
forth.
B. In addition to the minimum annual rental, the LESSEE shall pay the
LESSOR as additional annual rental a sum equal to [Confidential treatment has
been requested] of the amount by which the LESSEE'S [Confidential treatment has
been requested] from all business conducted on and from the leased property
exceeds [Confidential treatment has been requested] for the preceeding lease
year.
The percentage rental payment amount shall be computed and paid
quarterly in a sum equal to [Confidential treatment has been requested] of the
amount by which the LESSEE'S [Confidential treatment has been requested] exceed
[Confidential treatment has been requested] for the preceeding quarter. Payments
of percentage rent shall be payable on the fifteenth (15th) day of the month
following each calendar quarter.
-2-
<PAGE>
At the end of each twelve (12) consecutive months, the total of all
sales shall be computed for said period of time and the tents shall be
recomputed by taking a guaranteed annual minimum rental of [Confidential
treatment has been requested] and adding thereto the percentage rents, if any.
If the LESSEE shall have paid a total of rents which are in excess of the
recomputed rents, then the LESSOR shall return to the LESSEE the surplus of the
collected rents over the recomputed rents. In no event shall less than the
minimum annual rental be paid.
C. The term [Confidential treatment has been requested] received by the
LESSEE from the sales of retail or commercial items to the public, which are
subject to the sales tax imposed under New Mexico State Law.
D. The LESSEE shall deliver to the LESSOR a copy of each sales tax
return it has filed with the State of New Mexico. The items expressed thereon
shall be the basis for the computation of the percentage rents. Copies of the
sales tax returns shall be delivered to the LESSOR along with that quarter's
percentage rental payment.
PROPERTY TAXES
--------------
The LESSEE shall pay all real property taxes assessed and levied against
the leased property during the term of this lease.
LESSEE shall pay all taxes levied against the LESSEE'S personal
property, merchandise, cars, trucks, equipment, fixtures, and mobile structures
placed upon the premises by LESSEE.
USE AND EXCLUSIVE USE
---------------------
The LESSEE shall use and occupy the demised premises for the purpose of
operating a business engaged in the sale of goods and services including but not
limited to: curios, jewelry, gifts, food service, and other related activities.
The LESSOR shall not lease any portion of the above described property
of which the leased property is a part for any purpose whatever without specific
consent of LESSEE. The LESSOR shall not permit any person except the LESSEE, its
agents, or servants to sell or exchange on such property any article whatsoever
without specific written consent and permission from LESSEE.
REPAIRS
-------
The LESSEE shall at its cost keep and maintain said premises, the
appurtenances and improvements in good repair and in sanitary condition, and
shall promptly repair all damage caused to said demised premises.
-3-
<PAGE>
LESSEE'S RIGHT TO ALTER AND IMPROVE
-----------------------------------
LESSEE shall have the right to make changes, alterations, or additions
to the building located on the leased property or to construct improvements on
the leased property.
A. Any permanent improvement to the leased property or any part thereof
during the term of this lease shall at once become the absolute property of the
LESSOR without payment of any kind therefor.
B. Any mobile structures including but not-limited to, merchandise,
equipment, fixtures, cars, trucks, mobile homes, and personal property shall be
removed by LESSEE upon termination of this lease if all moneys and obligations
owed by LESSEE to LESSOR have been satisfied, then ownership of same shall
remain with LESSEE. Further, LESSEE shall repair any damage caused by removal of
the above.
UTILITIES
---------
LESSEE shall pay all charges for gas, electricity, water, sewer, if any,
and telephone used or supplied in connection with the leased property, and shall
indemnify the LESSOR against any liability or damages on such account.
DEFAULT
-------
Should LESSEE fail to pay any installment of rent when due or fail to
fulfill or perform any of the agreements or provisions of this lease, which are
the obligation of the LESSEE, or otherwise at any time to be in default
thereinunder, and fail to pay such rent or continue in breach or default for a
period of thirty (30) days after LESSOR shall have demanded in writing by
Certified Return Receipt mail for performance thereof; or should LESSEE be
adjudicated a bankrupt or make an assignment for benefit of creditors; or should
LESSEE'S interest in this lease be levied on or attached in any action against
LESSEE and such levy or attachment is not vacated within sixty (60) days
thereafter, then in any such event or events, LESSEE'S interest in the leased
premises and in this lease shall not be transferred by operation of law, but
LESSOR may, at LESSOR'S election, and without prejudice to any other rights or
remedies which might otherwise be available to LESSOR, (1) bring appropriate
action against LESSEE to enforce the agreements and provision of this lease, and
to compel the LESSEE to abide by the same; (2) terminate this lease, and in such
event LESSOR may rightfully re-enter tile leased premises without notice or
demand, and repossess the same or recover possession thereof, as if such
premises were held by forcible detainer; or (3) to pursue, in connection with
the foregoing or separately, and other right or remedy provided by law: provided
however, that LESSEE shall not be in default hereunder
-4-
<PAGE>
in the event that such obligation, other than the payment of rent is fulfilled
and performed within such Thirty (30) day period.
LESSOR'S RIGHT OF ACCESS
------------------------
The LESSOR may enter the leased property, at any reasonable time, for
the purpose of inspecting the leased property or performing any work which the
LESSOR deems necessary to maintain property interest.
PROPERTY INSURANCE, DESTRUCTION OF PREMISES AND
-----------------------------------------------
OBLIGATION TO REBUILD
---------------------
A. The LESSEE shall provide insurance against the damage or destruction
by fire or any other casualty of all improvements and the contents therein
located on the leased premises. The buildings and other permanent improvements
located on the premises shall be insured in an amount equal to TWO HUNDRED FIFTY
THOUSAND AND N01100 DOLLARS ($250,000.00) on the date of this lease. Thereafter,
the LESSEE shall continue to insure the building and other permanent
improvements at the actual replacement value. The LESSOR shall have the right
every three (3) years to have an appraisal done, at the LESSOR'S expense, of the
buildings and permanent improvements as a means of establishing the amount of
insurance required at that time. The aforementioned insurance on the building
and permanent improvements only shall provide that the LESSOR is designated as
additional insured, and that any payment for losses shall be paid to LESSOR.
B. As a condition of insuring the building and permanent improvements
against casualty risk as herein before provided, the LESSEE may elect to repair
or rebuild the damage or destruction by fire or any other casualty to the
building and, permanent improvements. If LESSEE elects to repair or rebuild such
damage, the LESSOR shall be obligated to remit payments up to the full amount of
the insurance proceeds received by the LESSOR to any contractors or other
individuals or entities which perform repair or rebuilding services to the
leased premises.
If LESSEE elects not to repair or rebuild, this lease shall terminate
and the LESSOR shall retain any insurance proceeds for the damage to the
buildings and permanent improvements located on the leased premises.
C. If all or any part of the leased premises is damaged or destroyed by
fire or other casualty, and if there is a substantial interference with the
operation of the LESSEE'S business in the leased premises beyond LESSEE'S
control requiring the LESSEE to temporarily close its business tot he public,
the minimum rental shall be equitably apportioned or abated for the duration of
such repairs or rebuilding in proportion to the extent to which there is
interference with the operation of the LESSEE'S business.
-5-
<PAGE>
GENERAL PUBLIC LIABILITY INSURANCE
----------------------------------
LESSEE agrees to hold LESSOR harmless, including costs and attorneys
fees, from any loss, damage, or liability occasioned by, or arising from, any
default hereunder, or -negligent- act on the part of the LESSEE, its agents,
employees, invitees, or concessionaires; and to provide at its cost and to keep
current a standard form comprehensive liability policy insuring the LESSOR and
LESSEE from public liability in limits of not less than ONE MILLION AND NOIIOO
DOLLARS ($1,000,000.00) combined single limit coverage per occurrence; the
LESSEE shall provide LESSOR with satisfactory proof of the existence of said
policy upon request from LESSOR.
MUTUAL RELEASE OF LIABILITY TO
------------------------------
EXTENT OF SPECIFIC INSURANCE COVERAGE
-------------------------------------
The LESSOR and the LESSEE and all parties claiming under them hereby
mutually release and discharge each other from all claims and liabilities
arising from or caused by any hazard covered by insurance in connection with
property on or activities conducted on the leased property, regardless of the
cause of the damage or loss.
EMINENT DOMAIN
--------------
If the leased property or any part thereof, is taken by eminent domain
such that the property is rendered unusable for LESSEE'S commercial purposes,
this lease shall expire on the date when the leased property shall so be taken
and the rent shall be apportioned to the date. If at any time the entrance to
the property is closed more than three days, the rent shall abate for the period
involved. LESSOR shall receive any compensation paid for the taking of the fee,
buildings and permanent improvements, less any amounts that must be paid to any
mortgage holder with a security position held on the fee, buildings or permanent
improvements. Further, if LESSEE'S personal property including, but not limited
to, merchandise, equipment and fixtures is also taken or rendered unusable by
virtue of the exercise of eminent domain then LESSEE shall receive any
compensation paid for that taking.
CONDITION OF PURCHASE, AND WARRANTIES AND
-----------------------------------------
REPRESENTATIONS OF TURNER'S CURIOS
----------------------------------
A. This lease is conditioned upon the purchase by LESSEE of LESSOR'S
existing inventory, equipment, and other personal property of Turner's Curios
coincidentally with the effective date of this lease.
B. LESSEE has had the opportunity to and has inspected all books,
records, inventory, fixtures, buildings, and other personal property of Turner's
Curios. LESSEE acknowledges that LESSOR has made no representations or
warranties either express or implied including, but not limited to,
merchantability and suitability for LESSEE'S purposes, as to the nature of the
business, its profitability, or its inventory, fixtures, equipment and other
personal property to be transferred from Turner's Curios. LESSEE is purchasing
all such items "as is" and without recourse against LESSOR.
-6-
<PAGE>
LIQUOR PROHIBITION
------------------
LESSOR, its agents, employees assigns, sublessees or invitees shall not
sell, serve or transfer alcoholic beverages on the leased premises without the
written consent of LESSOR. LESSOR shall have the right to condition any such
consent upon the payment of percentage rent on any alcoholic beverage gross
receipts at a rate to be mutually agreed upon.
HEALTH RATING
-------------
At all times during the term of this lease and any extensions thereof,
LESSEE shall maintain with any and all applicable federal, state and local
health and environmental agencies satisfactory ratings or designations for
cleanliness and healthful conditions.
SIGNS
-----
A. Included in this lease are thirty-six (36) existing billboards along
Interstate 40 which currently advertise Turner's Curios. LESSOR will use its
best efforts to retain the existing leases, licenses or easements for those
billboards for tile benefit of LESSEE; however, LESSEE acknowledges that many of
the billboards are not the subject of written leases, licenses or easements and
may be terminated at any time by the landowner or other party on whose land the
billboards are located. Should any or all of the billboard leases, licenses, or
easements be terminated for any reason and the billboards be removed, that shall
not constitute a breach of this lease agreement, nor entitle LESSEE to any
abatement of its rent.
B. LESSEE agrees to be responsible for the repair and maintenance of
all of the billboards at its sole expense and shall maintain said billboards in
at least as good a condition as they are on tile effective date of this lease.
LESSEE may increase the size of any billboard to the extent permitted by the
landowner or other party on whose property tile billboard sets; however, LESSEE
may not cause any of the billboards to be reduced in size or removed. Any and
all leases, licenses or permits or fees related thereto, which are required for
tile billboards by the state or federal government agencies or by private
landowners will be done by LESSEE and at its sole expense. It is understood that
upon the execution of this lease agreement all signs become the exclusive
property of LESSEE for the term of this lease and LESSOR hereby assigns all
signs, sign locations, and any income derived therefrom during any term of this
lease to LESSEE. LESSOR shall receive any compensation paid by the taking
authority, for any sign removed by virtue of any state ordinance, regulation or
other governmental to those signs as a result of the upgrading of the structures
by the actions of the LESSEE.
-7-
<PAGE>
NON-COMPETITION
---------------
LESSOR and LESSEE mutually agree that any business conducted on the
Chevron Service Station property adjacent to the leased premises will not
directly compete with any business activities on the leased premises. Sales Of
goods and services on that adjacent Property shall be limited to gasoline
related Products and automobile accessories and service, Plus incidental vending
and over-the-counter candy and gum sales. LESSEE will use its best efforts at
all times during the term of this lease to maximize its gross income on the
leased premises.
SUBORDINATION
-------------
LESSEE Is given the absolute right to mortgage the leased premises
without the consent of LESSOR provided as follows: (1) Any mortgage is with an
institutional lender (savings and loan, bank, or Insurance company); (2) Only
one mortgages renewal, extension, modification, or replacement thereof may be
granted during the term of this lease and any option terms; (3) The entire
proceeds from any loan shall be used exclusively for improvements to the leased
premises; (4) No mortgage shall exceed ONE HUNDRED EIGHTY THOUSAND AND NO/IOO
DOLLARS ($180,000.00); (5) No mortgage, renewal, extension, modification, or
replacement thereof shall exceed In its term the term of this lease; (6) LESSOR
shall receive notices of any default under the mortgage or any note or other
obligation, which the mortgage secures; (7) Mortgage shall take the leased
premises on any foreclosure or other repossession subject to the provisions of
this lease; (8) LESSOR shall have the right to approve any Parties which
mortgagee places in possession of the leased premises; (9) LESSOR shall have the
option, if LESSEE defaults under the mortgage, notes or any obligations
thereunder, (a) to assume the mortgage of LESSEE and cure any default upon
thirty (30) days written notice to LESSOR of such default and LESSEE'S failure
to cure; or (b) to pay off the entire amount then due under the mortgage; and
(10) Any default under the mortgage which LESSOR cures shall be a default under
the lease and permit LESSOR to exercise all of its rights under the provisions
of the default clause of this agreement as hereinbefore provided.
RIGHT OF FIRST REFUSAL
----------------------
LESSOR hereby grants LESSEE the Right of First Refusal as defined below:
A. This Right of First Refusal shall continue so long as LESSEE shall be
current in its payments of rental sums provided in the lease described in said
agreement and in performing all of the terms and conditions stated therein to be
kept and performed.
-8-
<PAGE>
B. LESSEE has the right to purchase the real property and personal
property described in said lease under the following terms and conditions:
1. This right refers to all the LESSOR'S land area, buildings and
improvements located on the leased premises and hereinbefore described, and its
highway signs, and shall include the contiguous property located west and north
of tile leased premises on which the Chevron Service Station buildings and
equipment are located and more particularly described below:
A certain tract of land situated within the Northwest 1/4 of Section 27,
T10N, R7E, N.M.P.M., Santa Fe County, New Mexico (said tract is also
referred to and comprising portion of Lot numbered one (1), Block
numbered (2), of the unrecorded plat of Carl's Subdivision to the County
of Santa Fe, New Mexico), and being more particularly described by metes
and bounds survey as follows:
Beginning at the Southwest corner of the parcel herein described, which
is the point of intersection of the Northerly right-of-way line of U.S.
Interstate 40 (Frontage Road) and the Easterly right-of-way line of New
Mexico State Highway 344; thence,
N 00(Degree)01'00" W, 174.84 feet distance along said Easterly
right-of-way of New Mexico State Highway 344 to the Northwest corner;
thence,
S 89(Degree)06'00" E, 250-34 feet distance along an existing barbed wire
fence line to the Northeast corner; thence,
S 07(Degree)25'00" W, 153.59 feet distance along an existing fence line
to a point; thence,
N 57(Degree)20'00" W, 93...99 feet distance to a point; thence,
S 32(Degree)40'00" W, 140.00 feet distance to a point on the
aforementioned Northerly right-of-way line of U.S. Interstate 40
(Frontage Road); thence,
N 57(Degree)20'00" W, 89.95 feet distance along said right-of-way line
of U:S. Interstate 40 (Frontage Road) to the point and place of
beginning, and containing 0.894 acres, more or less.
2. If LESSOR shall receive a bona fide offer to purchase the
hereinbefore described premises, in whole or in part, LESSOR shall thereupon
deliver to LESSEE a copy of said offer and the said LESSEE shall have thirty
(30) days in which to meet said offer and to make all equivalent offer to
purchase.
3. If LESSOR shall receive a bona fide offer to purchase which LESSEE
shall not meet nor make (after receipt of notice from LESSOR) and which LESSOR
does not accept, then this "First Refusal" shall continue in full force and
effect according to the provisions hereof. However, if LESSEE shall not meet nor
make an offer communicated to it by LESSOR and LESSOR shall accept the offer mad
by a third party, then this "First Refusal" shall terminate for that part of the
premises only, and shall continue in full force and effect for the remaining
premises.
4. Any sale by LESSOR will be subject to this lease dated September
29th, 1983.
-9-
<PAGE>
C. The "Right of First Refusal" shall have only one exception and in
that event, and that event only, shall no "Right of First Refusal" be granted.
That event shall be the offer to purchase and purchase of the property by
Michael Jay Turner, the son of the LESSOR, and the "Right of First Refusal"
shall continue in full force and effect for the benefit of the LESSEE if, and
after, the hereinbefore described premises are purchased, in whole o r in .part,
by Michael Jay Turner, the son of the LESSOR. This paragraph shall in no way be
construed to prevent a devise by will or gift by LESSOR.
LESSOR'S LIABILITY TERMINATED BY SALE
-------------------------------------
The term LESSOR as used in the lease, means only the owner for the
time being of the leased property, so that in the event of any sale of the
leased property, after LESSEE did not meet any bona fide offer of a third party
described in "First Refusal". the seller shall be and hereby is entirely
relieved of all obligations of the LESSOR hereunder. Without further agreement
between the parties or between either of the parties and any purchaser of the
leased property, such purchaser shall be deemed to have assumed all obligations
of the LESSOR under this lease, and any sale shall be made subject to the terms
of this lease.
NOTICE AND PAYMENTS
-------------------
A. Any notice under this lease must be in writing and must be sent by
Registered or Certified, Return-Receipt mail to the last address of the party to
whom the notice is to be given, as designated by such party in writing. The
LESSOR hereby designates its address as follows:
J. T. Turner and Idra M. Turner
PO Box 580
Moriarty, New Mexico 87035
And, a copy of any notice from LESSEE to LESSOR shall be sent to:
Steven Fairfield
PO Box 26387
Albuquerque, New Mexico 87125
The LESSEE hereby designates its address as follows:
Bowlin's Incorporated
136 Louisiana NE
Albuquerque, New Mexico 87108
B. Payments are to be sent by regular first-class mail to the
hereinbefore designated addresses of the LESSOR and the LESSEE, or to the last
address of the party to whom payment is to be sent, as designated by such party
in writing.
RECORDING
---------
LESSEE or LESSOR may record a memorandum of this lease agreement in lieu
of the entire lease.
-10-
<PAGE>
ATORNEYS' FEES AND COSTS
------------------------
In the event of suit to enforce the provisions hereof, the prevailing
party shall be entitled to recover its attorneys' fees and costs incurred
therein.
ASSIGNMENT
----------
LESSEE may not transfer or assign this lease or any right or interest
hereunder, or sublease the leased premises or any part thereof without first
obtaining LESSOR'S Prior written consent, which consent shall not be
unreasonably withheld.
SUCCESSORS AND ASSIGNS
----------------------
This lease shall apply to and bind the heirs, executors, administrators,
successors, and assigns of the respective parties hereto.
IN WITNESS WIIEREOFT LESSOR and LESSEE have executed this lease as of
the day and year first hereinbefore written.
LESSOR:
/s/ J. T. TURNER
----------------------------------
J. T. TURNER
/s/ IDRA M. TURNER
----------------------------------
IDRA M. TURNER
ACKNOWLEDGMENT
--------------
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me this 29th day of
September, 1983, by J. T. Turner and Idra M. Turner.
/s/ S.F. Fofell
----------------------------------
Notary Public
My Commission Expires:
4-9-85
- ---------------------
LESSEE:
BOWLIN'S INCORPORATED
by /s/ M. L. Bowlin
----------------------------------
Michael L. Bowlin, President
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me this 29th day of
September, 1983, by Michael L. Bowlin, President of Bowlin's Incorporated, a New
Mexico Corporation on behalf of said Corporation.
/s/ S. F. Fofall
-------------------------------
Notary Public
My Commission Expires:
4-9-85
- ---------------------
<PAGE>
[MAP OF LOCATION]
State of New Mexico
OFFICE OF THE
Commissioner of Public Lands
JIM BACA
COMMISSIONER Santa Fe P.O. BOX 1148
SANTA FE. NEW MEXICO 87504-1148
April 13, 1992
Bowlin's Incorporated
136 Louisiana N.E.
Albuquerque, New Mexico 87108
RE: State Land Office Business Lease No. BL-514
Dear Sirs:
Enclosed is an approved copy of Business Lease No. BL-514.
Should you have questions regarding this lease, please call Bea Mirabal
at (505) 827-5773.
Sincerely,
Pleas M. Glenn
Assistant Commissioner
PMG/bm
Enclosures
<PAGE>
COMMISSIONER OF PUBIJC LANDS
NEW MEMM STATE LAND OFFICE
STATE OF NEW MEXICO
BUSINESS LEASE
LEASE NO. BL-514
THIS LEASE, dated October 1, 1991, is made and entered into by and between the
Commissioner of Public Lands, New Mexico State Land Office, State of New Mexico,
hereinafter called "Lessor, and Bowlin's Incorporated, 136 Louisiana NE,
Albuquerque, New Mexico 87108, hereinafter called "Lessee."
Lessor and Lessee agree and covenant as follows:
1. LEASE. For and in consideration of and subject to the rentals
and the terms, covenants, conditions, agreements, obligations and reservations
contained in this lease, Lessor grants and leases to Lessee and Lessee hires and
takes from Lessor the following described tract of land:
A certain 15.08 +/- acre tract of land, being a part of the
NW1/4SW1/4 of Section 36, Township 23 South, Range 2 West, NMPH, located
northeast of a highway interchange, about 13 miles west of Las Cruces, Dona Ana
County, New Mexico and being more particularly described as follows: Beginning
at an iron rod at the southwest corner of this tract, a point in the west line
of Sec. 36 T23S, R2W, NMPM, a point in the north RIW of the north frontage road
of Interstate #10 Hwy., whence the west 1/4 corner of said Sec. 36 bears N 0o
28' E 399 feet and a R/W rail Marked 528 + 00 bears N 65o 27' W 41.96 feet;
thence along the west line of said Sec. 36 N 0o 28' E at 399 feet said 1/4
corner with brass cap and at 602.65 feet an iron rod at the northwest corner of
this tract; thence N 89o 49o E 1566.38 feet to an iron rod at the northeast
corner of this tract; thence S 0o 28' W 250 feet to a RIW rail 19 + 33.4; thence
along the north RIW of the north frontage of Interstate #10 Highway with the
following courses and distances:
1. Southwesterly along a curve to the left (R=791.3'; = 46o; D =7.241o; L.C.
bears S 80o 28' W 618.52 feet) 635.3 feet to R/W rail 13 + 58.4
2. S 57o 36' W 293.31 feet to RIW rail 533 + 12.16
3. S 82o 10' W 67. 11 feet to R/W rail 032 + 75
4. S 82o 12' W 650.98 feet to the point of beginning.
2. RENT. Lessee shall pay to Lessor as rent for the land and
rights and privileges granted in this lease $3,900.00 per year in advance.
<PAGE>
3. TERM. The term of this lease shall begin on the date of this
lease and shall run for five (5) years, ending at midnight on September 30,
1996, unless terminated or cancelled at an earlier time as provided in this
lease.
4. PERMITTED USE. Lessee shall use the land granted in this
lease only for the purpose of a Trading Post. No other use shall be permitted
unless Lessor, in written form, has previously granted his consent in writing.
5. IMPROVEMENTS AND RECLAMATION. Lessee may place the following
improvements on the land granted in this lease:
-Trading Post building
-Well and Storage tank
-Gasoline Sales Facility
-Indian Hogan
-Paving & site preparation
-Utilities & lights
-Signs, fences, Miscellaneous
-Store Manager's quarters (unauthorized, removable)
-Employee quarters (unauthorized, removable)
No other improvements shall be placed on said land unless Lessor has previously
consented to them in writing. Upon the termination or cancellation of this
lease, but not if it is renewed or extended, Lessee shall remove all
improvements it placed on said land provided all rentals have been fully paid
and shall return and restore said land to its condition existing prior to
placement of such improvements, provided, however, Lessor may request Lessee to
leave such improvements in place, entitling Lessee to compensation for such
improvements as provided by law. Any improvement placed upon the land granted by
this lease without the prior written consent of Lessor shall become the property
of Lessor without compensation to Lessee.
6. LIEN. As security f or the payment of any rent that is due
and unpaid, Lessee grants to Lessor a first and prior lien upon any and all
improvements, fixtures and equipment which have been or shall be placed upon the
land granted by this lease.
7. ASSIGNMENT AND SUBLEASE. Lessee shall not assign or sublease
the land or any part. thereof granted by this lease nor the improvements or any
part thereof on said land without the prior written consent of Lessor. Lessor
may condition such consent upon an increase in the rental provided for in this
lease and may require other conditions or covenants before consenting to an
assignment or sublease. Such additional rental, conditions or covenants shall
not be unreasonable but shall be in accord with the proper trust administration
of the land granted by this lease.
-2-
<PAGE>
8. HOLDING OVER. If Lessee occupies the land granted by this
lease after the termination or cancellation of this lease for the purpose of
removing Lessee's property, the rent due Lessor for such use and occupancy shall
be $200.00 per day.
9. DEFAULT AND CANCELLATION. The violation by Lessee of any of
the terms, conditions or covenants of this lease or the nonpayment by Lessee of
the rent due under this lease shall be considered a default and shall lead to
the cancellation of this lease 30 days after Lessor has sent written notice of
such default to the Lessee by registered mail; provided, however, said
cancellation shall not be made if within the 30-day notice period Lessee cures
or remedies said default or otherwise complies with any demand contained within
such written notice which leads to the cure or remedy of a default. The mailing
of the notice as provided in this paragraph shall constitute notice of the
intention of Lessor to cancel this lease and no proof of receipt of such notice
shall be necessary or required.
10. RENEWAL.. If at the expiration of the initial term of this
lease or the term of any renewal, Lessor desires to lease the land granted by
this lease for the same permitted use as allowed in this lease for a term of no
more than 5 years, Lessor shall so notify Lessee in writing by mailing notice 60
days prior to expiration of the lease term. Upon receipt of such notice, if
Lessee has complied with all the terms of this lease, Lessee may renew this
lease for a term of no more than 5 years subject to all the terms, conditions,
and covenants of this lease, and such additional or amended annual rental and
terms, conditions and covenants as Lessor may prescribe; provided, however, this
ease shall not be renewed if a third party has, in good faith, offered to pay a
higher annual rental than set by Lessor or offered by Lessee and Lessee has
failed to better such offer by an amount set by Lessor. Nothing contained in
this paragraph shall limit the right of Lessor at the termination of this lease
or any renewal. term to offer the land granted by this lease for sale or lease
at a public auction pursuant to law.
11. MAINTENANCE. Lessee shall maintain the land leased under
this lease and any improvements, fixtures or equipment on said land in a
workmanlike manner.
12. RELINQUISHMENT. At any time if all rentals then due and owed
have been fully paid and this lease is not in default, Lessee may relinquish
this lease to Lessor and be relieved of any further obligations under this
lease. Relinquishment shall be made on a form provided by Lessor and accompanied
by a fee of $30.00. Upon relinquishment Lessee shall not be entitled to a refund
of any rentals paid.
-3-
<PAGE>
13. EXISTING RIGHTS. This lease is entered into subject to any
and all valid existing rights in or on the land granted by this lease.
14. RESERVATIONS. Lessor reserves the right to execute leases on
the land granted by this lease for mining purposes and for the extraction of
petroleum, oil, gas, salt, geothermal resources, and other mineral deposits
there from and the right to go upon, explore for, mine, remove and sell same.
Lessor further reserves the right to grant rights-of-way and easements over,
upon, or across the said land for public highways, railroads, tramways,
telephone, telegraph and power lines, irrigation works ' sewer lines, drainage
ditches, mining, logging, and for other purposes.
15. COMPLIANCE WITH LAWS. Lessee shall at its own expense fully
comply with all laws, regulations, rules, ordinances, and requirements of the
applicable city, county, state and federal authorities and agencies which have
been or may be enacted or promulgated, in all matters and things affecting the
land granted by this lease and operations thereon. Such agencies shall not be
deemed third party beneficiaries under this lease.
16. HOLD HARMLESS. Lessee shall save and hold harmless,
indemnify and defend Lessor and the State of New Mexico and their agent or
agents, in their official and individual capacities, of and from any and all
liability claims, losses, or damages arising out of or alleged to arise out of
or indirectly connected with the operations of Lessee under this lease, off or
on the land granted by this lease or arising out of the presence on said land of
any agent, contractor or subcontractor of Lessee.
17. SCOPE OF AGREEMENT. This lease incorporates all the
agreements, covenants and understandings between Lessor and Lessee concerning
the land granted by this lease and the use permitted by this lease, and all such
agreements, covenants and understandings have been merged into this written
lease. No prior agreement or understanding, verbal or otherwise, between Lessor
and Lessee or their agents shall be valid or enforceable unless embodied in this
lease.
18. AMENDMENT. This lease shall not be altered, changed or
amended except by instrument in writing executed by Lessor and Lessee.
19. WAIVER. No waiver of any breach or default by Lessee of any
of the terms, conditions or covenants of this lease shall be held to be a waiver
of any subsequent breach. No waiver shall be valid or binding unless the same is
in writing and signed by Lessor.
-4-
<PAGE>
20. ATTORNEY'S FEES AND COSTS. Lessee agrees that if it is found
by a court of competent jurisdiction to have breached this lease, Lessor may
recover from Lessee reasonable attorney's fees and costs of litigation.
21. APPLICABLE LAW. This lease shall be governed by the law of
the State of New Mexico.
22. SUCCESSORS IN INTEREST. All terms, conditions and covenants
in this lease shall extend to and bind the heirs, assigns, agents, attorneys,
contractors and successors in interest of Lessor and Lessee.
Executed in duplicate.
Witness the hands and seals of Lessor and Lessee on the day and
year first above written.
_________________________________ __________________________
LESSEE LESSEE
_____________________________
COMMISSIONER OF PUBLIC LANDS
FOR A NATURAL PERSON ACTING IN HIS OWN RIGHT
State of_________________________________)
County of________________________________)
The foregoing instrument was acknowledged before me this______________
day of _____________________, 19____ by _____________________________
(name or names of persons or person or.
______________________________________________________________________
persons acknowledging).
_______________________________
Notary Public
My commission expires:
________________________
-5-
<PAGE>
FOR A NATURAL PERSON AS PRINCIPAL ACTING BY ATTORNEY-IN-FACT
State of____________________)
County of___________________)
The foregoing instrument was acknowledged before me this______________
day of _____________________, 19____ by ______________________________
(name or names of acknowledging
________________________________, partner(s) on behalf of ____________
partner or partners) (name of
______________________, a partnership.
partnership)
_____________________
Notary Public
My commission expires:
________________________
FOR A PARTNERSHIP ACTING BY ONE OR MORE PARTNERS
State of____________________)
County of___________________)
The foregoing instrument was acknowledged before me this______________
day of _____________________, 19____ by ______________________________
(name or names of acknowledging
________________________________, partner(s) on behalf of ____________
partner or partners) (name of
______________________, a partnership.
partnership)
_____________________
Notary Public
My commission expires:
________________________
-6-
<PAGE>
FOR A LIMITED PARTNERSHIP ACTING BY ONE OR MORE GENERAL PARTNERS
State of____________________)
County of___________________)
The foregoing instrument was acknowledged before me this _____________
day of ________________________, 19___ by ____________________________
(name of acknowledging general partner or
__________________________________, partner(s), on behalf of _________
partners)
__________________________________, a limited partnership.
limited partnership)
_____________________
Notary Public
My commission expires:
________________________
FOR A CORPORATION OR INCORPORATED ASSOCIATION
State of____________________)
County of___________________)
The foregoing instrument was acknowledged before me this _______________ day of
________________________, 19____ by ____________________________________________
(name of officer)
____________________________________ of _______________________________________,
(title of officer) (name of corporation acknowledging)
a ___________________________________ corporation, on behalf of the corporation.
(state or county of incorporation)
_____________________
Notary Public
My commission expires:
________________________
-7-
Lease No. 03-824.
STATE LAND DEPARTMENT
STATE OF ARIZONA
COMMERCIAL LEASE
THIS INDENTURE, made and entered into this 21ST day of SEPTEMBER, 1986
by and between the State of Arizona, hereinafter called the lessor, and BOWLIN'S
INCORPORATED A NEW MEXICO CORPORATION, of Albuquerque, State of New Mexico
hereinafter called the lessee:
WITNESSETH, that the State Land Commissioner, virtue of the authority
vested in him by law, and in consideration of the application heretofore made
and the covenants and agreements of this lease, hereinafter set forth, has this
day leased to the said lessee the State Land, as hereinafter described, subject
to any and all indebtedness that may be known to be due or that may be proven to
be due hereafter.
TO HAVE AND TO HOLD the same for the period ending the 20th day September,
1996, and subject to the conditions and reservations elsewhere set forth herein.
The lessee agrees to pay as rental therefor an amount to be determined by the
State Land Commissioner each year by an appraisal made by him, on this duly
authorized agent, as provided by law. The rental so fixed by the State Land
Commissioner will be due and payable annually in advance.
That it is further understood and agreed that this lease is issued for the
purpose of. Restaurant, retai1, fuel sales and other related commercial
purposes.
03-824
------
This is an amendment to the terms of lease 03-824 effective July 31, 1987. The
lease shall be amended according to this mutual agreement between the lessee and
the lessor as follows: Term 9.2 shall be amended to read as follows:
9.2 Notwithstanding anything to the contrary contained herein and irrespective
of any insurance carried by lessee for the benefit of lessor under the
provisions of this Article, lessee expressly agrees to protect and does hereby
indemnify and hold lessor and the premises harmless from any and all damages or
liabilities at any time occasioned by or arising out of (i) any act, activity or
omission of , its agents, servants, employees, sublessees, concessionaires, or
of anyone holding under lessee; (ii) the occupancy or use of the premises or any
part thereof by under lessee.
Attached to and made apart of commercial lease 03-824, issued by the State Land
commissioner of the State of Arizona to BOWLIN'S INCORPORATED, this 2nd day of
September, 1987.
- -Patricia Ryan- -Bowlin's Incorporated by William J. Mcabe, VP-
for State land Commissioner Lessee
Arizona State land Department
Lessor
Dated September 10, 1987
<PAGE>
IN WITNESS WHEREOF, the Arizona State Land Commissioner, by virtue of the
powers vested in him by law, has caused these presents to be executed by said
lessor, at Phoenix, Arizona, on the day and year first above written, and the
said lessee has hereunto affixed his signature at the place and on the day and
year as set forth herein.
STATE OF ARIZONA, LESSOR
By -Patricia Ryan-
(signature)
for the State Land commissioner
(SEAL)
Signed in the county of BERNALILLO State of NEW MEXICO on the 8th day of MAY,
1987.
Sign Here -Bowlin's Incorporated
by William Mcabe-
This lease is
issued in duplicate
<PAGE>
SUPPLEMENTAL CONDITIONS
(A) The lessee will not sub-let or assign the land herein described or this
least without the written consent of the State Land Commissioner, first
obtained, and will, upon the expiration of the lease, surrender peaceable
possession of the said land.
(B) The lessee will not permit any loss, nor commit or cause any waste in,
to or upon said land; nor cut or remove nor allow to be cut or removed any
timber or standing trees that may be upon said land, save and except only such
as may be necessary for the improvement of said land, (and then only with the
written consent of the State Land Commissioner) or for fuel for the domestic use
of said lessee; provided that nothing herein shall be construed to permit the
cutting of saw timber for any purpose.
(C) That the lessor excepts and reserves out of the grant hereby made, all
oils, gases, coal, ores, limestone, minerals, fossils, and fertilizers of every
name and description that may be found in or upon the land herein described, or
any part thereof.
(D) The lands herein described are subject to the execution by lessor of
drilling permits and leases for the purpose of prospecting for, and the
extraction of, oil and/or gases.
(E) That the lessor also reserves the right, as provided by law, to grant
to the United States rights-of-way and easements over, across or upon the lands
embraced in this lease for canals, reservoirs, dams, power or irrigating plants
or works, railroads, tramways, transmission lines or other purposes for
irrigation works in connect on wit any government reclamation project.
(F) That if, at any time after the execution of this lease, it is shown to
the satisfaction of the State Land Commissioner, that there has been fraud or
collusion upon the part of the lessee to obtain or hold this lease at a less
rental than its value, or through such fraud and collusion a former lessee of
said land has been allowed to escape payment of the rental due for the use of
said land by the former lessee, this least shall be null and void, at the option
of the State Land Commissioner, insofar as it relates to the land affected by
said fraud or collusion.
(G) That if at any time after the execution of this lease it is shown to
the satisfaction of the State Land Commissioner that the lessee herein has
misrepresented, by implication or otherwise, the value of the improvements
placed upon the land herein embraced by a former lessee, or any other person or
persons and the lessee herein not being the owner of said improvements at the
time of the execution of this lease, this lease shall be null and void, at the
option of the State Land Commissioner. insofar as it relates to the land upon
which said improvements are situated.
(H) If the lessee should fail to pay the agreed rental when due, or fail to
keep the covenants and agreements herein set forth, the State Land Commissioner,
at his option, may cancel said lease or declare the same forfeited in the manner
provided by law.
(1) That the State of Arizona shall be forever wholly absolved from any
liability for damages which might result to the lessee herein on account of this
lease having been forfeited for nonpayment of rentals due thereunder prior to
the expiration of the full time for which it is issued.
(J) It is understood by the lessee that the establishment of any water
right, or rights, shall be by and for the State of Arizona, and that no claim
thereto shall be made by said lessee; such rights shall attach to and become
appurtenant to the said land.
(K) If the lessee desires to place improvement on the land described herein
the approval or the State Land Commissioner must first be obtained. That the
lessee will, on or before the first day of July of each year during the term
herein specified, rile with lessor a sworn statement setting forth therein the
character of improvements constructed on said demised premises and the actual
cash value thereof.
(L) That said lessee shall have the fight to remove from said demised
premises, at the end of the term herein specified or upon the earlier
termination thereof, all buildings, structures or improvements of whatever
nature placed by it on said premises. Such fight to be exercised within thirty
(30) days from the date of the end of such term or earlier termination thereof.
(M) That said lessee shall give lessor thirty (30) days notice in writing
in advance of the abandonment of said premises or termination of these presents.
<PAGE>
SUPPLEMENTAL CONDITIONS
(cont.)
(N) The terms, conditions and covenants of this lease are subject to
present laws relating to state lands and the rights of both lessor and lessee
hereunder are each and all subject to such modifications as may be consistent
with such amendments, revisions or repeals of existing laws as may hereafter be
made and no provisions of this lease shall create any vested right in the lessee
herein.
(0) Any improvements placed on this commercial lease must conform to
existing Laws and Ordinances relative to commercial construction and maintenance
in the area where this land is located. Approval granted by regulators,
authorities will accompany application to place improvements when riled with the
State Land Department.
(P) That the lessor also reserves the right to grant rights-of-way and
casements over, across, or upon the lands embraced in this lease for public
highways, railroads, tramways, telephone, telegraph, transmission lines, pipe
lines, irrigation works, flood control, drainage works, logging and other
purposes, and this lease is issued subject to all existing rights-of-ways.
(Q) Lessee shall notify the Lessor in writing of the number of any license
issued by the State Tax Commission of Arizona to Lessee, any Sub-lessee,
Concessionaire or Assignee, and the name in which issued; Lessee, any
Sub-Lessee, Concessionaire or Assignee does hereby consent to the examination of
any such returns filed with the State Tax Commission by Lessee, any Sub-Lessee,
Concessionaire or Assignee.
(R) Lessee and each Sub-Tenant, Concessionaire or Assignee shall at all
times keep and maintain an accounting system and books of accounts and records
satisfactory to Lessor Lessee shall, at all times during business hours, have
access to such records at the place where the same are kept, for the purpose of
inspecting and auditing the same.
(S) Within 60 days after request is made by Lessor, Lessee shall file with
Lessor a statement of the total gross sales made for the period therein
specified; unless otherwise directed by Lessor, this report may be made by
riling with the Lessor the requested information on the form used by the State
Tax Commission of Arizona (Form ST-1, (1-68) at present) "Combined
Transaction-Privilege (sales) Tax, Education Excise Tax, and Special Excise Tax
for Education Return."
(T) Improvements made on or to the site, without the written consent of the
Lessor as required by Arizona Revised Statutes, Section 37-321, shall constitute
a breach of this lease and subject this lease to cancellation by Lessor.
(U) All buildings and structures shall be of new construction, and no
buildings or structures shall be moved from any other location onto the leased
premises without the prior written approval of Lessor.
(V) Gas, electric, power, telephone, water, sewer, cable television and
other utility or service lines of every nature whatsoever shall be placed and
kept underground (except to the extent, if any, such underground placement may
be prohibited by law) unless Lessor otherwise approves in writing.
(W) Prior to the approval of any application to place improvements on the
leased premises, the Lessee shall file with Lessor plans and specifications
(including but not limited to grading and landscape plans) showing the nature.
location, approximate costs, quality of proposed materials, size, area, height,
color, shape and design of the proposed improvements; the Lessor may also
require a perimeter survey of the leased premises, upon which shall be shown the
location of the completed improvements.
If the removal of plants protected under the Arizona Native plant law is
necessary to enjoy the privilege of this document, the permittee hereunder must
previously acquire the written permission of the Arizona State Land Department
and Arizona Commission of Agriculture and Horticulture to remove those plants.
The lease may be amended from time to time by mutual agreement of the
parties hereto, provided that the lessor deems such amendment to be in the best
interests of the State of Arizona.
The lessee acknowledges that lessee has not been induced to enter into this
lease agreement by any promises from the State Land Department or any of its
personnel that the premises being leased herein will be offered for sale at any
time.
<PAGE>
Lessee agrees and understands that all uses of the land not expressly
authorized or permitted by this lease are lease are expressly prohibited.
In any action arising out of this lease, the prevailing party is entitled
to recover reasonable attorneys' fees in addition to the amount of any judgment,
costs and other expenses as determined by the court. In the case of the lessor,
reasonable attorneys, fees shall be calculated at the reasonable market value
for such services when rendered by private counsel notwithstanding that it is
represented by the Arizona Attorney General's Office or other salaried counsel.
The Lessee agrees to indemnify, hold and save Lessor harmless against all
loss, damage, liability, expense, costs and charges incident to or resulting in
any way from any injuries to person or damage to property caused by or resulting
from the use, condition or occupation of the land.
CONDEMNATION
If at any time during the duration of this lease the whole or any part of
the leased premises shall be taken by direct sale, lease, institutional taking
or acquisition in any manner through condemnation proceedings or otherwise, for
any quasi-public or public purpose by any person, private or public corporation,
or any governmental agency having authority to exercise the power of eminent
domain or condemnation proceedings pursuant to any law, general, special or
otherwise. this lease shall expire on the date when the leased property shall be
so taken or acquired except that in the event of a partial taking the lease may
continue in full force and effect for those lands not taken, however, the lessee
shall have no compensable right or interest in the real property being condemned
and shall have no compensable right or interest in severance damages which may
accrue to the remaining lease property not acquired by condemnation proceedings.
Rent paid or to be paid by lessee shall be apportioned as of the date of such
taking and rent for any remaining land under the lease after the taking shall be
reduced proportionately to the acreage remaining under the lease to the lessee.
The State Land Department shall be entitled to and shall receive any and all
awards, including severance damage to remaining State lands, that may be made
for any eminent domain or condemnation proceedings concerning the land which is
the subject of this lease, except, that lessee shall have the right to receive
any and all awards or payments made for and, buildings or other improvements
lawfully placed on the subject property by the lessee with the approval of the
State Land Department.
Notice of State Authority to Cancel this Contract:
A. The State may cancel any contract, without penalty or further
obligation, made after September 4, 1978, by the State or any of its departments
or agencies if any person significantly involved in initiating, negotiating,
securing, drafting or creating the contract on behalf of the State or any of its
departments or agencies is, at any time while the contract or any extension of
the contract is in effect, an employee of any other party to the contract in any
capacity or a consultant to any other party of the contract with respect to the
subject matter of the contract.
B. The cancellation shall be effective when written notice from the
Governor is received by all other parties to the contract unless the notice
specifies a later time.
<PAGE>
DESCRIPTION OF LAND LEASED CONTAINED IN LEASE SUPPLEMET ATTACHED HERETO AND MADE
A PART HEREOF.
STATE OF ARIZONA
LAND DEPARTMENT
02-41-87 BOWLIN'S INC 03 00824 00
136 LOUISIANA NE LEASE NUMBER
ALBUQUERQUE NM 87108
Location Description Acres Beginning cc Fund
11 11 09.0 S 09.0 E M&B IN S2SW S OF 4.50 B1P 053 04
11 11 09.0 S 09.0 E HWY 84 FRONTAGE ROAD 0.00 B1P 053 04
TOTAL ACRERAGE 4.50
LESSEE SIGNATURE DATE
- -Bowlin's Incorporated by William J. Mcabe, VP 5/8/87
COMMISSIONER
- -Patricia Ryan for SLC 9/10/87
<PAGE>
ASSIGNMENT OF LEASE
Phoenix, Arizona
The application of .............................................................
................................................................................
for permission to assign Lease No........... and the application of ............
................................................................................
for the assumption of said Lease, having been duly considered this .............
day of ................., 19... and without waive, of State rights which may
exist against the lease assigned, and with this consent not to be construed as
initiating any new rights in assignee of lease, consent is hereby given for the
assignment applied for and it is ordered that the said Lease No ............ and
all rights thereunder be and are hereby transferred to the said.................
......................... I
By ..............................
For the State Commissioner
================================================================================
ASSIGNMENT OF LEASE
Phoenix, Arizona
The application of .............................................................
................................................................................
for permission to assign Lease No........... and the application of ............
................................................................................
for the assumption of said Lease, having been duly considered this .............
day of ................., 19... and without waive, of State rights which may
exist against the lease assigned, and with this consent not to be construed as
initiating any new rights in assignee of lease, consent is hereby given for the
assignment applied for and it is ordered that the said Lease No ............ and
all rights thereunder be and are hereby transferred to the said.................
......................... I
By ..............................
For the State Commissioner
<PAGE>
OTHER TERMS
-----------
03-824
1. "CPI" shall mean the Consumer Price Index, U.S. City Average for all
Urban Consumers--All Items (1967 equals 100) for the pertinent month, issued by
the Bureau of Labor Statistics of the U.S. Department of Labor. If the CPI shall
hereafter be converted to a different standard reference base or otherwise
revised, adjustments of rent based upon the CPI shall be made with the use of
such conversion factor, formula or table for converting the CPI as may be
published by the Bureau of Labor Statistics, or if said Bureau shall not publish
the same, then with the use of such conversion factor, formula or table as may
be published by any nationally recognized publisher of similar statistical
information. If the CPI shall cease to be published, there shall be substituted
therefore such index as Lessor selects as a reasonable substitute.
2. Lessee shall pay rent to lessor for the use and occupancy of the
premises during the term of this lease without offset or deduction except as
provided hereafter and, without notice or demand, at the times and in the
amounts as follows:
2.1 The base rent for the first year shall be $9,000 based on an appraises
land value of $20,000 per acre times 10% of land value for 4.5 acres. The
base rent for years two thru ten shall also be 10% of land value as
adjusted in term 3 and 4 below.
2.2 Lessee agrees to pay as annual rental, 2% of all gross receipts except
fuel sales. Lessee agrees to pay I of one cent per gallon of fuel sales.
"Gross Receipts" as used in this lease shall include all receipts and all
cash and credit revenue or any other consideration of lessee or any
persons, firms or corporations claiming through or under lessee as
sublessee, concessionaire, licensee or otherwise, at, in or upon the
premises as a result of operations permitted under this lease including all
revenues whether in cash or on a charge basis whether collected or
uncollected by lessee including but not limited to vending machines and
coin operated games.
2.3 The lessee shall pay the base rental as defined in 2.1 or the
percentage rental as defined in 2.2, whichever is greater.
2.4 The lessee shall pay, annually in advance, the lease rent as defined in
this agreement. At the end of each lease year, the annual rental amounts,
ad defined in item 2.2, for the lease year just ended shall be calculated.
If such calculated annual rental exceeds the base rental paid for that
year, such excess shall be paid to lessor within sixty (60) days after the
pertinent lease year end.
3. The land value shall be adjusted each lease year by the Consumer Price
Index but shall never be less than the previous lease year's rent, except when
valuations are made pursuant to term 4.
4. Lessor shall adjust the land value by reappraisal at the end of the
fifth year for rental rate charges in order to reflect changes in general
economic conditions.
<PAGE>
5 Lessee shall pay a penalty of five percent (5%) of any amount delinquent,
and shall pay daily interest on delinquent amount plus penalty for the rate by
the Arizona State Treasurer, according to law.
6. Lessee shall make application to place improvements on the leased
premises and have Department approval of such application prior to any
construction activities.
7. Any improvements placed upon the leased premises without prior written
permission of the Land Department, shall be forfeited and become property of the
State.
8. Lessee shall adhere to all rules, regulations, ordinances, and building
codes as promulgated by local jurisdictions and any applicable State agencies.
9. Insurance and Indemnity:
9.1 Lessor shall not be liable at any time for any lots, damage or injury
to the property or person of any person at any time, occasioned by or
arising out of (i) any act, activity or omission of lessee, its agents,
servants, employees, sublessees, concessionaires, or of Anyone holding
under lessee 2; and (ii) the occupancy or use of the 'leased premises or
any part thereof by or under lessee.
9.2 Notwithstanding anything to the contrary contained herein and
irrespective of any insurance carried by lessee for the benefit of lessor
under the provisions of this Article, lessee expressly agrees to protect
and does hereby indemnify and hold lessor and the premises harmless from
any and all damages or liabilities at any time occasioned by or arising out
of (i) any act, activity or omission of lessee, its agents, servants,
employees, sublessees, concessionaires, or of anyone holding under lessee;
(ii) the occupancy or use of the premises or any part thereof by or under
lessee; and (iii) any wrongful or negligent act, activity or omission of
lessor, its agents, servants or employees, it being the specific intent of
the parties to indemnify the State of Arizona for any and all losses,
claims, judgments and attorney's fees arising out of the contract.
9.3 Lessee, at its expense, shall at all times during the term and any
extension maintain in full force a policy or policies of comprehensive
liability insurance, including property damage, written by one or more
responsible insurance companies licensed to do business in the State of
Arizona, which insure lessee and lessor against liability for injury to
persons and property and death of any person or persons occurring in, on or
about the premises, or arising out of lessee's maintenance, use and
occupancy thereof. All public liability and personal property damage
policies shall contain a provision that lessor, named as an additional
insured, shall be entitled to recovery under the policies for any loss
occasioned to it, its servants, agents and employees by reason of the
negligence or wrongdoing of lessee, its servants, agents, employees,
sublessees, concessionaires. Further, the policies shall provide that their
coverage is primary over any other
<PAGE>
insurance coverage available to the lessor, its servants, agents and
employees. All policies of insurance delivered to lessor must contain a
provision that the company writing the policy shall give to lessor thirty
(30) days notice in writing in advance of any cancellation or lapse, or the
effective date of any reduction in the amounts of insurance.
9.4 The insurance shall afford protection to the limit of not less than
Five Hundred Thousand Dollars ($500,000.00) in respect to injury to or
death of one person; One Million Dollars ($1,000,000.00) in respect of any
one occurrence; and One Hundred Thousand Dollars ($100,000.00) with respect
to property damage.
9.5 Notwithstanding anything to the contrary in this Article, lessee's
obligations to carry the insurance provided for herein may be brought
within the coverage of a so-called blanket policy or policies of insurance
maintained by lessee, provided, however, that the coverage afforded lessor
will not be reduced by reason of the use of such blanket policy of
insurance.
9.6 Copies of all the executed policies of insurance or certificates
thereof shall be delivered to lessor prior to lessee's occupancy of the
premises.
<PAGE>
03-924
------
This is an amendment to the terms of lease 03-824 effective July 31, 1987.
The lease shall be amended according to this mutual agreement between the
lessee and the lessor as follows:
Term 9.2 shall be amended to read as follows:
9.2 Notwithstanding anything to the contrary contained herein and
irrespective of any insurance carried by lessee for the benefit of lessor
under the provisions of this Article, lessee expressly agrees to protect
and does hereby indemnify and hold lessor and the premises harmless from
any and all damages or liabilities at anytime occasioned by or arising out
of (i) any act, activity or emission of lessee,its agents, servants,
employees, sublessees, concessionaires, or of anyone holding under lessee;
(ii) the occupancy or use of the premises or any part thereof by under
lessee.
Attached to and made a part of Commercial Lease 03-824, issued by the State
Land Commissioner of the State of Arizona to BOWLIN'S INCORPORATED, this
27th day of August, 1987.
-Patricia Ryan- -Bowlin's' Incorporated by William Mcabe, VP
(signature) (signature)
State Land commissioner Lessee
Arizona State Land Department
Lessor
Date 8-27-87 8-19-87
<PAGE>
SUPPLEMENTAL CONDITIONS
(A) The lessee will not sublet or assign the land herein described or this
lease without the written consent of the State Land Commissioner, first
obtained, and will, upon the expiration of the lease, surrender peaceable
possession of the said land.
(B) The lessee will not permit any loss, nor commit or cause any waste in,
to or upon said land; nor cut or remove nor allow to be cut or removed any
timber or standing trees that may be upon said land, save and except only such
as may, be necessary for the improvement of said land, (and then only with the
written consent of the State Land Commissioner) or for fuel for the domestic use
of said lessee; provided that nothing herein shall be construed to permit the
cutting of saw timber for any purpose.
(C) That the lessor excepts and reserves out of the grant hereby made, all
oils, gases, coal, ores, limestone, minerals, fossils, and fertilizers of every
name and description that may be found in or upon the land herein described, or
any part thereof.
(D) The lands herein described are subject to the execution by lessor of
drilling permits and leases for the purpose of prospecting for, and the
extraction of, oil and/or gases.
(E) That the Lessor also reserves the right, as provided by law, to grant
to the United States rights-of-way and easements over across or upon the lands
embraced in this lease for canals, reservoirs, dams, power or irrigating plants
or works, railroads, tramways, transmission lines or other purposes, for
irrigation works in connection with any government reclamation project.
(F) That if at any time after the execution of this lease, it is shown to
the satisfaction of the State Land Commissioner, that there has been fraud or
collusion upon the part of the lessee to obtain or hold this lease at a less
rental than its value. or through such fraud and collusion a former lessee of
said land has been allowed to escape payment of the rental due for the use of
said land by the former lessee, this lease shall be null and void, at the option
of the State Land Commissioner. insofar as it relates to the land affected by
said fraud or collusion.
(G) That if at any time after the execution of this lease it is shown to
the satisfaction of the State Land Commissioner that the lessee herein has
misrepresented, by implication or otherwise, the value of the improvements
placed upon the land herein embraced by a former lessee, or any other person or
persons and the lessee herein not being the owner of said improvements at the
time of the execution of this lease, this lease shall be null and void, at the
option of the State Land Commissioner, insofar as it relates to the land upon
which said improvements are situated.
(H) If the lessee should fail to pay the agreed rental when due, or fail to
keep the covenants and agreements herein set forth, the State Land Commissioner,
at his option, may cancel said lease or declare the same forfeited in the manner
provided by law,.
(1) That the State of Arizona shall be forever wholly absolved from any
liability for damages which might result to the lessee herein on account of this
lease having been forfeited for nonpayment of rentals due thereunder prior to
the expiration of the full time for which it is issued.
(J) It is understood by the lessee that the establishment of any water
fight, or rights, shall be by and for the State of Arizona, and that no claim
thereto shall be made by said lessee; such rights shall attach to and become
appurtenant to the said land.
(K) If the lessee desires to place improvement on the land described herein
the approval of the State Land Commissioner must first be obtained. That the
lessee will, on or before the first day of July of each year during the term
herein specified, file with lessor a sworn statement setting forth therein the
character of improvements constructed 'd demised premises and the actual cash
value thereof.
(L) That said lessee shall have the right to remove from said demised
premises, at the end of the term herein specified or upon the earlier
termination thereof, all buildings, structures or improvements of whatever
nature placed by it said premises. Such right to be exercised within thirty (30)
days from the date of the end of such term or earlier on termination thereof.
(M) That said lessee shall give lessor thirty (30) days notice in writing
in advance of the abandonment of said premises or termination of these presents.
No. 03-88518
STATE LAND DEPARTMENT
STATE OF ARIZONA
COMMERCIAL LEASE
THIS INDENTURE, made and entered into this 11th day of June, 1986 by and
between the State of Arizona, herein called the lessor, and BOWLIN'S
INCORPORATED, A NEW MEXICO CORPORATION of Albuquerque, State of New Mexico,
herein called the lessee:
WITNESSETH, that the State Land Commissioner, by virtue of the authority
vested in him by law, and in consideration of the application heretofore made,
and the covenants and agreements of this lease, hereinafter set forth, has this
day leased to the said lessee the State Land, as hereinafter described, subject
to any and all indebtedness that may, be know, to be due or that may be proven
to be due hereafter.
TO HAVE, AND TO HOLD the same for the period ending the. 10th day of June,
1996, and subject to the conditions and reservations elsewhere set forth herein.
The lessee agrees to pay as rental therefore an amount to be determined by the
State Land Commissioner each year by an appraisal made by him, or his duly
authorized agent, as provided by law. The rental so fixed by the State land
Commissioner will be due and payable annually in advance.
That it is further under-stood and agreed that this lease is issued for the
purpose of: Restaurant, retai1, fuel sale, and other related commercial
purposes.
IT IS HEREBY COVENANTED AND AGREED by both parties hereto that this lease is
issued subject to all the provisions and requirements thereto, which are found
in the various Acts of the Legislature of the State of Arizona, the same as
though they were fully set forth herein.
IT IS HEREBY FURTHER COVENANTED AND AGREED that all of the covenants,
conditions and agreements, included in this lease, shall be, become and are a
part of the lease, the same as though set forth in full over the signatures of
the contracting parties hereto.
NOTICE TO ANYONE DEALING WITH THIS DOCUMENT This document
merely authorizes pursuit of its stated purposes; its
existence does not constitute a rending by the and
Department that those purposes may be pursued profitable.
1
<PAGE>
IN WITNESS WHEREOF, the Arizona State Land Commissioner, by virtue of the
powers vested in him by law, has caused these presents to be executed by said
lessor, at Phoenix, Arizona, on the day and year first above written and the
said lessee has hereunto affixed his signature at the place and on the day and
year as set forth herein.
STATE OF ARIZONA, LESSOR
By /s/ Pat L. Ryan
-------------------------------------
For the State Land Commissioner
(SEAL)
Signed in the County of MARICOPA, State of Arizona, on the 29th day of December,
1986.
(Sign Here) Bowlin's Incorporated by:
/s/ Signature Illegible E.V.P.
-------------------------------
Lessee
(Sign Here)
-------------------------------
Lessee
This lease is
issued in duplicate
2
<PAGE>
SUPPLEMENTAL CONDITIONS
(A) The lessee will not sublet or assign the land herein described or this
lease without the written consent of the State Land Commissioner, first
obtained, and will, upon the expiration of the lease, surrender peaceable
possession of the said land.
(B) The lessee will not permit any loss, nor commit or cause any waste in,
to or upon said land; nor cut or remove nor allow to be cut or removed any
timber or standing trees that may be upon said land, save and except only such
as may, be necessary for the improvement of said land, (and then only with the
written consent of the State Land Commissioner) or for fuel for the domestic use
of said lessee; provided that nothing herein shall be construed to permit the
cutting of saw timber for any purpose.
(C) That the lessor excepts and reserves out of the grant hereby made, all
oils, gases, coal, ores, limestone, minerals, fossils, and fertilizers of every
name and description that may be found in or upon the land herein described, or
any part thereof.
(D) The lands herein described are subject to the execution by lessor of
drilling permits and leases for the purpose of prospecting for, and the
extraction of, oil and/or gases.
(E) That the Lessor also reserves the right, as provided by law, to grant
to the United States rights-of-way and easements over across or upon the lands
embraced in this lease for canals, reservoirs, dams, power or irrigating plants
or works, railroads, tramways, transmission lines or other purposes, for
irrigation works in connection with any government reclamation project.
(F) That if at any time after the execution of this lease, it is shown to
the satisfaction of the State Land Commissioner, that there has been fraud or
collusion upon the part of the lessee to obtain or hold this lease at a less
rental than its value. or through such fraud and collusion a former lessee of
said land has been allowed to escape payment of the rental due for the use of
said land by the former lessee, this lease shall be null and void, at the option
of the State Land Commissioner. insofar as it relates to the land affected by
said fraud or collusion.
(G) That if at any time after the execution of this lease it is shown to
the satisfaction of the State Land Commissioner that the lessee herein has
misrepresented, by implication or otherwise, the value of the improvements
placed upon the land herein embraced by a former lessee, or any other person or
persons and the lessee herein not being the owner of said improvements at the
time of the execution of this lease, this lease shall be null and void, at the
option of the State Land Commissioner, insofar as it relates to the land upon
which said improvements are situated.
(H) If the lessee should fail to pay the agreed rental when due, or fail to
keep the covenants and agreements herein set forth, the State Land Commissioner,
at his option, may cancel said lease or declare the same forfeited in the manner
provided by law.
(I) That the State of Arizona shall be forever wholly absolved from any
liability for damages which might result to the lessee herein on account of this
lease having been forfeited for nonpayment of rentals due thereunder prior to
the expiration of the full time for which it is issued.
(J) It is understood by the lessee that the establishment of any water
fight, or rights, shall be by and for the State of Arizona, and that no claim
thereto shall be made by said lessee; such rights shall attach to and become
appurtenant to the said land.
(K) If the lessee desires to place improvement on the land described herein
the approval of the State Land Commissioner must first be obtained. That the
lessee will, on or before the first day of July of each year during the term
herein specified, file with lessor a sworn statement setting forth therein the
character of improvements constructed 'd demised premises and the actual cash
value thereof.
(L) That said lessee shall have the right to remove from said demised
premises, at the end of the term herein specified or upon the earlier
termination thereof, all buildings, structures or improvements of whatever
nature placed by it said premises. Such right to be exercised within thirty (30)
days from the date of the end of such term or earlier on termination thereof.
(M) That said lessee shall give lessor thirty (30) days notice in writing
in advance of the abandonment of said premises or termination of these presents.
(Continued)
3
<PAGE>
SUPPLEMENTAL CONDITIONS
(cont.)
(N) The terms, conditions and covenants of this lease are subject to
present laws relating to state lands and the rights of both lessor and lessee
hereunder are each and all subject to such modifications as may be consistent
with such amendments, revisions or repeals of existing laws as may hereafter be
made and no provisions of this lease shall create any vested right in the lessee
herein.
(0) Any improvements placed on this commercial lease must conform to
existing Laws and Ordinances relative to commercial construction and maintenance
in the area where this land is located. Approval granted by regulatory
authorities will accompany application to place improvements when riled with the
State Land Department.
(P) That the lessor also reserves the right to grant rights-of-way and
easements over, across, or upon the lands embraced in this lease for public
highways, railroads, tramways, telephone, telegraph, transmission lines, pipe
lines, irrigation works, flood control, drainage works, logging and other
purposes, and this lease is issued subject to all existing rights-of-ways.
(Q) Lessee shall notify (he Lessor in writing of the number of any license
issued by the State Tax Commission of Arizona to Lessee, any Sub-lessee,
Concessionaire or Assignee, and the name in which issued; Lessee, any
Sub-Lessee, Concessionaire or Assignee does hereby consent to the examination of
any such returns filed with the State Tax Commission by Lessee, any Sub-Lessee,
Concessionaire or Assignee.
(R) Lessee and each Sub-Tenant, Concessionaire or Assignee shall at all
times keep and maintain an accounting system and books of accounts and records
satisfactory to Lessor Lessee shall, at all times during business hours, have
access to such records at the place where the same are kept, for the purpose of
inspecting and auditing the same.
(S) Within 60 days after request is made by Lessor, Lessee shall file with
Lessor a statement of the total gross sales made for the period therein
specified; unless otherwise directed by Lessor, this report may be made by
filing with the Lessor the requested information on the form used by the State
Tax Commission of Arizona (Form ST-1. (1-68) at present) "Combined
Transaction-Privilege (sales) Tax, Education Excise Tax, and Special Excise Tax
for Education Return."
(T) Improvements made on or to the site, without the written consent of the
Lessor as required by Arizona Revised Statutes, Section 37-321, shall constitute
a breach of this lease and subject this lease to cancellation by Lessor.
(U) All buildings and structures shall be of new construction, and no
buildings or structures shall be moved from any other location onto the leased
premises without the prior written approval of Lessor.
(V) Gas, electric, power, telephone, water, sewer, cable television and
other utility or service lines of every nature whatsoever shall be placed and
kept underground (except to the extent, if any, such underground placement may
be prohibited by law) unless Lessor otherwise approves in writing.
(W) Prior to the approval of any application to place improvements on the
leased premises, the Lessee shall file with lessor plans and specifications
(including but not limited to grading and landscape plans) showing the nature,
location, approximate costs, quality of proposed materials, size, area, height,
color, shape and design of the proposed improvements, the Lessor may also
require a perimeter survey of the leased premises, upon which shall be shown the
location of the completed improvements.
If the removal of plants protected under the Arizona Native plant law is
necessary to enjoy the privilege of this document, the permittee hereunder must
previously acquire the written permission of the Arizona State Land Department
and Arizona Commission of Agriculture and Horticulture to remove those plants.
The lease may be amended from time to time by mutual agreement of the parties
hereto, provided that the lessor deems such amendment to be in the best
interests of the State of Arizona.
The lessee acknowledges that lessee has not been induced to enter into this
lease agreement by any promises from the State Land Department or any of its
personnel that the premises being leased herein will be offered for sale at any
time.
(Continued)
4
<PAGE>
missing--
expressly prohibited.
In any action arising out of this lease, the prevailing party is entitled to
recover reasonable attorneys' fees in addition to the amount of any judgment,
costs and other expenses as determined by the court. In the case of the lessor,
reasonable attorneys' fees shall be calculated at the reasonable market value
for such services when rendered by private counsel notwithstanding that it is
represented by the Arizona Attorney General's Office or other salaried counsel.
The Lessee agrees to indemnify, hold and save Lessor harmless against all loss,
damage, liability, expense, costs and charges incident to or resulting in any
way from any injuries to person or damage to property caused by or resulting
from the use, condition or occupation of the land.
CONDEMNATION
If at any time during the duration of this lease the whole or any part of the
leased premises shall be taken by direct sale, lease, institutional taking or
acquisition in any manner though condemnation proceedings or otherwise, for any
quasi-public or public purpose by any person, private or public corporation, or
any governmental agency having authority to exercise the power of eminent domain
or condemnation proceedings pursuant to any law, general, special or otherwise.
this lease shall expire on the date when the leased property shall be so taken
or acquired except that in the event of a partial taking the lease may, continue
in full force and effect for those lands not taken, however, the lessee shall
have no compensable right or interest in the real property being condemned and
shall have no compensable right or interest in severance damages which may
accrue to the remaining lease property not acquired by condemnation proceedings.
Rent paid or to be paid by lessee shall be apportioned as of the date of such
taking and rent for any remaining land under the lease after the taking shall be
reduced proportionately to the acreage remaining under the lease to the lessee.
The State Land Department shall be entitled to and shall receive any and all
awards, including severance damage to remaining State Lands, that may be made
for any eminent domain or condemnation proceedings concerning the land which is
the subject of this lease, except that lessee shall have the right to receive
any and all awards or payments made for any buildings or other improvements
lawfully placed on the subject property by the lessee with the approval of the
State Land Department.
Notice of State Authority to Cancel this Contract:
A. The State may cancel any contract, without penalty or further obligation,
made after September 4, 1978, by the State or any, of its departments or
agencies if any person significantly involved in initiating, negotiating,
securing, drafting or creating the contract on behalf of the State or any of its
departments or agencies is, at any time while the contract or any, extension of
the contract is in effect, an employee of any other party to the contract in any
capacity or a consultant to any other party of the contract with respect to the
subject matter of the contract.
B. The cancellation shall be effective when written notice from the Governor is
received by all other parties to the contract useless the notice specifies a
later time.
5
<PAGE>
MADE A PART HEREOF
STATE OF ARIZONA
LAND DEPARTMENT
BOWLINS INCORPORATED
11-12-86 136 LOUISIANA N E LEASE NO. 0388518 00
ALBUQUERQUE NM 87108
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Locations Description Acres Beginning cc Fund
===================================================================================================
<S> <C> <C> <C> <C>
11 11 09.0S 09.0E PART SWLY BETWEEN 10.40 B1 053 04
- ---------------------------------------------------------------------------------------------------
11 11 09.0S 09.0E SR 84 AND I-10 AND 0.00 B1 053 04
- ---------------------------------------------------------------------------------------------------
11 11 09.0S 09.0E NWLY PICACHO TI 0.00 B1 053 04
- ---------------------------------------------------------------------------------------------------
</TABLE>
TOTAL ACRES 10.40
- -Bowlin's Incorporated by Date: 12/29/86
/s/ Signature Illegible EVP
/s/ Pat Ryan for SLC Date: 12/30/86
(signature)
<PAGE>
OTHER TERMS FOR COMMERCIAL LEASE 03-88518
-----------------------------------------
1. Site Development Plans and county approved as built construction plans
shall be submitted to the State Land Department by the lessee. Site
Development Plans shall be submitted for Department approval prior to
construction.
2. Lessee shall make application to place improvements on the leased
premises and have Department approval- of such application prior to any
construction activities.
3. Lessee shall adhere to all rules, regulations, ordinances, and building
codes as promulgated by local jurisdictions and any applicable State
agencies.
4. "CPI" shal.1 mean the Consumer Price Index, U.S. City Average for all
Urban Consumers--All Items (1967 equals 100) for the pertinent month,
issued by the Bureau of Labor Statistics of the U.S. Department of
Labor. If the CPI shall hereafter be converted to a different standard
reference base or otherwise revised, adjustments of rent based upon the
CPI shall be made with the use of such conversion factor, formula or
table for converting the CPI as may be published by the Bureau of Labor
Statistics, or if said Bureau shall not publish the same, then with the
use of such conversion factor, formula or table as may be published by
any nationally recognized publisher of similar statistical information.
If the CPI shall cease to be published, there shall be substituted
therefor such index as Lessor selects as a reasonable substitute.
5. Lessee shall pay rent to lessor for the use an d occupancy of the
premises during the term of this lease without offset or deduction
except as provided hereafter and, without notice or demand, at the
times and in the amounts as follows:
The annual rent shall be due on the anniversary of the commencement
date as follows:
5.1 The base rent for year one (1) shall be $1,200 which is based on
appraised land value of $12,229 per acre times 1% land value per year
for 10.4 acres. The base rent for years two (2) and three (3) shall
also be 1% of appraised land value, as that value is adjusted pursuant
to paragraph 6 below. Upon development of the leased land, but not
later than the fourth lease year, the base rent shall be 8% of
appraised land value as adjusted.
5.2 In addition the lessee agrees to pay as rental two and oneself
percent (2 1/2%) of all gross receipts except fuel sales. "Gross
Receipts" as used in this lease shall include all receipts and all cash
and credit revenue or any other consideration of lessee or any persons,
firms or corporations claiming through or under lessee as sublessees,
concessionaire, licensee or otherwise, at, in or upon the premises as a
result of operations permitted under this lease including all revenues
whether in cash or on a charge basis whether collected or uncollected
by lessee including but not limited to vending machines and coin
operated games.
<PAGE>
5.3 As additional rental lessee agrees to pay 1/4 of one cent per
gallon of fuel sales.
6. The appraised land value shall be adjusted each lease year by the
Consumer Price Index but shall never be less than the amount for the
previous lease year.
7. Lessor shall adjust the land value by reappraisal at the end of the
fifth year for rental rate charges in order to reflect changes in
general- economic conditions.
8. Lessee agrees to pay $2,275 for reimbursement of the previous lessee's
improvements. The total amount of reimbursement is $6,950. A payment of
$4,675 was received by the Department of 9/13/85 leaving a balance of
$2,275. This payment must accompany the accepted lease offer.
9. Insurance and Indemnity:
9.1 Lessor shall not be liable at any time for any loss, damage or
injury to the property or person of any person at any time, occasioned
by or arising out of (i) any act, activity or omission of lessee, its
agents, servants, employees, sublessees, concessionaires, or of anyone
holding under lessee; and (ii) the occupancy or use of the leased
premises or any part thereof by or under lessee.
9.2 Notwithstanding anything to the contrary contained herein and
irrespective of any insurance carried by lessee for the benefit of
lessor under the provisions of this Article, lessee expressly agrees to
protect and does hereby indemnify and hold lessor and the premises
harmless from any and all damages or liabilities at any time occasioned
by or arising out of (i) any act, activity or omission of lessee, its
agents, servants, employees, sublessees, concessionaires, or of anyone
holding under lessee; (ii) the occupancy or use of the premises or any
part thereof by or under lessee; and (iii) any wrongful or negligent
act, activity or omission of lessor, its agents, servants or employees,
it being the specific intent of the parties to indemnify the State of
Arizona for any and all losses, claims, judgments and attorney's fees
arising out of the contract even if they result from lessor's own
negligence or wrongdoing.
9.3 Lessee, at its expense, shall at all times during the term and any
extension maintain in full force a policy or policies of comprehensive
liability insurance, including property damage, written by one or more
responsible insurance companies licensed to do business in the State of
Arizona, which insure lessee and lessor against liability for injury to
persons and property and death of any person or persons occurring in,
on or about the premises, or arising out of lessee's maintenance, use
and occupancy thereof. All public liability and personal property
damage policies shall contain a provision that lessor, named as an
additional shall be entitled to recovery under the policies for any
employees.
3-88518
<PAGE>
03-88518
--------
this is an amendment to the terms of lease 03-88518 effective July 31, 1987. The
lease shall be amended according to this mutual agreement between the lessee and
the lessor as follows:
Term 9.2 shall be amended to read as follows:
9.2 Notwithstanding anything to the contrary contained herein and irrespective
of any insurance carried by lessee for the benefit of lessor under the
provisions of this Article, lessee expressly agrees to protect and does hereby
indemnify and hold lessor and the premises harmless from any and all damages or
liabilities at any time occasioned by or arising out of (i) any act, activity or
omission of lessee, its agents, servants, employees, sublessees,
concessionaires, or of anyone holding under lessee; (ii) the occupancy or use of
the premises or any part thereof by under lessee.
Attached to and made a part of Commercial Lease 03-88518, issued by the State
Land Commissioner of the State of Arizona to BOWLIN'S INCORPORATED, this 2nd day
of September, 1987.
Bowlin's Incorporated
/s/ Patricia Ryan /s/ by William Mcabe V.P.
- ----------------------------- ------------------------------
State land Commissioner Lessee
Arizona State Land Department
Lessor
September 16, 1987 9/2/87
------------------ ------
Date Date
<PAGE>
- -missing
reason of the negligence or wrongdoing of lessee, its servants, agents,
employees, sublessees, concessionaires. Further, the policies shall provide that
their coverage is primary over any other insurance coverage available to the
lessor, its servants, agents and employees. All policies of insurance delivered
to lessor must contain a provision that the company writing the policy shall
give to lessor thirty (30) days notice in writing in advance of any cancellation
or lapse, or the effective date of any reduction in the amounts of insurance.
9.4 The insurance shall afford protection to the limit of not less than Five
Hundred Thousand Dollars ($500,000.00) in respect to injury to or death of one
person; One Million Dollars ($1,000,000.00) in respect of any one occurrence;
And One Hundred Thousand Dollars ($100,000.00) with respect to property damage.
9.5 Notwithstanding anything to the contrary in this Article, lessee's
obligations to carry the insurance provided for herein may be brought within the
coverage of a so-called blanket policy or policies of insurance maintained by
lessee, provided, however, that the coverage afforded lessor will not be reduced
by reason of the use of such blanket policy of insurance.
9.6 copies of all the executed policies of insurance or certificates thereof
shall be delivered to lessor prior to lessee's occupancy of the premises.
<PAGE>
This is an amendment to the terms of lease 03-88518 effective May 15, 1987. The
lease shall be amended according to this mutual agreement between the lessee and
the lessor as follows:
5. Lessee shall pay rent to lessor for the use and occupancy of the premises
during the term of this lease without offset or deduction except as
provided hereafter and, without notice or demand, at the times and in the
amounts as follows:
The annual rent shall be due on the anniversary of the commencement date as
follows:
5.1. The base rent for year one (1) shall be $1,200 which is based on
appraised land value of $12,229 per acre times 1% land value per year for
10.4 acres. The base rent for years two (2) and three (3) shall also be 1%
of appraised land value, as that value is adjusted pursuant to paragraph 6
below. Upon development of the leased land, but not later than the fourth
lease year, the base rent shall be 10% of appraised land value as adjusted.
5.2 Lessee agrees to pay as annual rental 2% of all gross receipts except
fuel sales. Lessee agrees to pay 1/4 of one cent per gallon of fuel sales.
"Gross Receipts" as used in this lease shall include all receipts and all
cash and credit revenue or any other consideration of lessee or any
persons, firms or corporations claiming through or under lessee as
sublessee, concessionaire, licensee or otherwise, at, in or upon the
premises as a result of operations permitted under this lease including all
revenues whether in cash or on a charge basis whether collected or
uncollected by lessee including but not limited to vending machines and
coin operated games.
5.3 The lessee shall pay the base rental as defined in 5.1 or the
percentage as defined in 5.2, whichever is greater.
5.4 The lessee shall pay, annually in advance, the base rent as defined in
this agreement. At the end of each lease year, the annual rental amounts,
as defined in item 5.2, for the lease year just ended shall be calculated.
If such calculated annual rental exceeds the base rental paid for that
year, such shall be paid to lessor sixty (60) days after the pertinent
lease year end.
6. The land value shall be adjusted each lease year by the Consumer Price
Index, but such adjusted value shall never be less than the value
established for the previous lease year, except when valuations are made
pursuant to item 7 below.
<PAGE>
Term 9.2 shall be amended to read as follows :
9.2 Notwithstanding anything to the contrary contained herein and
irrespective of any insurance carried by lessee for the benefit of lessor
under the provisions of this Article, lessee expressly agrees to protect
and does hereby indemnify and hold lessor and the premises harmless from
any and all damages or liabilities at any time occasioned by or arising out
of (i) any act, activity or omission of lessee, its agents, servants,
employees, sublessees, concessionaires, or of anyone holding under lessee;
(ii) the occupancy or use of the premises or any part thereof by under
lessee; and (iii) any wrongful or negligent act, activity or omission of
lessor, its agents, servants or employees, it being the specific intent of
the parties to indemnify tile State of Arizona for any and all losses,
claims, judgments and attorney's fees arising out of the contract.
Attached to and made a part of Commercial Lease 03 88518, issued by The State
Land Commissioner of the State of Arizona to Bowlin's Inc. this 14th day of
August, 1987.
Bowlin's Incorporated by:
/s/ Patricia Ryan /s/ William Mcabe, V.P.
- ----------------------------- ---------------------------
State Land Commissioner Lessee
Arizona State land Department
Lessor
May 8, 1987
---------------------------
Date:
PROMISSORY NOTE
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<C> <C> <C> <C> <C> <C> <C> <C>
$535,000.00 08-23-1996 02-28-1997 50028855 030 002 53868 49MAP
Borrower: Bowlin's, Incorporated Lender: Norwest Bank New Mexico, National Association
150 Louisiana NE Journal Center Business Banking
Albuquerque, NM 87108 P.O. Box 1081
7412 Jefferson Blvd. NE
Albuquerque, NM 87109
============================================================================================================
Principal Amount: $535,000.00 Initial Rate: 9.250% Date of Note: August 23, 1996
</TABLE>
PROMISE TO PAY. Bowlin's, Incorporated ("Borrower") promises to pay to Norwest
Bank New Mexico, National Association ("Lender"), or order, In lawful money of
the United States of America, the principal amount of Five Hundred Thirty Five
Thousand & 00/100 Dollars ($53S,000.00), together with Interest on the unpaid
principal balance from August 23, 1996, until paid in full.
PAYMENT. Borrower will pay this loan In one principal payment of $535,000.00
plus Interest on February 28, 1997. This payment due February 28, 1997, will be
for all principal and accrued Interest not yet paid. In addition, Borrower will
pay regular monthly payments of all accrued unpaid Interest due as of each
payment date, beginning September 30, 1996, with all subsequent Interest
payments to be due on the same day of each month after that. Interest on this
Note is computed on a 365/366 simple interest basis; that is, by applying the
ratio of the annual interest rate over the number of days In a year (366 during
leap years), multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent Index which Is the NORWEST BANK
MINNESOTA, N.A. BASE LENDING RATE (the 'Index'). The Index is not necessarily
the lowest rate charged by Lender on Its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The Interest rate change will not occur more often than
each DAY. The Index currently Is 8.250% per annum. The Interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.000
percentage point over the Index, resulting In an Initial rate of 9.250% per
annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due.
LATE PAYMENTS. It any payment is not received by Lender within five calendar
days after the payment is due as provided In this Note (the "Due Date'), then
additional interest will accrue beginning on the sixth calendar day on the
entire unpaid principal balance at the rate of three percent (3%) per year (the
"Additional Interest') until all past-due payments and any Additional Interest
are paid in full. All payments received more than 5 calendar days after the Due
Date will be applied first to past due interest and principal, then to current
interest and current principal, and then to cost of collection.
APPLICATION OF REGULAR PAYMENTS. Notwithstanding any provision of this Note to
the contrary, any regularly scheduled installment payment of principal and
interest which is received before the due date of such payment, or which is
received within 5 calendar days after the due date, will be applied to interest
and to principal as if such payment were received on the due date.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower falls to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
Insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or Insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (g) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, and after Lender has notified borrower of said
Default and if such Default shall not be remedied within 15 days after such
notification then, Lender may declare the entire unpaid principal balance on
this Note and all accrued unpaid interest immediately due, without notice, and
then Borrower will pay that amount. Upon default, Including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable Interest rate on this Note to 6.000 percentage points
over the Index. The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.
This Note has been delivered to Lender and accepted by Lender In the State of
New Mexico. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Bernalillo County, the State of New
Mexico. This Note shall be governed by and construed in accordance with the laws
of the State of New Mexico.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts.
FINANCIAL STATEMENTS. I agree to provide to you, upon request, any financial
statements or information you may deem necessary. I warrant that all financial
statements and information I provide to you are or will be accurate, correct and
complete.
ARBITRATION. Lender and Borrower agree that, except for "Core Proceedings' under
the United States Bankruptcy Code, all disputes, claims and controversies
between them, whether individual, joint, or class In nature, arising from this
Note or otherwise, including, without limitation, contract and tort disputes,
shall be arbitrated pursuant to the Commercial Arbitration rules of the American
Arbitration Association (the "AAA'), upon request of either party. No act to
take or dispose of any collateral securing this Note shall constitute a waiver
of this arbitration agreement or be prohibited by this arbitration agreement.
This includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the uniform
Commercial Code.
Any disputes, claims or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any collateral
securing this Note, Including any claim to rescind, reform or otherwise modify
any agreement relating to the collateral securing this Note. shall also be
arbitrated, provided however that no arbitrator shall have the right or the
power to enjoin or restrain any act of any party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing In this Note shall preclude any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel, waiver,
laches and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of an
action for these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation and enforcement of this arbitration provision.
Any arbitration hereunder shall be conducted before one arbitrator who shall be
an attorney who has practiced in the area of commercial law for at least ten
(10) years or a retired judge at the District Court or an appellate court level.
The parties to the dispute or their representatives shall obtain from AAA a list
of persons meeting the criteria outlined above and the parties shall select the
person in the manner established by the AAA.
In any arbitration hereunder: (1) the arbitrator shall decide (by documents only
or with a hearing, at the arbitrator's discretion) any pre-hearing motions which
are substantially similar to pre-hearing motions to dismiss for failure to state
a claim or motions for summary adjudication; (2) discovery shall be permitted,
but shall be limited as provided in the New Mexico Rules of Civil Procedure,
with all discovery to be completed no later than 20 days before the hearing date
and within 180 days of the commencement of arbitration proceedings; and any
requests for an extension of the discovery periods, or any discovery disputes
shall be subject to final determination by the arbitrator; and (3) the
arbitrator shall award costs and expenses of the arbitration proceeding in
accordance with the Lender's Rights provisions of this Note.
LOAN AGREEMENT PROVISION. THIS PROMISSORY NOTE IS SUBJECT THAT CERTAIN LOAN
AGREEMENT DATED FEBRUARY 5, 1996,
<PAGE>
08-23-1996 PROMISSORY NOTE Page 2
Loan No 50028855 (Continued)
================================================================================
BETWEEN BOWLIN'S, INCORPORATED AND NORWEST BANK NEW MEXICO, NATIONAL
ASSOCIATION.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
Bowlin's, Incorporated
By: /s/ Michael L. Bowlin
-----------------------------
Michael L. Bowlin, President
================================================================================
COMMERCIAL GUARANTY
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<C> <C> <C> <C> <C> <C> <C> <C>
$535,000.00 08-23-1996 02-28-1997 50028855 030 002 53868 49MAP
Borrower: Bowlin's Incorporated Lender: Norwest Bank New Mexico, National Association
150 Louisiana NE Journal Center Business Banking
Albuquerque, NM 87108 P. O. Box 1081
7412 Jefferson Blvd. NE
Albuquerque, NM 87108
Guarantor: Michael L. Bowlin
9420 Pebble Beach NE
Albuquerque, NM 87111
</TABLE>
================================================================================
AMOUNT OF GUARANTY. The principal amount of this Guaranty is Four Million One
Hundred Twenty Six Thousand 00/100 Dollars ($4,126,000.00).
CONTINUING GUARANTY. For good and valuable consideration, Michael L. Bowlin
("Guarantor") absolutely and unconditionally guarantees and promises to pay to
Norwest Bank New Mexico, National Association ("Lender") or its order, in legal
tender of the United States of America, the Indebtedness (as that term Is
defined below) of Bowlin's, Incorporated ("Borrower") to Lender on the terms and
conditions set forth in this Guaranty. The obligations of Guarantor under this
Guaranty are continuing.
DEFINITIONS. The following words shall have the following meanings when used In
this Guaranty:
Borrower. The word "Borrower" means Bowlin's, Incorporated.
Guarantor. The word "Guarantor" means Michael L. Bowlin.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated August 23, 1996.
Indebtedness. The word "Indebtedness' is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and indebtedness to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, other obligations, and liabilities of
Borrower, or any of them, and any present or future judgments against
Borrower, or any of them, and whether any such indebtedness is voluntarily
or involuntarily incurred, due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined; whether Borrower
may be liable individually or jointly with others, or primarily or
secondarily, or as guarantor or surety; whether recovery on the
indebtedness may be or may become barred or unenforceable against Borrower
for any reason whatsoever; and whether the indebtedness arises from
transactions which may be voidable on account of infancy, insanity, ultra
vires, or otherwise.
Lender. The word 'Lender' means Norwest Bank New Mexico, National
Association, its successors and assigns.
Related Documents. The words 'Related Documents' mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $4,126,000.00,
plus all interest thereon, plus all of Lender's costs, expenses, and attorneys'
fees incurred in connection with or relating to (a) the collection of the
indebtedness, (b) the collection and sale of any collateral for the indebtedness
or this Guaranty, or (c) the enforcement of this Guaranty. Attorneys' fees
include, without limitation. attorneys' fees whether or not there is a lawsuit,
and if there is a lawsuit, any fees and costs for trial and appeals.
The above limitation on liability is not a restriction on the amount of the
indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties. The liability
of Guarantor will be the aggregate liability of Guarantor under the terms of
this Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor Intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all indebtedness
within the limits set forth in the preceding section of this Guaranty.
Accordingly, no payments made upon the indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the indebtedness or any of the indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, of any notice to Guarantor or
to Borrower, and will continue in full force until all indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be delivered to Lender at the address of Lender listed
above or such other place as Lender may designate in writing. Written revocation
of this Guaranty will apply only to advances or new indebtedness created after
actual receipt by Lender of Guarantor's written revocation. For this purpose and
without limitation, the term 'new Indebtedness' does not include indebtedness
which at the time of notice of revocation is contingent, unliquidated,
undetermined or not due and which later becomes absolute, liquidated, determined
or due, This Guaranty will continue to bind Guarantor for all indebtedness
incurred by Borrower or committed by Lender prior to receipt of Guarantor's
written notice of revocation, including any extensions, renewals. substitutions
or modifications of the indebtedness. All renewals, extensions, substitutions,
and modifications of the indebtedness granted after Guarantor's revocation, are
contemplated under this Guaranty and, specifically will not be considered to be
new indebtedness. This Guaranty shall bind the estate of Guarantor as to
indebtedness created both before and after the death or incapacity of Guarantor,
regardless of Lender's actual notice of Guarantor's death. Subject to the
foregoing, Guarantor's executor or administrator or other legal representative
may terminate this Guaranty in the same manner in which Guarantor might have
terminated it and with the same effect. Release of any other guarantor or
termination of any other guaranty of the indebtedness shall not affect the
liability of Guarantor under this Guaranty. A revocation received by Lender from
any one or more Guarantors shall not affect the liability of any remaining
Guarantors under this Guaranty. It is anticipated that fluctuations may occur in
the aggregate amount of indebtedness covered by this Guaranty, and it is
specifically acknowledged and agreed by Guarantor that reductions in the amount
of indebtedness, even to zero dollars ($0.00), prior to written revocation of
this Guaranty by Guarantor shall not constitute a termination of this Guaranty.
This Guaranty is binding upon Guarantor and Guarantor's heirs, successors and
assigns so long as any of the guaranteed indebtedness remains unpaid and even
though the indebtedness guaranteed may from time to time be zero dollars
($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the indebtedness or any part of the indebtedness,
including increases and decreases of the rate of interest on the indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
indebtedness, and exchange, enforce, waive, subordinate, fall or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
of payments and credits shall be made on the indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or quality in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has not and will not without the prior written consent of
Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise
dispose of all or substantially all of Guarantor's assets, or any interest
therein; (d) Lender has made no representation to Guarantor as to the
creditworthiness of Borrower; (e) upon Lender's request. Guarantor will provide
to Lender financial and credit information in form acceptable to Lender, and all
such financial information provided to Lender is true and correct in all
material respects and fairly presents the financial condition of Guarantor as of
the dates thereof, and no material adverse change has occurred In the financial
condition of Guarantor since the date of the financial statements; and (f)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis Information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events,
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that absent a request for information
<PAGE>
08-23-1996 COMMERCIAL GUARANTY Page 2
Loan No 50028855 (Continued)
================================================================================
Lender shall have no obligation to disclose to Guarantor any Information or
documents acquired by Lender In the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or In connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, Including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (a) to give
notice of the terms, time, and place. of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (f) to pursue any other
remedy within Lender's power; or (g) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become Insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
'creditor' of Borrower within the meaning of 11.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, Including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b) any
election of remedies by Lender which destroys or otherwise adversely affects
Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower
for reimbursement, including without limitation, any loss of rights Guarantor
may suffer by reason of any law limiting, qualifying, or discharging the
Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment In full in legal tender,
of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the
basis of unjustified impairment of any collateral for the Indebtedness; (a) any
statute of limitations, if at any time any action or suit brought by Lender
against Guarantor is commenced there is outstanding Indebtedness of Borrower to
Lender which Is not barred by any applicable statute of limitations; or (t) any
defenses given to guarantors at law or in equity other than actual payment and
performance of the Indebtedness. If payment Is made by Borrower, whether
voluntarily or otherwise, or by any third party, on the Indebtedness and
thereafter Lender Is forced to remit the amount of that payment to Borrower's
trustee in bankruptcy or to any similar person under any federal or state
bankruptcy law or law for the relief of debtors, the Indebtedness shall be
considered unpaid for the purpose of enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of Its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any
such-waiver is determined to be contrary to any applicable law or public policy,
such waiver shall be effective only to the e)dent permitted by law or public
policy.
LENDER'S RIGHT OF SETOFF. In addition to all lions upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security Interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held In a general or special account or deposit, whether held
jointly with someone else, or whether hold for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
Interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security Interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay in so
doing. Every right of setoff and security Interest shall continue in full force
and effect until such right of setoff or security interest is specifically
waived or released by an instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes Insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment In legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees. and Lender hereby is authorized, In the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
Amendments. This Guaranty, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Guaranty. No alteration of or amendment to this Guaranty shall
be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
Applicable Law. This Guaranty has been delivered to Lender and accepted by
Lender In the State of Now Mexico. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
Bernalillo County, State of New Mexico. This Guaranty shall be governed by
and construed In accordance with the laws of the State of New Mexico.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Guaranty.
Lender may pay someone else to help enforce this Guaranty, and Guarantor
shall pay the costs and expenses of such enforcement. Costs and expenses
Include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay or
Injunction), appeals, and any anticipated post-judgment collection services.
Guarantor also shall pay all court costs and such additional fees as may be
directed by the court.
*Specifically by Certified Return Receipt Mail
Notices. All notices required to be given by either party to the other under
this Guaranty shall be in writing, may be sent by telefacsimilie, and,
except for revocation notices by Guarantor, shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier,
or when deposited In the United States mail, first class postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above or to such other addresses as either party may designate to the
other In writing. All revocation notices by Guarantor shall be in writing
and shall be effective only upon delivery to Lender as provided above in the
section titled 'DURATION OF GUARANTY.' If there is more than one Guarantor,
notice to any Guarantor will constitute notice to all Guarantors. For notice
purposes, Guarantor agrees to keep Lender informed at all times of
Guarantor's current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor. then all words used in this Guaranty In the singular shall be
deemed to have been used In the plural where the context and construction so
require; and where there is more than one Borrower named in this Guaranty or
when this Guaranty is executed by more than one Guarantor, the words
'Borrower' and "Guarantor' respectively shall mean all and any one or more
of them. The words "Guarantor,' 'Borrower,' and "Lender' include the heirs,
successors, assigns, and transferees of each of them. Caption headings In
this Guaranty are for convenience purposes only and are not to be used to
Interpret or define the provisions of this Guaranty. If a court of competent
jurisdiction finds any provision of this Guaranty to be Invalid or
unenforceable as to any person or circumstance, such finding shall not
render that provision Invalid or unenforceable as to any other persons or
circumstances, and all provisions of this Guaranty In all other respects
shall remain valid and enforceable. If any one or more of Borrower or
Guarantor are corporations or partnerships, it is not necessary for Lender
to inquire Into the powers of Borrower or Guarantor or of the officers,
directors, partners, or agents acting or purporting to act on their behalf,
and any Indebtedness made or created in reliance upon the professed exercise
of such powers shall be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given In writing and signed by Lender. No
delay or omission on the part of Lender In exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Guaranty shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Guaranty. No prior waiver by Lender, nor any
course of dealing between Lender and Guarantor, shall constitute a waiver of
any of Lender's rights or of any of Guarantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Guaranty. the granting of such consent by Lender in any Instance shall not
constitute continuing consent to subsequent instances
<PAGE>
08-23-1996 COMMERCIAL GUARANTY Page 3
Loan No 50028855 (Continued)
================================================================================
where such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED AUGUST 23, 1996.
GUARANTOR:
X (Signature)
-------------------------
Michael L. Bowlin
- --------------------------------------------------------------------------------
INDIVIDUAL ACKNOWLEDGMENT
STATE OF New Mexico )
--------------
)ss
COUNTY OF Bernalillo )
-------------
This instrument was acknowledged before me on Aug, 23, 1996 by Michael L.
Bowlin.
(Signature)
------------------------------
Notary Public
My Commission Expires
10-11-99
- ----------------------
================================================================================
"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 10th day of March , 19 83 , by and between
Interstate Dairy Queen Corporation of the city of Atlanta , county of Fulton ,
and state of Georgia , herinafter referred to as "Licensor" and Bowlin's Inc.
d/b/a DQ/B of Edgewood, NM of the city of Edgewood county of Santa Fe , State of
New Mexico herein after referred to as "Licensee":
WHEREAS, Licensor is the exclusive licensee of American Dairy. Queen
Corporation in certain geographical areas including the territory hereinafter
defined of the right to use, license and permit others to use the "Dairy Queen"
trademark, service mark and trade name which has been registered in the United
States Patent Office, in each state of the union and in foreign countries as
well as those trademarks and service marks (hereinafter collectively referred to
as "Trademarks"), a list of which is attached hereto and made a part hereof as
Appendix A; and
WHEREAS, Licensor and its predecessors in interest acting under said
exclusive license instituted, developed, promoted, and established the "Dairy
Queen" franchise business and system in the aforesaid territory which consists
of the sale of dairy products, food products, beverages and other products and
services under said trademarks and utilizing in connection therewith certain
types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods together with advertising and promotion programs
developed from time to time; and
WHEREAS, it is the purpose of Licensor to provide to Licensee in a retail
store outlet an organization to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the trademarks and-to make available uniform and approved
equipment, supplies, ingredients, merchandising and business techniques and the
advertising and promotional programs of American Dairy Queen Corporation, and
WHEREAS, Licensee desires to operate a "Dairy Queen" retail store as part
of the "Dairy Queen" system and to enter into this operating Agreement subject
to the conditions and controls herein prescribed for the purpose of offering to
the public products and services of uniformly high quality and standards to the
end of protecting the interests of Licensee, of Licensor, of American Dairy
Queen Corporation and all other persons engaged in said business.
WHEREAS, it is the intent of both Licensor and Licensee to preserve within
the context of a "Dairy Queen" retail store continuing consumer confidence in
the reliability and quality of all products sold under any of the Trademarks;
and, each party desires that all products sold under any of the Trademarks,
consistently conform to the highest expectations of consumers of such products;
and, whereas, by this Agreement the parties contemplate that Licensee's store,
in addition to normal "Dairy Queen" food and beverage products, may also sell
Permitted Products, as defined hereinafter.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the grant by Licensor of this Operating Agreement and the
payment by Licensee of the participation fees provided in Paragraph 9 hereof, it
is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject to
Grant to all the terms, conditions and provisions hereof,
Licensee the right and license to:
Mailing Address: 1.1 Establish and operate a retail store
DQ of Edgewood under the name "Dairy Queen" at Interstate
c/o Bowlin's, Inc. 40 x State Route 344 Edgewood , New Mexico
136 Louisiana, N. E. 87015 hereinafter referred to as the
Albuquerque, NM 87108 "Authorized Location" (provided, however,
in the event an Authorized Location is not
designated on the date hereof, and such
location is not designated herein by
Licensor within ninety (90) days after such
date, this Agreement shall become null and
void and all deposit is including the
franchise fee shall be returned to
Licensee).
1.2 Use at the Authorized Location the
trademark on and in association with sale
of all uniform and approved products and
services as American may authorize from
time to time, with all approved sales
promotion programs relative thereto.
1.3 Use at the Authorized Location the
Trademarks on and in association with
the uniform equipment, supplies, and
ingredients for the products approved by
American.
1.4 Employ in the business of said store
the merchandising, advertising, promotion
and business methods and techniques
developed, adopted and approved by
American.
Acceptance by Licensee 2. Licensee hereby accepts the above license
from Licensor subject to all the terms, by
Licensee provisions and conditions hereof and
agrees that Licensee shall cause to have a "Dairy
Queen" store established within 180 days of the
date hereof (unless an extension of time is
expressly authorized in writing by Licensor), and
thereafter maintained and operated at the
Authorized Location, under Licencee's active and
continuous supervision
<PAGE>
and management and upon the standards hereinafter
provided. Licensee further expressly acknowledges
and agrees:
2.1 American is the owner of all right,
title and interest in and to the trademark,
and the good will attributable thereto of
the business in connection with which said
Trademarks have been, and are and will be
used at the Authorized Location. Licensor
is the licensee of the right to use the
Trademarks in the territory which includes
the Authorized Location. Specifically, but
without limiting the foregoing, Licensee
disclaims any and all right, title and
interest in or to the Trademarks and to the
good will associated with the Trademarks of
the "Dairy Queen" retail store at the
Authorized Location and acknowledges and
agrees that all such good will is the
exclusive property of American.
2.2 The trademarks are valuable property
rights owned by American.
2.3 The trademarks shall be used only in
connection with such products and services
as may be approved or specified by American
and shall at all times be used only in a
manner approved by American.
2.4 Licensee's rights to the use of
trademarks is specifically limited to
Licensee's retail store operation at
Authorized Location.
2.5 Licensee shall use no other trademarks,
trade names or service marks in said
business except those authorized by
American and as set forth in Appendix A
except by the prior written consent of
American.
2.6 Licensee shall not use the words "Dairy
Queen" or any of the Trademarks, or any
word or mark similar thereto, as a part of
its corporate or business name unless first
approved in writing by American, and shall
use only the word "Dairy Queen" and no
other words whatsoever except with the
express written consent of American as the
trade name on the store from which the said
products and services are sold. In the
event American does approve the use of the
words "Dairy Queen", or any of the
Trademarks, as a part of Licensee's
corporate or business name Licensee shall
cause such name to be changed so as to
eliminate those words and
<PAGE>
Trademarks from the name within thirty (30)
days after termination of this Agreement.
2.7 Licensee shall adopt and follow in good
faith the systems, programs and methods
prescribed by Licensor for Licensee's
retail operation in accordance with this
Operating Agreement.
2.8 Neither Licensee nor any person owning
an interest directly or indirectly in
Licensee shall directly or indirectly
operate or permit to be operated or hold
any interest (other then 1% or less of any
outstanding stock or debt of any class of
any public company) in any restaurant or
fast-food business other than a Bowlin's or
its affiliates at the time of signing or
one authorized by this Agreement without
the prior written consent of Licensor.
Term 3. The License granted herein shall continue
until terminated by Licensee, with or without
cause, on sixty (60) days prior written notice to
Licensor, or until otherwise terminated by either
Licensee or Licensor in accordance with the
provisions of this Agreement.
TRADEMARK STANDARDS AND REQUIREMENTS
General Declarations 4. Licensee agrees that nothing in this agreement
gives him the right to use the Trademarks except
the right to use the same under the terms and
conditions of this Agreement and that Licensee's
use there of injures to the benefit of American.
Specifically, but without limiting the foregoing,
Licensee acknowledges and agrees that American has
the right and may distribute for its own account
products identified by the Trademarks through not
only "Dairy Queen" retail stores but through any
other distribution method which may from time to
time be established.
Use of Trademarks 4.1 Licensee shall confine his use the
trademarks to the sales promotion programs,
sale of products and services which shall
in quality, mode and conditions of
manufacture and sale, comply with such
standards as are established or approved by
American. In order to promote and protect
the business interests of each of the
parties, the value of the "Dairy Queen"
business and the business interests of
other persons engaged therein, uniformity
shall be maintained in the type, standard
and
<PAGE>
quality of stores, equipment, supplies and
ingredients used therein, and the
conditions of preparation and the
procedures employed in the sale of said
products and services.
Acknowledgment of Necessity of 4.2 Licensee agrees that the provisions,
Uniformity restrictions and controls provided in this
Operating Agreement are all necessary,
reasonable and desirable for such purposes
and that Licensee's said business shall be
conducted in accordance with American's
uniform requirements with respect to
quality, production, appearance,
cleanliness, service, merchandising and
advertising standards. Licensee
acknowledges and agrees that substantial
uniformity in facilities, products,
services and operations are essential to
the conduct of a system such as the "Dairy
Queen" system, and therefore further agrees
to honor and implement recommendations of
American and Licensor directed to enhancing
and furthering such uniformity.
Equipment and Supplies 4.3 Licensee agrees to purchase and use, in
the operation of Licensee's "Dairy Queen"
retail store, only equipment, supplies,
ingredients and services which are approved
by American or by Licensor. Nothing herein
shall be constructed as an attempt to limit
unreasonably the sources from which
Licensee may procure equipment, supplies,
ingredients or services. Rather, it is the
intention of the parties that such items
conform to American's standards and
specifications of consistent quality and
uniformity. Nothing contained herein shall
be deemed to require Licensor to approve an
inordinate number of suppliers of a given
item or service w3hich in the reasonable
judgment of American or licensor would
result in licensees or prevent effective
and economical supervision of suppliers by
approval of additional suppliers shall be
in writing and shall contain such
information as American and Licensor may
reasonably request. American and Licensor
reserve the right to charge back to
Licensee or the proposed supplier all
reasonable expenses incurred in considering
requests for approval.
Approved Adaptations 4.4 Complete and detailed uniformity under
many varying conditions may not be possible
or practical and Licensor and
<PAGE>
American reserve the right and privilege,
at Licensor's and American's sole
discretion and as Licensor's and American
may deem in the best interests of all
concerned in any specific instance, to vary
Standards to accommodate special needs of
Licensee's Authorized Site or that of any
other like based on the peculiar site or
location, density of population, business
potential, population of trade area,
existing business practices, requirements
of local law, or any other condition which
Licensor deems to be of importance to the
successful operation of a like business.
Litigation 4.5 In the event that any person, firm or
company, who is not a licensee or
franchisee of American or Licensor, uses or
infringes upon the Trademarks, American
shall control all litigation and shall be
the sole judge as to whether or not suit
shall be instituted or other action taken.
Notice of Potential 4.6 Licensor and American hereby advise
American and/or Licensee the licensor, American and /or
Licensor Profit affiliates of American and/or Licensor may
from time to time make available to
Licensee goods, products and/or services
for use in Licensee's "Dairy Queen" retail
store in respect to the sale or provision
of which Licensor, American and/or
affiliates of American and/or Licensor may
make a profit. Licensor further advises
Licensee that Licensor, American and/or
affiliates of American and/or Licensor may
from time to time receive consideration
from suppliers and /or manufactures in
consideration of such services provided or
rights licensed to such persons by
American, Licensor or their respective
affiliates.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall
control with respect to Licensee's Authorized
Location and retail store:
Store Facility 5.1 Licensee agrees that the retail store
shall constructed and equipped in
accordance with American's currently
approved specifications and standards in
respect to building, equipment, inventory,
signage, fixtures, location and design and
accessory features.
Future Alteration 5.2 Any replacement, reconstruction,
addition or modification in building,
equipment or signage, to be made hereafter,
whether at the request of
<PAGE>
Licensee or of Licensor, shall be made in
accordance with written specifications
approved by Licensor or American. Licensor
and American shall not unreasonably
withhold such approval.
Maintenance 5.3 The building, equipment and signage
employed in the conduct of Licensee's
business shall be maintained in accordance
with an annual maintenance list prepared by
Licensor and based upon periodic
inspections of the premises by Licensor's
representatives. Within a period of ninety
(90) days after the receipt of such annual
maintenance list, Licensee shall effect the
items of maintenance reasonably provided
therein including the repair of defective
items and/or the replacement of
unrepairable or obsolete items of equipment
and signage. Routine maintenance shall be
conducted in accordance with general
schedules published by Licensor or American
and made available to Licensee.
Relocation 5.4 Should it become necessary, on account
of condemnation, sale, or other cause,
including expiration or cancellation of
lease or rental contract, to relocate said
store, Licensor shall grant Licensee
authority to do so within a radius of 1,000
yards of the Authorized Location, provided
the new site is reasonably suited for a
"Dairy Queen" retail store in accordance
with Licensor's standards for store sites,
does not infringe on rights of another
licensee, is reasonably distant from other
"Dairy Queen" retail stores, and the new
retail store is constructed, equipped and
opened for business in accordance with the
current standards of American at that time
within one year after discontinuing
operation of a "Dairy Queen" retail store
at the previous Authorized Location.
Modernization and/or 5.5 Each and every transfer as provided in
Replacement of Time of Paragraph 9.10 hereof shall be expressly
Transfer conditioned upon Licensee promptly
performing and effecting such items of
modernization and/or replacement of
building, equipment, and signage as may be
necessary to permit the same to conform to
the standards then prescribed by American
for similarly situated store operations.
Licensee recognizes and acknowledges that
the requirements of this paragraph 5.5 are
both reasonable and necessary to insure
continued public acceptance and patronage
and to avoid deterioration
<PAGE>
or obsolescence in the business conducted
hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with
respect to products and operations:
Authorized Product Line 6.1 Licensee's business shall be confined
to the preparation and sale of only such
products as from time to time are
designated or approved by American for sale
by Licensees which are parties to this form
of Operating Agreement. The premises upon
which said business is operated shall not
be used for any other business and there
shall not be sold or offered for sale
therefrom any other product or service
(excepting the preparation, storage and
sale of Permitted Products) without the
written consent of American. Specifically,
but without limiting the foregoing,
alcoholic or intoxicating beverages shall
not be sold or offered for sale or
otherwise handled upon said premises.
Approved Menu 6.2 Attached hereto as Appendix B is the
currently approved menu for Licensee's
retail store. American may from time to
time make reasonable modifications to said
approved menu provided said modifications
are made in respect to all licensees which
have this form of Operating Agreement and
are located in similar areas of the
country. In addition, Licensee may from
time to time request variation from the
currently approved menu. Such variations
shall only be made with the written consent
of the American.
Authorized, Ingredients, 6.1 Licensee shall use in preparing
Formulas, Supplies, products only such ingredients, formulas,
Preparation; Subject to and supplies as are specified by American
Change by American and in such portions, sizes and appearance
and packaging as set forth in American's
most current "Store American Management
Operations Manual" and "products
preparation charts". Copies of the current
"Store management Operations Manual" and
"products preparation charts" have been
supplied to Licensee by Licensor
temporaneously with execution of this
Operating Agreement. Licensee acknowledges
and agrees that these may be changed from
time to time by American and that Licensee
is obligated to conform to the requirements
as so changed from time to time. All other
supplies, including cones, cups,
containers, eating utensils, napkins, and
all other customer service materials of all
description and types, shall meet the
standards of uniformity and quality as
<PAGE>
now or hereafter reasonably set by
American. Licensee shall be furnished with
lists of approved equipment, supplies,
ingredients and services.
Serving and Promotion Items 6.4 All sales promotional material,
customer "goodwill" items, cartons,
containers, wrappers and paper goods,
eating and serving utensils, customer
convenience items (including napkins, baby
bibs, and disposal containers), used in the
sales promotion, sale and distribution of
all products covered by this Operating
Agreement shall, where practicable, contain
one or more Trademarks and indicate that it
is produced and sold under authority of
American and shall be subject to approval
by Licensor or American before being used.
Maintenance and Sanitation 6.5 Licensee's said business shall be
operated and maintained at all times in
compliance with any and all reasonable
health and sanitary standards prescribed by
American or by governmental authority. In
addition to complying with such standards,
if such store shall be subject to any
sanitary or health inspection by any
governmental authorities under which it may
be rated in one or more than one
classification, it shall be maintained and
operated so as to be rated in the highest
available health and sanitary
classification with respect to each
governmental agency inspecting the same.
Inspection and Recommendation 6.6 American, Licensor or its authorized
representative shall have the right from
time to time to enter Licensee's store at
all reasonable times during the business
day for the purpose of making periodic
inspections to ascertain if all the
provisions of this Operating Agreement arc
being observed by Licensee and to inspect
Licensee's said store, lands, equipment,
and to test, sample and inspect his
supplies, ingredients and products, as well
as storage, preparation and formulation
thereof and the conditions of sanitation
and cleanliness in the storage, production,
handling and serving thereof.
Period of 6.7 Licensee's store shall be opened to the
Operation public and operated twelve months per year
and at least twelve hours each day of the
year. Any variance from this provision must
be authorized in writing by Licensor. Acts
of God, war, strikes or riots preventing
Licensee from temporarily complying with
the foregoing shall to that extent suspend
compliance
<PAGE>
therewith.
Notice of Existence of 6.8 Licensee acknowledges that he is aware
Different Forms of of the fact that present licensees of
License Agreements Licensor and American operate under a
number of different forms of agreement and
that consequently Licensor's and American's
obligations and rights in respect to their
respective licenses may differ materially
in certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall
control with respect to personnel, training and
supervision:
Management System 7.1 Licensee shall adopt and use as his
continuing operational routine the standard
"Dairy Queen" management system as well as
American's standards with respect to
product preparation, merchandising,
employee recruitment and training,
equipment and facility maintenance and
sanitation. From time to time American will
revise these programs to meet changing
conditions of retail operation in the best
interest of "Dairy Queen" retail stores,
and Licensee shall adopt and implement any
such changes.
Training 7.2 Licensee shall, at Licensee's expense,
attend American's store management training
program, at a place to be designated by
American, prior to the opening of
Licensee's store. In the event Licensee
fails to complete such training to the
reasonable satisfaction of American or
Licensor, Licensor may within thirty (30)
days thereafter declare this Agreement null
and void whereupon all deposits including
the franchise fee shall be returned to
Licensee. If during the term hereof
Licensee operates said store with a manager
other than himself, Licensee shall, at
Licensee's expense, cause such person to
attend and successfully complete such
training program.
Staffing 7.3 Licensee shall hire and supervise
efficient, competent, sober and courteous
operators and employees for the operation
of the business and set and pay their
wages, commissions and incentives with no
liability therefor on American or Licensor.
Licensee shall require all his employees to
work in clean uniforms approved by Licensor
but furnished at the cost of Licensee or
his employees as Licensee may determine. No
employee of Licensee shall be deemed to
<PAGE>
be an employee of Licensor or American for
any purpose(s)whatsoever.
Internal Training Program 7.4 Licensor shall provide or make
available to Licensee an in-store training
program for all store employees. Licensee
shall train and periodically re-train all
store employees using the training aids
made available by Licensor. From time to
time, American will revise such training
materials and aids and it or Licensor make
the same available to Licensee for
purchase.
Attendance at Meetings 7.5 Licensee, or manager of Licensee, at
Licensee's expense, shall attend at least
one national, regional or approved local
marketing area meeting each year which
Licensor and/or American originates for and
on behalf of "Dairy Queen" operators to set
forth new methods and programs in store
operation, training, management, sales and
sale promotion programs. Licensor further
strongly recommends that key employees of
Licensee also attend such meetings.
SALES PROMOTION PROGRAMS
Sales Promotion Programs 8.1 Licensor and Licensee, together with
and Payment to American other licensees of American, shall
of Expenses for cooperate in the sales promotion programs
Administering Same of approved products. To this end,
American has reserved the right to
establish and organize sales promotion
programs from time to time and Licensee
agrees to pay to Licensor for remittance to
American a sales promotion program fee as
set forth in Paragraph 9.1 hereof. Licensee
acknowledges and agrees that American has
had in the past, and shall in the future
have, the discretion to determine
expenditures of funds collected in respect
to sales promotion programs and as to the
selection of the promotional materials and
programs for which said expenditures are
made, provided, however, that American
shall make a good faith effort to expend
such funds in the general best interest of
participating licensees. Licensee
acknowledges and agrees that American may
compensate itself and/or its affiliates for
the expense of administering such sales
promotion programs. Licensor shall advise
Licensee annually of American's expenses in
administering said sales promotion
programs.
Sales Promotion Materials 8.2 Licensee shall only use such sales
promotion program or other advertising
materials as are furnished, approved or
made available by or through American.
<PAGE>
Said materials shall be used only in a
manner prescribed by American. American
shall not unreasonably withhold approval of
any reasonable sales promotion materials.
Yellow Pages 8.3 Licensee shall, if requested by
Licensor, list separately, or participate
in a listing, in the Yellow Pages of his
local telephone directory containing such
copy as may reasonably be specified by
Licensor. The cost of such listing shall be
paid by Licensee, or by Licensee and other
participating licensees in the case of a
joint listing. Licensor shall not specify
an unreasonably expensive listing.
FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-up, 9.1 Licensee shall pay to Licensor as a
Franchise, License and service and set-up fee $-0- of which $-0-
Sales Promotion has been paid upon the execution of this
Program Fees Agreement and a balance of $ -O.- is
payable in accordance with the terms of
Appendix C attached hereto. Said service
and set-up fee is intended to compensate
Licensor for its expenses incurred, and
services rendered in establishing and
setting up Licensee's initial operation. In
addition to said service and set-up fee,
during the full term of this Operating
Agreement, and in consideration of the
rights granted hereunder, Licensee shall
pay to Licensor as license fee in respect
to the rights granted herein a sum equal to
4% of gross retail sales, exclusive of
retail sales taxes, of all products, goods
and wares of every kind and nature sold
from, or in connection with the operation
of, Licensee's "Dairy Queen" retail store,
including, but without limiting the
generality of the foregoing, sales of all
products of any of the Trademarks as well
as sales of other merchandise whether or
not identified by other brand names and
which may be authorized for sale by
American or Licensor from time to time;
provided, notwithstanding the foregoing,
that no such continuing license fee shall
be payable with respect to sales of
Permitted Products. In addition, mittance
to American a sales promotion fee to be
expended in accordance with the provisions
of Paragraph 8.1. The sales promotion fee
shall be a sum equal to not less than 3%
nor more than 5% of Licensee's gross retail
sales net of sales taxes (excluding sales
of Permitted Products). Licensor shall
determine
<PAGE>
and notify Licensee of the exact percentage
prior to the first day of each fiscal year
of Licensor (except no notification will be
given with respect to any year for which
the percentage is to be unchanged from the
preceding year). Such percentage shall be
the same as that to be employed during such
succeeding year by the majority of "Dairy
Queen" licensees within the marketing area
as determined by American within which
Licensee's store is located.
Computations and Remittances 9.2 All amounts due and owing hereunder
shall be computed at the end of each
month's operation and remittance for the
same shall be made to Licensor on or before
the twelfth day of the following month
accompanied by the reports provided for in
Paragraph 9.4 hereof. The computation of
said amounts shall be certified and sworn
to by Licensee in the manner specified by
Licensor and Licensee shall supply to
Licensor such supporting or supplementary
materials as Licensor may reasonably
require to verify the accuracy of such
remittances.
Surcharge 9.3 At Licensor's option, Licensor may
Method of require Licensee to pay to suppliers of
Precollection mix, meat and other products and
ingredients used in the conduct of the
business a surcharge on all units of such
commodities purchased by Licensee. Said
surcharge shall be paid to such supplier by
Licensee at the time of purchase of such
commodities. Said surcharge shall be
established by Licensor at a reasonable
rate so as to approximate the amount of
license fee and sales promotion fee which
will be payable by Licensee. Said surcharge
shall be paid to said supplier or suppliers
for the account of Licensor, the same to be
regarded by the parties as a method of
precollection of said license and sales
promotion fees. The amounts so collected
shall be credited by Licensor against the
license and sales promotion fees due from
Licensee to Licensor at the end of each
month's operations. Licensor shall submit
to Licensee on a monthly or quarterly basis
a reconciliation of said license and sales
promotion fees account setting forth the
credits to Licensee's account by reason of
amounts collected for Licensor by suppliers
by way of the aforesaid surcharge method.
In the event Licensee shall fail to submit
reports in accordance with Paragraph 9.4,
Licensor may make said reconcilia-
<PAGE>
tion of amounts due in conformance with its
best judgment with regard to said amounts
due and same shall be conclusive as to the
amounts due Licensor from Licensee unless
within a period of ten (10) days after
mailing of said reconciliation to Licensee
by Licensor, Licensee provides evidence in
a form satisfactory to Licensor of the
correct amounts due. Licensee shall pay
such amounts, if any, determined to be owed
pursuant to Licensor's reconciliation
within ten (10) days after a mailing of
notice to Licensee by Licensor. If Licensor
determines that Licensee has overpaid
license or sales promotion fees on the
surcharge basis, Licensor shall remit to
Licensee an amount equal to the excess fees
collected at the time the monthly or
quarterly reconciliation is provided
Licensee.
Reports and Records 9.4 Licensee shall keep true records from
which all sums payable under this Agreement
and the dates of accrual thereof may be
readily determined. Licensee shall make
written reports to Licensor in such form as
Licensor may from time to time prescribe
within fourteen (14) days after the end of
each month's operation setting forth the
amount of gross sales of all products from,
or in connection with the operation of,
said store and the business thereof during
said month. In addition to the foregoing,
and in addition to such other information
as Licensor may from time to time require,
said monthly report shall accurately set
forth the total number of gallons of mix,
the total number of pounds of meat, and the
quantity of other basic commodities used
during said month and the sources from
which said mix, meat and other commodities
were purchased together with a complete
statement of Licensee's cost of labor,
utilities, rent and each other cost of
operation. For the purpose of said reports
the date of use of such mix, meat and other
commodities shall be deemed to be the date
of receipt at the store. Licensor, American
or the authorized representative of either
shall have the right at all times during
the business day to enter Licensee's
premises where books and records relative
to said store are kept, and to inspect,
copy and audit such books and records. In
the event that any such inspection or audit
reveals a variance of 3% or more from data
reported to Licensor or American, in
addition to any other rights it may have,
Licensor or
<PAGE>
American may conduct such further periodic
audits and/or inspections of Licensee's
books and records as it reasonably deems
necessary for up to one year thereafter and
such further audits and/or inspections
shall be at Licensee's sole expense
including without limitation reasonable
professional fees, travel and room and
board expenses directly related thereto.
Financial Planning and Management 9.5 Licensee agrees to employ sound
financial management practices in
connection with the operation of said
business and to that end Licensee shall
maintain on forms approved or provided by
Licensor or American a monthly profit plan,
a monthly profit and loss statement and a
monthly balance sheet accurately reflecting
the operations and condition of said
business. In addition to the foregoing,
Licensee shall employ such methods of
record keeping, bookkeeping and reporting
as Licensor shall from time to time
reasonably require and copies of all
monthly profit plans, profit and loss
statements, sales summaries and breakdowns
for the preceding month shall be forwarded
to Licensor on or before the fourteenth day
of the following month.
Payment of Debts 9.6 Licensee agrees to pay promptly, when
due, all taxes and assessments that may be
assessed against said premises or the
equipment or supplies used in connection
with Licensee's business, all liens and
encumbrances of every kind and character
created or placed upon or against any of
said property and all accounts and other
indebtedness of every kind incurred by
Licensee in the conduct of said business.
In the event Licensee should default in
making any such payment, Licensor shall be
authorized but not required, to pay the
same on Licensee's behalf and Licensee's
covenants promptly to reimburse Licensor on
demand for any such payment. to Licensor by
the same arise this Paragraph vision of
this interest at 12% per Any and all
amounts owing Licensee hereunder, whether
under the provisions of 9.6 or under any
other Agreement, shall bear interannum or
the maximum rate permitted by law,
whichever is less, from and after the date
of accrual thereof.
Timely Payment 9.7 The default by Licensee in the timely
payment of any indebtedness owing to
Licensor and/or American, or to any
affiliates of Licensor and/or American, or
the default by Licensee in the
<PAGE>
payment of any indebtedness of Licensee
with respect to which Licensor or American
or any of Licensor's and/or American's
affiliates is a guarantor, co-signer,
endorser or obligor, shall constitute a
breach of this Operating Agreement,
rendering the same subject to termination
in accordance with the provisions of
Paragraphs 10.1 and 10.2 hereof.
Insolvency, Etc. 9.8 In the event that Licensee be declared
insolvent or bankrupt, or in the event a
receiver is appointed, this Operation
Agreement shall automatically terminate as
of the date of such declaration or
appointment.
Liability and Insurance 9.9 Licensee hereby waives all claims
against Licensor and/or American for
damages to property or injuries to persons
arising out of the Operation of Licensee's
business, and Licensee shall indemnify and
save Licensor and/or American and/or the
affiliates of either harmless of and from
any damage or injury to property or persons
arising from or in connection with the
operation of said business or the
consumption of the product thereof.
Licensee further agrees to purchase and
maintain in full force and effect during
the term of this Agreement, at Licensee's
sole expense, liability insurance in an
aggregate amount not less than $300,000
insuring Licensee, Licensor and American
from liability for any and all such
damage or injury and Licensee further
agrees to deliver to Licensor a proper
certificate evidencing the existence of
such insurance coverage and Licensee's
compliance with the provisions of this
paragraph and which provides that Licensor
and American will be given thirty (30) days
prior written notice of material change,
termination or cancellation of the policy.
Said insurance coverage shall commence as
of the date Licensee commences operating a
"Dairy Queen" retail store or as of the
date the Authorized Location is first
identified as a site on which a "Dairy
Queen" retail store will be operated,
whichever shall first occur.
Assignment and Transfer 9.10 Licensee agrees not to transfer,
assign or alienate his interest herein or
hereunder in whole or in part without the
prior written consent of Licensor, which
consent shall not be withheld unreasonably,
but Licensor may insist that any proposed
assignment be an assignment of all of
Licensee's interest
<PAGE>
hereunder and that any proposed assignee,
be a person, in Licensor's reasonable
judgment, qualified to provide active
supervision over the operation of said
store in compliance with Licensee's
obligations hereunder and who has
sufficient net worth and sources of capital
which meet Licensor's then current
requirements for a store operation of the
type contemplated by this form of
agreement. In the event Licensee's said
interest should be so transferred or
assigned, Licensee shall pay to Licensor
contemporaneously therewith the sum of One
Thousand Five Hundred Dollars ($1,500), or
an amount equal to one-half of the license
fees paid or payable by Licensee in respect
of operations in the twelve (12) months
ending with the month prior to the month in
which the assignment is approved, whichever
is the greater amount, as a fee for the
preparation of a new Operating Agreement in
assignee's name, for Licensor's assistance
in reset-up of the retail store and for any
and all other expenses incurred and
services rendered by Licensor in effecting
said transfer. In the event of any such
assignment, the assignee, as a condition of
Licensor approving such assignment, must
attend and to the reasonable satisfaction
of Licensor successfully complete, at
assignee's expense, American's training
program at American's training center. In
the event Licensee is a corporation,
partnership or other entity, any transfer
or transfers of stock (or other form of
ownership interest) constituting in the
aggregate a controlling interest in
Licensee shall be subject to the consent,
transfer fee and all other applicable
provisions of this Agreement. Licensor may
withhold its consent to any proposed
transfer until all amounts owed by Licensee
to Licensor, American, the affiliates or
subsidiaries of either and approved "Dairy
Queen" suppliers have been paid in full.
Offsets 9.11 Licensee waives any and all existing
and future claims and offsets against any
amounts due hereunder, which amounts shall
be paid when due. Licensor and American
shall be entitled to apply or cause to be
applied against amounts due to either of
them of any of their respective affiliated
companies any amounts which may from time
to time be held by either of them or their
respective affiliates on Licensee's behalf
for be owed to Licensee by
<PAGE>
Licensor or American or their respective
affiliates.
CONTRACT VIOLATION
Remedies, Arbitration 10. In the event of any dispute between the
parties hereto arising under, out of, in
connection with or in relation to this Agreement,
said dispute shall be submitted by the parties to
binding arbitration in accordance with the Rules
and Procedures and under the auspices of the
American Arbitration Association. The arbitration
shall take place at the capital of the state of
the Authorized Location of Licensee or at such
other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be
finally, and binding on all parties.
Notwithstanding the foregoing, Licensee recognizes
that his "Dairy Queen" store is one of a large
number of stores similarly situated and selling to
the public similar products, and hence the failure
on the part of a single licensee to comply with
the terms of his Operating Agreement could cause
irreparable damage to Licensor, American and/or to
some or all other "Dairy Queen" licensees.
Therefore, it is mutually agreed that in the event
of a breach or threatened breach of any of the
terms of this Operating Agreement by Licensee,
Licensor shall forthwith be entitled to an
injunction restraining such breach and/or to a
decree of specific performance without having to
show or prove any actual damage, together with
recovery of reasonable attorney's fees and other
costs incurred in obtaining said equitable relief,
until such time as a final and binding
determination is made by the arbitrators. The
foregoing equitable remedy shall be in addition
to, and not in lieu of, all other remedies and
rights which Licensor might otherwise have by
virtue of any breach of this Agreement by
Licensee.
Breach of Contract 10.1 Licensee shall be in default hereunder
if Licensor determines that Licensee has
made any false report to Licensor, or has
failed to pay when due any amounts owed to
Licensor, or has in Licensor's judgment in
any other way breached any of the terms of
this Agreement, including but not limited
to, failing to submit required reports,
failing to meet any requirements or
specifications established with respect to
product quality, physical property,
conditions or equipment or materials used,
products manufactured, menu or use of
approved products, packages or promotional
materials. Failure of Licensee to pay to
Licensor any past due amount owed within
fourteen (14) days of Licensor's
<PAGE>
written notice of default therein shall be
construed as Licensee's voluntary
abandonment of this Agreement and the
franchised business hereunder operated.
10.2 Except as hereinafter provided,
failure of Licensee to cure a default by
Licensee hereunder within fourteen (14)
days from the date of a written notice of
default mailed or delivered to Licensee,
which notice states such default, shall
give Licensor good cause to terminate this
Agreement. Termination shall be
accomplished by mailing or delivering to
Licensee written notice of termination,
which notice shall state the grounds
therefore and shall be effective (i)
immediately in any case of voluntary
abandonment of this Agreement by Licensee
of conviction of Licensee of an offense
directly related to the business conducted
hereunder; or (ii) sixty (60) days after
the date of such notice of termination in
all other cases; provided, however, that
notwithstanding any other provision of this
Paragraph 10, this Agreement may be
terminated immediately upon failure of
Licensee to cure within twenty-four (24)
hours of notice thereof any default under
this Agreement which materially impairs the
good will associated with any of the
Trademarks. In addition to the foregoing,
this Agreement may be terminated by
Licensor upon any ground or by any period
of notice as may be permitted from time to
time by applicable law or regulation. Any
notice of default of termination shall be
personally delivered or be mailed by
certified or registered mail, return
receipt requested, postage prepaid.
Land, Building Lease, 10.3 Subject to the provisions of Paragraph
or Failure to Reopen 5.4 hereof, any failure to rebuild or
repair and reopen for operation Licensee's
destroyed or damaged store or store whose
lease has been terminated or not renewed
within one year of the date of occurrence
of such termination, destruction or damage,
shall automatically terminate this
Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this Operating
Agreement:
Reversion of Trademark Rights 11.1 All rights to the use of the
Trademarks and the right and license to
conduct said business at the Authorized
Location shall revert to Licensor and
Licensee
<PAGE>
shall immediately cease all use of the
Trademarks and pay all monies due at said
date. Licensee shall promptly and at his
own expense remove or obliterate all store
signage and displays furnished to Licensee
by Licensor and shall remove or obliterate
and thereafter discontinue all use of any
signage or displays at the Authorized
Location or in his possession bearing any
of the Trademarks or names or material
confusingly similar to any of the
Trademarks.
11.2 All right, title and interest of
Licensee in and to this Operating Agreement
shall become the property of Licensor.
Purchase 11.3 Licensor shall have the first option
to purchase any or all equipment, fixtures,
furnishings or supplies, of whatever kind,
owned by Licensee and used by him in the
production of the "Dairy Queen" product, or
any of the other approved products under
any of the Trademarks hereunder at a price
determined by a qualified appraiser
selected with the consent of both parties.
if the parties cannot agree upon the
selection of such an appraiser he shall be
appointed by a Judge of the United States
District Court of Licensee's Authorized
Location upon petition of either party.
Said option to purchase may be exercised by
Licensor at any time within thirty (30)
days from the date of such termination or
within thirty (30) days after the date of
the receipt by Licensor of the appraiser's
determination, whichever shall be the later
date, and shall not be impaired or
terminated by the attempted sale or other
transfer of any such equipment or supplies
by Licensee to a third party- Upon the
exercise of such option and tender of
payment for any such equipment or supplies,
Licensee agrees to sell and deliver the
same to Licensor free and clear of all
encumbrances, and to execute and deliver to
Licensor a bill of sale therefore.
Non-Compete 11.4 Licensee shall not directly or
indirectly engage in any competitive
business within 2,000 yards of the
Authorized Location for a period of one
year after said date of termination of this
Agreement except through a Bowlin's or an
affiliate in operation at the time of
signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that the
store facilities and operations of Licensee
hereunder may include in addition to "Dairy Queen"
or "Dairy Queen/Brazier" food and beverage
<PAGE>
service the sale of various other products not
identified or designated by Company's Trademarks,
including, but not limited to, motor vehicle fuel,
oil and related automotive products, souvenir-type
products, tobacco products, sundries, and packaged
food products not intended for consumption on the
premises where sold and which are not competitive
with food and beverage products identified or
designated by the Trademarks (all of said products
collectively referred to in this Agreement as
"Permitted Products"). In order to prevent public
confusion, preserve and protect the Trademarks and
establish the principles which shall govern
Licensee's sale of Permitted Products and usage of
the Trademarks, the parties agree that
notwithstanding any provision of this or any other
Agreement to the contrary, the following
provisions shall control with regard to Permitted
Products:
12.1 Licensee may sell Permitted Products
from its licensed store. Licensee may use
in the business operated hereunder in the
manner and to the extent permitted by this
Agreement marks and names identifying
Permitted Products.
12.2 The Trademarks shall not under any
circumstances be used to identify or
designate Permitted Products or any other
product(s) for which use of the Trademarks
has not been specifically authorized by
American. Permitted Products shall be sold
only from physical facilities (such as a
different area, room or building) which are
clearly distinct and apart from the "Dairy
Queen" retail store.
12.3 No product shall be sold from any part
of any sublicensed store's site which
detracts or threatens to detract from the
reputation or goodwill of the "Dairy Queen"
trade name or any of the Trademarks.
Licensor shall have the right to direct
Licensee to remove from the store and
discontinue the sale of any product item or
items which in American's good faith
judgment violates the quality standard of
the preceding sentence. No product shall
under any circumstances be sold from the
"Dairy Queen" portion of the licensed store
which has not received the specific Prior
approval of Licensor.
12.4 A building design and related facility
standards, based upon American's existing
design and specifications for "Dairy
Queen"/ "Brazier" stores, shall be
developed by mutual consultation and
agreement, which shall take into account
the particular requirements for a "Dairy
Queen" or "Dairy Queen"/"Brazier" facility
to be situated along an Interstate highway.
Licensee shall comply strictly with
<PAGE>
the design and facility standards developed
hereunder.
12.5 Notwithstanding Paragraph 8.2 hereof,
Licensee may employ off-site advertising
media such as billboards and radio
commercials, provided such advertising is
approved by Licensor and American, and
provided further that no such advertising
shall be used which creates or fosters any
confusion as to the identity, source or
quality of goods identified or designated
by the Trademarks. Licensor acknowledges
that it may be necessary to share extant
billboard space with an existing Stuckey's,
Wayfara or other store, and Licensor
requires that advertising for the "Dairy
Queen" store be as visually and physically
separate from the other advertising as is
feasible.
12.6 Because the "Dairy Queen" store
hereunder may also sell Permitted Products,
the parties agree that notwithstanding any
other provision of this Agreement or any
other contract between the parties,
Licensor deems it to be necessary and
desirable, to permit the following:
a. To allow Licensee to sell
Permitted Products in conjunction
with a "Dairy Queen" or "Dairy
Queen"/"Brazier" store;
b. To allow the principal
shareholders of Licensee and
members of their immediate families
to own any amount or class of stock
or debt in any Bowlin's business;
c. To the extent and in the manner
permitted hereunder, to allow
Licensee to sell and to advertise
Permitted Products in conjunction
with products identified or
designated by the Trademarks;
d. Subject to Paragraph 6.1 hereof,
to relieve Licensee from the
obligation with respect to
Permitted Products, to purchase and
use equipment, supplies,
ingredients and services approved
by American;
e. To allow Licensee to construct
and equip its retail store in
accordance with building design and
related facility standards
developed under Paragraph 12.4
hereof;
f. To relieve Licensee: (i) from
the obligation of using, in
preparing or selecting Permitted
Products, ingredients, formulas and
supplies
<PAGE>
specified by American; (ii) from
the obligation to observe, with
respect to Permitted Products, the
requirements relative to portions,
sizes, appearance and packaging set
forth in American's "Store
Management Operations Manual" and
"product preparation charts"; and
(iii) with respect to Permitted
Products, to allow the use of other
supplies and customer service
materials without regard to
standards of uniformity and quality
as are now or hereafter set by
American;
g. To allow Licensee its principal
shareholders or members of their
immediate families to engage in a
competitive business within 2,000
yards of the Authorized Location of
the store licensed hereunder, as
defined in the Operating Agreement,
but only through Bowlin's business;
and
h. To relieve stockholders of this
corporate Licensee from the
obligation of personally
guarantying the obligations of
Licensee under the Operating
Agreement. Sale or transfer of this
License to another corporation
shall include the then customary
guarantees required of
corporations.
GENERAL PROVISIONS
13.1 In the event any one or more clauses
of this Agreement shall be held to be void
or unenforceable for any reason by any
court of competent jurisdiction such clause
or clauses shall be deemed to be separable
and of no force or effect in such
jurisdiction and the remainder of this
Agreement shall be deemed to be valid and
in full force and effect, and the terms of
this Operating Agreement shall be equitably
adjusted so as to compensate the
appropriate party for any consideration
lost because of the elimination of such
clause or clauses.
13.2 Any waiver by Licensor of any breach
or default by Licensee shall not be deemed
to be a waiver of any other or subsequent
breach or default nor an estoppel to
enforce its rights in the event of any
other or subsequent breach.
13.3 This Agreement, and the application
form executed by Licensee requesting
Licensor to enter into this Agreement,
constitute the sole agreement between the
parties with respect to the entire subject
matter of this Operating Agreement and
embodies all prior agreements and
negotiations with respect to the "Dairy
Queen" business. There are no
representations of any kind except as
contained herein and in the aforesaid
application.
<PAGE>
13.4 Except as otherwise provided in this
Agreement, any notice, demand or
communication provided for herein shall be
in writing, signed by the party giving the
same, deposited in the registered or
certified United States mail, return
receipt requested, postage prepaid, and;
a. If intended for American shall
be addressed to American Dairy
Queen Corporation at 5701 Green
Valley Drive, Minneapolis,
Minnesota, 55437;
b. If intended for Licensor shall
be addressed to Licensor at the
address hereinabove set forth;
c. If intended for Licensee, shall
be addressed to Licensee at the
Authorized Location hereinabove
designated;
or to such other address as may have been
given to the other party by notification as
herein provided.
Notices for purposes of this Agreement
shall be deemed to have been received on
the earlier of the date of delivery or
first attempted delivery as indicated on
the return receipt (or, in the absence of a
noted delivery or noted attempted delivery
date, 15 days from noted date of mailing).
13.5 If Licensee consists of two or more
individuals, such individuals shall be
jointly and severally liable and references
to Licensee in this Agreement shall include
all such individuals. Reference to Licensee
as male shall also include a female
licensee, partnership or corporation or any
other business entity. Headings and
captions contained herein are for
convenience of reference only and shall not
be taken into account in construing or
interpreting this Agreement.
13.6 Subject to the terms of Paragraph 9.10
hereof, this Agreement shall be binding
upon and inure to the benefit of the
administrators, executors, heirs,
successors and assigns of the parties.
13.7 This Agreement shall be effective only
when approved by an officer of American and
shall be governed by and interpreted in
accordance with the law of the state in
which the Authorized Location is Located.
13.8 This Agreement shall be deemed to be
amended from time to time as may be
necessary to bring any of its provisions
into conformity with valid applicable laws
or regulations.
<PAGE>
IN WITNESS THEREOF, the parties hereto have executed the foregoing "Dairy Queen"
Operating Agreement the date first above written.
LICENSEE
BOWLIN'S, INC. d/b/a DQ/B of Edgewood, NM
------------------------------------------
By /s/ M.L. BOWLIN
-------------------------------
Its Executive Vice President
ATTEST:
/s/ SUE BROWN
- ---------------------------
ASST SECRETARY
LICENSOR
INTERSTATE DAIRY QUEEN CORPORATION
By /s/ Signature Illegible 3/14/83
-------------------------------
Its PRESIDENT
-------------------------------
ATTEST:
/s/ KIMBERLY H. FISHER
- ---------------------------
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
By /s/ Herman E. Nelson
-------------------------------
Its V.P. 6/2/83
-------------------------------
ATTEST:
/s/ ROSE CULIN /s/ JOHN H. GRAVEL /s/ CAROL M. GRAVEL
- --------------------------- ------------------------------------------
JOHN H. GRAVEL AND CAROL M. GRAVEL
<PAGE>
APPENDIX "A"
Licensee has the right and privilege to use the following trademarks and
service marks in accordance with the attached Operating Agreement.
This Appendix "A" may be amended by Company from time to time in order to
make available additional trademarks or service marks or to delete those which
become unavailable. Licensee agrees to use only those trademarks and service
marks which are then currently authorized.
DAIRY QUEEN BUSTER BAR
BRAZIER DILLY
MR. MISTY DQ
MR. MISTY KISS THE ELLIPSE DESIGN
ROOF DESIGN BROWNIE DELIGHT
LET'S ALL GO TO THE THE CONE WITH THE CURL ON TOP
DAIRY QUEEN
FIESTA DESIGN: THE CONE WITH THE
CURL ON TOP
Each of the above trademarks and, or service marks must be used only in the
manner specified by the Company and in connection with the goods and/or services
specified by the Company. No deviations will be permitted.
<PAGE>
APPENDIX "D"
RESERVATIONS TO CERTAIN ITEMS IN
"DAIRY QUEEN" OPERATING AGREEMENT
1 Paragraph 4.6. licensor advises that the purpose of this paragraph is full
disclosure.
2. Paragraph 5.1. Licensee and American have agreed on the plans for remodeling
the existing building to conform to requirements of Paragraph 5. 1.
3. Paragraph 6.1 Licensee operates a full Line novelty and curio store in the
building adjoining Licensee "Dairy Queen"/"Brazier" operation. Licensee
maintains separate accounting for sales from adjoining store and "Dairy
Queen"/"Brazier" operations. Sales in Licensee's merchandise, novelty, and curio
store shall not be subject to continuing license fees or sales promotion fees.
4. Paragraph 6.1. Licensee may sell the Traditional or Biscuit Breakfast as
provided for by American in the breakfast test program until the test is
discontinued at which time Licensee may apply for a menu deviation which may or
may not be granted by Licensor.
5. Paragraph 9.1. Licensor is obligated to pay monthly sales promotion fees as
provided for in paragraph 9.1 Any deviation or variance from the required
monthly payment shall be of a temporary nature and shall not in any way
prejudice Licensee's obligation to strictly follow Paragraph 9.1 and make
monthly sales promotion fee payments if requested at a later date by Licensor.
In recognition that Interstate Licensees in the past have expended more than 3%
of sales on advertising (primarily in outdoor, the most effective medium for
communicating to highway travelers), American and Interstate have temporarily
without prejudice allowed Licensees to credit monthly advertising expenditures
to sales promotion fee payments each month. If a Licensor does not expend the
required sales promotion fee percentage monthly, the balance must be remitted.
American reserves the right to discontinue this special advertising arrangement
at anytime.
Development of national advertising program and other events in American's and
Interstate's exclusive discretion and judgment may require, and Licensee hereby
agrees to make, full and regular monthly payments of the sales promotion fee to
Interstate.
Licensee is obligated to pay and participate annually in the Annual Marketing
Program (AMP). In cases where licensee pays sales promotion fee monthly to
Interstate, the AMP fee will be paid from amounts remitted to Interstate. In
cases where Licensee does not pay sales promotion fee monthly to Interstate,
Licensee shall remit the annual fee to Interstate.
6. Paragraph 9.4. Licensee has requested that for reasonable and orderly
availability of data that if Licensor or American wishes to audit or look at
Licensee's books, that Licensor give Licensee at least 10 days notice prior to
date so data may be readily available to Licensor. Licensor and American, in
accordance with generally accepted auditing standards, decline to give such
notice.
7. Paragraph 9.5. Licensee already owns an in-house computer that generates a
profit and loss statement for a profit center such as Licensee's "Dairy Queen".
Licensee hereby requests that Licensor accept Licensee's profit and loss report;
as already programmed, which uses profit center identification and consolidated
balance sheet. Licensor has requested and shall be furnished with a "dummy"
statement for consideration.
<PAGE>
8. Paragraph 10.1. 10.2, and 13.4. Licensee requires and licensor agrees that
any notices under any contract or agreement shall be mailed certified mail,
return receipt. and that for purposes of this Agreement notice shall be deemed
to have been received on the earlier of the date of delivery or first attempted
delivery as indicated on the return receipt (or in the absence of a noted
delivery date, or noted attempted delivery date, 15 days from noted date of
mailing).
<PAGE>
APPENDIX "B"
Dairy Queen/Brazier(R) Date:______________ Initials:_______________
(Licensee)
(Please attach to copy of current operating agreement)
3/15/83 /s/ ILLEGIBLE
------- -------------
(Licensor)
Below is listed the approved menu of Company for Dairy Queen/Brazier(R) stores
which is in current use and effect Licensee is authorized to use this menu in
accordance with the attached Operating Agreement.
This Appendix "B" may be amended by Company from time to time in order to make
available additional products or to delete those which become unavailable.
Licensee agrees to use only those products which are then currently authorized
for use in Dairy Queen/Brazier(R) stores.
Licensee shall use in preparing products only such ingredients, formulas and
supplies as are specified by Company and in such portions, sizes, appearance and
package as set forth in Company's most current "Store Management Operations
Manual" and "Product Preparation Charts."
<TABLE>
<CAPTION>
National Required National Required National Required
Brazier(R) Food Items Dairy Queen(R) ,Soft Serve Items Beverage Items
- --------------------- -------------------------------- -----------------
<S> <C> <C>
Hamburgers: Cones Carbonated Drinks**
Single Dipped Cones Mr. Misty
Double Sundaes
Triple Shakes/Malts
w/Lettuce and Tomato Float National Optional
w/Cheese Mr. Misty"- Float* Beverage Items
-----------------
Hot Dog Freeze Milk
w/Chili Mr. Misty", Freeze* Coffee
w/Cheese Banana Split Hot Chocolate
Fish Fillet Sandwich Peanut Buster Parfait Iced Tea
w/Cheese Double Delight(TM) Lemonade
Chicken Sandwich Dilly Bar Diet Carbonated Soft Drinks**
w/Cheese Buster Bar and/or
French Fries Fudge Nut BarTM
Onion Rings DO sandwich and/or
Chili Dog Split Dillywich
Mr. Misty Kiss and/or
Home Pak
National Optional
Brazier(R) Food Items
- ---------------------
Super Dog
w/Chili National Optional
w/Cheese Dairy Queen Soft Serve Items
Chili Bowl ----------------------------
Barbecue Sandwich Hot Fudge Brownie Delight
Strawberry Shortcake
Special Category Brazier(R) Items Banana Supreme
- ------------------------ Shake'N Sundae
Brazier(R) Crispy Fried Chicken Parfait
Soda
Frozen Cakes and Logs.
(Licensee may sell frozen cakes and loge
subject to meeting the special requirements
as set forth from time to time by company
and by obtaining prior certification
of eligibility from company.)
</TABLE>
* Special Category Brazier items may be sold by Licensee if Licensee desires to
do so, but they are not required. Notwithstanding the foregoing, Licensee may
only continue to sell a special category item by substantiating to Company that
the sale of each item amounts to at least 2% of the stores total annual retail
sales.
** A minimum of three carbonated soft drinks must be provided by Licensee. All
carbonated soft drinks must be of high quality in national distribution and made
by a primary manufacturer.
Note: The Dairy Queen soft serve and Brazier food and beverage items listed on
the National Optional menu, shown above, may be sold by Licensee it Licensee
desires to do so, but are not required to be sold.
7/6/81
"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 1st day of May , 19 82 , by and between
Interstate Dairy Queen Corporation of the city of Atlanta , county of Fulton ,
and state of Georgia , hereinafter referred to as "Licensor" and Bowlin's Inc.
d/b/a DQ of Flying C, of the city of Albuquerque county of Bernalillo, State of
New Mexico herein after referred to as "Licensee":
WHEREAS, Licensor is the exclusive licensee of American Dairy Queen
Corporation (herein after referred to as "American") in certain geographical
areas including the territory which includes the Authorized Location hereinafter
set forth of the right to license others, in accordance with the terms of this
Agreement, to use the "Dairy Queen" trademark, service mark and trade name which
has been registered in the United States Patent Office, in each state of the
union and in foreign countries as well as those trademarks and service marks
(hereinafter collectively referred to as "Trademarks"), a list of which is
attached hereto and made a part hereof as Appendix A; and
WHEREAS, Licensor and its predecessors in interest acting under said
exclusive license instituted, developed, promoted, and established the "Dairy
Queen" franchise business and system in the aforesaid territory which consists
of the sale of dairy products, food products, beverages and other products and
services under said trademarks and utilizing in connection therewith certain
types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods together with advertising and promotion programs
developed from time to time; and
WHEREAS, it is the purpose of Licensor to provide to Licensee in a retail
store outlet an organization to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the trademarks and-to make available uniform and approved
equipment, supplies, ingredients, merchandising and business techniques and the
sales promotional programs of American, and
WHEREAS, Licensee desires to operate a "Dairy Queen" retail store as part
of the "Dairy Queen" system and to enter into this Operating Agreement subject
to the conditions and controls herein prescribed for the purpose of offering to
the public products and services of uniformly high quality and standards to the
end of protecting the interests of Licensee, of Licensor, of American Dairy
Queen Corporation and all other persons engaged in said business; and,
WHEREAS, it is the intent of both Licensor and Licensee to preserve within
the context of a "Dairy Queen" retail store continuing consumer confidence in
the reliability and quality of all products sold under any of the Trademarks;
and, each party desires that all products sold under any of the Trademarks,
<PAGE>
consistently conform to the highest expectations of consumers of such products;
and, whereas, by this Agreement the parties contemplate that Licensee's store,
in addition to normal "Dairy Queen" food and beverage products, may also sell
Permitted Products, as defined hereinafter.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the grant by Licensor of this Operating Agreement and the
payment by Licensee of the participation fees provided in Paragraph 9 hereof, it
is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject
Grant to to all the terms, conditions and provisions
Licensee hereof, the right and license to:
Mailing Address: 1.1 Establish and operate a retail store
DQ of Flying C, NM under the name "Dairy Queen" at Interstate
c/o Bowlin's, Inc. 40, 1st exit West of Guadalupe County (as
136 Louisiana, N. E. indicated on the attached map), New Mexico
Albuquerque, NM 87108 hereinafter referred to as the
"Authorized Location" (provided, however,
in the event an Authorized Location is not
designated on the date hereof, and such
location is not designated herein by
Licensor within ninety (90) days after such
date, this Agreement shall become null and
void and all deposit is including the
franchise fee shall be returned to
Licensee).
1.2 Use at the Authorized Location the
trademark on and in association with sale
of all uniform and approved products and
services as American may authorize from
time to time, with all approved sales
promotion programs relative thereto.
1.3 Use at the Authorized Location the on
and in association with the uniform
equipment, supplies, and ingredients for
the products approved by American.
1.4 Employ in the business of said store
the merchandising, advertising, promotion
and business methods and techniques
developed, adopted and approved by
American.
Acceptance by Licensee 2. Licensee hereby accepts the above license
from Licensor subject to all the terms, by
Licensee provisions and conditions hereof and
agrees that Licensee shall cause to have a "Dairy
Queen" store established within 180 days of the
date hereof (unless an extension of time is
expressly authorized in writing by Licensor), and
thereafter maintained and operated at the
Authorized Location, under Licencee's active and
continuous supervision
[map of area surrounding franchised store]
<PAGE>
and management and upon the standards hereinafter
provided. Licensee further expressly acknowledges
and agrees:
2.1 American is the owner of all right,
title and interest in and to the trademark,
and the good will attributable thereto of
the business in connection with which said
Trademarks have been, and are and will be
used at the Authorized Location. Licensor
is the licensee of the right to use the
Trademarks in the territory which includes
the Authorized Location. Specifically, but
without limiting the foregoing, Licensee
disclaims any and all right, title and
interest in or to the Trademarks and to the
good will associated with the Trademarks of
the "Dairy Queen" retail store at the
Authorized Location and acknowledges and
agrees that all such good will is the
exclusive property of American.
2.2 The trademarks are valuable property
rights owned by American.
2.3 The trademarks shall be used only in
connection with such products and services
as may be approved or specified by American
and shall at all times be used only in a
manner approved by American.
2.4 Licensee's rights to the use of
trademarks is specifically limited to
Licensee's retail store operation at
Authorized Location.
2.5 Licensee shall use no other trademarks,
trade names or service marks in said
business except those authorized by
American and as set forth in Appendix A
except by the prior written consent of
American.
2.6 Licensee shall not use the words "Dairy
Queen", or any of its Trademarks, or any
word or mark similar thereto, as a part of
its corporate or business name unless first
approved in writing by American, and shall
use only the word "Dairy Queen" (and no
other words whatsoever) as the trade name
on the store from which the said products
and services are sold. In the event
American does approve the use of the words
"Dairy Queen", or any of the Trademarks, as
a part of Licensee's corporate or business
name Licensee shall cause such name to be
changed so as to eliminate those words and
<PAGE>
Trademarks from the name within thirty (30)
days after termination of this Agreement.
2.7 Licensee shall adopt and follow in good
faith the systems, programs and methods
prescribed by Licensor for Licensee's
retail operation in accordance with this
Operating Agreement.
2.8 Neither Licensee nor any person owning
an interest directly or indirectly in
Licensee shall directly or indirectly
operate or permit to be operated or hold
any interest (other then 1% or less of any
outstanding stock or debt of any class of
any public company) in any restaurant or
fast-food business other than a Bowlin's or
its affiliates at the time of signing or
one authorized by this Agreement without
the prior written consent of Licensor.
TERM
Term 3. The License granted herein shall continue
until terminated by Licensee, with or without
cause, on sixty (60) days prior written notice to
Licensor, or until otherwise terminated by either
Licensee or Licensor in accordance with the
provisions of this Agreement.
TRADEMARK STANDARDS AND REQUIREMENTS
General Declarations 4. Licensee agrees that nothing in this agreement
gives him any title to or interest in the
Trademarks except the right to use the same under
the terms and conditions of this Agreement and
that Licensee's use there of injures to the
benefit of American. Specifically, but without
limiting the foregoing, Licensee acknowledges and
agrees that American has the right and may
distribute for its own account products identified
by the Trademarks through not only "Dairy Queen"
retail stores but through any other distribution
method which may from time to time be established.
Use of Trademarks 4.1 Licensee shall confine his use the
trademarks to the sales promotion programs,
sale of products and services which shall
in quality, mode and conditions of
manufacture and sale, comply with such
standards as are established or approved by
American. In order to promote and protect
the business interests of each of the
parties, the value of the "Dairy Queen"
business and the business interests of
other persons engaged therein, uniformity
shall be maintained in the type, standard
and
<PAGE>
quality of stores, equipment, supplies and
ingredients used therein, and the
conditions of preparation and the
procedures employed in the sale of said
products and services.
Acknowledgment of Necessity of 4.2 Licensee agrees that the provisions,
Uniformity restrictions and controls provided in this
Operating Agreement are all necessary,
reasonable and desirable for such purposes
and that Licensee's said business shall be
conducted in accordance with American's
uniform requirements with respect to
quality, production, appearance,
cleanliness, service, merchandising and
advertising standards. Licensee
acknowledges and agrees that substantial
uniformity in facilities, products,
services and operations are essential to
the conduct of a system such as the "Dairy
Queen" system, and therefore further agrees
to honor and implement recommendations of
American and Licensor directed to enhancing
and furthering such uniformity.
Equipment and Supplies 4.3 Licensee agrees to purchase and use, in
the operation of Licensee's "Dairy Queen"
retail store, only equipment, supplies,
ingredients and services which are approved
by American or by Licensor. Nothing herein
shall be constructed as an attempt to limit
unreasonably the sources from which
Licensee may procure equipment, supplies,
ingredients or services. Rather, it is the
intention of the parties that such items
conform to American's standards and
specifications of consistent quality and
uniformity. Nothing contained herein shall
be deemed to require Licensor to approve an
inordinate number of suppliers of a given
item or service w3hich in the reasonable
judgment of American or licensor would
result in licensees or prevent effective
and economical supervision of suppliers by
approval of additional suppliers shall be
in writing and shall contain such
information as American and Licensor may
reasonably request. American and Licensor
reserve the right to charge back to
Licensee or the proposed supplier all
reasonable expenses incurred in considering
requests for approval.
Approved Adaptations 4.4 Complete and detailed uniformity under
many varying conditions may not be possible
or practical and Licensor and
<PAGE>
American reserve the right and privilege,
at American's sole discretion and as
Licensor and American may deem in the best
interests of all concerned in any specific
instance, to accommodate special needs of
Licensee's Authorized Site or that of any
other like based on the peculiar site or
location, density of population, business
potential, population of trade area,
existing business practices, requirements
of local law, or any other condition which
Licensor and American deem to be of
importance to the successful operation of a
like business.
Litigation 4.5 In the event that any person, firm or
company, who is not a licensee or
franchisee of American or Licensor, uses or
infringes upon the Trademarks, American
shall control all litigation and shall be
the sole judge as to whether or not suit
shall be instituted or other action taken.
Notice of Potential 4.6 Licensor and American hereby advise
American and/or Licensor Licensee that Licensor, American
Profit and /or affiliates of American and/or
Licensor may from time to time make
available to Licensee goods, products
and/or services for use in Licensee's
"Dairy Queen" retail store in respect to
the sale or provision of which Licensor,
American and/or affiliates of American
and/or Licensor may make a profit. Licensor
further advises Licensee that Licensor,
American and/or affiliates of American
and/or Licensor may from time to time
receive consideration from suppliers and
/or manufactures in consideration of such
services provided or rights licensed to
such persons by American, Licensor or their
respective affiliates.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall
control with respect to Licensee's Authorized
Location and retail store:
Store Facility 5.1 Licensee agrees that the retail store
shall constructed and equipped in
accordance with American's currently
approved specifications and standards in
respect to building, equipment, inventory,
signage, fixtures, location and design and
accessory features.
Future Alteration 5.2 Any replacement, reconstruction,
addition or modification in building,
equipment or signage, to be made hereafter,
whether at the request of
<PAGE>
Licensee or of Licensor, shall be made in
accordance with written specifications
approved by Licensor or American. Licensor
and American shall not unreasonably
withhold such approval.
Maintenance 5.3 The building, equipment and signage
employed in the conduct of Licensee's
business shall be maintained in accordance
with an annual maintenance list prepared by
Licensor and based upon periodic
inspections of the premises by Licensor's
representatives. Within a period of ninety
(90) days after the receipt of such annual
maintenance list, Licensee shall effect the
items of maintenance reasonably provided
therein including the repair of defective
items and/or the replacement of
unrepairable or obsolete items of equipment
and signage. Routine maintenance shall be
conducted in accordance with general
schedules published by Licensor or American
and made available to Licensee.
Relocation 5.4 Should it become necessary, on account
of condemnation, sale, or other cause,
including expiration or cancellation of
lease or rental contract, to relocate said
store, Licensor shall grant Licensee
authority to do so within a radius of 1,000
yards of the Authorized Location, provided
the new site is reasonably suited for a
"Dairy Queen" retail store in accordance
with Licensor's standards for store sites,
does not infringe on rights of another
licensee, is reasonably distant from other
"Dairy Queen" retail stores, and the new
retail store is constructed, equipped and
opened for business in accordance with the
current standards of American at that time
within one year after discontinuing
operation of a "Dairy Queen" retail store
at the previous Authorized Location.
Modernization and/or 5.5 Each and every transfer as provided in
Replacement of Time of Transfer Paragraph 9.10 hereof shall be expressly
conditioned upon Licensee promptly
performing and effecting such items of
modernization and/or replacement of
building, equipment, and signage as may be
necessary to permit the same to conform to
the standards then prescribed by American
for similarly situated store operations.
Licensee recognizes and acknowledges that
the requirements of this paragraph 5.5 are
both reasonable and necessary to insure
continued public acceptance and patronage
of, and to avoid deterioration
<PAGE>
or obsolescence in the business conducted
hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with
respect to products and operations:
Authorized Product Line 6.1 Licensee's business shall be confined
to the preparation and sale of only such
products as from time to time are
designated or approved by American for sale
by Licensees which are parties to this form
of Operating Agreement. The premises upon
which said business is operated shall not
be used for any other business and there
shall not be sold or offered for sale
therefrom any other product or service
(excepting the preparation, storage and
sale of Permitted Products) without the
written consent of American. Specifically,
but without limiting the foregoing,
alcoholic or intoxicating beverages shall
not be sold or offered for sale or
otherwise handled upon said premises.
Approved Menu 6.2 Attached hereto as Appendix B is the
currently approved menu for Licensee's
retail store. American may from time to
time make reasonable modifications to said
approved menu provided said modifications
are made in respect to all licensees which
have this form of Operating Agreement and
are located in similar areas of the
country. In addition, Licensee may from
time to time request variation from the
currently approved menu. Such variations
shall only be made with the written consent
of the American.
Authorized, Ingredients, 6.3 Licensee shall use in preparing
Formulas, Supplies, products only such ingredients, formulas,
Preparation; Subject to Change by and supplies as are specified by American
American and in such portions, sizes and appearance
and packaging as set forth in American's
most current "Store Management Operations
Manual" and "products preparation charts".
Copies of the current "Store management
Operations Manual" and "products
preparation charts" have been supplied to
Licensee by Licensor temporaneously with
execution of this Operating Agreement.
Licensee acknowledges and agrees that these
may be changed from time to time by
American and that Licensee is obligated to
conform to the requirements as so changed
from time to time. All other supplies,
including cones, cups, containers, eating
utensils, napkins, and all other customer
service materials of all description and
types, shall meet the standards of
uniformity and quality as
<PAGE>
now or hereafter reasonably set by
American. Licensee shall be furnished with
lists of approved equipment, supplies,
ingredients and services.
Serving and Promotion Items 6.4 All sales promotional material,
customer "goodwill" items, cartons,
containers, wrappers and paper goods,
eating and serving utensils, customer
convenience items (including napkins, baby
bibs, and disposal containers), used in the
sales promotion, sale and distribution of
all products covered by this Operating
Agreement shall, where practicable, contain
one or more Trademarks and indicate that it
is produced and sold under authority of
American and shall be subject to approval
by Licensor or American before being used.
Maintenance and Sanitation 6.5 Licensee's said business shall be
operated and maintained at all times in
compliance with any and all reasonable
health and sanitary standards prescribed by
American or by governmental authority. In
addition to complying with such standards,
if such store shall be subject to any
sanitary or health inspection by any
governmental authorities under which it may
be rated in one or more than one
classification, it shall be maintained and
operated so as to be rated in the highest
available health and sanitary
classification with respect to each
governmental agency inspecting the same.
Inspection and Recommendation 6.6 American, Licensor or its authorized
representative shall have the right from
time to time to enter Licensee's store at
all reasonable times during the business
day for the purpose of making periodic
inspections to ascertain if all the
provisions of this Operating Agreement arc
being observed by Licensee and to inspect
Licensee's said store, lands, equipment,
and to test, sample and inspect his
supplies, ingredients and products, as well
as storage, preparation and formulation
thereof and the conditions of sanitation
and cleanliness in the storage, production,
handling and serving thereof.
Period of 6.7 Licensee's store shall be opened to the
Operation public and operated twelve months per year
and at least twelve hours each day of the
year. Any variance from this provision must
be authorized in writing by Licensor. Acts
of God, war, strikes or riots preventing
Licensee from temporarily complying with
the foregoing shall to that extent suspend
compliance
<PAGE>
therewith.
Notice of Existence of 6.8 Licensee acknowledges that he is aware
Different Forms of of the fact that present licensees of
License Agreements Licensor and American operate under a
number of different forms of agreement and
that consequently Licensor's and American's
obligations and rights in respect to their
respective licenses may differ materially
in certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall
control with respect to personnel, training and
supervision:
Management System 7.1 Licensee shall adopt and use as his
continuing operational routine the standard
"Dairy Queen" management system as well as
American's standards with respect to
product preparation, merchandising,
employee recruitment and training,
equipment and facility maintenance and
sanitation. From time to time American will
revise these programs to meet changing
conditions of retail operation in the best
interest of "Dairy Queen" retail stores,
and Licensee shall adopt and implement any
such changes.
Training 7.2 Licensee shall, at Licensee's expense,
attend American's store management training
program, at a place to be designated by
American, prior to the opening of
Licensee's store. In the event Licensee
fails to complete such training to the
reasonable satisfaction of American or
Licensor, Licensor may within thirty (30)
days thereafter declare this Agreement null
and void whereupon all deposits including
the franchise fee shall be returned to
Licensee. If during the term hereof
Licensee operates said store with a manager
other than himself, Licensee shall, at
Licensee's expense, cause such person to
attend and successfully complete such
training program.
Staffing 7.3 Licensee shall hire and supervise
efficient, competent, sober and courteous
operators and employees for the operation
of the business and set and pay their
wages, commissions and incentives with no
liability therefor on American or Licensor.
Licensee shall require all his employees to
work in clean uniforms approved by Licensor
but furnished at the cost of Licensee or
his employees as Licensee may determine. No
employee of Licensee shall be deemed to
<PAGE>
be an employee of Licensor or American for
any purpose(s)whatsoever.
Internal Training Program 7.4 Licensor shall provide or make
available to Licensee an in-store training
program for all store employees. Licensee
shall train and periodically re-train all
store employees using the training aids
made available by Licensor. From time to
time, American will revise such training
materials and aids and it or Licensor make
the same available to Licensee for
purchase.
Attendance at Meetings 7.5 Licensee, or manager of Licensee, at
Licensee's expense, shall attend at least
one national, regional or approved local
marketing area meeting each year which
Licensor and/or American originates for and
on behalf of "Dairy Queen" operators to set
forth new methods and programs in store
operation, training, management, sales and
sale promotion programs. Licensor further
strongly recommends that key employees of
Licensee also attend such meetings.
SALES PROMOTION PROGRAMS
Sales Promotion Programs 8.1 Licensor and Licensee, together with
and Payment to American other licensees of American, American shall
of Expenses for cooperate in the sales promotion programs
Administering Same of approved products. To this end, American
has reserved the right to establish and
organize sales promotion programs from time
to time and Licensee agrees to pay to
Licensor for remittance to American a sales
promotion program fee as set forth in
Paragraph 9.1 hereof. Licensee acknowledges
and agrees that American has had in the
past, and shall in the future have, the
discretion to determine expenditures of
funds collected in respect to sales
promotion programs and as to the selection
of the promotional materials and programs
for which said expenditures are made,
provided, however, that American shall make
a good faith effort to expend such funds in
the general best interest of participating
licensees. Licensee acknowledges and agrees
that American may compensate itself and/or
its affiliates for the expense of
administering such sales promotion
programs. Licensor shall advise Licensee
annually of American's expenses in
administering said sales promotion
programs.
Sales Promotion Materials 8.2 Licensee shall only use such sales
promotion program or other advertising
materials as are furnished, approved or
made available by or through American.
<PAGE>
Said materials shall be used only in a
manner prescribed by American. American
shall not unreasonably withhold approval of
any reasonable sales promotion materials.
Yellow Pages 8.3 Licensee shall, if requested by
Licensor, list separately, or participate
in a listing, in the Yellow Pages of his
local telephone directory containing such
copy as may reasonably be specified by
Licensor. The cost of such listing shall be
paid by Licensee, or by Licensee and other
participating licensees in the case of a
joint listing. Licensor shall not specify
an unreasonably expensive listing.
FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-up, 9.1 Licensee shall pay to Licensor as a
Franchise, License and service and set-up fee $15,000.00 of which
Sales Promotion $7,500.00 has been paid upon the
Program Fees execution of this Agreement and a balance
of $7,500.00 is payable in accordance with
the terms of Appendix C attached hereto.
Said service and set-up fee is intended to
compensate Licensor for its expenses
incurred, and services rendered in
establishing and setting up Licensee's
initial operation. In addition to said
service and set-up fee, during the full
term of this Operating Agreement, and in
consideration of the rights granted
hereunder, Licensee shall pay to Licensor
as license fee in respect to the rights
granted herein a sum equal to 4% of gross
retail sales, exclusive of retail sales
taxes, of all products, goods and wares of
every kind and nature sold from, or in
connection with the operation of,
Licensee's "Dairy Queen" retail store,
including, but without limiting the
generality of the foregoing, sales of all
products of any of the Trademarks as well
as sales of other merchandise whether or
not identified by other brand names and
which may be authorized for sale by
American or Licensor from time to time;
provided, notwithstanding the foregoing,
that no such continuing license fee shall
be payable with respect to sales of
Permitted Products. In addition, mittance
to American a sales promotion fee to be
expended in accordance with the provisions
of Paragraph 8.1. The sales promotion fee
shall be a sum equal to not less than 3%
nor more than 5% of Licensee's gross retail
sales net of sales taxes (excluding sales
of Permitted Products). Licensor shall
determine
<PAGE>
and notify Licensee of the exact percentage
prior to the first day of each fiscal year
of Licensor (except no notification will be
given with respect to any year for which
the percentage is to be unchanged from the
preceding year). Such percentage shall be
the same as that to be employed during such
succeeding year by the majority of "Dairy
Queen" licensees within the marketing area
as determined by American within which
Licensee's store is located.
Computations and Remittances 9.2 All amounts due and owing hereunder
shall be computed at the end of each
month's operation and remittance for the
same shall be made to Licensor on or before
the twelfth day of the following month
accompanied by the reports provided for in
Paragraph 9.4 hereof. The computation of
said amounts shall be certified and sworn
to by Licensee in the manner specified by
Licensor and Licensee shall supply to
Licensor such supporting or supplementary
materials as Licensor may reasonably
require to verify the accuracy of such
remittances.
Surcharge 9.3 At Licensor's option, Licensor may
Method of require Licensee to pay to suppliers of
Precollection mix, meat and other products and
ingredients used in the conduct of the
business a surcharge on all units of such
commodities purchased by Licensee. Said
surcharge shall be paid to such supplier by
Licensee at the time of purchase of such
commodities. Said surcharge shall be
established by Licensor at a reasonable
rate so as to approximate the amount of
license fee and sales promotion fee which
will be payable by Licensee. Said surcharge
shall be paid to said supplier or suppliers
for the account of Licensor, the same to be
regarded by the parties as a method of
precollection of said license and sales
promotion fees. The amounts so collected
shall be credited by Licensor against the
license and sales promotion fees due from
Licensee to Licensor at the end of each
month's operations. Licensor shall submit
to Licensee on a monthly or quarterly basis
a reconciliation of said license and sales
promotion fees account setting forth the
credits to Licensee's account by reason of
amounts collected for Licensor by suppliers
by way of the aforesaid surcharge method.
In the event Licensee shall fail to submit
reports in accordance with Paragraph 9.4,
Licensor may make said reconcilia-
<PAGE>
tion of amounts due in conformance with its
best judgment with regard to said amounts
due and same shall be conclusive as to the
amounts due Licensor from Licensee unless
within a period of ten (10) days after
mailing of said reconciliation to Licensee
by Licensor, Licensee provides evidence in
a form satisfactory to Licensor of the
correct amounts due. Licensee shall pay
such amounts, if any, determined to be owed
pursuant to Licensor's reconciliation
within ten (10) days after a mailing of
notice to Licensee by Licensor. If Licensor
determines that Licensee has overpaid
license or sales promotion fees on the
surcharge basis, Licensor shall remit to
Licensee an amount equal to the excess fees
collected at the time the monthly or
quarterly reconciliation is provided
Licensee.
Reports and Records 9.4 Licensee shall keep true records from
which all sums payable under this Agreement
and the dates of accrual thereof may be
readily determined. Licensee shall make
written reports to Licensor in such form as
Licensor may from time to time prescribe
within fourteen (14) days after the end of
each month's operation setting forth the
amount of gross sales of all products from,
or in connection with the operation of,
said store and the business thereof during
said month. In addition to the foregoing,
and in addition to such other information
as Licensor may from time to time require,
said monthly report shall accurately set
forth the total number of gallons of mix,
the total number of pounds of meat, and the
quantity of other basic commodities used
during said month and the sources from
which said mix, meat and other commodities
were purchased together with a complete
statement of Licensee's cost of labor,
utilities, rent and each other cost of
operation. For the purpose of said reports
the date of use of such mix, meat and other
commodities shall be deemed to be the date
of receipt at the store. Licensor, American
or the authorized representative of either
shall have the right at all times during
the business day to enter Licensee's
premises where books and records relative
to said store are kept, and to inspect,
copy and audit such books and records. In
the event that any such inspection or audit
reveals a variance of 3% or more from data
reported to Licensor or American, in
addition to any other rights it may have,
Licensor or
<PAGE>
American may conduct such further periodic
audits and/or inspections of Licensee's
books and records as it reasonably deems
necessary for up to one year thereafter and
such further audits and/or inspections
shall be at Licensee's sole expense
including without limitation reasonable
professional fees, travel and room and
board expenses directly related thereto.
Financial Planning and Management 9.5 Licensee agrees to employ sound
financial management practices in
connection with the operation of said
business and to that end Licensee shall
maintain on forms approved or provided by
Licensor or American a monthly profit plan,
a monthly profit and loss statement and a
monthly balance sheet accurately reflecting
the operations and condition of said
business. In addition to the foregoing,
Licensee shall employ such methods of
record keeping, bookkeeping and reporting
as Licensor shall from time to time
reasonably require and copies of all
monthly profit plans, profit and loss
statements, sales summaries and breakdowns
for the preceding month shall be forwarded
to Licensor on or before the fourteenth day
of the following month.
Payment of Debts 9.6 Licensee agrees to pay promptly, when
due, all taxes and assessments that may be
assessed against said premises or the
equipment or supplies used in connection
with Licensee's business, all liens and
encumbrances of every kind and character
created or placed upon or against any of
said property and all accounts and other
indebtedness of every kind incurred by
Licensee in the conduct of said business.
In the event Licensee should default in
making any such payment, Licensor shall be
authorized but not required, to pay the
same on Licensee's behalf and Licensee's
covenants promptly to reimburse Licensor on
demand for any such payment. to Licensor by
the same arise this Paragraph vision of
this interest at 12% per Any and all
amounts owing Licensee hereunder, whether
under the provisions of 9.6 or under any
other Agreement, shall bear interannum or
the maximum rate permitted by law,
whichever is less, from and after the date
of accrual thereof.
Timely Payment 9.7 The default by Licensee in the timely
payment of any indebtedness owing to
Licensor and/or American, or to any
affiliates of Licensor and/or American, or
the default by Licensee in the
<PAGE>
payment of any indebtedness of Licensee
with respect to which Licensor or American
or any of Licensor's and/or American's
affiliates is a guarantor, co-signer,
endorser or obligor, shall constitute a
breach of this Operating Agreement,
rendering the same subject to termination
in accordance with the provisions of
Paragraphs 10.1 and 10.2 hereof.
Insolvency, Etc. 9.8 In the event that Licensee be declared
insolvent or bankrupt, or in the event a
receiver is appointed, this Operation
Agreement shall automatically terminate as
of the date of such declaration or
appointment.
Liability and Insurance 9.9 Licensee hereby waives all claims
against Licensor and/or American for
damages to property or injuries to persons
arising out of the Operation of Licensee's
business, and Licensee shall indemnify and
save Licensor and/or American and/or the
affiliates of either harmless of and from
any damage or injury to property or persons
arising from or in connection with the
operation of said business or the
consumption of the product thereof.
Licensee further agrees to purchase and
maintain in full force and effect during
the term of this Agreement, at Licensee's
sole expense, liability insurance in an
aggregate amount not less than $300,000
insuring Licensee, Licensor and American
from liability for any and all such damage
or injury and Licensee further agrees to
deliver to Licensor a proper certificate
evidencing the existence of such insurance
coverage and Licensee's compliance with the
provisions of this paragraph and which
provides that Licensor and American will be
given thirty (30) days prior written notice
of material change, termination or
cancellation of the policy. Said insurance
coverage shall commence as of the date
Licensee commences operating a "Dairy
Queen" retail store or as of the date the
Authorized Location is first identified as
a site on which a "Dairy Queen" retail
store will be operated, whichever shall
first occur.
Assignment and Transfer 9.10 Licensee agrees not to transfer,
assign or alienate his interest herein or
hereunder in whole or in part without the
prior written consent of Licensor, which
consent shall not be withheld unreasonably,
but Licensor may insist that any proposed
assignment be an assignment of all of
Licensee's interest
<PAGE>
hereunder and that any proposed assignee,
be a person, in Licensor's reasonable
judgment, qualified to provide active
supervision over the operation of said
store in compliance with Licensee's
obligations hereunder and who has
sufficient net worth and sources of capital
which meet Licensor's then current
requirements for a store operation of the
type contemplated by this form of
agreement. In the event Licensee's said
interest should be so transferred or
assigned, Licensee shall pay to Licensor
contemporaneously therewith the sum of One
Thousand Five Hundred Dollars ($1,500), or
an amount equal to one-half of the license
fees paid or payable by Licensee in respect
of operations in the twelve (12) months
ending with the month prior to the month in
which the assignment is approved, whichever
is the greater amount, as a fee for the
preparation of a new Operating Agreement in
assignee's name, for Licensor's assistance
in reset-up of the retail store and for any
and all other expenses incurred and
services rendered by Licensor in effecting
said transfer. In the event of any such
assignment, the assignee, as a condition of
Licensor approving such assignment, must
attend and to the reasonable satisfaction
of Licensor successfully complete, at
assignee's expense, American's training
program at American's training center. In
the event Licensee is a corporation,
partnership or other entity, any transfer
or transfers of stock (or other form of
ownership interest) constituting in the
aggregate a controlling interest in
Licensee shall be subject to the consent,
transfer fee and all other applicable
provisions of this Agreement. Licensor may
withhold its consent to any proposed
transfer until all amounts owed by Licensee
to Licensor, American, the lailiates or
subsidiaries of either and approved "Dairy
Queen" suppliers have been paid in full.
Offsets 9.11 Licensee waives any and all existing
and future claims and offsets against any
amounts due hereunder, which amounts shall
be paid when due. Licensor and American
shall be entitled to apply or cause to be
applied against amounts due to either of
them of any of their respective affiliated
companies any amounts which may from time
to time be held by either of them or their
respective affiliates on Licensee's behalf
for be owed to Licensee by
<PAGE>
Licensor or American or their respective
affiliates.
CONTRACT VIOLATION
Remedies, Arbitration 10. In the event of any dispute between the
parties hereto arising under, out of, in
connection with or in relation to this Agreement,
said dispute shall be submitted by the parties to
binding arbitration in accordance with the Rules
and Procedures and under the auspices of the
American Arbitration Association. The arbitration
shall take place at the capital of the state of
the Authorized Location of Licensee or at such
other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be
finally, and binding on all parties.
Notwithstanding the foregoing, Licensee recognizes
that his "Dairy Queen" store is one of a large
number of stores similarly situated and selling to
the public similar products, and hence the failure
on the part of a single licensee to comply with
the terms of his Operating Agreement could cause
irreparable damage to Licensor, American and/or to
some or all other "Dairy Queen" licensees.
Therefore, it is mutually agreed that in the event
of a breach or threatened breach of any of the
terms of this Operating Agreement by Licensee,
Licensor shall forthwith be entitled to an
injunction restraining such breach and/or to a
decree of specific performance without having to
show or prove any actual damage, together with
recovery of reasonable attorney's fees and other
costs incurred in obtaining said equitable relief,
until such time as a final and binding
determination is made by the arbitrators. The
foregoing equitable remedy shall be in addition
to, and not in lieu of, all other remedies and
rights which Licensor might otherwise have by
virtue of any breach of this Agreement by
Licensee.
Breach of Contract 10.1 Licensee shall be in default hereunder
if Licensor determines that Licensee has
made any false report to Licensor, or has
failed to pay when due any amounts owed to
Licensor, or has in Licensor's judgment in
any other way breached any of the terms of
this Agreement, including but not limited
to, failing to submit required reports,
failing to meet any requirements or
specifications established with respect to
product quality, physical property,
conditions or equipment or materials used,
products manufactured, menu or use of
approved products, packages or promotional
materials. Failure of Licensee to pay to
Licensor any past due amount owed within
fourteen (14) days of Licensor's
<PAGE>
written notice of default therein shall be
construed as Licensee's voluntary
abandonment of this Agreement and the
franchised business hereunder operated.
10.2 Except as hereinafter provided,
failure of Licensee to cure a default by
Licensee hereunder within fourteen (14)
days from the date of a written notice of
default mailed or delivered to Licensee,
which notice states such default, shall
give Licensor good cause to terminate this
Agreement. Termination shall be
accomplished by mailing or delivering to
Licensee written notice of termination,
which notice shall state the grounds
therefore and shall be effective (i)
immediately in any case of voluntary
abandonment of this Agreement by Licensee
of conviction of Licensee of an offense
directly related to the business conducted
hereunder; or (ii) sixty (60) days after
the date of such notice of termination in
all other cases; provided, however, that
notwithstanding any other provision of this
Paragraph 10, this Agreement may be
terminated immediately upon failure of
Licensee to cure within twenty-four (24)
hours of notice thereof any default under
this Agreement which materially impairs the
good will associated with any of the
Trademarks. In addition to the foregoing,
this Agreement may be terminated by
Licensor upon any ground or by any period
of notice as may be permitted from time to
time by applicable law or regulation. Any
notice of default of termination shall be
personally delivered or be mailed by
certified or registered mail, return
receipt requested, postage prepaid.
Land, Building Lease, or 10.3 Subject to the provisions of Paragraph
Failure to Reopen 5.4 hereof, any failure to rebuild or
repair and reopen for operation Licensee's
destroyed or damaged store or store whose
lease has been terminated or not renewed
within one year of the date of occurrence
of such termination, destruction or damage,
shall automatically terminate this
Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this Operating
Agreement:
Reversion of Trademark Rights 11.1 All rights to the use of the
Trademarks and the right and license to
conduct said business at the Authorized
Location shall revert to Licensor and
Licensee
<PAGE>
shall immediately cease all use of the
Trademarks and pay all monies due at said
date. Licensee shall promptly and at his
own expense remove or obliterate all store
signage and displays furnished to Licensee
by Licensor and shall remove or obliterate
and thereafter discontinue all use of any
signage or displays at the Authorized
Location or in his possession bearing any
of the Trademarks or names or material
confusingly similar to any of the
Trademarks.
11.2 All right, title and interest of
Licensee in and to this Operating Agreement
shall become the property of Licensor.
Purchase 11.3 Licensor shall have the first option
to purchase any or all equipment, fixtures,
furnishings or supplies, of whatever kind,
owned by Licensee and used by him in the
production of the "Dairy Queen" product, or
any of the other approved products under
any of the Trademarks hereunder at a price
determined by a qualified appraiser
selected with the consent of both parties.
if the parties cannot agree upon the
selection of such an appraiser he shall be
appointed by a Judge of the United States
District Court of Licensee's Authorized
Location upon petition of either party.
Said option to purchase may be exercised by
Licensor at any time within thirty (30)
days from the date of such termination or
within thirty (30) days after the date of
the receipt by Licensor of the appraiser's
determination, whichever shall be the later
date, and shall not be impaired or
terminated by the attempted sale or other
transfer of any such equipment or supplies
by Licensee to a third party- Upon the
exercise of such option and tender of
payment for any such equipment or supplies,
Licensee agrees to sell and deliver the
same to Licensor free and clear of all
encumbrances, and to execute and deliver to
Licensor a bill of sale therefore.
Non-Compete 11.4 Licensee shall not directly or
indirectly engage in any competitive
business within 2,000 yards of the
Authorized Location for a period of one
year after said date of termination of this
Agreement except through a Bowlin's or an
affiliate in operation at the time of
signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that the
store facilities and operations of Licensee
hereunder may include in addition to "Dairy Queen"
or "Dairy Queen/Brazier" food and beverage
<PAGE>
service the sale of various other products not
identified or designated by Company's Trademarks,
including, but not limited to, motor vehicle fuel,
oil and related automotive products, souvenir-type
products, tobacco products, sundries, and packaged
food products not intended for consumption on the
premises where sold and which are not competitive
with food and beverage products identified or
designated by the Trademarks (all of said products
collectively referred to in this Agreement as
"Permitted Products"). In order to prevent public
confusion, preserve and protect the Trademarks and
establish the principles which shall govern
Licensee's sale of Permitted Products and usage of
the Trademarks, the parties agree that
notwithstanding any provision of this or any other
Agreement to the contrary, the following
provisions shall control with regard to Permitted
Products:
12.1 Licensee may sell Permitted Products
from its licensed store. Licensee may use
in the business operated hereunder in the
manner and to the extent permitted by this
Agreement marks and names identifying
Permitted Products.
12.2 The Trademarks shall not under any
circumstances be used to identify or
designate Permitted Products or any other
product(s) for which use of the Trademarks
has not been specifically authorized by
American. Permitted Products shall be sold
only from physical facilities (such as a
different area, room or building) which are
clearly distinct and apart from the "Dairy
Queen" retail store.
12.3 No product shall be sold from any part
of any sublicensed store's site which
detracts or threatens to detract from the
reputation or goodwill of the "Dairy Queen"
trade name or any of the Trademarks.
Licensor shall have the right to direct
Licensee to remove from the store and
discontinue the sale of any product item or
items which in American's good faith
judgment violates the quality standard of
the preceding sentence. No product shall
under any circumstances be sold from the
"Dairy Queen" portion of the licensed store
which has not received the specific Prior
approval of Licensor.
12.4 A building design and related facility
standards, based upon American's existing
design and specifications for "Dairy
Queen"/ "Brazier" stores, shall be
developed by mutual consultation and
agreement, which shall take into account
the particular requirements for a "Dairy
Queen" or "Dairy Queen"/"Brazier" facility
to be situated along an Interstate highway.
Licensee shall comply strictly with
<PAGE>
the design and facility standards developed
hereunder.
12.5 Notwithstanding Paragraph 8.2 hereof,
Licensee may employ off-site advertising
media such as billboards and radio
commercials, provided such advertising is
approved by Licensor and American, and
provided further that no such advertising
shall be used which creates or fosters any
confusion as to the identity, source or
quality of goods identified or designated
by the Trademarks. Licensor acknowledges
that it may be necessary to share extant
billboard space with an existing Stuckey's,
Wayfara or other store, and Licensor
requires that advertising for the "Dairy
Queen" store be as visually and physically
separate from the other advertising as is
feasible.
12.6 Because the "Dairy Queen" store
hereunder may also sell Permitted Products,
the parties agree that notwithstanding any
other provision of this Agreement or any
other contract between the parties,
Licensor deems it to be necessary and
desirable, to permit the following:
a. To allow Licensee to sell
Permitted Products in conjunction
with a "Dairy Queen" or "Dairy
Queen"/"Brazier" store;
b. To allow the principal
shareholders of Licensee and
members of their immediate families
to own any amount or class of stock
or debt in any Bowlin's business;
c. To the extent and in the manner
permitted hereunder, to allow
Licensee to sell and to advertise
Permitted Products in conjunction
with products identified or
designated by the Trademarks;
d. Subject to Paragraph 6-1 hereof,
to relieve Licensee from the
obligation with respect to
Permitted Products, to purchase and
use equipment, supplies,
ingredients and services approved
by American;
e. To allow Licensee to construct
and equip its retail store in
accordance with building design and
related facility standards
developed under Paragraph 12.4
hereof;
f. To relieve Licensee: (i) from
the obligation of using, in
preparing or selecting Permitted
Products, ingredients, formulas and
supplies
<PAGE>
specified by American; (ii) from
the obligation to observe, with
respect to Permitted Products, the
requirements relative to portions,
sizes, appearance and packaging set
forth in American's "Store
Management Operations Manual" and
"product preparation charts"; and
(iii) with respect to Permitted
Products, to allow the use of other
supplies and customer service
materials without regard to
standards of uniformity and quality
as are now or hereafter set by
American;
g. To allow Licensee its principal
shareholders or members of their
immediate families to engage in a
competitive business within 2,000
yards of the Authorized Location of
the store licensed hereunder, as
defined in the Operating Agreement,
but only through a Bowlin's
business; and
h. To relieve stockholders of this
corporate Licensee from the
obligation of personally
guarantying the obligations of
Licensee under the Operating
Agreement. Sale or transfer of this
License to another corporation
shall include the then customary
guarantees required of
corporations.
GENERAL PROVISIONS
13.1 In the event any one or more clauses
of this Agreement shall be held to be void
or unenforceable for any reason by any
court of competent jurisdiction such clause
or clauses shall be deemed to be separable
and of no force or effect in such
jurisdiction and the remainder of this
Agreement shall be deemed to be valid and
in full force and effect, and the terms of
this Operating Agreement shall be equitably
adjusted so as to compensate the
appropriate party for any consideration
lost because of the elimination of such
clause or clauses.
13.2 Any waiver by Licensor of any breach
or default by Licensee shall not be deemed
to be a waiver of any other or subsequent
breach or default nor an estoppel to
enforce its rights in the event of any
other or subsequent breach.
13.3 This Agreement, and the application
form executed by Licensee requesting
Licensor to enter into this Agreement,
constitute the sole agreement between the
parties with respect to the entire subject
matter of this Operating Agreement and
embodies all prior agreements and
negotiations with respect to the "Dairy
Queen" business. There are no
representations of any kind except as
contained herein and in the aforesaid
application.
<PAGE>
13.4 Except as otherwise provided in this
Agreement, any notice, demand or
communication provided for herein shall be
in writing, signed by the party giving the
same, deposited in the registered or
certified United States mail, return
receipt requested, postage prepaid, and;
a. If intended for American shall
be addressed to American Dairy
Queen Corporation at 5701 Green
Valley Drive, Minneapolis,
Minnesota, 55437;
b. If intended for Licensor shall
be addressed to Licensor at the
address hereinabove set forth;
c. If intended for Licensee, shall
be addressed to Licensee at the
Authorized Location hereinabove
designated;
or to such other address as may have been
given to the other party by notification as
herein provided.
Notices for purposes of this Agreement
shall be deemed to have been received on
the earlier of the date of delivery or
first attempted delivery as indicated on
the return receipt (or, in the abscence of
a noted delivery or noted attempted
delivery date, 15 days from noted day of
mailing).
13.5 If Licensee consists of two or more
individuals, such individuals shall be
jointly and severally liable and references
to Licensee in this Agreement shall include
all such individuals. Reference to Licensee
as male shall also include a female
licensee, partnership or corporation or any
other business entity. Headings and
captions contained herein are for
convenience of reference only and shall not
be taken into account in construing or
interpreting this Agreement.
13.6 Subject to the terms of Paragraph 9.10
hereof, this Agreement shall be binding
upon and inure to the benefit of the
administrators, executors, heirs,
successors and assigns of the parties.
13.7 This Agreement shall be effective only
when approved by an officer of American and
shall be governed by and interpreted in
accordance with the law of the state in
which the Authorized Location is Located.
13.8 This Agreement shall be deemed to be
amended from time to time as may be
necessary to bring any of its provisions
into conformity with valid applicable laws
or regulations.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the foregoing "Dairy Queen"
Operating Agreement the date first above written.
LICENSEE
BOWLIN'S, INC. d/b/a DQ of FLYING C, NM
---------------------------------------
ATTEST:
By /s/ MICHAEL L. BOWLIN
---------------------------------------
Michael Bowlin Subject to reservations
detailed in attached Appendex "D"
---------------------------------------
/s/ SUE E. BROWN
- --------------------------------
Asst. Secretary LICENSOR
INTERSTATE DAIRY QUEEN CORPORATION
---------------------------------------
By /s/ SIGNATURE ILLEGIBLE
---------------------------------------
Its President
-----------------------------------
ATTEST:
/s/ GREGORY W. GRIFFITH
- --------------------------------
Sec Treas
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
By: /s/ HERMAN E. NELSON
---------------------------------------
Its V.P.
-----------------------------------
<PAGE>
APPENDIX "A"
Licensee has the right and privilege to use the following trademarks and
service marks in accordance with the attached Operating Agreement.
This Appendix "A" may be amended by Company from time to time in order to
make available additional trademarks or service marks or to delete those which
become unavailable. Licensee agrees to use only those trademarks and service
marks which are then currently authorized.
DAIRY QUEEN BUSTER BAR
BRAZIER DILLY
MR. MISTY DQ
MR. MISTY KISS THE ELLIPSE DESIGN
ROOF DESIGN BROWNIE DELIGHT
LET'S ALL GO TO THE THE CONE WITH THE CURL ON TOP
DAIRY QUEEN
FIESTA DESIGN: THE CONE WITH THE
CURL ON TOP
Each of the above trademarks and, or service marks must be used only in the
manner specified by the Company and in connection with the goods and/or services
specified by the Company. No deviations will be permitted.
<PAGE>
APPENDIX "B"
"Dairy Queen/Brazier"
Below is listed the approved menu of Company for "Dairy Queen/Brazier" stores
which is in current use and effect. Licensee is authorized to use this menu in
accordance with the attached Operating Agreement.
This Appendix "B" may be amended by Company from time to time in order to make
available additional products or to delete those ,,,Iiich become unavailable.
Licensee agrees to use only those products which are then currently authorized
for use in "Dairy- Queen Brazier" stores.
<TABLE>
<CAPTION>
NATIONAL REQUIRED ITEMS NATIONAL REQUIRED ITEMS NATIONAL OPTIONAL ITEMS
<S> <C> <C>
CONES SANDWICHES HOT FUDGE BROWNIE DELIGHT SUNDAE
DIPPED CONES SUPER "BRAZIER" SUNDAE SUPREME SUNDAE
SUNDAES THE "HALF POUNDER" STRAWBERRY SHORTCAKE SODAS
"FIESTA" SUNDAE BIG "BRAZIER" FROZEN NOVELTIES
BANANA SPLIT BIG "BRAZIER" WITH TOMATO BIG BUSTER BAR
PARFAIT SHAKES AND MALTS HOMEPAK BRAIZER WITH CHEESE SANDWICHES
FLOATS HAMBURGER OR BRAIZER SUPER DOG
FREEZES CHEESEBURGER OR BRAZIER WITH CHEESE SUPER DOG WITH CHILI
"MR. MISTY" FLOAT HOT DOG SUPER DOG WITH CHEESE
"MR. MISTY" FREEZES HOT DOG WITH CHILI BARBECUE
FROZEN NOVELTIES HOT DOG WITH CHEESE STEAK SANDWICH
"DILLY" BAR FISH SANDWICH CHILI BOWL
"BAR DQ" FISH SANDWICH WITH CHEESE BRAZIER CRISPY FRIED CHICKEN
"DQ SANDWICH" FRENCEH FRIES
"DILLYWICH" ONION RINGS
"MR. MISTY KISS"
"STAR KISS"
DRINKS
THREE APPROVED CARBONATED DRINKS
"MR. MISTY"
</TABLE>
Each of the above products is to be used only in the rather specified by company
and in connection with the goods and/or services specified by the Company as set
forth in the "Dairy Queen" Store Management Operations @'Manual and the
"Brazier" Operations Manual of the Company. as changed or attended from time to
time by Company. No deviations will he permitted.
3/77
<PAGE>
Appendix "C"
Licensee shall pay to Licensor as a service and set-up fee $15,000 of which
$7,500 has been paid upon the execution of this Agreement and a balance of
$7,500 Is payable as follows: $1,500 principal payable each June lst (beginning
June 1, 1983 and ending June 1, 1987) and 12% interest per annum on the unpaid
principal payable each June lst.
<PAGE>
APPENDIX "D"
RESERVATIONS TO CERTAIN ITEMS IN
"DAIRY QUEEN" OPERATING AGREEMENT
1 Paragraph 4.6. licensor advises that the purpose of this paragraph is full
disclosure.
2. Paragraph 5.1. Licensee and American have agreed on the plans for remodeling
the existing building to conform to requirements of Paragraph 5.1.
3. Paragraph 6.1 An application to Mr. Rosencrans of "Interstate Dairy Queen"
for some optional items to be added to our "DQ" menu has been made. Licensee
will not serve such items, unless and until approved as optional items by
American. Also, in Licensee's store building adjoining the "Dairy
Queen"/"Brazier" Licensee does sell alcoholic beverages, intended for
consumption off premises. licensee wishes to disclose this so it is no surprise
to Licensor or American later. No alcoholic beverages are sold in the
"DQ"/"Brazier" building. Licensee acknowledges that the nature of dispensing the
alcoholic beverages is in package sales and Licensee shall not dispense alcohol
intended for consumption on the premises. Licensee operates a full Line novelty
and curio store in the building adjoining Licensee "Dairy Queen"/"Brazier"
operation. Licensee maintains separate accounting for sales from adjoining store
and "Dairy Queen"/"Brazier" operations. Sales in Licenisee's merchandise,
novelty, and curio store shall not be subject to continuing license fees or
sales promotion fees.
4. Paragraph 6.1. Licensee may sell the Traditional or Biscuit Breakfast as
provided for by American in the breakfast test program until the test is
discontinued at which time Licensee may apply for a menu deviation which may or
may not be granted by Licensor.
5. Paragraph 9.1. Licensor is obligated to pay monthly sales promotion fees as
provided for in paragraph 9.1 Any deviation or variance from the required
monthly payment shall be of a temporary nature and shall not in any way
prejudice Licensee's obligation to strictly follow Paragraph 9.1 and make
monthly sales promotion fee payments if requested at a later date by Licensor.
In recognition that Interstate Licensees in the past have expended more than 3%
of sales on advertising (primarily in outdoor, the most effective medium for
communicating to highway travelers), American and Interstate have temporarily
without prejudice allowed Licensees to credit monthly advertising expenditures
to sales promotion fee payments each month. If a Licensor does not expend the
required sales promotion fee percentage monthly, the balance must be remitted.
American reserves the right to discontinue this special advertising arrangement
at anytime.
Development of national advertising program and other events in American's and
Interstate's exclusive discretion and judgment may require, and Licensee hereby
agrees to make, full and regular monthly payments of the sales promotion fee to
Interstate.
Licensee is obligated to pay and participate annually in the Annual Marketing
Program (AMP). In cases where licensee pays sales promotion fee monthly to
Interstate, the AMP fee will be paid from amounts remitted to Interstate. In
cases where Licensee does not pay sales promotion fee monthly to Interstate,
Licensee shall remit the annual fee to Interstate.
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6. Paragraph 9.4. Licensee has requested that for reasonable and orderly
availability of data that if 1-icensor or American wishes to audit or took at
T-Licensee books, that Licensor give Licensee at Least 10 days notice prior to
date so data may be readily available to Licensor. T-icensor and American, in
accordance with generally accepted auditing standards, decline to give such
notice.
7. Paragraph 9.5. Licensee already owns an in-house computer that generates a
profit and loss statement for a profit center such as Licensee's "Dairy Queen".
Licensee hereby requests that Licensor accept Licensee's profit and loss report;
as already programmed, which uses profit center identification and consolidated
balance sheet. Licensor has requested and shall be furnished with a "dummy"
statement for consideration.
8. Paragraph 10.1. 10.2, and 13.4. Licensee requires and licensor agrees that
any notices under any contract or agreement shall be mailed certified mail,
return receipt. and that for purposes of this Agreement notice shall be deemed
to have been received on the earlier of the date of delivery or first attempted
delivery as indicated on the return receipt (or in the absence of a noted
delivery date, or noted attempted delivery date, 15 days from noted date of
mailing).
9. Paragraph 12.3. Licensee agrees to not sell Liquor or alcoholic beverages
directly in the "Dairy Queen"/"Brazier" building of the Bowlin's Flying "C"
Ranch. However, in the Flying "C" Ranch building of Licensee operation, liquor
and alcoholic beverages will continue to be sold, for consumption off the
premises. See Appendix D, Paragraph 3.
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"DAIRY QUEEN"
SUBFRANCHISE DISCLOSURE STATEMENT
ACKNOWLEDGMENT OF RECEIPT
The undersigned hereby acknowledges receipt of a completed subfranchise
disclosure statement concerning the above subfranchise dated December 1, 1981.
/s/ M.L. BOWLIN
---------------------------
12/15/81
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"DAIRY QUEEN"
STORE OPERATING LICENSE AGREEMENT
THIS AGREEMENT entered into this 18th day of November 1986 , by and between
DAIRY QUEEN OF SOUTHERN ARIZONA, INC., an Arizona corporation, hereinafter
referred to as "Company", and BOWLINS INCORPORATED, a New Mexico Corporation
hereinafter referred to as "Licensee", "Store Owner", "Operator".
I. PREMISES OF THIS AGREEMENT.
1. Licensee hereby agrees that this Agreement is premised upon the
following of facts which are accepted, and specifically agreed upon by Licensee:
a. Company is the exclusive Licensee of Dairy Queen in the territory
comprising the subject matter of this Agreement entitled to use, license, and
permit others to use the trademark and trade name "Dairy Queen" and certain
other trademarks (hereinafter referred to as "derivative trademarks") which are
derived from the words "Dairy Queen" or either of said words or abbreviations
thereof, including by way of example and not limitation trademarks employing the
use of the word "Queen", the letters "Q" or "D.Q."; said "Dairy Queen" trademark
having been registered in the State of Arizona and in the United States Patent
Office as Registrations Nos. 728,531 and 728,894. This Agreement and undertaking
by Licensee includes every single use or derivation of the trademark, the
method, or mode of operation, or any information or material or items derived
therefrom.
b. Company and its predecessors in interest have promoted, developed
and established within said areas a franchise business under said exclusive
license, which comprises the selling of a frozen and/or semi-frozen dairy
product in various forms (including for example such items as buster and dilly
bars) under the trademark "Dairy Queen" from retail stores bearing the trade
name "Dairy Queen", has used the trademark "Dairy Queen" or freezers used in the
preparation of and dispensing of said product and has employed certain other
equipment, items, designs,
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logos, promotional material, merchandising methods, techniques, standards,
requirements, uniforms, supplies, ingredients, methods, and other techniques,
which are to remain the specific property of Company, and, after this Agreement
ends, are to be returned to Company, and for which Licensee has no right to
utilize said items.
c. In entering this Agreement, Licensee agrees that Licensee desires to
engage in the "Dairy Queen" business and further desires to enter into this
written franchise and license agreement with Company for the use of the
trademark and trade name and any derivative trademarks, and to become involved
in a business subject to the covenants set forth herein, the use of the
merchandising methods employed herein, said use by Licensee to be subject to
conditions and controls herein prescribed for the purposes of offering to the
public wholesome products of a uniform quality and standard and of protecting
the interest of all persons engaged in said business.
d. That by entering this Agreement, Licensee specifically agrees to
become subject to all regulations, policies, and standards as set forth by
Company from time to time.
e. Further, Licensee agrees to provide only those services and sell
only those products specifically approved and authorized by Company.
II. LICENSE.
Company hereby grants to Licensee, subject to the terms, conditions
and provisions hereof, and subject to any and all policies of Company to be
enunciated during the term of this Agreement, and any which are in existence at
this time, an exclusive right and license to operate a "Dairy Queen" Store at
the following location only:
17 Mlles East of Benson Arizona, on Interstate 10 at Johnson Road.
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said license to include the rights to:
1. Establish and operate a "Dairy Queen" store employing "Dairy Queen"
merchandising methods, materials, and using the trademark "Dairy Queen", and
said derivative trademark on and in association with the advertising and sale of
the frozen dairy products, and the trade name "Dairy Queen" on the said store
from which the product is sold, and further subject to the further provisions of
this Agreement.
2. To use in said store only approved machines, and items of any and
all kind approved by Company. As to freezers, "Dairy Queen" freezers must be
used in producing and dispensing said "Dairy Queen" products, it being clearly
understood and agreed by Licensee that no approved "Dairy Queen" freezer shall
be moved or caused or permitted to be removed from said authorized location for
the purpose of operating same.
3. Use of the trademark "Dairy Queen" on said approved freezers
produced by authorized manufacturers.
4. Use at the authorized location on, and in association with,
production, packaging, and sale of uniform and approved products and services
designated periodically by Company, involving the related sales promotion
programs and materials approved periodically by Company, and utilizing any form
equipment, uniforms, merchandising means, fixtures, supplies, ingredients, and
other items as approved by Company for use in the storage, preparation,
packaging, merchandising, and sale of such products.
III. LICENSEE'S ACCEPTANCE AND ACKNOWLEDGMENTS.
1. Licensee hereby accepts said License subject to the terms,
provisions and conditions hereof, and agrees to cause one "Dairy Queen" store to
be established and maintained at the
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authorized location and agrees to provide active and continuous supervision and
management upon standards and policies as set by Company. (Large block of
material X'd out on original document) Initialed by AAB & MLH
2. Company is the exclusive licensee of the right to use the trademark
names at the location for and in which the within franchise and license
agreement is operative, and has the exclusive right to grant to Licensee the use
of said trade names.
3. The trade names and trademarks have valuable goodwill to Company,
and are a valued property right, the use of which has been licensed to Company.
4. The authorized location, the Dairy Queen Store, and the use of
trademarks and only in connection with such products as may be specified by
Company and not otherwise, and shall at all times be used and only in a manner
approved by Company. In years of technological change, new products and services
are often developed. It is the specific purpose of this Agreement, that in the
event there are merchandising changes, technological changes, and changes in
merchandising, the approval of Company must be received in writing prior to
offering any such goods, or service. Otherwise, this Agreement will be declared
null and void. As a specific example of the purpose of this provision, Licensee
agrees that it is the purpose of this Agreement that present "Dairy Queen"
products are to be sold to members of the general public from standardized
"Dairy Queen."
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locations. That the "Dairy Queen" locations are built for a specific purpose in
mind, and not for the use or sale or development of such specific items as video
games and arcades. Such uses of the premises are not allowed pursuant to the
terms of this Agreement, and Licensee hereby agrees to same.
5. Licensee shall use no trade name or trademark other than "Dairy
Queen" in said business except with the written consent of Company. Similarly,
Licensee shall link no other trademarks or trade names belonging to others with
"Dairy Queen" in a "Dairy Queen" authorized location. For example, Licensee is
only entitled to sell "Dairy Queen" products or services at their location. They
cannot sell items of food, or otherwise, without the authorization of Company.
See Addendum 4A-1 (AAB & MLH)
6. Licensee specifically agrees that this Agreement , at the sole
option and discretion of Company, may be declared null and void if Licensee
breaches any provisions of this Agreement, and, if after having seven (7) days
written notice of breach by mail, the conditions specified have not been
corrected by Licensee. Then, Company, at its own option, may terminate this
Agreement. See Addendum 4A-II (AAB &MLH)
7. Licensee further and specifically agrees that under no circumstances
breaches of this Agreement, whether continuing or otherwise, at any time, in any
way, be regarded as waived by Company.
8. As to Licensee's obligations, time is always of the essence in this
Agreement.
IV. TERM.
1. The license granted herein shall be for a term of 20 (Twenty) years,
unless sooner terminated in accordance with the provisions hereof.
V. MONETARY AGREEMENTS.
1. Licensee shall pay to Company as a franchise fee, the sum of Four
(4%) Percent (see attached Addendum to "Dairy Queen" License) upon the execution
of this Agreement. Said fee is a fee paid to Company for granting and entering
into this Agreement. Said fee is earned when paid, and is not refundable
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under any circumstances whatsoever.
b. All amounts due and owing shall be paid on a monthly basis and shall
be computed at the end of each month's operation and remittance for same shall
be made to Company on or before the third (3rd) day of the following month
accompanied by reports required by said Company. The computation of said amount
shall be certified and sworn to by Licensee in a manner or form prescribed by
Company and Licensee shall supply to Company all self-supporting or
supplementary materials as Company may require to verify the accuracy of such
remittances. Furthermore, Licensee grants to Company the right to check with any
suppliers, Company's or others, with whom Licensee is doing business to check on
the operation of the business .
c. Payment dates as set forth herein are specifically agreed to be the
dates upon which said items are to be received by the Company. Any payments of
any nature or kind received after the due date subjects Licensee to default. THE
ACCEPTANCE OF LATE PAYMENTS SHALL NOT, UNDER ANY CIRCUMSTANCES BE DEEMED A
WAIVER BY COMPANY OF THE RIGHT TO PROMPT AND APPROPRIATE PAYMENT. Any payments
received after the eighth of any month shall be subject to a late fee equal to
five (5%) percent of the amount of
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said sum due. In addition, any sums paid after the eighth shall be
subject to interest at the rate of one and one-half (1 1/2%) percent per month.
In addition, Licensee agrees to compensate Company for any and all collection
efforts or activities on any payments made after the due dates contained herein.
These expenses shall include office expenses, telephone expenses, expenses of
time and effort of employees to write letters, make phone calls, and attempt
contact with Licensee or Licensee's agents, and shall include any and all costs
and expenses in contacting collection agencies, lawyers, or other personnel in
an attempt to speed payment. The amount of any and all expenses shall be
determined by Company, in Company's sole discretion, and Licensee hereby agrees
to grant Company the right to determine the amount of said expenses, and hereby
agrees to be bound by said decision of Company. Any failures to pay said amounts
as set by Company shall also be regarded as a breach of this Agreement
subjecting Licensee to forfeiture, pursuant to page 18, Section XXII.
d. In addition to any and all other options as required, or allowed by
law, or as provided in this Agreement, Company shall have the right to require
Licensee, if delinquent at any time, to make a pre-payment equal to three
month's royalties as security for the prompt payment of any and all obligations.
e. Company shall further have the option to require Licensee to make
pre-payments on royalty and advertising and merchandising fees by requiring
Licensee to pay a surcharge on each gallon of mix, and on other products and
ingredients used in the conduct of business at the authorized location to the
respective suppliers thereof. Licensee shall pay the surcharge to the suppliers
at the -time of purchase of such commodities. The surcharge shall be established
by Company in such amounts as determined by Company, which amounts shall not
substantially exceed the monthly continuing royalty, advertising, and
merchandising fees due hereunder. The surcharge shall be paid to the supplier or
suppliers for the account of the Company. The amount
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so prepaid and remitted to Company from suppliers will be credited against the
continuing license and advertising and merchandising fees at the end of each
month.
3. Licensee further agrees to pay to Company the amount of not less
than three (3%) percent, nor more than six (6%) percent, of all gross sales,
excluding sales taxes, as and for the promotion and advertising of "Dairy Queen"
products. To this end, Company reserves the sole right in its sole discretion to
establish and organize advertising and promotional programs from time to time.
Payments of advertising and merchandising fund money shall be subject to the
same terms and conditions as royalty fee payments required in this Agreement.
See Addendum 4A-III attach 4. In addition, Licensee agrees to spend additional
monies in merchandising and marketing of their individual "Dairy Queen" store.
4. In addition, Licensee agrees to spend additional monies in
merchandising and marketing of their individual "Dairy Queen" store.
VI. TRANSFER OF AGREEMENT.
1. Company reserves the right to know specifically at all times with
whom Company is doing business. (AAB & MLH)
2. Licensee shall not transfer, assign, encumber, or in any way
alienate this Agreement, or the rights, duties, or obligations under this
Agreement without the written approval of Company.
Licensee shall give Company written notice of intent to sell. Any
attempt to transfer, assign, sell, or alienate without the express written
approval of Company shall immediately breach this Agreement. No party without
the express written permission of Company shall have the right to sell "Dairy
Queen" products at the location specified in this Agreement, or at any other
location.
3. If any sale, transfer, or assignment of any nature or kind is agreed
upon by Company, Company is hereby given the right of first refusal to any such
agreed upon transfer or sale. Notwithstanding anything to the contrary contained
above in this part 2 hereof, Licensee hereby grants to Company the right of
first refusal to purchase all of Licensee's right, title and
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interest in and to Licensee's "Dairy Queen" business located at the Authorized
Location in this Agreement in the event Licensee should desire to sell the same.
In such event, Licensee shall notify Company in writing that he has received and
is prepared to accept a good faith offer from a third party who is financially
able and otherwise qualified to become a licensee of Company. The said notice
shall identify proposed purchaser and be signed by Licensee and proposed
purchaser and precisely set forth all of the terms of the written offer which
Licensee shall have received from the proposed purchaser. Company shall then
have thirty (30) days after the receipt of such notice to exercise its right of
first refusal, the same to be in writing and on the same terms and conditions,
MINUS any realtor's fees, as have been offered to Licensee by the proposed
purchaser.
4. In the event of any assignment agreed upon by Company Licensee shall
pay to Company contemporaneously therewith the sum of TWO THOUSAND DOLLARS
($2,000.00) or a sum equal to one-half of the license fees paid for the previous
calendar year, whichever is greater, as and for a transfer fee.
This Agreement may be transferred to any proposed new assignee,
transferee, or purchaser in it's entirety: Should proposed new assignee,
transferee, or purchaser desire to extend the duration of, or modify the terms
of this agreement such modification would be contingent upon and subject to the
new party entering into a new agreement with Company. if, for any reason,
Company, and the proposed assignee, transferee, or purchaser cannot agree to the
terms and conditions of a new contract, then any attempt at assignment,
transfer, sale, no matter how enumerated, shall be void.
VII. DEATH OR DISABILITY.
In the event of the death, disability or incapacity of any individual
Licensee or principal officer or director of an incorporated Licensee or partner
in a partnership Licensee, should the decedent's heir or successor in interest,
or the corporation or partnership, as the case may be, wish to continue
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as Licensee hereunder, such person shall apply for Company's consent thereto,
successfully complete Company's training program and pay the applicable transfer
fee, in accordance with this paragraph VII as in any case of a proposed transfer
of Licensee's interest in this agreement.
VIII. BUSINESS NAME.
Licensee shall not use the word "Dairy Queen" as a part of its
corporate or business name unless first approved in writing by Company, and
shall use only the words "Dairy Queen" (and no other words whatsoever) as the
trade name on the store from which the product is sold. See Addendum 4A-1.
IX. FURTHER LICENSEE DECLARATIONS.
1. Licensee agrees that nothing contained herein gives him any right,
title or interest in the trademark and trade name "Dairy Queen" nor in said
derivative trademarks except the right to use same under the terms and
conditions of this Agreement and that Licensee's use thereof inures to the
benefit of the owner hereof. Licensee hereby acknowledges the validity of the
trademark and trade name "Dairy Queen" and any derivative trademarks therefrom
and further agrees to do nothing or use the trademark and trade name or said
derivative trademarks in any way to infringe the rights of Company or Company's
licensor. Licensee shall use only the trademark and trade name "Dairy Queen" and
said derivative trademarks on and in association with the advertising and sale
of a frozen dairy product, and no other product, which shall in quality and mode
and condition of manufacture and sale comply with such standards as may be fixed
or approved by Company. It is further agreed by the parties hereto that in order
to promote and protect the business interests of each of the parties, the good
will of the "Dairy Queen" business and the business interests of other persons
engaged in the "Dairy Queen" business, requires substantial uniformity to be
maintained in the type, standard and quality of the "Dairy Queen" stores, the
mix, the freezers, and products used therein, the conditions of preparation and
merchandising and sale of the
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product. To this end, it is agreed that the rules and controls and policies of
Company, those contained in this Agreement, and enacted by Company shall
prevail. Licensee agrees that the provisions, restrictions, and controls and
agreements provided in this document are all necessary, reasonable, and
desirable for such purposes and that Licensee's "Dairy Queen" business shall be
conducted in accordance with Company's standards and requirements. The standards
and requirements include requirements of quality, production, appearance,
cleanliness, service, merchandising and advertising. The setting forth of
specific items is not in any way meant to limit the specific items to which this
Agreement applies. It is mutually understood and agreed that these controls
include the specific requirements without limiting any general statement or
policy or controls expressed.
2. Licensee further agrees to utilize only such "mix" in the
preparation of "Dairy Queen" products which conforms to the standards prescribed
by Company. Licensee shall strictly observe the product overrun limitations
which shall be made known to Licensee by Company from time to time during this
Agreement as guidance to Licensee in formulating products for sale. "Product
overruns" is defined by the parties as being the amount of air incorporated into
the "Dairy Queen" mix in the course of producing "Dairy Queen" products. To
avoid misunderstanding, Company and Licensee acknowledge that neither shall
expect the other to be agreeable to a product overrun exceeding forty-five (45%)
percent.
3. Licensee further agrees to utilize only such supplies used in the
production, handling, serving or garnishing of "Dairy Queen" products and
ancillary lines and related goods conforming to standards prescribed by Company
from time to time.
4. Company shall have the sole right to approve the supplies and
ingredients used in the business.
5. Licensee shall use only approved "Dairy Queen" freezers produced by
authorized manufacturers.
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6.Licensee shall produce and sell the "Dairy Queen" product line only
in a store constructed in accordance with plans furnished by Company and
containing approved "Dairy Queen" signs; said plans -to remain the property of
Company at all times; and shall maintain the store in a high state of repair,
cleanliness and sanitation at all times. Before any store for the sale or
distribution of "Dairy Queen" is constructed, the location thereof shall be
subject to -the approval, in writing, of Company. Licensee further agrees to
acquire the right to use or to commence promptly the construction of one such
building at the authorized location herein above described and complete or
contract for the completion of the same on or before July 1, 1987. AAB & MLH
Upon completion of said building Licensee shall, at his own expense, install
freezers and equipment therein in a manner approved by Company. The parking area
shall be black-topped or paved in a manner approved by Company. No material
alterations to or changes in said building or premises shall be made during the
period of this contract or any renewal hereof without the prior approval in
writing by the Company.
7. Licensee shall hire and supervise efficient, competent, sober and
courteous operators and employees wearing uniform Company dress for the purpose
of operating the business. Licensee shall set their wages and commissions, and
pay all such wages and commissions due them with no liability therefor on the
Company. Licensee shall require all its employees to work in clean uniforms
approved by the Company but furnished at the cost of Licensee or the employee as
Licensee may determine.
8. Licensee agrees at all times to repaint the buildings on said
premises at least annually and to maintain said buildings and said entire
premises in a high state of repair, cleanliness and sanitation. Should
Licensee's "Dairy Queen" store be rated other than the highest rating given by
any local, state or federal sanitation or health authorities, said store shall
immediately be closed and such steps or measures shall be
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taken by Licensee as may be necessary to obtain the highest rating before it is
reopened for business. Any such closing shall be regarded as a material breach
of this Agreement. it is agreed between the parties that cleanliness and
sanitation are two of the most important ingredients in general public
acceptance of "Dairy Queen" products. Any action by any authority closing a
"Dairy Queen" store is regarded as a serious dereliction by Licensee.
9. Licensee further covenants that in the event Company standards are
not met, the store may be closed until steps are taken to remedy this situation,
or at Company's option, this Agreement may terminate, as to page 18, Section
XXII.
10. All Advertising, cartons, containers, wrappers, and paper goods
used in the advertising, sale and distribution of the "Dairy Queen" products
shall, where practicable, indicate that it is produced and sold on the authority
of Company and shall be subject to approval by Company before being used.
11. All portions of "Dairy Queen" products sold or offered for sale
shall comply with requirements established from time to time by Company as to
weight, size, and appearance and all such products shall be processed in strict
accordance with the formula and methods furnished by Company.
12. From time to time as Company shall deem desirable, Company may
place a qualified representative at Licensee's place of business to train,
instruct, and familiarize employees thereof with the standard business methods
and procedures of Company, or, may require Licensee or any supervisory or
operating employee of Licensee to spend a reasonable amount of time at another
like place of business designated by Company for the purpose of observing,
receiving training and instruction, and practicing standard business methods and
procedure.
13. Licensee further agrees, that at any time Company may send a
representative to Licensee's location to review documents, records, the physical
facilities, and the operation of the business.
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14. Licensee agrees to comply with all applicable federal, state,
local, county, and municipal laws, statutes, ordinances and regulations
pertaining to the conduct of the "Dairy Queen" business and the sale of the
"Dairy Queen" products.
15. As noted previously, Licensee agrees that technology may develop
new forms of amusement such as video games. Nothing in this Agreement authorizes
the use of any items developed by time, or technology, or ingenuity, which are
not authorized by this Agreement, or by Company in writing.
See Addendum 4A-1.
16. Licensee further agrees to appear at and attend the annual Company
store operator's meeting and convention, and to appear and attend at any and all
conferences, meetings, or other functions as are designated by Company.
X. SIGNS.
1. Licensee shall prominently identify the store with one or more of
the 'trademarks specified by Company, and with no other name or mark, said signs
shall as to color, lettering, size, design and general appearance be approved by
Company prior to construction and erection.
2. Licensee shall at his own expense cause such signs to be
constructed, erected, and maintained throughout the term of this Agreement. All
signs must be approved by Company.
3. Company is hereby given the right to designate any additional signs
to be placed at the premises, at Licensee's expense. Such signs shall include,
where appropriate, highway signs and other similar sign items. Company shall be
the sole arbiter of when such signs, or additional signs, are appropriate or in
need of maintenance.
XI. FREEZERS.
All approved "Dairy Queen" freezers used in producing and dispensing
the "Dairy Queen" product shall have a nameplate fastened thereto identifying
the same as "Dairy Queen" freezers, and shall be first approved by Company for
use in "Dairy Queen" stores.
XII. RELATED GOODS.
1. Licensee may sell in said "Dairy Queen" store
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only such products permitted and approved in writing by Company.
2. No food, sandwiches, hamburgers, cigarettes, potato chips, gum, or
other like products are to be sold from said "Dairy Queen". See Addendum 4A-I.
(AAB & MLH)
3. Similarly, no unauthorized including games are to be allowed. See
Addendum 4A-1. (AAB & MLH)
XIII. BUSINESS HOURS.
1. Licensee shall operate its "Dairy Queen" business during a period of
at least nine (9) consecutive months in each calendar year and such place of
business shall be opened to the public at least twelve (12) hours during each
day of said period. Acts of God, war, strikes or riots preventing Licensee from
temporarily complying with the foregoing shall exempt compliance therewith.
2. Licensee shall close said "Dairy Queen" business for a period of not
less than two (2) weeks of each calendar year for the purpose of necessary
maintenance and repairs - painting and general cleaning. See Addendum 4A-IV
attached (AAB & MLH)
XIV. INSPECTION.
Company, or its authorized representative, shall have the right to
inspect the premises, and every portion of its operation for the purpose of
making inspections to ascertain if all the provisions of this Agreement are
being observed. Furthermore, Company is entitled to test, sample, and inspect
all supplies, products, and materials of all kinds, the preparation and
formulation thereof, and the conditions of sanitation and cleanliness in the
production, handling, and serving thereof.
XV. RECORDS AND REPORTS.
Licensee agrees to keep a complete set of books and records from which
all sums payable under this Agreement may be determined. Such books and records
shall include a monthly profit and loss statement reflecting the operations of
Licensee's business, copies of which Licensee shall furnish
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to Company within twenty-five (25) days after the end of each month's operation.
The aforesaid books, records, and financial statements shall be maintained by
Licensee on forms meeting the specifications of Company. All such records shall
be open and available to Company for inspection at all times. Company shall have
the right to cause an audit of the business of Licensee to be made for a
determination of gross sales- if any statement of gross sales previously
submitted by Licensee to Company shall be found to be incorrect by audit or
otherwise, in an amount in excess of two (2%) percent of gross sales, Licensee
shall be subject to immediately pay the cost of such audit as well as any
additional fees found to be payable by Licensee to Company; and may be subject
to termination, otherwise, the cost of audit shall be paid by Company.
XVI. LITIGATION.
As between Company and Licensee, Company shall control all litigation
relating to the trademark and trade name "Dairy Queen" and said derivative
trademarks and shall be the sole judge as to whether or not suit shall be
instituted for the infringement thereof, the expense for any such litigation in
the territory stated herein shall be borne by Company and Licensee and any
others, in manner and extent to be agreed upon in each instance by the said
parties. Licensee shall promptly notify Company of any such use or infringement
of which he becomes aware.
XVII. LIABILITY INSURANCE.
Licensee hereby waives all claims against Company for damages to
property or injuries to persons arising out of the operation of said business,
and Licensee shall indemnify and save Company harmless of and from any damages
or injury to property or persons arising from or growing out of the operations
of said business in any way, or the consumption of the product hereof. Licensee
further covenants and agrees to purchase and maintain in full force and effect,
at Licensee's sole expense, liability insurance in an amount of not less than
-16-
<PAGE>
$300,000.00 insuring both parties hereto from liability for any and all such
damage or injury and Licensee further agrees to deliver to Company a certificate
evidencing the existence of such insurance coverage and Licensee's compliance
with the provisions of this paragraph.
XVIII. COMPETITIVE LICENSE.
Company shall not license the establishment of any competitive business
under said trademarks and trade name within the protected area covered by this
Agreement during -the term hereof. Similarly, Licensee shall not license,
establish, or operate any competitive business within the protected area covered
by this Agreement during the term hereof without written consent of Company.
XIX. PAYMENT OF DEBTS.
Licensee covenants and agrees to pay promptly when due, all taxes and
assessments that may be assessed against said premises or equipment used in
connection with Licensee's "Dairy Queen" business, all liens and encumbrances of
any kind and character created or placed upon or against any of said property,
as well as all accounts and other indebtedness of every kind incurred by
Licensee in the conduct of said business; and should Licensee default in making
any such payment, Company shall be authorized to pay same and Licensee covenants
promptly to reimburse Company on demand of such payment. By undertaking any such
payments, Company is not under any circumstances obligating itself to pay any
said sums, but is doing so only to protect Company's good name and Licensee
under this Agreement. Company, by doing so, shall not be undertaking or
sustaining any liability for any such debts or obligations or liabilities in any
way, shape or form.
XX. INDEPENDENT CONTRACTOR.
It is agreed and understood that Licensee is an independent agency, and
independent contractor, not in any manner the agent or employee of Company, nor
has Company any interest in the business of Licensee except to the extent set
forth in this Agreement.
-17-
<PAGE>
XXI. INDEMNITY.
Licensee agrees to save and hold Company harmless from any loss, damage
or liability incurred by Company by reason of any violation of this Agreement by
Licensee.
XXII. NOTICES OF BREACH.
1. In the event that Company determines that Licensee has failed to
meet the requirements and specifications established in this Agreement, or any
of the terms and conditions hereof, Company shall notify Licensee in writing of
that fact, and shall set forth the terms and conditions to be corrected. If
Licensee fails to correct such problems, violations, or conditions within seven
(7) days from the date of (Return Receipt Requested) mailing of said notice by
certified mail/to the address of the authorized location, Company shall
thereupon have the right to cancel and terminate this Agreement.
XXIII. MODERNIZATION.
1. Because business advances, and because society changes, and methods
of doing business change, it is the duty of Licensee to modernize, refurbish,
the building, equipment, signage, and all other items as may be reasonably
necessary to permit the business to conform to the standards then existing, and
to cause such repairs or remodeling, at his expense as are necessary to keep
Licensee in compliance with all of the terms and conditions of this Agreement.
Failure to do so will be regarded as a breach of this Agreement.
2. In any event, at the time of any proposed transfer, the Licensee
must modernize, refurbish, and/or replace building, equipment and any other
items from the store as are necessary to be in compliance with the requirements
of the Company as then existing.
XXIV. BANKRUPTCY.
In the event that Licensee shall be declared insolvent or bankrupt, or
in the event a receiver be appointed, or that any proceedings taken by, for, or
against Licensee under any provision of the Federal Bankruptcy Act or any
amendment
-18-
<PAGE>
thereof, or make an assignment for the benefit of creditors under any State law,
this Agreement shall be terminated and all rights of Licensee shall be forfeited
forthwith to the Company.
XXV. NON-COMPETE CLAIMS.
Neither Licensee nor any principal of an incorporated Licensee shall
directly or indirectly engage in any competitive business with the protected
area of the authorized location for a period of two and one-half (2 1/2 ) years
after the date of termination by either party with or without cause. Licensee
shall not assert any claim or cause of action against Company after one (1) year
following the effective date of termination of this Agreement.
XXVI. TERMINATION.
1. Termination by Licensor.
Upon termination of this Agreement:
a. All rights of Licensee to the use of the trademarks and all other
rights and licenses granted herein, including a right to license and conduct the
"Dairy Queen" business at the authorized location shall revert to Company
without further act or deed of any party.
b. Any right, title and interest of Licensee in, to and under this
operating Agreement shall become the property of Company. Licensee shall
immediately cease all use and display of trademarks, materials, and any and all
ancillary items, services, or products, and shall pay all sums due to Company or
its affiliate or whose payment by Company or its affiliate has guaranteed.
c. Company shall have first option to purchase any and all freezers of
any kind whatsoever owned by Licensee and used by him in the production of the
"Dairy Queen" product at and for an amount equal to the original price paid for
each such freezer less fifty (50%) percent for use and depreciation for first
year. Less twenty (20%) percent per year after first twelve (12) month period.
-19-
<PAGE>
2. Termination by Licensee.
Licensee shall not be entitled to terminate this agreement for cause
unless he shall have given Company written notice of the grounds for such
termination and Company shall have failed to cure such grounds to the reasonable
satisfaction of Licensee within thirty (30) days of Company's receipt of such
notice. As a condition to Licensee or his successor terminating this Agreement
without cause at any time, Licensee shall pay to Company an amount equal to two
times the License Fees payable to Company in respect to (1) the last twelve (12)
months of the store's active operations, or (2) the entire period the store has
been open for business, whichever is the shorter period.
XXVII. MISCELLANEOUS CLAUSES.
1. In the event at any time one or more clauses of this Agreement shall
be held to be void by any Court, such clauses shall be deemed to be separable
and the remainder of this Agreement shall be deemed to be valid and in full
force and effect.
2. Any waiver by Company of any breach by Licensee shall not be deemed
to be a waiver of any subsequent breach nor an estoppel to enforce its right for
any subsequent breach.
3. This Agreement constitutes the agreement between the parties, and is
the sole agreement between the parties, and embodies all prior agreements and
negotiations with respect to the "Dairy Queen" business. Licensee agrees that
there are no representations of any kind made by Company except as contained
herein.
4. If Licensee consists of two or more individuals, such individuals
shall be jointly and severally liable, and references to Licensee in this
Agreement shall include all such individuals.
5. This Agreement shall be binding upon and inure to the benefit of the
administrators, executors, heirs, successors, and assigns of the parties.
-20-
<PAGE>
XVIII. ADMINISTRATIVE AND PROMOTIONAL-PEES.
1. Licensee acknowledges and agrees that Company may compensate itself
and/or its affiliated companies for the expense of administering and promoting
the sales promotion programs set forth herein.
XXIX. DIFFERENT FORMS OF LICENSE AGREEMENTS.
l. Licensee acknowledges that he is aware of the fact that some
existing licensees of Company operate under different forms of Agreement and
that consequently, Company's obligations and rights with respect to the various
licensees may differ.
XXX. RULES OF COMPANY.
1. Company is the sole judge of that which is compatible with the sale
of "Dairy Queen" products, and Licensee shall not look beyond Company in such
matters as rules and controls. These matters are left to the sole discretion of
Company, and Licensee hereby specifically agrees.
IN WITNESS WHEREOF, the parties have caused the foregoing "Dairy Queen"
Store Operating License Agreement to be executed all as of the date first above
written.
DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
ATTEST: First Party
Signature Illegible By /s/ Mildred L. Hanigan
- ----------------------- -------------------------------------
Mildred L. Hanigan President
WITNESS:
Signature Illegible BOWLINS INCORPORATED, a New Mexico Corp.
- ------------------------ ----------------------------------------
LICENSEE
WITNESS:
Signature Illegible BY: /s/ C. C. Bess, Exec. V. Pres.
- ------------------------ ----------------------------------------
LICENSEE
-21-
<PAGE>
ADDENDUM TO LICENSE AGREEMENT
-----------------------------
IT IS AGREED BY THE PARTIES THAT THIS ADDENDUM DATED THIS 18th DAY OF November,
1986 SHALL BECOME A PART OF THE ATTACHED LICENSE AGREEMENT. THE FRANCHISEE
ACKNOWLEDGES THAT HE HAS HAD AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE
EXECUTION BY THE PROSPECTIVE FRANCHISEE OF ANY BINDING FRANCHISE OR OTHER
AGREEMENT, OR AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE PAYMENT OF ANY
CONSIDERATION BY THE FRANCHISEE, WHICHEVER OCCURS FIRST, A COPY OF THE OFFERING
CIRCULAR, TOGETHER WITH A COPY OF THE LICENSE AGREEMENT RELATING TO THE
FRANCHISE.
DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
ATTEST: Franchisor
/s/ Joyce M. Skripkan By /s/ Mildred L. Hanigan
- ---------------------- --------------------------------------
President Mildred L. Hanigan
WITNESS:
/s/ David B. Raybould BOWLIN'S INCORPORATED, a New Mexico Corp.
- ----------------------- -------------------------------------------
Licensee and Franchisee
WITNESS:
/s/ Tom Hanigan BY: /s/ C. C. Bess, Exec. V. Pres.
- ----------------------- -------------------------------------------
Licensee and Franchisee
<PAGE>
ADDENDUM TO "DAIRY QUEEN" LICENSE AGREEMENT
NO. 4
This Addendum made and entered into, in duplicate, at Douglas Arizona, on this
18th day of November, 1986 by and between DAIRY QUEEN OF SOUTHERN ARIZONA, INC.,
and Arizona Corporation, hereinafter called "company", and BOWLIN'S
INCORPORATED, a New Mexico Corporation of Albuquerque, New Mexico, hereinafter
called "Licensee".
WHEREAS, the parties hereto have executed a "DAIRY QUEEN LICENSE AGREEMENT"
(duplicate copy of which agreement is attached hereto) dated 18 November 1986,
and covering the following "Authorized Location". 17 Miles East of Benson,
Arizona, on Interstate 10 at Johnson road Cochise (County) Arizona (State).
WHEREAS, the parties hereto wish to amend such agreement heretofore executed to
provide for a single combination Franchise Fee and Royalty Fee in consideration
of the rights granted Licensee under said Agreement and in lieu of the separate
Franchise Fee and Royalty Fee provided for in said Agreement:
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, it is agreed by and between the parties hereto as follows:
1. Paragraph 5 of the said "Dairy Queen" License Agreement, between the
parties hereto, is amended to read as follows;
Licensee shall pay to Company, as a total combined Franchise Fee and
Royalty Fee in respect of the rights granted Licensee under the terms of said
"Dairy Queen" License Agreement, a sum computed upon a percentage of the total
combined gross retail sales, exclusive of sales taxes, of all products sold
under said License Agreement, the same to be computed in accordance with the
following schedule:
Four Percent (4%) of all gross sales in each calendar year.
Gross Sales shall include sales of every kind and nature from and in
connection with said store, including the sale of "Dairy Queen" products and all
other products and related goods which may be authorized for sale therein.
IN WITNESS WHEREFOF, the parties have caused the forgoing Amendment to be
executed all as of the date first above written.
DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
ATTEST: an Arizona Corporation.
/s/ Joyce M. Skripkan By: /s/ Mildred L. Hanigan
- ----------------------- --------------------------------------
Mildred L. Hanigan President
WITNESS:
/s/ David B. Raybould BOWLIN'S INCORPORATED, a New Mexico Corp.
- ----------------------- ------------------------------------------
WITNESS:
/s/ Tom Hanigan BY: /s/ C. C. Bess, Exec. V. Pres.
- ----------------------- -----------------------------------------
LICENSEE
<PAGE>
ADDENDUM TO "DAIRY QUEEN" LICENSE AGREEMENT
NO. 4A
This Addendum made and entered into, in duplicate, at Douglas, Arizona,
on this 18th day of November, 1986, by and between DAIRY QUEEN OF SOUTHERN
ARIZONA, INC., an Arizona Corporation, hereinafter called "Company", and
BOWLIN'S INCORPORATED of 136 Louisiana NE, Albuquerque, New Mexico, 87108
hereinafter called "Licensee".
WHEREAS, the parties hereto have executed a "DAIRY QUEEN LICENSE
AGREEMENT" (triplicate copy of which agreement is attached hereto) dated this
18th day of November 1986, and covering -the following "Authorized Location":
17 Miles East of Benson on Interstate 10 at Johnson road
I.
WHEREAS, the parties have mutually agreed to the following:
NOW THEREFORE, in consideration of -the mutual promises and covenants
contained herein, it is agreed by and between the parties hereto as follows:
DAIRY QUEEN OF SOUTHERN ARIZONA, INC., acknowledges with BOWLIN'S
INCORPORATED that at present there is already a system of food and gift items
offered to the public in their establishment. it is fully understood that upon
the opening of the Dairy Queen/Brazier unit, the old food line now in operation
will be discontinued entirely and only the Brazier authorized food line will be
sold from the Dairy Queen unit only.
HOWEVER, it is mutually understood and agreed upon, since Licensee
operates a full line novelty and curio business in a store building with
gasoline and other automotive items sold on the premises with said store
building adjoining Licensee's DAIRY QUEEN operation, the sales in Licensee's
merchandise, novelty and curio plus gasoline and automotive items shall not be
subject to the sales continuing License fees or promotional fees as is provided
in said DAIRY QUEEN LICENSE AGREEMENT.
II
WITH RESPECT TO: Page 5, Article 6, of the DAIRY QUEEN LICENSE
AGREEMENT, notification of any breach or default must be by Certified Mail,
Return Receipt Requested, to the Licensee at:
Bowlin's Incorporated
136 Louisiana, NE
Albuquerque, NM 87108
And Licensee shall have at least seven (7) days to cure such default.
<PAGE>
III
WITH RESPECT TO: Page 8, Section V, paragraph 3, of the DAIRY QUEEN
LICENSE AGREEMENT, Company agrees to waive the payment of promotion and
advertising fees by the Licensee, upon demonstration by the Licensee that he is
providing outdoor advertising -through the use of billboards located along
Interstate 10 in Arizona, such advertising being to the mutual benefit of both
Company and Licensee.
IV
WITH RESPECT TO: Page 15, Section XIII, paragraph 2,: IT IS FURTHER
AGREED that such closing shall be at the Licensee's option, but the necessary
repairs, maintenance, painting, and cleaning shall be promptly accomplished to
the satisfaction of the Company on a regular and routine basis.
IN WITNESS WHEREOF, the parties have caused the foregoing Amendment to
be executed all as of the date first written above. DAIRY QUEEN OF SOUTHERN
ARIZONA, INC. ATTEST: Franchisor
By: /s/ Joyce M. Skripkar By /s/ Mildred L. Hanigan
----------------------------- ---------------------------------
Mildred L. Hanigan - President
BOWLIN'S INCORPORATED
136 Louisiana, NE
ATTEST: Albuquerque, NM 87108
BY: /s/ D. B. Raybould BY: /s/ C. C. Bess, Exec. V. Pres.
----------------------------- ---------------------------------
<PAGE>
"MR. MISTY"
STORE SUBLICENSE AGREEMENT
BETWEEN STATE OR DISTRICT OPERATOR AND STORE OPERATOR
THIS AGREEMENT is executed in quadruplicate this 18TH day of November
1986, by and between DAIRY QUEEN OF SOUTHERN ARIZONA, INC. (hereinafter referred
to as LICENSOR), and BOWLIN'S INCORPORATED, a New Mexico Corporation
(hereinafter referred to as LICENSEE): WHEREAS, LICENSEE is the operator of the
DAIRY QUEEN* store located at 17 Miles East of Benson on Interstate 10 at
Johnson road (hereinafter referred to as LOCATION), under and by virtue of
written authority granted by LICENSOR; and
WHEREAS, LICENSOR has been licensed the exclusive right and license
within its DAIRY QUEEN Franchise Territory to use and to sub-license the use of
the following described trademarks, hereinafter referred to as TRADEMARKS:
(a) The words "MR. MISTY" and "MR. MISTY KISS," and
(b) The fanciful caricature used in connection with "MR.
MISTY" and "MR. MISTY KISS"; and
WHEREAS, LICENSOR'S said right and license to use said TRADEMARKS is
limited solely to DAIRY QUEEN stores owned or franchised by it, in connection
with a particular and unique semi-frozen confection, of the nature generically
of what is sometimes known in the trade as a slush drink and novelty confection,
made in accordance with prescribed secret formulae, standards and specifications
(hereinafter sometimes referred to as PRODUCT); and
WHEREAS, the parties are desirous of providing for a sublicense of
TRADEMARKS so that LICENSEE is authorized and entitled to use TRADEMARKS at
LOCATION in a manner which is consistent and uniform with the use of TRADEMARKS
at other DAIRY QUEEN stores throughout the country; and
WHEREAS, the parties agree and acknowledge that TRADEMARKS are a
valuable and subsisting property right, that PRODUCT is a unique and superior
confection heretofore sold at retail only in DAIRY QUEEN stores, and that the
provisions herein respecting the standards and specifications for PRODUCT and
for the use of TRADEMARKS are reasonable and necessary to protect their
respective rights, and the rights of those having superior and similar rights
therein.
NOW, THEREFORE, in consideration of the premises and of the mutual
undertakings and obligations herein set forth, it is agreed:
1. LICENSOR hereby licenses to LICENSEE the exclusive privilege to use
TRADEMARKS, provided that such is limited solely to use at LOCATION in
connection with PRODUCT and is subject to the provisions hereof.
2. Nothing herein shall be understood to be a sale, assignment
or grant to LICENSEE of any right, title or interest in and to TRADEMARKS.
3. For this license, LICENSEE shall pay to LICENSOR, or to whoever is
designated in writing by LICENSOR to receive payment in LICENSOR'S behalf, a
service fee as specified in Exhibit 1 hereto. LICENSEE understands and agrees
that the AMERICAN DAIRY QUEEN CORPORATION (from which LICENSOR has received its
rights in and to TRADEMARKS) may buy and sell some or all of the ingredients,
equipment, or containers used in the making of PRODUCT and in so doing may
realize some profit.
(To be filled Out in Quadruplicate) *Reg. U.S. Pat. Off., Am. D. Q. Corp.
<PAGE>
4. LICENSEE admits and agrees not to contest the validity or ownership
of TRADEMARKS or LICENSOR'S superior right to the use thereof during the
duration of this agreement and for a period of two (2) years after the
termination of this agreement.
5. LICENSEE'S use of TRADEMARKS on PRODUCT enclosure and on advertising
and promotional literature with respect thereto, will conform in every respect
to samples which LICENSOR provides to LICENSEE or expressly approves in writing.
6. LICENSEE acknowledges that it is of the utmost importance that
PRODUCT sold at LOCATION under TRADEMARKS shall conform strictly to said
prescribed standards and specifications emanating through, from or provided by
LICENSOR for the quality, flavor, appearance and texture of PRODUCT, for the
ingredients used in the production of PRODUCT, for the equipment necessary,
including dispensing freezers, to make PRODUCT at LOCATION, and for the
containers in which PRODUCT is sold, as determined from time to time. A copy of
the current standards and specifications is attached and made a part hereof as
Exhibit 2. PRODUCT purchased by LICENSOR or its representatives from LICENSEE or
from any store licensed hereunder during the normal course of business shall be
considered as representative of PRODUCT sold by LICENSEE in determining
LICENSEE'S conformance with said standards and specifications. Failure on
LICENSEE'S part to conform to said standards and specifications shall constitute
a material breach of this agreement entitling LICENSOR to terminate the same
upon giving thirty (30) days written notice. This paragraph, however, shall not
be construed to mean that LICENSEE is required to purchase any of the
ingredients, or equipment, or containers used in making and selling PRODUCT from
LICENSOR or from sources designated by LICENSOR, if there is another source or
sources available which can provide ingredients, or equipment, or containers
- -which satisfy LICENSOR'S standards and specifications. Said standards and
specifications may include suggestions as to retail prices for PRODUCT sold at
LOCATION, but, if so, such are no more than suggestions, are not binding or
mandatory, and nothing herein or therein contained shall require or obligate
LICENSEE or anyone licensed hereunder in any way to sell PRODUCT at any price
other than that which the seller voluntarily determines.
7. Each reproduction, publication and use of TRADEMARKS pursuant hereto
shall bear the statutory notice of trademark registration adjacent thereto, as
required or approved by LICENSOR.
8. Any use which LICENSEE may make of TRADEMARKS shall inure to the
benefit of LICENSOR.
9. This license shall be in effect until terminated by mutual agreement
of the parties, provided that LICENSOR shall have the right to terminate this
license upon giving thirty (30) days prior written notice to LICENSEE if
LICENSEE (a) fails to carry out any of the provisions of this agreement, or (b)
ceases or refuses for any reason to continue to participate in the DAIRY QUEEN
service programs of the AMERICAN DAIRY QUEEN CORPORATION or its affiliated
companies. LICENSEE shall have the right to terminate this license and to cease
using TRADEMARKS and PRODUCT effective at the end of any calendar year upon
giving at least thirty (30) days prior written notice to LICENSOR.
10. In the event that LICENSOR'S rights in and to TRADEMARKS and
PRODUCT are terminated for any reason, whether by LICENSOR'S own action or
otherwise, this agreement and LICENSEE'S rights hereunder shall automatically
terminate.
11. Upon the expiration or termination of this license for any reason,
LICENSEE will promptly and completely cease and desist in the use of TRADEMARKS
or of any similar trademark, as well as the secret formulation for the base of
PRODUCT.
12. LICENSEE admits and acknowledges that it enters into this agreement
freely and voluntarily, understanding all the provisions hereof, and
understanding further that it is not necessary for it to enter into this
agreement in order to continue to enjoy any existing right and interest licensed
to it by LICENSOR in connection with LOCATION.
13. LICENSEE is fully and solely responsible for any and all claims
made on account of injuries to persons or otherwise, arising from or as a result
of the manufacture, use, or consumption of PRODUCT sold at LOCATION and shall
hold LICENSOR completely harmless therefrom.
14. The waiver of any breach hereof shall not be effective to waive any
subsequent breach hereof.
-2-
<PAGE>
15. The authorization hereby granted to LICENSEE to use and sell
TRADEMARKS and PRODUCT at LOCATION is limited as provided herein and does not
include, by implication or otherwise, authorization to use or sell any other
non-DAIRY QUEEN product or non-DAIRY QUEEN trademark not previously approved by
LICENSOR.
16. This agreement is to be governed by and interpreted in accordance
with the laws of the State of Illinois, embodies the entire agreement and
understanding of the parties relating to the subject matter hereof, and may be
amended or modified only by an instrument executed by both parties. The making,
execution and delivery hereof has been induced by no representation, statement,
warranty, or agreement other than expressed herein.
17. This agreement is binding on the successors and assigns of the
parties, and LICENSEE shall not assign or lease this agreement or any of the
rights granted hereunder without prior written consent of LICENSOR.
IN WITNESS WHEREOF the parties hereto have caused their signature
affixed the day, month and year first above written. ARIZONA, INC.
DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
/s/ Mildred L. Hanigan
-----------------------------------------
LICENSOR -Mildred L. Hanigan
BOWLIN'S INCORPORATED, a New Mexico Corp.
-----------------------------------------
LICENSSEE
BY: /s/ C. C. Bess, Exec. V. Pres.
-----------------------------------------
LICENSEE
-3-
<PAGE>
C
DESCRIPTION OF EXHIBITS
TO STORE SUBLICENSE AGREEMENT
BETWEEN STATE OR DISTRICT
OPERATOR AND STORE OPERATOR
Exhibit 1: Statement of amount of and method of computing
service fee; to which should be added a designation
by LICENSOR of who is authorized to collect service
fees paid pursuant to the agreement.
(See attached Draft of Exhibit 1)
Exhibit 2: Copy of current standards and specifications for
PRODUCT, including such for ingredients, processing,
equipment, and containers.
<PAGE>
C
EXHIBIT # 1
LICENSEE shall pay a service fee on the Mr. Misty products with said
service fee paid in the following manner. Mr. Misty sales shall be included with
the reported gross sales figures each month and paid on the net sales at the
royalty rate of 6-5-4% or flat 4%, depending on contract type.
LICENSOR may from time to time in writing specify some other person or
entity to whom or which said service fee shall be paid by LICENSEE.
<PAGE>
C
EXHIBIT # 2
STANDARDS AND SPECIFICATIONS FOR
"MR. MISTY" PRODUCTS
The following standards and specifications are effective until further written
notice from the American Dairy Queen Corporation. The "Mr. Misty" license
agreements to which this exhibit pertains require strict compliance with the
standards and specifications here set forth. Should any store operator have any
question about the interpretation of the standards and specifications, he is
requested to contact either American Dairy Queen Corporation or his regional
franchise operator from whom he received his rights to use the "Mr. Misty" and
"Mr. Misty Kiss" trademarks.
The sources for approved freezers and for approved base and concentrated
flavors, which are recommended below, are the only sources of such which are
known at this time and which when used as provided herein will produce "Mr.
Misty" products meeting the required standards of quality, taste, appearance,
temperature, texture, and consistency. If and when other sources of freezers, or
of base and concentrated flavors become known to or are made known to American
Dairy Queen Corporation, these sources will be reviewed to ascertain if their
product satisfies these standards and specifications. If so, these sources will
be added to those approved below.
I-FREEZER:
Freezers approved for dispensing "Mr. b4isty" products are those
manufactured for this purpose by the following manufacturers: H. C.
Duke and Son, East Moline, Illinois, and Stoelting Bros.
Manufacturing Company, Kiel, Wisconsin. The steps in maintaining,
cleaning and operating the freezers of either of said manufacturers
must be adhered to as stated in the manufacturer's instructions. The
additional steps for the -operation of an approved freezer which are
stated below must also be complied with.
II-"MR. MISTY" BASE INGREDIENT AND FLAVORED CONCENTRATES:
The unflavored base ingredient to be used in making "Mr. Misty"
products is made in accordance with the secret formulae and
specifications of the owner of the "Mr. Misty" and "Mr. Misty Kiss"
trademarks. Only the base ingredient so made may be used in making
products sold under these trademarks. American Dairy Queen
Corporation has arranged for the manufacture of such base
ingredient, and the store operator will know he has the proper base
ingredient if the label thereon indicates that it is approved by
American Dairy Queen Corporation. The foregoing also applies to the
flavored concentrates for use in making flavored "Mr. Misty"
products. At this time, both the approved base ingredient and the
approved flavored concentrates are available through American Dairy
Queen Corporation. If and when the owner of the trademarks
authorizes a different or additional source for either the base
ingredient or the flavored concentrates, these standards and
specifications will be-modified accordingly.
III-"MR. MISTY" PRODUCTS FORMULA AND SPECIFICATIONS:
A.-LIQUID BASE:
1. UNFLAVORED BASE INGREDIENT AND ADDITION OF FLAVORS UPON
SERVING:
(a) To five (5) pounds of sugar,
(b) Add one (1) pint of approved unflavored base
ingredient.
(c) Add sufficient water to make five (5) gallons of
mix.
(d) Stir the resulting mix thoroughly and place into an
approved dispensing freezer.
(e) Add desired flavor upon serving as follows:
(i) Place the correct amount of the desired flavored
concentrate in the bottom of the cup in the
proportions indicated below, and
(ii) Fill the balance of the cup with the unflavored
mix dispensed from the approved freezer.
<PAGE>
(f) The proportions of the desired flavor concentrate
to be added upon serving are:
<TABLE>
<CAPTION>
"MR. MISTY" "MR. MISTY KISS"
<S> <C> <C> <C>
(i) Four (4) oz. Cup: (sample size) (i) Quart Container:
1/2 pumpstroke (1/8 oz.) 6 pumpstrokes (1 1/2 oz.)
(ii) Nine (9) oz. Cup: Fill to 24 oz. Level with
1 pumpstrokes (1/4 oz.) unflavored mix.
(iii) twelve (12) oz. Cup:
1 1/2 pumpstrokes (3/8 oz.)
(iv) sixteen (16 oz. Cup:
2 pumpstrokes (1/2 oz.)
</TABLE>
2. PREFLAVORING TO SERVE ONE FLAVOR DIRECT FROM DISPENSER
FREEZER:
"Mr. Misty" products may be preflavored in order to
serve a single-flavored product directly from the
freezer, at the option of the store operator, in
accordance with the following: add twenty (20) ounces
of approved flavored concentrate to five (5) gallons of
unflavored mix made as specified above stir thoroughly,
and place in an approved freezer.
IV-FREEZER OPERATION:
Proper sanitation instructions for use in the dispensing freezer are
available from the authorized freezer manufacturers; however, all freezers
will be cleared and sanitized at least weekly. The operating temperature of
the freezing compartment must be within one (1o) degree, more or less, of
twenty-seven (27o) degrees at all times.
V-APPROVED CUPS AND CONTAINERS:
"Mr. Misty" products may be served only in cups and containers which are
imprinted with the Mr. Misty" trademarks in the format and style appearing on
cups and containers approved or distributed by or obtained through American
Dairy queen Corporation or an approved source. Samples of such format style
will be furnished by American Dairy queen Corporation upon request.
VI-ADVERTISING AND DISPLAY MATERIALS:
The approved format for signs, posters and other advertising materials to
promote "Mr. Misty" products shall be as appear in signs, posters and
advertising materials approved or distributed by or obtained through American
Dairy Queen Corporation. Samples thereof will be provided upon request.
The above standards and specifications supersede any previously issued by the
Dairy Queen national Development Company and American Dairy Queen Corporation.
AMERICAN DAIRY QUEEN CORPORATION
By: Signature Illegible
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President
<PAGE>
"FOOD SERVICE ADDENDUM"
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TO "DAIRY QUEEN" STORE OPERATING LICENSE AGREEMENT
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Food Service Addendum entered into this 18th day of November, 1986
between DAIRY QUEEN OF SOUTHERN ARIZONA, INC. of the City of Douglas County of
Cochise and State of Arizona, hereinafter referred to as "Licensor", and
BOWLIN'S INC., a New Mexico Corp. of the City of Albuquerque County of
Bernalillo and State of New Mexico hereinafter referred to as "Licensee":
WHEREAS, Licensor is a licensee of American Dairy Queen Corporation
(hereinafter referred to as "American") in certain areas of the right to license
others to use a distinctive food service system (the "System") identified by the
"Brazier" or other trademarks owned by American and listed on Appendix A,A1,A2
(hereinafter collectively referred to as "Trademarks"); and,
WHEREAS, Licensor has been licensed by American to develop, promote and
establish the System as an adjunct to the "Dairy Queen" business conducted
within Licensor's Territory, and to license "Dairy Queen" sublicensees to use
the System and one or more of the Trademarks designated periodically by American
to identify the System and its various products; and,
WHEREAS, Licensor and Licensee are parties to a certain "Dairy Queen"
Franchise and/or License Agreement executed by Licensee and Licensor or its
predecessor whereby Licensee is authorized to operate a "Dairy Queen" retail
store (hereinafter referred to as "the Store") at the address set forth in
Paragraph 2.1 of this Addendum; and,
WHEREAS, Licensor and Licensee each desire that all products sold under
the System or any of the Trademarks consistently conform to the quality
standards of the System as well as the highest expectations of consumers;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, the parties hereby agree as follows:
1. AMENDMENT.
1.1 Coordination of Agreements. This Amendment shall be
attached to, made a part of and wholly merged into that certain "Dairy
Queen" Franchise, License or 0perating Agreement dated the 18th day of
November 1986, between the undersigned parties (the "Agreement"). The
Agreement, supplemented by this Addendum, is to remain in full fore and
effect and is to be deemed superseded by this Amendment only to the
extent necessary to implement the terms hereof in connection
D.Q.S.A., INC. Form Food Service
APPENDIX "B-2" - 28 March 1986
<PAGE>
with Licensee's use of the System for the "food service" aspect of his
business, and in respect to the sales promotion program fees to also
include the dairy product sales as outlined in Paragraph 6.3. The
Agreement shall continue to govern the "dairy products" aspect of
Licensee's business. As used herein, the term "dairy products" and
references to Licensee's "Dairy Queen" business as conducted prior to
execution of this Addendum refer to frozen or semi-frozen or other
dairy or confectionery products and the "Dairy Queen" trademarks, now
or hereafter created, whose use is licensed to Licensee by the
Agreement. The term "food service" and references to the "System"
defined herein and licensed hereunder refer to all other prepared or
ready-to-eat foods, and the related "Dairy Queen", "Brazier" and other
trademarks, including beverages, now or hereafter created, whose use is
licensed to Licensee by this Addendum or that are registered for foods
or restaurant services other than those defined above as "dairy
products" and related marks. In all other cases and for all purposes
the Agreement and this Addendum shall be construed and treated as a
single instrument and, to the extent that they are not inconsistent
therewith, all the terms and provisions hereinafter contained shall be
defined and interpreted in conjunction with all of the terms and
provisions of said Franchise and/ or License Agreement.
1.2 Preservation of Right. The license granted by this
Addendum shall continue until terminated by either Licensee or Licensor
in accordance with the provisions of this Amendment. Under no
circumstances shall this Addendum remain in effect after any
termination or expiration of the Agreement. Upon any termination or
expiration of this Addendum, Licensee shall revert to no lesser nor
greater status or rights than Licensee is entitled to under the
Agreement as it existed immediately prior to the execution of this
Addendum. Each party shall have the same rights and duties in respect
to the "Dairy Queen" trademark as each had immediately prior to
execution of this Addendum. Termination or expiration of the Agreement
in accordance with its terms, however, shall automatically terminate
this addendum without further notice or action of either party.
2. LICENSE. Licensor hereby grants to Licensee, subject to all the
terms, conditions and provisions hereof, the right and license to:
2.1 Store Identification. Use the Trademarks at or about the
Store located at: 17 Miles East of Benson on Interstate 10 at Johnson
Road on and in association with the advertising, promotion and sale of
all uniform and approved food service products and services as Licensor
periodically may authorize. See Appendix "A", "A-1" or "A-2" attached
hereto.2.2 Trademark Usage. Use the Trademarks at the Store on and in
association with the uniform equipment, supplies, containers and
ingredients for the food service and other products approved
periodically by Licensor, and to use one or more of the Trademarks
designated periodically by American on signage used to identify the
Store.
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2.3 Business Method. Employ in the business of the Store the
merchandising, sales promotion programs and business methods and
techniques developed and approved by American and adopted and approved
by Licensor.
2.4 Assistance. Receive the assistance and services of
Licensor provided for in this Addendum.
3. ACCEPTANCE OF LICENSE. Licensee hereby accepts the above license
from Licensor subject to all the terms, provisions and conditions hereof and
agrees to implement the System as Licensee's sole food service system and menu
within ninety days of the date of this Addendum. Licensee further expressly
acknowledges and agrees:
3.1 Trademark Ownership. American is the owner of all right,
title and interest in and to the Trademarks together with the good
will, associated with or attributable to the Trademarks, of the
business with which said Trademarks have been and are used at and about
Licensee's Store. Said trademarks are valuable property rights owned by
American. Licensee shall not contest or challenge American's ownership
or registration of the Trademarks.
3.2 Trademark Use. The Trademarks shall be used only on or
with such products and services as may be approved or specified by
Licensor and shall at all times be used only in a manner approved by
Licensor.
3.3 Location of Use. Licensee's right to the use of the
Trademarks is specifically limited to the site of the Store under the
Agreement, and in connection with sales promotion programs approved by
Licensor.
3.4 Other Marks. Licensee shall use no other trademarks, trade
names or service marks in the food service business at the Store except
those authorized periodically by Licensor except with the prior written
consent of Licensor.
3.5 Changes in Marks. Licensee acknowledges that Licensor
shall have the right and power in its sole discretion within the
Territory to select, adopt, alter, amend or discontinue the use of one
or more words, phrases, trademarks, trade names, service marks or the
like, heretofore or hereafter in use in connection with the food
service business hereby licensed to Licensee, from time to time as
Licensor may deem expedient or as may be required by American; and
Licensee further acknowledges that no such usage, terminology, or
adoption, change or discontinuance thereof, shall in any manner or
degree have any effect upon the remainder of this Addendum or upon
Licnesee's original "Dairy Queen" franchise agreement. Any such new or
altered word(s), trademarks, trade names or service marks or the like
shall be deemed subsumed under the definition of the Trademarks
hereinabove contained. Licensor engages that it will not make an
unreasonable number of such changes, or make such changes at
unreasonably close intervals.
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3.6 Authorized Trademarks. Licensor shall keep Licensee
informed by means of revisions to the attached Appendix A,A1,A2, which
is hereby incorporated herein, as to the full list of currently
authorized food service trademarks, trade names and service marks.
Licensee shall, upon notice of any alteration therein, forthwith
conform his operations to such enumeration as revised.
3.7 Business Identification. Licensee shall not use the
Trademarks or any of them as a part of his corporate or business name
and shall use in connection with his food service business only one or
more of the Trademarks as may be designated periodically by American as
the trade name on the store from which the said food service products
and services are sold, but Licensee shall also display the "Dairy
Queen" Trademark on said store.
3.8 Business Method. Licensee shall adopt and follow in good
faith the systems, programs and methods prescribed for Licensee's food
service operation pursuant to this Addendum.
3.9 Conflicts of Interest. Neither Licensee nor any person
owning an interest directly or indirectly in Licensee shall directly or
indirectly operate or permit to be operated or hold any interest (other
than 1% or less of the outstanding stock or debt of any class of any
public company) in any restaurant or fast-food business other than one
authorized by this Amendment without the prior written consent of
Licensor.
4. TRADEMARK STANDARDS AND REQUIREMENTS. Licensee agrees that nothing herein
contained gives him any right, title or interest in the Trademarks except the
right to use the same under the terms and conditions of this Addendum and that
Licensee's use thereof inures to the benefit of American. American and Licensor
have the right to distribute for their own account products identified by the
Trademarks through other methods of distribution that may be established
periodically.
4.1 Uniform Use of Marks. Licensee shall confine his use of
the food service Trademarks to the sales promotion programs and sale of
food service products and services which shall in quality, mode and
conditions of manufacture and sale, comply with such reasonable
standards as are established or approved from time to time by Licensor.
In order to promote and protect the business interests of each of the
parties, the value of the "Dairy Queen" business and the business
interests of other persons engaged in such business, Licensee shall
adhere to system standards of uniformity prescribed by Licensor in the
type, standard and quality of stores, equipment, supplies and
ingredients used therein, and the conditions of preparation and the
procedures employed in the sale of said products and services. Licensor
shall not make an unreasonable number of changes with respect to such
matters.
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<PAGE>
4.2 Uniform Facilities. Licensee agrees that the food service
business hereunder shall be conducted in accordance with Licensor's
uniform requirements with respect to quality, production, appearance,
cleanliness, service, merchandising and sales promotion standards.
Licensee acknowledges and agrees that substantial uniformity in
facilities, products, services and operations are essential to the
conduct of a system such as the "Dairy Queen" system, and therefore
further agrees to honor and implement recommendations of Licensor
directed to enhancing and furthering such uniformity.
4.3 Equipment and Supplies. Licensee agrees to purchase and
use in the operation of the food service portion of Licensee's Store,
only equipment, supplies and ingredients which are approved by
Licensor. Nothing herein shall be construed as an attempt to limit
unreasonably the sources from which Licensee may procure equipment,
supplies, and ingredients. Rather it is the intention of the parties
that such items conform to Licensor's standards and specifications of
consistent quality and uniformity. Nothing contained herein shall be
deemed to require Licensor to approve an inordinate number of suppliers
of a given item or service which in the reasonable judgment of Licensor
would result in higher cost generally to Licensor's licensees or
prevent effective and economical supervision of suppliers by Licensor.
Requests for approval of additional suppliers shall be in writing and
shall contain such information as Licensor may reasonably request.
Licensor reserves the right to charge back to Licensee or the proposed
supplier all reasonable expenses incurred in considering requests for
approval.
4.4 Approved Adaptations. Complete and detailed uniformity
under many varying conditions may not be possible or practical and
Licensor reserves the right and privilege, at Licensor's sole
discretion and as Licensor may deem in its best interests to vary
standards for any other licensee based upon the peculiarities of a
particular site or circumstance, density of population, business
potential, population of trade area, existing business practices or any
other condition which Licensor deems to be of importance to the
successful operation of such licensee's business. Licensee shall not by
entitled to any variation from specifications or standards prescribed
hereunder by reason of any variation granted to any other person.
Licensee acknowledges that he is aware that other licensees of Licensor
or American operate under a number of different forms of agreement and
that, consequently, the obligations and rights of the parties to such
agreements may differ materially in certain instances from those
provided herein. Licensee further agrees that any requirement, standard
or specification prescribed hereunder is subject to reasonable periodic
modification or recession by Licensor or American to adapt the System
to changing conditions and competitive circumstances.
4.5 Litigation. In the event any person who is not a licensee
of Licensor or American, uses or infringes upon the Trademarks,
American shall control all litigation and shall be the sole judge as to
whether or not suit shall be instituted, prosecuted or settled, the
terms of settlement and whether or not any other action is taken.
Licensee
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shall promptly inform Licensor of any litigation or threatened
litigation by or against Licensee which arises out of the operation of
Licensee's business or pertains to the Trademarks. Thereafter, Licensee
shall keep Licensor informed of the status of any such litigation or
threatened litigation and cooperate with any action reasonably
undertaken by Licensor or American with respect thereto.
4.6 Notice of Potential Profit. American and Licensor hereby
advise Licensee that American, Licensor and/or the affiliates of either
of them may from time to time make available to Licensee goods,
products and/or services for use in Licensee's Store on whose sale
American, Licensor and/or such affiliates may make a profit. American
and Licensor further advise Licensee that American, Licensor or the
affiliates of either of them may from time to time receive
consideration from suppliers and/or manufacturers in consideration of
rights licensed or services rendered to such persons. Licensee agrees
that American, Licensor and/or such affiliates shall be entitled to
said profits and/or consideration.
5. PRODUCT AND OPERATIONS STANDARDS. The following provisions shall
control with respect to products and operations of Licensee's food service
operations:
5.1 Authorized Product Line. Licensee's food service business
at the Store shall be confined to the preparation and sale of only such
products as Licensor periodically designates and approves. The Store
shall not be used for any other business than the food service business
licensed hereunder and Licensee's current "Dairy Queen" business, and
Licensee shall not offer for sale therefrom any other product or
service of any description without the written consent of Licensor.
Specifically but without limiting the foregoing, alcoholic or
intoxicating beverages shall not be sold or offered for sale or
otherwise handled upon said premises. RE: Section 1, Paragraph 4 of
page 1, Addendum 4A to the "Agree
5.2 Approved Menu. Attached hereto as Appendix B is the
currently approved menu for Licensee's food service business. Licensor
may from time to time make reasonable modifications to said approved
menu provided said modifications are made in respect to all licensees
which have this or a comparable agreement and are located in similar
marketing areas. In addition, Licensee may from time to time request
variation from the currently approved menu. Proposal for such variation
shall be submitted in writing to Licensor for its approval and shall be
in the form (if any) prescribed by Licensor. Said proposal shall
contain sufficient information to permit Licensor to evaluate the
proposal fairly and fully. Such variations shall only be made with the
prior written consent of Licnesor.
5.3 Authorized Ingredients, Formulas, Supplies, Preparation.
Licensee shall use in preparing food service products only such
ingredients, formulas and supplies as specified by Licensor and in such
portions, sizes, appearance and packaging as set forth in the most
current "Store Management Operations Manual" and "Product Preparation
Charts". Licensee acknowledges and agrees that these may be changed
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from time to time by Licensor and that Licensee is obligated to conform
to the requirements as so changed from time to time. All other
supplies, including containers, eating utensils, napkins and all other
customer service materials and promotional items of all descriptions
and types shall meet the reasonable standards of uniformity and quality
as now or hereafter are approved by Licensor for the Territory.
Licensee shall be furnished with current lists of approved equipment,
supplies, ingredients, services and applicable standards of uniformity
and quality.
5.4 Serving and Promotional Items. All sales promotion
material, customer "good will" items, cartons, containers, wrappers and
paper goods, eating and serving utensils, customer convenience items
(including napkins, baby bibs, and disposable containers) used in the
sales promotion, sale and distribution of all food service products
shall, where practicable, contain one or more of the Trademarks
authorized for use by Licensee as appropriate to the product in
question, and indicate that it is produced and sold under the authority
of American and shall be subject to approval by American before being
used.
5.5 Health and Sanitation. Licensee's food service business
shall be operated and maintained at all times in compliance with any
and all applicable health and sanitary standards prescribed by Licensor
and by governmental authority including any standards prescribed by
Licensor that are more restrictive than those set by governmental
authority. In addition to complying with such standards, if the Store
shall be subject to any sanitary or health inspection by any
governmental authorities under which it may be rated in one or more
than one classification, it shall be maintained and operated so as to
be rated in the highest available health and sanitary classification
with respect to each governmental agency inspecting the same.
5.6 Inspection. Licensor, American or their authorized
representative shall have the right to enter Licensee's Store at all
reasonable times during the business day for the purpose of making
periodic inspections to ascertain if all the provisions of this
Addendum are being observed by Licensee and to inspect Licensee's
Store, lands and equipment, and to test, sample and inspect his
supplies, ingredients and products, as well as the storage, preparation
and formulation thereof and the conditions of sanitation and
cleanliness in the storage, production, handling and serving thereof.
6. START SALES PROMOTION PROGRAMS AND FEES.
6.1 Sales Promotion Programs and Payment of Administrative
Expenses. Licensee shall cooperate in sales promotion programs of
approved food service products. To this end Licensor reserves the right
to establish and organize sales promotion programs from time to time
and Licensee agrees to pay to Licensor a sales promotion program fee as
set forth in Paragraph 6.3 hereof. Licensee acknowledges and agrees
that Licensor has had in the past, and shall have in the future, the
discretion to determine expenditures of funds collected in respect to
sales promotion programs and as to the timing and selection of the
promotional materials and programs for which
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said expenditures are made, provided, however, that Licensor shall make
a good faith effort to expend such funds in the general best interests
of participating licensees. Licensor shall expend sales promotion funds
as provided herein. Licensee acknowledges and agrees that Licensor may
compensate itself and/or its affiliated companies for the expense of
administering and promoting such food service sales promotion programs.
Licensor shall advise Licensee annually of the receipts and
expenditures of sales promotion programs and of Licensor's expense of
administering and promoting said programs.
6.2 Approved Materials. Licensee shall use only such sales
promotion program materials or other advertising materials as are
furnished, approved or made available by or through Licensor and/or
American. Said materials shall be used only in a manner prescribed by
Licensor and/or American.
6.3 Sales Promotion Program Fee. Licensee shall pay to
Licensor a sales promotion fee to be expended in accordance with the
provisions of Paragraph 6.1. The sales promotion fee shall be a sum
equal to not less than 3% nor more than 6% of Licensee's gross retail
sales (net of sales taxes), including both dairy product and food
service sales, from Licensee's Store. Licensor shall notify Licensee of
the exact percentage by January of each year. (Except no notification
will be given with respect to any year for which the percentage is to
be unchanged from the preceding year). Such percentage shall be the
same as that to be employed during such succeeding year by the majority
of "Dairy Queen" licensees within the marketing area as determined by
Licensor within which Licensee's Store is located. This sales promotion
fee (and the license fee provided for in Paragraph 9.1) are in addition
to, and not in lieu of, any fees (other than sales promotion or
advertising fees) required to be paid pursuant to Licensee's
above-referenced "Dairy Queen" franchise agreement; the sales promotion
fee herein provided for shall supersede and replace any sales promotion
or advertising fees required to be paid by Licensee to Licensor under
any other such franchise or License agreement. RE: Section III of page
2, Addendum 4A to the "Agreement
6.4 Yellow Pages. Licensee shall, if requested by Licensor,
list separately, or participate in a listing, in the Yellow Pages of
his local telephone directory containing such copy as may reasonably be
specified by Licensor. The cost of such listing shall be paid by
Licensee, or by Licensee and other participating licensees in the case
of a joint listing. Licensor shall not specify an unreasonably
expensive listing.
7. FACILITY STANDARDS. The following shall control with respect to
Licensee's facilities at his Store:
7.1 Store Facility. Licensee agrees that the food service
facilities shall be constructed and equipped in accordance with
Licensor's currently approved specifications and standards for
building, equipment, signage, fixtures, location and design and
accessory features.
7.2 Future Alteration. Any replacement, reconstruction,
addition or modification in building, interior or exterior decor or
image, equipment or signage, to be made after consent is granted by
Licensor for the
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initial plans, whether at the request of Licensee or of Licensor, shall
be made in accordance with written specifications which have received
the prior written consent of Licensor, which shall not be unreasonably
withheld.
7.3 Maintenance. The building, equipment and signage employed
in the conduct of Licensee's food service business shall be maintained
in accordance with specific lists prepared by Licensor and based upon
periodic inspections of the premises by Licensor's representatives.
Within a period of ninety (90) days after the receipt of any particular
maintenance list, Licensee shall effect the items of maintenance
designated therein including the repair of defective items and/or the
replacement of unrepairable or obsolete items of equipment and signage.
Routine maintenance shall be conducted in accordance with general
schedules published by Licensor or American and made available to
Licensee.
7.4 Relocation. Should it become necessary, on account of
condemnation, sale or other cause, including expiration or cancellation
of lease, to relocate the entire Store, Licensor shall grant Licensee
authority to do so at a site, acceptable to Licensor, that is within a
radius of 1,000 meters of the Authorized Location, is reasonably suited
for a "Dairy Queen" retail store, does not infringe on rights of
another licensee, is reasonably distant from other "Dairy Queen" retail
stores, and provided that the new retail store is constructed, equipped
and fully ready to be opened for business within one year after
discontinuing operation of a "Dairy Queen" Store at the Authorized
Location, all in accordance with the current standards of American and
Licensor at that time. If the need to relocate the Store is
attributable to the voluntary act or omission of Licensee, Licensee's
right to relocate the Store as provided herein shall be void and
Licensee's interest in this Agreement shall be abandoned unless
Licensee shall have given Licensor notice of his intent to relocate not
less than sixty (60) days prior to closing the Store, shall have
procured a site acceptable to Licensor within 60 days after closing the
prior Store, and shall have opened the new retail Store for business
within 180 days of such closure.
7.5 Modernization and Refurbishment Upon Transfer. Each and
every transfer of any interest in this Agreement or business conducted
hereunder is expressly conditioned upon Licensee promptly effecting
such items of modernization, refurbishing and/or replacement of
building, equipment, fixtures and signage as may be reasonably
necessary to permit the same to conform to the standards then
prescribed by American for similarly situated new "Dairy Queen" store
operations. Licensee acknowledges and agrees that the requirements of
this Paragraph are both reasonable and necessary to insure continued
public acceptance and patronage of the "Dairy Queen" system, and to
avoid deterioration or obsolescence in connection with the operation of
the business.
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8. PERSONNEL AND SUPERVISION STANDARDS. The following shall control
with respect to personnel, training and supervision:
8.1 Training. Licensee shall, at Licensee's expense, attend
and complete American's training program, at Minneapolis, Minnesota,
(or at another location designated by Licensor) prior to opening of
Licensee's food service operations. If Licensee operates the Store
principally through a hired manager, Licensee shall, at Licensee's
expense, also cause such person to attend and complete American's or
Licensor's training program. Under no circumstances shall Licensee
permit management of the Store's operations on a regular basis by a
person who has not successfully completed American's or Licensor's
training program.
8.2 Staffing. Licensee shall hire and supervise efficient,
competent, sober and courteous persons as his employees for the
operation of his food service business and set and pay their wages,
commissions and incentives with no liability therefor on American or
Licensor. Licensee shall require all his employees to work in clean
uniforms approved by Licensor but furnished at the cost of Licensee or
his employees as Licensee may determine. No employee of Licensee shall
be deemed to be an employee of Licensor or American for any purpose(s)
whatsoever.
8.3 Internal Training Program. Licensor shall provide or make
available to Licensee an in-store training program for all store
employees. Licensee shall train and periodically re-train all store
employees using the training aids made available by Licensor. American
periodically will revise such training materials and aids and it or
Licensor will make the same available for purchase by Licensee.
8.4 Attendance at Meetings. Licensee, or Licensee's manager,
at Licensee's expense, shall attend at least one national, regional or
approved local marketing area meeting each year which American
originates for and on behalf of "Dairy Queen" operators to set forth
new methods and programs in store operation, training, management,
sales and sales promotion programs. Licensor further strongly
recommends that key employees of Licensee also attend such meetings.
9. FEES, REPORTING AND FINANCIAL MANAGEMENT.
9.1 Continuing Franchise License Fee. During the full term of
this Operating Agreement, and in consideration of the rights licensed
hereunder, Licensee shall pay to Licensor as license fee in respect to
the rights licenses herein a sum equal to: 4 (four) % of gross retail
sales, exclusive of retail sales taxes, of all products, goods and
wares of every kind and nature sold from, or in connection with the
food service portion of, Licensee's "Dairy Queen" Store, including, but
without limiting the generality of the foregoing, sales of all products
under any of the Trademarks as well as sales of other food service
merchandise whether or not identified by other brand names.
9.2 Computations and Remittances. All amounts due and owing
hereunder shall be computed at the end of each month's operation and
remittance
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for the same shall be made to Licensor on or before the tenth day of
the following month accompanied by the reports provided for in
Paragraph 9.4 hereof. The computation of said amounts shall be
certified by Licensee in the manner and form specified by Licensor and
Licensee shall supply to Licensor such supporting or supplementary
materials as Licensor may reasonably require to verify the accuracy of
such remittances.
9.3 Surcharge Method of Pre-collection. At Licensor's option,
Licensor may require Licensee to pay to suppliers of food service
products and ingredients a surcharge on all units of such commodities
purchased by Licensee. Said surcharge shall be established by Licensor
at a reasonable rate so as to approximate the amount of license fee and
sales promotion fee which will be payable by Licensee. Said surcharge
shall be paid to said supplier or suppliers for the account of
Licensor, and be regarded by the parties as a method of pre-collection
of said license and sales promotion fees. The amounts so collected
shall be credited by Licensor against the license and sales promotion
fees due from Licensee to Licensor at the end of each month's
operations. Licensor shall submit to Licensee on Licensor's choice of a
monthly or quarterly basis a reconciliation of Licensee's license and
sales promotion fees account setting forth the credit to Licensee's
account from amounts collected for Licensor by suppliers by way of the
aforesaid surcharge method. Should Licensee fail to submit reports in
accordance with Paragraph 9.4, Licensor may make said reconciliation of
amounts due in conformance with its best judgment as to amounts due and
Licensor's reconciliation shall be conclusive as to the amounts due
Licensor from Licensee unless within a period of ten (10) days after
mailing of said reconciliation to Licensee by Licensor, Licensee
provides evidence in a form satisfactory to Licensor of the correct
amounts due. Licensee shall pay such amounts, if any, determined to be
owed pursuant to Licensor's reconciliation within ten (10) days after a
mailing of notice to Licensee by Licensor. If Licensor determines that
Licensee has over-paid license or sales promotion fees on the surcharge
basis, Licensor shall remit to Licensee an amount equal to the excess
fees collected at the time the monthly or quarterly reconciliation is
provided Licensee.
9.4 Records and Reports. Licensee shall keep true records from
which all sums payable under this Agreement and the dates of accrual
thereof may be readily determined including but not limited to a
monthly statement or profit and loss; an annual balance sheet,
statement of profit and loss and statement of changes in financial
position; records of purchases, special sales and promotions, check
registers, sales tax returns, daily cash register tapes or similar
records showing all sales and such other related information as
Licensor may reasonably specify. Licensee shall make written reports to
Licensor in such form as Licensor periodically may reasonably
prescribe, within ten (10) days after the end of each month's operation
setting forth such information and data as may by reasonably necessary
to determine the sums payable to Licensor by Licensee during said
month. In addition to the foregoing and in addition to such other
information as Licensor may from time to time reasonably require, said
monthly report shall accurately set forth the gross retail
-11-
<PAGE>
sales of the Store as well as the total of number of gallons of mix,
the total number of pounds of meat, and the quantity of other basic
commodities used by the Store during said month and the sources where
said mix, meat and other commodities were purchased. For the purpose of
said reports, the date of use of such mix, meat and other commodities
shall be deemed to be the date of receipt at the Store.
9.5 Inspection and Audit. Licensee shall keep all books and
records relating to the Store at a location where they shall be readily
accessible to Licensor and American. Licensor, American or the
authorized representative of either shall have the right at all times
during the business day to enter the premises where Licensee's books
and records relative to the Store are kept, and to inspect, copy and
audit such books and records. In the event that any such inspection or
audit reveals an understatement of Licensee's gross sales, continuing
license fees or sales promotion fee of 2-1/2% or more, or a variance of
5% or more from other data reported to Licensor in respect to any other
material item, in addition to any other rights it may have, Licensor or
American may conduct such further periodic audits and/or inspections of
Licensee's books and records as it reasonably deems necessary for up to
two years thereafter and such further audits and/or inspections shall
be at licensee's sole expense, including professional fees, travel and
living expenses directly related thereto.
9.6 Financial Responsibility and Insurance. Licensee hereby
waives all claims against Licensor and American for damages to property
or injuries to persons arising out of the operation of Licensee's
business and Licensee shall indemnify and save Licensor and American
harmless of and from any damage or injury to property or persons
arising from or growing out of the operations of Licensee's business.
Licensee further agrees to purchase and maintain in full force and
effect, at Licensee's expense, public liability insurance in an amount
not less than $500,000 or such greater amount as Licensor periodically
may reasonably specify taking into account inflation, risk levels or
other factors deemed important by Licensor, insuring both parties
hereto, and American, by name, from liability for any and all such
damage or injury and waiving the insurer's rights or subrogation
against Licensor and American. Licensee agrees to deliver to Licensor
periodically a certificate evidencing the existence of such insurance
coverage and which provides that Licensor will be given not less than
thirty (30) days written notice of material change of or termination or
cancellation of the policy.
9.7 Offsets. Licensee waives any and all existing and future
claims and offsets against any amounts due hereunder, which amounts
shall be paid when due. Licensor and American shall be entitled to
apply or cause to be applied against amounts due to either of them or
any of their respective affiliated companies any amounts which may from
time to time be held by either of them or their respective affiliates
on Licensee's behalf or be owed to Licensee by Licensor or American or
their respective affiliates. All amounts owed by Licensee to Licensor
hereunder shall bear interest from their due date(s) until paid at the
lesser of 18% per annum or the maximum contract rate of interest
permitted by the law of the state of the Authorized Location of
Licensee's Store.
-12-
<PAGE>
10. RESOLUTION OF DISPUTES; TERMINATION. Except as qualified below, in
the event of any dispute between the parties hereto arising under, out of, in
connection with or in relation to this Agreement, said dispute shall be settled
in a court of law. However, at the agreement of both parties, said dispute shall
be submitted by the parties to binding arbitration in accordance with the Rules
and Procedures and under the auspices of the American Arbitration Association.
The arbitration shall take place at the capital of the state of the Authorized
Location of Licensee or at such other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be final and binding on all
parties. Notwithstanding the foregoing, Licensee recognizes that his Store is
one of a large number of stores similarly situated and selling to the public
similar products, and hence the failure on the part of a single licensee or
sublicensee to comply with the terms of his Agreement could cause irreparable
damage to Licensor, American and/or to some or all other "Dairy Queen"
licensees. Therefore, it is mutually agreed that in the event of a breach or
threatened breach of any of the terms of this Addendum by Licensee, Licensor
shall forthwith be entitled to an injunction restraining such breach and/or to a
decree of specific performance without having to show or prove any actual
damage, together with recovery of reasonable attorney's fees and other costs
incurred in obtaining said equitable relief, until such time as a final and
binding determination is made by the arbitrators and/or the court of law. The
foregoing equitable remedy shall be in addition to, and not in lieu of, all
other remedies or rights which Licensor might otherwise have by virtue of any
breach of this Agreement by Licensee. Licensor also reserves the right to
commence a civil action against Licensee or take other appropriate action to
collect sums of money due to Licensor, and to compel Licensee to compile and
submit required reports to Licensor or to permit inspections or audits
authorized by this Addendum. The prevailing party in any action or proceeding
hereunder shall be entitled to recover its reasonable attorney's fees and costs
therein.
10.1 Breach of Contract. Licensee shall be in default
hereunder if he does any act that manifests his intent to abandon the
license granted herein, or if Licensor reasonably determines that
Licensee has breached any of the terms of this Addendum, which without
limiting the generality of the foregoing shall include making any false
report to Licensor; failure to pay when due any amounts required to be
paid to Licensor or American or the affiliates of either whether
pursuant to this Addendum or to any third party as required by this
Addendum; conviction of Licensee of any felony or misdemeanor which
brings or tends to bring the Trademarks or the "Dairy Queen" system
into disrepute or impairs or tends to impair the goodwill of the
Trademarks, failure to abide by "Dairy Queen" system standards and
requirements in connection with the operation of Licensee's business or
failure to meet any requirements or specifications established with
respect to product quality, physical property, conditions or equipment
or materials used, products manufactured, menu or use of approved
products, packages or promotional materials. Failure of Licensee to pay
to Licensor any past due amount owed within seven (7) days of
Licensor's written notice of default therein shall be construed as
Licensee's voluntary abandonment of this Addendum and the food service
business operated hereunder.
-13-
<PAGE>
10.2 Termination by Licensor. Except as hereinafter provided,
failure of Licensee to cure a default by Licensee hereunder within
seven (7) days from the date of a written notice of default mailed or
delivered to Licensee, which notice states such default, shall give
Licensor good cause to terminate this Addendum. Termination shall be
accomplished by mailing or delivering to Licensee written notice of
termination, which notice shall state the grounds therefore and shall
be effective (i) immediately in any case of voluntary abandonment of
this Addendum by Licensee or conviction of Licensee of an offense
directly related to the business conducted hereunder; or (ii) sixty
(60) days after the date of such notice of termination in all other
cases; provided, however, that notwithstanding any other provision of
this Paragraph 10, this Addendum may be terminated immediately upon
failure of Licensee to cure within twenty-four (24) hours of notice
thereof any default under this Addendum which materially impairs the
good will associated with any of the Trademarks. In addition to the
foregoing, this Addendum may be terminated by Licensor upon any ground
or by any shorter period of notice (but not less than seven days except
as provided above) as may be expressly permitted from time to time by
applicable law or regulation. The provisions of any applicable law or
regulation prescribing permissible grounds, or minimum periods of
notice, for termination of this franchise shall supersede any provision
of this Addendum that is less favorable to Licensee than such law or
regulation. This Addendum shall terminate automatically without notice
or any act by any party upon any termination or expiration of
Licensee's "Dairy Queen" franchise agreement referred to in Paragraph
1.1.
10.3 Loss of Lease; Failure to Reopen. Subject to the
provisions of Paragraph 7.4 hereof, any termination of the land or
building lease for Licensee's Store, or any failure to rebuild or
repair and reopen for operation Licensee's destroyed or damaged store
within one year of the date of occurrence of such destruction or
damage, shall be construed as Licensee's voluntary abandonment of this
franchise and Addendum.
11. TERMINATION CONSEQUENCES. Upon termination of this Addendum:
11.1 Reversion of Rights. All rights, title and interest of
Licensee in and to @his Addendum shall become the property of Licensor.
11.2 Discontinuation of Use of Marks. All of Licensee's rights
to the use of the Trademarks and the right and license to conduct the
franchised food service business shall revert to Licensor and Licensee
shall immediately cease all use of all such Trademarks and pay all
monies due at said date. Licensee shall promptly and at his own expense
remove or obliterate all store signage and displays furnished to
Licensee by Licensor and shall remove or obliterate any signage or
displays at Licensee's Store or in his possession bearing any of said
Trademarks or names or material confusingly similar to any of said
Trademarks.
11.3 Termination by Licensee. Refer to "Dairy Queen" Store
Operating License Agreement, page 20, Section XXVI Termination,
paragraph 2 Termination by Licensee.
-14-
<PAGE>
12. MISCELLANEOUS.
12.1 Severability. In the event at any future time one or more
clauses of this Addendum shall be held to be void or unenforceable for
any reason by any court of competent jurisdiction, such clause or
clauses shall be deemed to be separable and the remainder of this
Addendum shall be deemed to be valid and in full force and effect and
the terms of this Addendum shall be equitably adjusted so as to
compensate the appropriate party for any consideration lost because of
the elimination of such clause or clauses.
12.2 Waivers. Any waiver by Licensor of any breach by Licensee
shall not be deemed to be a waiver of any other or subsequent breach
nor an estoppel to enforce its rights in respect of any other or
subsequent breach.
12.3 Joint Liability; Pronoun References. If Licensee consists
of two or more individuals, such individuals shall be jointly and
severally liable and references to Licensee in this Addendum shall
include all such individuals. Reference to Licensee as male shall also
include a female licensee, partnership or corporation or any other
business entity as relevant in the context.
12.4 Conformance with Law. This Addendum shall be deemed to be
amended from time to time as may be necessary to bring any of its
provisions into conformity with valid applicable laws or regulations.
12.5 Transfer Prohibited. This Addendum is not assignable or
transferable in whole or in part to any party except in connection with
a transfer or assignment of the "Dairy Queen" franchise referred to in
Paragraph 1.1 to which Licensor has given its prior written consent.
Regarding transfer fee as set forth in the "Agreement", gross sales
amounts shall include all gross sales of "Dairy Queen" Soft Serve
Products and Brazier Food line, in computing transfer fee.
12.6 Entire Agreement. Subject to the exceptions set forth in
this Addendum, this Addendum constitutes the sole agreement between the
parties with respect to its subject and embodies all prior agreements
and negotiations with respect to the System. There are no
representations of any kind except as contained herein. Paragraph
captions are for ease of reference and do not alter or limit the
provisions of this Addendum.
12.7 Relationship. Licensee is an independent contractor and
is not in any manner the agent, partner or employee of Licensor nor has
Licensor any interest in, or power over, the business of Licensee,
except to the limited extent expressly set forth in this Agreement.
-15-
<PAGE>
12.8 Parties Bound. This Agreement shall be binding upon, and
inure solely to the benefit of, the administrators, executors, heirs,
successors and assigns of the parties. No person who is not a named
party to this Agreement is, or is intended to be, a beneficiary hereof.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
Addendum the date first above written.
ATTEST: LICENSOR:
DAIRY QUEEN OF ARIZONA, INC.
----------------------------
/s/ Joyce M. Skripkan By /s/ Mildred L. Hanigan
- ------------------------ ---------------------------------------
Mildred L. Hanigan, President
WITNESS: LICENSEE:
/s/ David B. Raybould BOWLIN'S INCORPORATED, a New Mexico Corp.
- ------------------------ -----------------------------------------
/s/ Tom Harrigan By: /s/ C. C. Bess, Exec. V. Pres.
- ------------------------ -----------------------------------------
- ------------------------
ACCEPTED:
AMERICAN DAIRY QUEEN CORPORATION
By /s/ Herman E. Nelson
---------------------------------------
Its V.P.
-----------------------------
D.Q.S.A., INC. Form Food Service
Appendix "B-2" 28 March 1986
-16-
<PAGE>
ADDENDUM TO LICENSE AGREEMENT
-----------------------------
IT IS AGREED BY THE PARTIES THAT THIS ADDENDUM DATED THE 18th DAY OF November ,
1986 , SHALL BECOME A PART OF THE ATTACHED LICENSE AGREEMENT.
THE FRANCHISEE ACKNOWLEDGES THAT HE HAS HAD AT LEAST TEN (10) BUSINESS DAYS
PRIOR TO THE EXECUTION BY THE PROSPECTIVE FRANCHISEE OF ANY BINDING FRANCHISE OR
OTHER AGREEMENT, OR AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE PAYMENT OF ANY
CONSIDERATION BY THE FRANCHISEE, WHICHEVER OCCURS FIRST, A COPY OF THE OFFERING
CIRCULAR, TOGETHER WITH A COPY OF THE LICENSE AGREEMENT RELATING TO THE
FRANCHISE.
ATTEST
DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
ATTEST: Franchisor
/s/ Joyce M. Skripkan By /s/ Mildred L. Hanigan
- --------------------------- --------------------------------------
President - Mildred L. Hanigan
WITNESS:
/s/ D. B. Raybould BOWLIN'S INCORPORATED, a New Mexico Corp.
- --------------------------- -----------------------------------------
Licensee and Franchisee
/s/ Tom Hanigan By: /s/ C. C. Bess, Exec. V. Pres.
- --------------------------- ----------------------------------------
Licensee and Franchisee
- --------------------------- ----------------------------------------
Licensee and Franchisee
<PAGE>
APPENDIX "A"
Licensee has the right to use the following trademarks and service marks in
accordance with the attached Operating Agreement.
This Appendix "A" may be amended by Company from time to time in order to make
available additional trademarks or service marks or to delete those which become
unavailable. Licensee agrees to use only those trademarks and service marks
which are then currently authorized.
DAIRY QUEEN(TM) DQ'(TM)
BRAZIER(TM) THE ELLIPSE DESIGN(TM)
MR. MISTY(TM) BROWNIE DELIGHT(TM)
MR. MISTY KISS(TM) THE CONE WITH THE CURL ON TOP(TM)
LET'S ALL GO TO THE DAIRY QUEEN(TM) DESIGN: THE CONE WITH THE CURL ON TOP(TM)
FIESTA(TM) QUEEN'S CHOICE AND DESIGN(TM)
FULL MEAL DEAL(TM) DOUBLE DELIGHT(TM)
CHILI DOG SPLIT(TM) STARKISS(TM)
PEANUT BUSTER' PARFAIT(TM) BIG "O"(TM)
FUDGE NUT BAR(TM) IT'S A REAL TREAT'(TM)
BANANA SUPREME(TM) DQ CHIPPER SANDWICH(TM)
WE TREAT YOU RIGHT(TM) BLIZZARD(TM)
MORE BURGER THAN BUN(TM) CHOCOLATE PEANUT BUTTER CRUNCH(TM)
SUPER DOG TV(TM) MR. MALTIE(TM)
ROYAL BANANA SPLIT(TM) CHOCOLATE CHIP COOKIE SANDWICH(TM)
SNAK DEAL(TM) CHOCOLATE MOUNTAIN SUNDAY(TM)
BUSTER BAR(TM) BIG CONE AND DESIGN(TM)
DILLY' BAR(TM) DQWICH(TM)
DILLYWICH
Each of the above trademarks and/or service marks must be used only in the
manner specified by the Company and in connection with the goods and/or services
specified by the Company. No deviations will be permitted.
1/22/86
Reg. U.S. Pat. Office Am D.O. Corp., "Trademark, Am. D.Q. Corp.
DATE: 11/18/86 INITIALS: M.L.H. C.C.B.
---------------- ------------------- -------------------
(Licensor) (Licensee)
<PAGE>
Date: 11/18/86 Initials:
------------ ---------
(Licensee)
APPENDIX "B"
Dairy Queen /Brazier
(Please attach to copy of current operating agreement)
(Licensee)
Below is listed the approved menu of Company for Dairy Queen", /Brazier' stores
which is in current use and effect. Licensee is authorized to use this menu in
accordance with the attached Operating Agreement.
This Appendix "B" may be amended by Company from time to time in order to make
available additional products or to delete those which become unavailable.
Licensee agrees to use only those products which are then currently authorized
for use in Dairy Queen/Brazier stores.
Licensee shall use in preparing products only such ingredients, formulas and
supplies as are specified by Company and in such portions, sizes. appearance and
package as set forth in Company's most current "Store Management Operations
Manual" and "Product Preparation Charts."
<TABLE>
<CAPTION>
National Required National Required National Required
Brazier Food Items Dairy Queen, Soft Serve Items Beverage Items
- ------------------ ----------------------------- --------------
<S> <C> <C>
Homestyle Hamburgers: Cones A minimum of three carbonated
Single Dipped Cones soft drinks**
Double Sundaes Mr. Misty(R)*
Triple Shakes/Malts
w/Lettuce and Tomato Float National Optional
w/Cheese Mr. Misty(R) Float* Beverage Items
Freeze --------------
Hot Dog Mr. Misty(R) Freeze* Soft Drinks (32 oz.)
w/Chili Banana Split Milk
w/Cheese Peanut Buster(R) Parfait Coffee
Fish Fillet Sandwich Double Delight(TM) Hot Chocolate
w/Cheese Home Pak: Iced Tea
Chicken Breast Fillet Sandwich Pint Lemonade
w/Cheese Quart Diet Soft Drinks**
French Fries Half Gallon
Large Novelties:
Small Dilly(R) Bar
Onion Rings Buster Bar(R) and/or Fudge Nut Bar(TM)
DQ(R) Sandwich and/or Dillywich(R)
National Optional Mr. Misty Kiss(R) * and/or Starkiss(R)
Brazier(R) Food Items
- ---------------------
Super Dog(TM)
w/Chili National Optional
w/Cheese Dairy Queen Soft Serve Items
Chili Dog Split(R) ------------------------------
Quarter Pound Hot Dog: Hot Fudge Brownie Delight(R)
w/Chili Strawberry Shortcake
w/Cheese Banana Supreme(R)
Polish Sausage Shake'N Sundae
Barbecue Sandwich Parfait
Chili Bowl Soda
Nachos Sundae 11 oz.
Chopped Pork Loin Fritter DQ Chipper Sandwich(R) or
Chicken Nuggets DQ Chocolate Chip Cooke Sandwich(R)
Beef Nuggets DQ Push
Fried Mushrooms Blizzard(R)***
Turnover Low-Fat Soft Frozen Yogurt***
Biscuit Breakfast*** Dairy Queen(R) Frozen Cakes***
Traditional Breakfast*** Queen's Choice(R) Premium Hard
Salad Bar*** Ice Cream***
* Mr. Misty, contract stores only.
** All carbonated drinks must be of high quality in national distribution
and made by a primary manufacturer.
*** These items are Optional menu additions to be sold only by Dairy Queen
or Dairy Queen/Brazier store operators who have been certified to do so
by American Dairy Queen Corporation or a Territory Operator for store
franchise owners franchised directly by them in their respective areas.
The product weights/portions for these items are specified in the
respective product preparation procedures from ADQC.
</TABLE>
1/22/86 Note: The Dairy Queen soft serve and Brazier food and beverage
items listed on the National Optional menu, shown above, may be
sold by Licensee it Licensee desires to do so, but are not
required to be sold.
Reg. U.S. Pat. Off., Am. D.O. Corp.
<PAGE>
"QUEEN'S CHOICE" HARD ICE CREAM
PRODUCT ADDENDUM
LICENSEE: BOWLIN'S INCORPORATED DATE: 18 November 1986
-------------------------------------------------- -----------------
STORE ADDRESS: 17 Miles East of Benson, Arizona on Interstate 10
-------------------------------------------------------------------
at Johnson Road.
-------------------------------------------------------------------
DAIRY QUEEN OF SOUTHERN ARIZONA, INC. (DQSA) has been authorized by
AMERICAN DAIRY QUEEN CORPORATION (ADQ) to use the "Dairy Queen" hard ice cream
products identified by the brand name and trademark "Queen's Choice" and/or
such. other brand name(s) or trademarks) as may be authorized periodically by
ADQ.
You, the undersigned Licensee(s) have read and do understand and agree
to all the criteria outlined by DQSA necessary in implementing the hard ice
cream program "Queen's Choice,, into your present Dairy Queen Store. Now,
therefore,
You, as a Licensee of DQSA, are authorized to use only ADQ approved
products, equipment, and packaging for the hard ice cream program. This is an
addendum to your existing "Dairy Queen" License Agreement specified below and
the sale of the hard ice cream products shall in all respects be subject to the
terms and conditions of that Agreement except as modified herein.
The undersigned hereby agrees that it will truthfully represent the
nature and quality of the hard ice cream products to the consumer and will take
all affirmative action necessary to comply with all federal, state, and local
laws, ordinances, and regulations relating to the labeling, advertising, and
sales of hard ice cream products.
DQSA hereby notifies Licensee that the "Queen's Choice" hard ice cream
program is License Fee bearing to DQSA, and shall be the sum Of 4% of total
gross sales, exclusive of sales tax, of the "Queen's Choice" hard ice cream
product. The method of collection of said License Fee shall be exactly as on the
soft-serve DAIRY QUEEN in the original License Agreement that is attached to and
made a part of and mentioned below.
In the matter of Advertising relating to "Queen's Choice" hard ice
cream, if and when "Queen's Choice" hard ice cream shall be declared a regular
system menu item by ADQ (cease being classified a "test" product item and
declared a full fledged regular system-wide Dairy Queen food product, optional
or otherwise), then and at that time the advertising of said item shall be
handled in somewhat the same manner as current Dairy Queen License Agreement
Stores are handling the advertising of their other Dairy Queen products, to wit:
Licensee shall pay to DQSA are not less than 3% nor more than 5% of
such sales, excluding sales taxes, toward the promotion and advertising of said
product. Licensee further agrees to participate and cooperate in the said
advertising and promotion of said product. To this end DQSA reserves the right
in its sole discretion to establish and organize advertising and promotional
programs to be conducted during the year and shall further notify Licensee of
advertising fee to be paid by him during such period. Payment of such
advertising fee shall be made to DQSA on or before the 3rd day of each calendar
month with respect to said gross sales during the previous calendar month. It is
further understood and agreed upon that the 3 (three) year Supplemental "Queen's
Choice" ADI Sale, Promotion Pledge will stay in effect and is a required pledge
for all Dairy Queen Stores regardless of when they begin with the Hard Ice Cream
Program. R.E: Section III, page 2 Addendum 4A to the 'Agreement". DAIRY QUEEN OF
SOUTHERN ARIZONA, INC.
By /s/ Mildred L. Hanigan BOWLIN'S INCORPORATED
-------------------------------- -----------------------------
President - Mildred L. Hanigan Licensee
BY: /s/ C. C. Bess, Exec. V. Pres.
---------------------------
Licensee
<PAGE>
SUPPLEMENTAL
"Queen's Choice"
ADI Sales Promotion Pledge
LICENSEE: BOWLIN'S INCORPORATED DATE: 18 November 1986
------------------------------------------------- ------------------
STORE ADDRESS: 17 Miles East of Benson, Arizona, on
---------------------------------------
Interstate 10 at Johnson Road
-----------------------------
STORE NUMBER: ADI # 0212
--------------------------------------------- -----------------
PLEDGE EFFECTIVE DATES: November 1986 to November 1989
------------------------------- -------------------------
Month Year Month Year
12 months fully or partially open during fiscal year.
- ------------------
The undersigned understands that the preliminary introduction of the new
optional "Queen's Choice" Hard Ice Cream Program is intended to be completed
over a period of two or more years to provide appropriate lead time for bringing
manufacturing on line, developing initial customer acceptance, and providing a
solid base of support for a system-w4-de introduction of the program. As a
demonstration to American Dairy Queen Corporation ("ADQ") and Dairy Queen of
Southern Arizona, Inc. ("DQSA") of the high level of initial advertising
supporter the "Queen's Choice" Hard Ice Cream Program which the undersigned is
prepared to make, and as an inducement to ADQ and DQSA to establish and collect
similar pledges for the Supplemental "Queen's Choice" ADI Sales Promotion
Program from other stores in the undersigned's ADI, and as an inducement to
other licensees within the ADI to pledge support for said program, the
undersigned represents that he has familiarized himself with DQSA Bulletin
41984-5 dated August 2, 1984, describing the "Queen's Choice" Hard Ice Cream
Program, that he will participate in the program upon introduction in his ADI in
accordance with said DOSA Bulletin, and the undersigned pledges, effective the
date of introduction of the program in his ADI, to participate in a special
advertising program to support the "Queen's Choice" product introduction for a
period of the remaining portion of DQSA's fiscal year ending December 31, during
which the program becomes effective in the undersigned's ADI and for the three
succeeding fiscal years. The undersigned recognizes that "Queen's Choice" Hard
Ice Cream is a new and optional product line which may not receive sufficient
customer acceptance to be continued by ADQ and DQSA as an approved optional.
product line, and that ADQ and DQSA reserve the right to discontinue the
"Queen's Choice" Hard Ice Cream Program on sixty (60) days prior notice to the
undersigned if the sales of hard ice cream in the system represent less than two
percent (2%) of total retail sales in the system. In the vent of such
discontinuance, this pledge shall terminate.
For the time period specified above, the undersigned agrees to pay to DQSA as a
supplemental advertising fee an amount equal to the greater of $ 100.00** per
month; or an amount equal to not less than three percent (3%), nor more than
five percent (5%) of the undersigned's gross retail sales (net of retail sales
tax) of hard ice cream products sold by the undersigned. DQSA will determine and
notify the undersigned of the exact percentage prior to the introduction date
and thereafter prior to December 31 of each year, except for any year for which
the Percentage is to be unchanged from the preceding year. The aforesaid amounts
shall be paid to DQSA monthly, along with such reports and reporting data as
DQSA may from to time require. The undersigned understands that the amounts
collected pursuant to this pledge will be expended by DQSA as specified in
Bulletin #1984-5 dated August 2, 1984 RE: Section III, page 2, Addendum 4A to
the "Agreement".
DAIRY QUEEN OF SOUTHERN ARIZONA, INC. LICENSEE:
/s/ Mildred L. Hanigan BOWLIN'S INCORPORATED
- ------------------------------------ -----------------------------------
President - Mildred L. Hanigan
BY: /s/ C. C. Bess, Exec. V. Pres.
---------------------------------
"DAIRY QUEEN"' OPERATING AGREEMENT
This Agreement entered into this lst day of September 1982, by and
between Interstate Dairy Queen Corporation of the city of Atlanta, county of
Fulton, and state of Georgia hereinafter referred to as Licensor," and Bowlin's,
Inc. d/b/a DQ of Bluewater, New Mexico, of the city of Bluewater, county of
Valencia and state of New Mexico, hereinafter refered to as "Licensee".
WHEREAS, Licensor is a licensee of American Dairy Queen Corporation (hereinafter
referred to as "American") in certain geographical areas, including the
territory which includes the Authorized Location hereinafter set forth, of the
right to license others, in accordance with the terms of this Agreement, to use
the "Dairy Queen" trademark, service mark and trade name which have been
registered in the United State Patent Office, in each state of the union and in
foreign countries, as well as those trademarks and service marks, a list of
which is attached hereto and made a part hereof as Appendix A (hereinafter all
of the foregoing collectively referred to as "Trademarks"); and,
WHEREAS, Licensor and its Predecessors in interest acting under said
license instituted, developed, promoted and established the "Dairy Queen"
franchise business and system in the aforesaid territory, which consists of the
sale of distinctive dairy products, food products, beverages and other products
and services under American's Trademarks and utilizing in connection therewith
certain types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods and sales promotion programs developed from time
to time; and,
WHEREAS, it is the purpose of Licensor to provide to Licensee in a
retail store outlet a system to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the Trademarks and make available uniform and approved equipment,
supplies, ingredients, merchandising and business techniques and the sales
promotion programs of American; and,
WHEREAS Licensee desires to operate a "Dairy Queen" retail store as
part of the "Dairy Queen" system and to enter into this Operating Agreement
subject to the conditions and controls herein prescribed for the purpose of
offering to the public products and services of uniformly high quality and
standards to the end of protecting the interests of Licensee, of Licensor, of
American and of all other persons engaged in said business; and,
WHEREAS it is the intent of both Licensor and Licensee to preserve
within the context of a "Dairy Queen" retail store continuing consumer
confidence in the reliability and quality of all products sold under any of the
Trademarks; and, each party desires that all products sold under any of the
Trademarks,
302A 2/77
(c)1976-Am.D.Q. Corp.
Revised Copyright 1977 Am.D.Q.Corporation
Candyland, Inc. - Permitted Products
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consistently conform to the highest expectations of consumers of such products;
and; whereas, by this Agreement the parties contemplate that Licensee's store,
in addition to normal "Dairy Queen" food and beverage products, may also sell
Permitted Products, as defined hereinafter.
NOW, THEREFORE, in consideration of the promises and of the mutual
promises and covenants herein contained, the grant by Licensor of this Operating
Agreement and the payment by Licensee of the various fees provided in Paragraph
9 hereof, it is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject to all
Grant to the terms, conditions and provisions hereof, the
Licensee right and license to:
1.1 Establish and operate a retail store under
the name "Dairy Queen" at
Mailing Address;
DQ of Bluewater 1-40 x Exit 72
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(Street)
c/o Bowlin's, Inc.
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136 Louisiana, N.E. Bluewater, New Mexico 87005
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(City) (State) (Zip)
Albuquerque, NM 87108 hereinafter referred to as the "Authorized
- --------------------- Location" (provided, however, in the event
an Authorized Location is not designated on
the date hereof, and such location, is not
designated herein by Licensor within ninety
(90) days after such date, this Agreement
shall become null and void and all deposits
including the franchise fee shall be
returned to Licensee).
1.2 Use at the Authorized Location the
Trademarks on and in association with the
sale of all uniform and approved products
And services as American may authorize from
time to time, and with approved sales
promotion programs relative thereto.
1.3 Use at the Authorized Location the
Trademarks on and in association with the
uniform equipment, supplies and ingredients
for the products approved by American.
1.4 Employ in the business of said store the
merchandising, sales promotion programs and
business methods and techniques developed
and approved by American.
Acceptance 2. Licensee hereby accepts the above license from
by Licensee Licensor subject' to all the terms, provisions and
conditions hereof and agrees that Licensee shall
cause to have a "Dairy Queen" store established
within 180 days of the date hereof (unless an
extension of time is expressly authorized in writing
by Licensor), and thereafter maintained and operated
at the Authorized Location, under Licensee's active
and continuous supervision
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once management and upon the standards hereinafter
provided. Licensee further expressly acknowledges and
agrees:
2.1 American is the owner tot all right, title
and interest in and to the trademarks, and
the good will attributable thereto the
business in connection with which said
Trademarks have been, are and will be used
at the Authorized Location. Licensor is the
licensee of the right to use the Trademarks
in the territory which includes the
Authorized Location. Specifically, but
without limiting the foregoing, Licensee
disclaims any and all right, title and
interest in or to the Trademarks and to the
good will associated with the Trademarks of
the "Dairy Queen" retail store at the
Authorized Location and acknowledges and
agrees that all such good will is the
exclusive property of American.
2.2 The Trademarks are valuable property rights
owned by American.
2.3 The Trademarks shall be used only in
connection with such products and services
as may be approved or specified by American
and shall at all times be used only in a
manner approved by American.
2.4 Licensee's right to the use of the
Trademarks is specifically limited to
Licensee's retail store operation at the
Authorized Location.
2.5 Licensee shall use no other trademarks,
trade names or service marks in said
business except those authorized by American
and as set forth in Appendix A except with
the prior written consent of American.
2.6 Licensee shall not use the words "Dairy
Queen" or any of the Trademarks, or any word
or mark similar thereto, as a part of its
corporate or business name unless first
approved in writing by American, and shall
only use the words "Dairy Queen" and no
other words whatsoever except with the
express written consent of American as the
trade name on the store from which the said
products and services are sold. In the event
American does approve the use of the words
"Dairy Queen" or any other Trademarks, as a
part of Licensee's corporate or business
name, Licensee shall cause such name to be
changed so as to eliminate those words and
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Trademarks from the name within thirty (30)
days after termination of this Agreement.
2.7 Licensee shall adopt and follow in good
faith the systems, programs and methods
prescribed by Licensor for Licensee's retail
operation in accordance with this Operating
Agreement.
2.8 Neither Licensee nor any person owning an
interest directly or indirectly in Licensee
shall directly or indirectly operate or
permit to be operated or hold any interest
(other than 1% or less of the outstanding
stock or debt of any class of any public
company) in any ant or fast-food business
other than ar or its affiliates at the time
of signing or one authorized by this
Agreement without the prior written consent
of Licensor.
TERM
Term 3. The License granted herein shall continue until
terminated by Licensee with or without cause, on
sixty (60) days prior written notice to Licensor, or
until otherwise terminated by either Licensee or
Licensor in accordance with the provisions of this
Agreement.
TRADEMARK STANDARDS AND REQUIREMENTS
General 4. Licensee agrees that nothing in this Agreement gives
Declarations any title to or interest in the Trademarks except the
right to use the same under the terms and conditions
of this Agreement and that Licensee's use thereof
inures to the benefit of American. Specifically, but
without limiting the foregoing, Licensee acknowledges
and agrees that American has the right and may
distribute for its own account products indentified
by the Trademarks through not only "Dairy Queen"
retail stores but through any other distribution
method which may from time to time be established.
Use of 4.1 Licensee shall confine, his-use of the
Trademarks Trademarks to or in association with the
sales promotion programs and sale of
products and services which shall in
quality, mode and conditions of manufacture
and sale, comply with such reasonable
standards as are established or approved by
American. In order to promote and protect
the business interests of each of the
parties, the value of the "Dairy Queen"
business and the business interests of other
persons engaged therein, uniformity shall be
maintained in the type, standard and
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quality stores, equipment, supplies and
ingredients used-therein, and the conditions
of preparation and the procedures employed
in the sale of said products and services.
Acknowledge- 4.2 Licensee agrees that the
ment of provisions, restrictions and
Necessity of controls provided in this Operating
Uniformity Agreement are all necessary,
reasonable and desirable for the
purposes expressed herein and that
Licenscee's business shall be
conducted in accordance with
Licensor's and American's uniform
requirements with respect to
quality, production, appearance,
cleanliness, services,
merchandising and sales promotion
standards. Licensee acknowledges
and agrees that substantial
uniformity in facilities products,
services and operations are
essential to the conduct of a
system. such as the "Dairy Queen"
system, and therefore further
agrees to honor and implement
recommendations of American and
Licensor directed to enhancing and
furthering such uniformity.
Equipment 4.3 Licensee agrees to purchase and
and Supplies use, in the operation of Licensee's
Dairy Queen" retail store, only
equipment, supplies, ingredients
and services which are approved by
American or by Licensor. Nothing
hereinshall be construed as an
attempt to limit unreasonably the
sources from which Licensee may
procure equipment, supplies,
ingredients or services. Rather, it
is the intention of the parties
that such items conform to
American's standards and
specifications of consistent
cuality and uniformity. Nothing
contained herein shall be deemed to
require American or Licensor to
approve an inordinate number of
suppliers of a given item or
service which in the reasonable
judgment of American or Licensor
would result in higher cost
generally to Licensor's licensees
or prevent effective and economical
supervision of suppliers by
American or Licensor. Requests for
approval or additional suppliers
shall be in writing and shall
contain such information as
American and Licensor may
reasonably request. American and
licensor reserve the right to
charge back to Licensee or the
proposed supplier all reasonable
expenses incurred in considering
requests for approval.
Approved 4.4 Complete and detailed uniformity
Adaptations under many varying conditions may
not be possible or practical and
Licensor and
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American reserve the right and
privilege, at Licensor's and
American's sole discretion and as
Licensor and American may deem in
the best interest of all concerned
in any specific instances, to vary
standards to accommodate special
needs of Licensee's Authorized Site
or that of any other licensee based
upon the peculiarities of a
particular site or location,
density of population, business
potential, population of trade
area, existing business practices,
requirements of local law or any
condition which Licensor and
American deem to be of importance
to the successful operation of such
licensee's business.
Litigation 4.5 In the event any person, firm or
company, who is not a licensee or
franchisee of American or Licensor,
uses or infringes upon the
Trademarks, American shall control
all litigation and shall be sole
judge as to whether or not suit
shall be instituted or other action
taken.
Notice of 4.6 Licensor and American hereby advise
Potential Licensee that Licensor, American
American and/or ando/or affiliates of American
Licensor Profit and/or Licensor may from time to
time make available to Licensee
goods, products and/or services for
use in Licensee's "Dairy Queen"
retail store in respect to the sale
or provision of which Licensor,
American and/or affiliates of
American and/or Licensor may make a
profit. Licensor further advises
Licensee that Licensor, American
and/or affiliates of American
and/or Licensor may from time to
time receive consideration from
suppliers and/or manufacturers in
consideration of services provided
or rights licensed to such persons
by American, Licensor or their
respective affiliates.
FACILITY STANDARDS AND MAINTENACE
5. The following provisions and conditions
shall control with respect to Licnesee's
Authorized Location and retail stores:
Store Facility 5.1 Licensee agrees that the retail
store shall be constructed and
equipped in accordance with
American's currently approved
specifications and standards in
respect to building, equipment,
inventory, signage, fixtures,
location and design and accessory
features.
Future 5.2 Any replacement, reconstruction,
Alteration addition or modification in
building, equipment or signage, to
be made hereafter, whether at the
request of
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Licensee or of Licensor, shall be
made in accordance with written
specifications approved in advance
by Licensor or American. Licensor
and American shall not unreasonably
withhold such approval.
Maintenance 5.3 The building, equipment and signate
employed in the conduct of
Licensee's business shall be
maintained in accordance with
maintenance schedules and
procedures or specific lists
prepared by Licensor and based upon
periodic inspections of the
premises by Licensor's
representatives. Within a period of
ninety (90) days after the receipt
of such maintenace lists, Licnesee
shall effect the items of
maintenace reasonably provided
therein including the repair of
defective items and/or the
replacement of unrepairable or
obsolete items of equipment and
signage. Routing maintenance shall
be conducted in accordance with
general schedules published by
Licensor or American and made
available to Licensee.
Relocation 5.4 Should it become necessary, on
account of condemnation, sale or
other cause, including expiration
or cancellation of lease or rental
contract, to relocate said store,
Licensor shall grant Licensee
authority to do so within a radius
of 1,000 years of the Authorized
Location, provided the new site is
reasonably suited for a `Dairy
Queen" retail store in accordance
with Licensor's standards for store
sites, does not infringe on rights
of another licensee, is reasonably
distant from other "Dairy Queen"
retail stores, and the new retail
stores is constructed, equipped and
opened for business in accordance
with the current standards of
American at that time within one
year after discontinuing operation
of a "Dairy Queen" retail store at
the previous Authorized Location.
Modernization 5.5 Each and every transfer as provided
and/or Replace- in paragraph 9.10 hereof shall be
ment of Time expressly conditioned upon Licensee
of Transfer promply performing and effecting
such items of modernization and/or
replacement of building, equipment
and signage as may be reasonably
necessary to permit the same to
conform to the standards then
prescribed by American for
similarly situated store
operations. Licensee recognizes and
acknowledges that the requirements
of this Paragraph 5.5 are both
reasonable and necessary to insure
continued public acceptance and
patronage of, and to avoid
deterioration
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or obsolescence in' the business
conducted hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with
respect to products and operations:
Authorized 6.1 Licensee's business shall be
Product Line confined to the preparation and
sale of only such products as from
time to time are designated and
approved by American for sale by
Licensees which are parties to this
form of operating Agreement. The
premises upon which said business
is operated shall not be used for
any other business and there shall
not be sold or offered for sale
there from any other product or
service (excepting the preparation,
storage and sale of Permitted
Products) without the written
consent of American. Specifically,
but without limitating the
foregoing, alcoholic or
intoxicating beverages shall not be
sold or offered for sale or
otherwise handled upon said
premises.
Approved Menu 6.2 Attached hereto as Appendix B is
the currently approved menu for
Licensee's retail store. American
may from time to time make
reasonable modifications to said
approved menu provided said
modifications are made in respect
to all licensees which have this
form of Operating Agreement and are
located in similar areas of the
country. In addition, Licensee may
from time to time request variation
from the currently approved menu.
Such variations shall only be made
with the prior written consent of
American.
Authorized 6.3 Licensee shall use in preparing
Ingredients, products only such ingredients,
Formulas, formulas and supplies as are
Supplies, specified by American and in such
Preparation; portions, sizes, appearance and
Subject to Change packaging as are set forth in
by American American's most current "Store
Management Operations Manual" and
"product preparation charts".
Copies of the current "Store
Management Operations Manual" and
"product preparation charts" have
been supplied to Licensee by.
Licensor contemporaneously with the
execution of this Operating
Agreement. "Licensee acknowledges
and agrees that these may be
changed from time to time by
American and that Licensee is
obligated to conform to the
requirement, as so changed from
time to time. All other supplies
including cones, cups, containers,
eating utensils., napkins and all
other customer service materials of
all descriptions and types s hall
meet the standards of uniformity
and quality as
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now or hereafter are reasonably set
by American. Licensee shall be
furnished with lists of approved
equipment, supplies, ingredients
and services.
Serving and 6.4 All sales Promotion material,
Promotion Items customer "good will" items,
cartons, containers, wrappers and
paper goods, eating and serving,
utensils, customer convenience
items (including napkins, baby bibs
and disposal containers) used in
the sales promotion, sale and
distribution of all products
covered by this operating Agreement
shall, where practicable contain
one or more of the Trademarks and
indicate that it is produced and
sold under the authority of
American and shall be subject to
approval by Licensor or American
before being used.
Maintenace 6.5 Licensee's said business shall be
and Sanitation operated and maintained at all
times in compliance with any and
all applicable health and-sanitary
standards prescribed by American,
Licensor and by qovern mental
authority. In addition to complying
with such standards, it such Store
shall be subject to any sanitary or
health inspection or any
Governmental authorities under
which it may be rated in one or
more than one classification, it
shall be maintained and operated so
as to be rated in highest available
health and sanitary classification
with respect to each governmental
agency inspecting the same.
Inspection and 6.6 American, Licensor or the
Recommendation authorized representative of either
shall have the right to enter
Licensee's store all reasonable
times during the business day for
the purpose of making periodic
inspections to ascertain if all the
provisions of this Operating
Agreement are being observed by
Licensee and to inspect Licensee's
said store, land and equipment, and
to test, sample and inspect his
supplies, ingredients and products
as well as the storage, preparation
and formulation thereof and the
condition of sanitation and
cleanliness in the storage,
production, handling and serving
thereof.
Period of 6.7 Licensee's store, shall be opened
Operation to the public and operated twelve
months per year and at least twelve
hours each day of the year. Any
variance from this provision must
be authorized in writing by
Licensor. Acts of God, war, strikes
or riots preventing Licensee from
temporarily complying with the
foregoing shall to that extent
suspend compliance
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therewith.
Notice of 6.8 Licensee acknowledges that he is
Existence of aware of the fact that present
Different Forms licensees of Licensor and American
of License operate under a number of different
Agreements forms of agreement and that
consequently Licensor's and
American's obligations and rights
in respect to their respective
licenses may differ materially in
certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions
shall control with respect to personnel,
training and supervision:
Management 7.1 Licensee shall adopt and use as his
System continuing operational routing the
standard "Dairy Queen" management
system as well as American's
standards with respect to product
preparation, merchandising,
employee recruitment and training,
equipment and facility maintenance
and sanitation. From time to time
American will revise these programs
to meet chancing conditions of
retail operation in the best
interest of "Dairy Queen" retail
stores, and Licensee shall adopt
and implement any such changes.
Training 7.2 Licensee shall, at Licensee's
expense, attend American's store
-management training program, at a
place to be designated by
American.- prior to the opening of
Licensee's store. In the event
Licensee fails to complete such
training to the reasonable
satisfaction of American or
Licensor, Licensor may within
thirty (30) days thereafter declare
this Agreement null and void
whereupon all deposits including
the franchise fee shall be returned
to Licensee. If during the term
hereof Licensee operates said store
with a manager other than himself,
Licensee shall, at Licensee's
expense, cause such person to
attend and successfully complete
such training program.
Staffing 7.3 Licensee shall hire and supervise
efficient, competent, sober and
courteous operators and employees
for the operation of the business
and set and pay their wages,
commissions and incentives with no
liability therefor on American or
Licensor. Licensee shall require
all his employees to work in clean
uniforms approved by Lcensor but
furnished at the cost of Licensee
or his employees as Licensee pay
determine. No employee of Licensee
shall be deemed to
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be an employee of Licensor or
American for any purpose(s)
whatsoever.
Internal 7.4 Licensor shall provide or make
Training available to Licensee an in-store
Program training program for all store
employees. Licensee shall train and
periodically re-train all store
employees using the training aids
made available by Licensor. From
time to time, American will revised
such training materials and aids
and it or Licensor make the same
available to Licensee for purchase.
Attendance at 7.5 Licensee, or manager of Licensee,
Meetings at Licensee's expense, shall attend
at least one national, regional or
approved local marketing area
meeting each year which Licensor
and/or American originates for and
on behalf of "Dairy Queen"
operators to set forth new methods
and programs in store operation,
training management, sales and sale
promotion programs. Licensor
further strongly recommends that
key employees of Licensee also
attend such meeting.
SALES PROMOTION PROGRAMS
Sales Promotion 8.1 Licensor and Licensee, together
Programs and with other licensees of American,
Payment to shall cooperate in the sales
American of promotion programs of approved
Expenses for products. To this end; American has
Administering reserved the right to establish and
Same organize sales promotion programs
from time to time and Licensee
agrees to pay to Licensor for
remittance to American a sales
promotion program fee as set forth
in Paragraph 9.2 hereof. Licensee
acknowledges and agrees that
American ,has had in the past, and
shall in the future have, the
discretion to determine
expenditures of funds; collected in
respect to sales promotion programs
and as to the selection of the
promotional materials and programs
for which said expenditures are
made, provided, however, that
American shall make a good faith
effort to extend such funds in the
general best interest of
participating licensees. Licensee
acknowledges and agrees that
American may compensate itself
and/or its affiliates for the
expense of administering such sales
promotion programs. Licensor shall
advise Licensee annual, of
American's expenses in
administering said sales promotion
programs.
Sales Promotion 8.2 Licensee shall only use such sales
Materials promotion program or other
advertising materials as are
furnished , approved or made
available by or through American.
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Said materials shall be used only
in a manner prescribed by American.
American shall not unreasonably
withhold approval of any reasonable
sales promotion materials.
Yellow Pages 8.3 Licensee, shall, if requested by
Licen- sor, list separately, or
participate in a listing, in the
Yellow Pages of his local telephone
directory containing such copy as
may reasonably be specified by
Licensor. The cost of such listing
shall be paid by Licensee, or by
Licensee and other participating
licensees in the case of a joint
listing. Licensor shall not specify
an unreasonably expensive listing.
FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-Up, 9.1 Licensee shall pay to Licensor as a
License and Franchise, service and set-up fee
Sales Promotion $ 10,000 of which $ 5,000 has been
Program Fees paid upon the execution of this
Agreement and a balance of $ 5,000
is payable in accordance with the
terms of Appendix C attached
hereto. Said service and set-up fee
is intended to compensate Licensor
for its expenses incurred, and
.services rendered, in establishing
and setting up Licensee's initial
operation. In addition to said
service and set-up fee during, the
full term of this Operating
Agreement, and in consideration of
the rights granted hereunder,
Licensee shall pay to Licensor as
license fee in respect to the
rights granted herein equal to 4%
of gross retail sales exclusive of
retail sales taxes of all products,
goods and wares of every kind and
nature sold from, or in connection
with the operation of Licensee's
"Dairy Queen" retail store,
including, but without limiting the
generality of the foregoing, sales
of all products under any other
Trademark as well as sales of other
merchandise whether or not
identified by other brand names and
which may be authorized for sale by
American or Licensor from time to
time provided, notwithstanding the
foregoing, that no such continuing
licensee fee shall be payable with
respect to sales of Permitted
Products. In addition, Licensee
shall pay to Licensor for
remittance to American a sales
promotion fee to be expended in
accordance with the provisions of
Paragraphs 8.1. The sales promotion
fee shall be a sum equal to not
less than 3% nor more than 5% of
Licensee's gross retail sales net
of sales taxes (excluding sales of
Permitted Products). Licensor shall
determine
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and notify Licensee of the exact
percentage prior to the first day
of each fiscal year of Licensor
(except no notification will be
given with respect to any year for
which the percentage is to be
unchanged from the preceding year)
Such percentage shall be the same
as that to be employed during such
succeeding year by the majority of
"Dairy Queen" licensees within the
marketing area as determined by
American within which Licensee's
store is located.
Computations 9.2 All amounts due and owing hereunder
and Remittances shall be computed at the end of
each month's operation and
remittance for the same shall be
made to Licensor on or before the
day of the following month
accompanied by the reports provided
for in Paragraph 9.4 hereof. The
computation of said amounts shall
be certified and sworn to by
Licensee in the manner specified by
licensor and Licensee shall supply
to Licensor such supporting or
supplementary materials as Licensor
may reasonably require to verify
the accuracy of such remittances.
Surcharge 9.3 At Licensor's option, Licensor may
Method of require Licensee to pay to.
Precollection suppliers of mix, meat and other
products and ingredients used in
the conduct of the business a
surcharge on all units of such
commodities purchased by Licensee.
Said surcharge shall be paid to
such supplier by Licensee at the
time of purchase of such
commodities. Said surcharge shall
be established by Licensor at a
reasonable rate so as to
approximate the amount of licensee
fee and sales promotion fee which
will be payable by Licensee. Said
surcharge shall be paid to said
supplier or suppliers for the
account of Licensor, the same to be
regarded by the parties as a method
of precollection of said license
and sales promotion fees. The
amounts so collected shall be
credited by Licensor against the
license and sales promotion fees
due from Licensee to Licensor at
the end of each month's operations.
Licensor shall submit to Licensee
on a monthly or quarterly basis a
reconciliation of said license and
sales promotion fees account
setting forth the credits to
Licensee's account by reason of
amounts collected for Licensor by
suppliers by way of the aforesaid
surcharge method. In the event
Licensee shall fail to submit
reports in accordance with
paragraph 9.4, Licensor may make
said reconcilia-
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tion of amounts due in conformance
with its best judgment with regard
to said amounts due and same shall
be conclusive as to the amounts due
Licensor from Licensee unless
within a period of ten (10) days
after mailing of said
reconciliation to Licensee by
Licensor, Licensee provides
evidence in a form satisfactory to
Licensor of the correct amounts
due. Licensee shall pay such
amounts, if any, determined to be
owed pursuant to Licensor's
reconciliation within ten (10) days
after a mailing of notice to
Licensee by Licensor if Licensor
determines that Licensee has
over-paid license or sales
promotion fees on the surcharge
basis, Licensor shall remit to
Licensee an amount equal to the
excess fees collected at the time
the monthly or quarterly
reconciliation is provided
Licensee.
Reports and 9.4 Licensee shall keep true records
Records from which all sums payable under
this Agreement and the dates of
accrual thereof may be readily
determined. Licensee shall make
written reports to Licensor in such
form as Licensor may from time to
time prescribe within fourteen (14)
days after the end of each month's
operation setting forth the amount
of gross sales of all products
from, or in connection with the
operation of, said store and the
business thereof during said month.
In addition to the foregoing, and
in addition to such other
information as Licensor may from
time to time require, said monthly
report shall accurately set forth
the total number of ,gallons of
mix, the total number of pounds of
meat, and the quantity of other
basic commodities used during said
month and the sources from which
said mix, meat and other
commodities were purchased together
with a complete statement of
Licensee's cost of labor,
utilities, rent and each other cost
of operation. For the purpose of
said reports the date of use of
such mix, meat and other
commodities shall be deemed to be
the date of receipt at the store.
Licensor, American or the
authorized representative of either
shall have the right at all times
during the business day to enter
Licensee's premises where books and
records. relative to said store are
kept, and to inspect, copy and
audit such books and records. In
the event that any such inspection
or audit , it reveals a variance of
3% or more from data, reported to
Licensor or American, in addition
to any other rights it may have
Licensor or
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American may conduct such further
periodic audits and/or inspections
of Licensee's books and records as
it reasonably deems necessary for
up to one year thereafter and such
further audits and/or inspections
shall be at Licensee's sole expense
including without limitation
reasonable pro- fessional fees '
travel and room and board expenses
directly related thereto.
Financial 9.5 Licensee agrees to employ sound
Planning and financial management practices in
Management connection with the operation of
said business and to that end
Licensee shall maintain on forms
approved or provided by Licensor or
American a monthly profit plan, a
monthly profit and loss statement
and a monthly balance sheet
accurately reflecting the
operations and condition of said
business. In addition to the
foregoing, Licensee shall employ
such methods of record keeping,
bookkeeping and reporting as
Licensor shall from time to time
reasonably require and copies of
all monthly profit plans profit and
loss statements, sales
summaries-and break downs. for the
preceding month shall be forwarded
to Licensor on or before the
fourteenth day of the following
month.
Payment 9.6 Licensee agrees to pay promptly,
of Debts when due, all taxes and assessments
that may be assessed against said
premises or the equipment or
supplies used in connection with
Licensee's business, all liens and
encumbrances of every kind and
character created or placed upon or
against any of said property and
all accounts and other indebtedness
of every kind incurred by Licensee
in the conduct of said business. In
the event Licensee should default
in making any such payment,
Licensor shall be authorized, but
not required, to pay the same on
Licensee's behalf and Licensee
covenants promptly to reimburse
Licensor on demand for any such
payment. Any and all amounts owing
to Licensor by Licensee hereunder,
whether the same arise under the
provisions of this Paragraph, 9.6
or under any other, provision,of
this Agreement, shall bear interest
at 12% per annum or the maximum
rate permitted by law, whichever is
less, from and after the date of
accrual thereof.
Timely 9.7 The default by Licensee in the
Payment timely payment of any
indebtedness owing to Licensor
an/or American, or to any
affiliates of Licensor and/or
American, or the default by
Licensee in the
-15-
<PAGE>
payment of any indebtedness of
Licensee or with respect to which
Licensor or American or any of
Licensor's and/or American's
affiliates is a guarantor,
co-signer, endorser or obligor,
shall constitute a breach of this
Operation Agreement, rendering the
same subject to termination in
accordance with the provisions of
Paragraphs 10.1 and 10.2 hereof.
Insolvency, 9.8 In the event that Licensee be
Etc. declared insolvent or bankrupt, or
in the event a receiver is
appointed, this Operating Agreement
shall automatically terminate as of
the date of such declaration or
appointment.
Liability and 9.9 Licensee hereby waives all claims
Insurance against Licensor and/or American
for damages to property or injuries
to persons arising out of the
operation of Licensee's business
and Licensee shall indemnify and
save Licensor and/or American
and/or the affiliates of either
harmless of and from an,.,, damage
or injury to property or persons
arising from or in connection with
the operation of said business or
the consumption of the product
thereof. Licensee further agrees to
purchase and maintain in full force
and effect during the term of this
Agreement, at Licensee's sole
expense, liability insurance in an
aggregate amount not less than
$300,000 insuring Licensee,
Licensor and American from
liability for any and all such
damage or injury and Licensee
further agrees to deliver to
Licensor a proper certificate
evidencing the existence of such
insurance coverage and Licensee's
compliance with the provisions of
this paragraph and which provides
that Licensor and American will be
given thirty (30) days prior
written notice of material change,
termination or Cancellation of the
policy. Said insurance coverage
shall commence as of the date
Licensee commences operating a
"Dairy Queen" retail store or as of
the date the Authorized Location is
first identified as a site on which
a "Dairy Queen" retail store will
be operated, whichever shall first
occur.
Assignment and 9.10 Licensee agrees not to transfer,
Transfer assign or alienate his interest
herein or hereunder in whole or in
part without the prior written
consent of Licensor, which consent
shall. not be withheld unreasonably
but Licensor may insist that any
proposed assignment be an
assignment of all of Licensee's
interest
-16-
<PAGE>
hereunder and that any proposed
assignee be a person, in Licensor's
reasonable judgment, qualified to
provide active supervision over the
operation of said store in
compliance with Licensee's
obligations hereunder and who has
sufficient net worth and sources of
capital which meet Licensor's then
current requirements for a store
operation of the type contemplated
by this form of agreement. In the
event Licensee's said interest
should be so transferred or
assigned, Licensee shall pay to
Licensor contemporaneously
therewith the sum of One Thousand
rive Hundred Dollars ($1,1500), or
an amount equal to one-half of the
license fees paid or payable by
Licensee in respect of operations
in the twelve (12) months ending
with the month prior to the month
in which the assignment is
approved, whichever is the greater
amount, as a fee for the
preparation of a new Operating
Agreement in assignee's name, for
Licensor's assistance in reset-up
of the retail store and for any and
all other expenses incurred and
services rendered by Licensor in
effecting said transfer. In the
event of any such assignment, the
assignee, as a condition of
Licensor approving such assignment,
must attend and to the reasonable
satisfaction of Licensor
successfully complete, at
assignee's expense, American's
training program at American's
training center. In the event
Licensee is a corporation,
partnership or other entity, any
transfer or transfers of stock (or
other form of ownership interest)
constituting in the aggregate a
controlling interest in Licensee
shall be subject to the consent,
transfer fee and all other
applicable provisions of this
Agreement. Licensor nay withhold
its consent to any proposed
transfer until all amounts owed by
Licensee to Licensor, American, the
affiliates or subsidiaries of
either and approved "Dairy Queen"
suppliers have been paid in full.
Offsets 9.11 Licensee waives any and all
existing and future claims and
of.0sets against any amounts due
hereunder, which amounts shall be
said when due. Licensor and
American shall be entitled to apply
or cause to be applied against
amounts due to either of them or
any of their respective affiliated
company any amounts which may from
time to time be held by either of
them or their respective
affiliates-on Licensee's behalf or
be owed to Licensee by
-17-
<PAGE>
Licensor or American or their
respective affiliates.
CONTRACT VIOLATION
Remedies, 10. In the event of any dispute between the
Arbitration parties hereto arising under, out of, in
connection with or in relation to this
Agreement, said dispute shall be submitted
by the parties to binding arbitration in
accordance with the Rules and Procedures and
under the auspices of the American
Arbitration Association. The arbitration
shall take place at the capital of the state
of the Authorized Location of Licensee or at
such other place as may be mutually
agreeable to the parties. The decision of
the arbitrators shall be final and binding
on all parties. Notwithstanding the
foregoing, Licensee recognizes that his
"Dairy Queen" store is one of a large number
of stores similarly situated and selling to
the public similar products, and hence the
failure on the part of a single licensee to
comply with the terms of his Operating
Agreement could cause irreparable damage to
Licensor, American and/or to some or all
other "Dairy Queen" licensees. Therefore, it
is mutually agreed that in the event of a
breach or threatened breach of and of the
terms of this Operating Agreement by
Licensee, Licensor shall forthwith be
entitled to an injunction restraining such
breach and/or to a decree of specific
performance without having to show or prove
any actual damage, together with recovery of
reasonable attorney's fees and other costs
incurred in obtaining said equitable relief,
until such time as a final and binding
determination is made by the arbitrators.
The foregoing equitable remedy shall be in
addition to, and not in lieu of, all other
remedies or rights which Licensor might
otherwise have by virtue of any breach of
this Agreement by Licensee.
Breach of 10.1 Licensee shall be in default
Contract hereunder if Licensor determines
that Licensee has made any false
report to Licensor, or has failed
to pay when due any amounts owed to
Licensor, or has in Licensor's
judgment in any other way breached
any of the terms of this Agreement,
including but not limited to,
failing to submit required reports,
failing to meet any requirements or
specifications established with
respect to product quality,
physical property, conditions or
equipment or materials used,
products manufactured menu or use
of approved products, packages or
promotional materials. Failure of
Licensee to pay to Licensor any
past due amount owed within
fourteen (14) days of Licensor's
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<PAGE>
written notice of default therein
shall be construed as Licensee's
voluntary abandonment of this
Agreement and the franchised
business hereunder operated.
10.2 Except as hereinafter provided,
failure of Licensee to cure a
default by Licensee hereunder
within :fourteen C14) days from the
date of a written notice of default
mailed or delivered to Licensee,
which notice states such default,
shall give Licensor good cause to
terminate this Agreement.
Termination shall be accomplished
by mailing or delivering to
Licensee written notice of
termination which notice shall
state the grounds therefore and
shall be effective immediately in
any case of voluntary 'abandonment
of this Agreement by Licensee or
conviction of Licensee of an
offense directly related to the
business conducted hereunder; or
(ii) sixty (60) days after the date
of such notice of termination in
all other cases; provided, however,
that notwithstanding any other
provision of this- Paragraph 10.,
this Agreement may be terminated
immediately upon failure of
Licensee to cure within twenty-four
(24) hours of notice thereof any
default under this Agreement which
materially impairs the good will
associated with any of the
Trademarks. In addition to the
foregoing, this Agreement may be
terminated by Licensor upon any
ground or by any period of notice
as may be permitted from time to
time by applicable law or
regulation. Any notice of default
of termination shall be personally
delivered or be mailed by certified
or registered mail, return receipt
requested, postage prepaid.
Land, Building 10.3 Subject to the provisions of
Lease, or Failure Paragraph 5.4 hereof, any failure
to Reopen to rebuild or repair and reopen for
operation Licensee's destroyed or
damaged store or store whose lease
has been terminated or not .
renewed within one )rear of the
date of occurrence of such
termination, destruction or damage,
shall automatically terminate this
operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this operating
Agreement:
Reversion of 11.1 All rights to the use of the
Trademark Trademarks and the right and
Rights license to conduct said business at
the authorized Location shall
revert to Licensor and Licensee
-19-
<PAGE>
shall immediately cease all use of
the Trademarks and pay all monies
due at said date. Licensee shall
promptly and at his own expense
remove or obliterate all store
signage and displays furnished to
Licensee by Licensor and shall
remove or obliterate and thereafter
discontinue .,.all use of any
signage or displays at the
Authorized Location or in his
possession bearing any of the
Trademarks or names or material
confusingly similar to any of the
Trademarks.
11.2 All right, title and interest of
Licensee in and to this Operating
Agreement shall become the property
of Licensor.
Purchase 11.3 Licensor shall have the first
option to purchase any or all
equipment, fixtures furnishings or
supplies, of whatever kind, owned
by Licensee and used by him in the
production of the "Dairy Queen"
product, or any of the other
approved products under any of the
Trademarks hereunder at a price
determined by a qualified appraiser
selected with the consent of both
parties. If the parties cannot
agree upon the selection of such an
appraiser he shall be appointed by
a Judge of the United States
District Court of Licensee's
Authorized Location upon petition
of either party. Said option to
purchase may be exercised by
Licensor at any time within thirty
(30) days from the date of such
termination or within thirty (30)
days after the date of the receipt
by Licensor of the appraiser's
determination, whichever shall be
the later date, and shall not be
impaired or terminated by the
attempted sale or other transfer of
any such equipment or supplies by
Licensee to a third party. Upon the
exercise of such option and tender
of payment for any such equipment
or supplies, Licensee agrees to
sell and deliver the same to
Licensor free and clear of all
encumbrances, and to execute and
deliver to Licensor a bill of
sale-therefore.
Non- 11.4 Licensee shall not directly or
Compete indirectly engage in any
competitive business within 2,000
yards of the Authorized Location
for a period of one year after said
date of termination of this
Agreement except though a
or an affiliate in operation
at the time of signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that
the store facilities and operations of
Licensee hereunder may include in addition
to "Dairy Queen" or "Dairy Queen/Brazier"
food and beverage
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<PAGE>
service the sale of various other products
not identified or-designated by Company's
Trademarks, including, but not limited to,
motor vehicle fuel, oil and related
automotive products, souvenir-type products,
tobacco products, sundries, and packaged
food products not intended for consumption
on the premises where sold and which are not
competitive with food and beverage products
identified or designated by the Trademarks
Call of said products collectively referred
to in this Agreement as "Permitted
Products"). In order to prevent public
confusion, preserve and protect the
Trademarks and establish the principles
which shall govern Licensee's sale of
Permitted Products and usage of the
Trademarks, the parties agree that
notwithstanding any provision of this or any
other Agreement to the contrary, the
following provisions shall control with
regard to Permitted Products:
12.1 Licensee may sell Permitted
Products from its licensed store.
Licensee may use in the business
operated hereunder in the manner
and to the extent permitted by this
Agreement marks and names
identifying Permitted Products.
12.2 The Trademarks shall not under any
circumstances be used to identify
or designate Permitted Products or
any other products) for which use
of the Trademarks has not been
specifically authorized by
American. Permitted Products shall
be sold only from physical
facilities (such as a different
area, room or building) which are
clearly distinct and apart from the
"Dairy Queen" retail store.
12.3 No product shall be sold from any
part of any sublicensed store's
site which detracts or threatens to
detract from the reputation or
goodwill of the "Dairy Queen" trade
name or any of the Trademarks.
Licensor shall have the right to
direct Licensee to remove from the
store and Discontinue the sale of
any product item or items which in
American's good faith jud4ment
violates the quality standard of
the preceding sentence. No product
shall under any circumstances be
sold from the "Dairy Queen" portion
of the licensed store which has not
received the specific prior
approval of Licensor.
12.4 A building design and related
facility standards, based upon
American's existing design and
specifications for "Dairy Queen/
Brazier" stores, shall be developed
by mutual consultation and
agreement, which shall take into
account the particular requirements
for a "Dairy Queen," or "Dairy
Queen/Brazier" facility to be
situated-along an Interstate
highway. Licensee shall comply
strictly with
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<PAGE>
the design and facility standards
developed hereunder.
12.5 Notwithstanding Paragraph 3.2
hereof, Licensee may employ
off-site advertising media such as
billboards and radio commercials,
provided such advertising is
approved by Licensor and American,
and provided further that no such
advertising shall be used which
creates or fosters any confusion as
to the identity, source or quality
of goods identified or designated
by the Trademarks. Licensor
acknowledges that it may be
necessary to share extant billboard
space with an existing Stuckey's,
Wayfara or other store.- and
Licensor requires that advertising
for the "Dairy Queen" store be as
visually and physically separate
from the other advertising as is
feasible.
12.6 Because the "Dairy Queen" store
hereunder may also sell Permitted.
Products, the parties agree that
notwithstanding any other provision
of this Agreement or any other
contract between the parties,
Licensor deems it to be necessary
and desirable, to permit the
following.
a. To allow Licensee to sell
Permitted Products in
conjunction with a "Dairy
Queen" or "Dairy
Queen/Brazier" store;
b. To allow the principal
shareholders of Licensee
and members of their
immediate families to own
any amount or class of
stock or debt in any
business;
c. To the extent and in the
manner permitted
hereunder, to allow
Licensee to sell and to
advertise Permitted
Products in conjunction
with products identified
or designated by the
Trademarks;
d. Subject to Paragraph 6.1
hereof, to relieve
Licensee from the
obligation, with respect
to Permitted Products, to
purchase and use
equipment, supplies,
ingredients and services
approved by American;
e. To allow Licensee to
construct and equip its
retail store in accordance
with building design and
related facility standards
developed under Paragraph
12.4 hereof;
f. To relieve Licensee: (i)
from the obligation of
using, in preparing or
selecting Permitted
Products, ingredients,
formulas and supplies
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<PAGE>
specified by American;
(ii) from the obligation
to observe, with respect
to Permitted Products, the
requirements relative to
portions, sizes,
appearance and packaging
set forth in American's
"Store Management
Operations Manual" and
"product preparation
charts"; and (iii) with
respect to Permitted
Products, to allow the use
of other supplies and
customer service materials
without regard to
standards of uniformity
and quality as are now or
hereafter set by American;
g. To allow Licensee its
principal shareholders or
members of their immediate
families to engage in a
competitive business
within 2,000 yards of the
Authorized Location of the
store licensed hereunder,
as defined in the
Operating Agreement, but
only through a Candyland-
business; and
h. To relieve stockholders of
this corporate Licensee
from the obligation of
personally guarantying the
obligations of Licensee
under the Operating
Agreement. Sale or
transfer of this License
to another corporation
shall include the then
customary guarantees
required of corporations.
GENERAL PROVISIONS
13.1 In the event any one or more
clauses of this Agreement shall be
held to be void or unenforceable
for any reason by any court of
competent jurisdiction such clause
or clauses shall be deemed to be
separable and of no force or effect
in such jurisdiction and the
remainder of this Agreement shall
be deemed to be valid and in full
force and effect, and the terms of
this Operating Agreement' shall be
equitably adjusted so as to
compensate the appropriate party
for any consideration lost because
of the elimination of such clause
or clauses.
13.2 Any waiver by Licensor of any
breach or default by Licensee shall
not be deemed to be a waiver of any
other or subsequent breach or
default nor an estoppel to enforce
its rights in the event of any
other or subsequent breach.
13.3 This Agreement, and the application
form executed by Licensee
requesting Licensor to enter into
this Agreement, constitute the sole
agreement between the parties with
respect to the entire subject
matter of this Operating Agreement
and embodies all prior agreements
and negotiations with respect to
the "Dairy Queen" business. There
are no representations of any kind
except as contained herein and in
the aforesaid application.
-23-
<PAGE>
13.4 Except as otherwise provided in
this Agreement, any notice, demand
or communication provided for
herein shall be in writing, signed
by the party giving the same,
deposited in the registered or
certified United States mail,
return receipt requested, postage
prepaid, and:
a. If intended for American
shall be addressed to
American Dairy Queen
Corporation at 5701 Green
Valley Drive, Minneapolis,
Minnesota 55437;
b. If intended for Licensor
shall be addressed to
Licensor at the address
hereinabove set forth;
c. If intended for Licensee,
shall be addressed to
Licensee at the Authorized
Location hereinabove
designated; or to such
other address as may have
been given to the other
party by notification as
herein provided.
13.5 If Licensee consists of two or more
individuals, such individuals shall
be jointly and severally liable and
references to Licensee in this
Agreement shall include all such
individuals. Reference to Licensee
as male shall also include a female
licensee, partnership or
corporation or any other business
entity. Headings and captions
contained herein are for
convenience of reference only and
shall not be taken into account in
construing or interpreting this
Agreement.
13.6 Subject to the terms of Paragraph
9.10 hereof, this Agreement shall
be binding upon and inure to the
benefit of the administrators,
executors.- heirs, successors and
assigns of the parties.
13.7 This Agreement shall be effective
only when approved by an officer of
American and shall be governed by
and interpreted in accordance with
the law of the state in which the
Authorized Location is Located.
13.8 This Agreement shall be deemed to
be amended from time to time as may
be necessary to bring any of its
provisions into conformity with
valid applicable laws or
regulations.
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<PAGE>
IN.WITNESS WHEREOF, the parties hereto have executed the foregoing
"DairyQueen" Operation Agreement the date first above written.
LICENSEE
BOWLIN'S, INC. d/b/a DQ of BLUEWATER,
NM
ATTEST:
By:/s/ MICHAEL L. BOWLIN
/s/ SUE E. BENSON --------------------------------------
- --------------------------- Its:/s/ Executive Vice President
Assistant Secretary ----------------------------------
LICENSOR
ATTEST
/s/ ANNETTE M. CAMPBELL
- ---------------------------
INTERSTATE DAIRY QUEEN CORPORATION
By: /s/ SIGNATURE ILLEGIBLE
--------------------------------------
Its: President
----------------------------------
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
By /s/ HERMAN E. NELSON
--------------------------------------
Its V.P.
--------------------------------------
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<PAGE>
APPENDIX "B"
Dairy Queen/Brazier(R) Date: 4/12/83
Initials:
(Licensee)(Please attach to copy of current operating agreement)
Below is listed the approved menu of Company for Dairy Queen/Brazier(R) stores
which is in current use and effect. Licensee is authorized to use this menu in
accordance with the attached Operating Agreement.
This Appendix "B" may be amended by Company from time to time in order to make
available additional products or to delete those which become unavailable.
Licensee agrees to use only those products which are- then currently authorized
for use in Dairy Queen/Brazier(R) stores.
Licensee shall use in preparing products only such ingredients, formulas and
supplies as are specified by Company and in such portions, sizes, appearance and
package as set forth in Company's most current "Store Management Operations
Manual" and "Product Preparation Charts."
<TABLE>
<CAPTION>
National Required National Required National Required
Brazier(R) Food Items Dairy Queen(R) Soft Serve Items Beverage Items
--------------------- ------------------------------- ------------------
<S> <C> <C>
Hamburgers Cones Carbonated Drinks**
Single Dipped Cones Mr. Misty(R)
Double Sundaes
Triple Malts/Shakes National Optional
w/Cheese Float Beverage Items
w/Lettuce and Tomato Mr. Misty(R) Float ------------------
Hot Dog Freeze Milk
w/Chili Mr. Misty(R) Freeze Coffee
w/Cheese Banana Split Hot Chocolate
Fish Sandwich Peanut Buster Parfait(TM) Iced Tea
w/Cheese Double Delight(TM) Lemonade
Chicken Sandwich Frozen Novelties Diet Carbonated Soft Drinks**
French Fries Dilly(R) Bar
Onion Rings Buster Bar(R) and/or
Chili Dog Split Fudge Nut Bar(TM)
DQ(R) Sandwich and/or
National Optional Dillywich(R)
Brazier(R) Food Items Mr. Misty Kiss(R) and/or
--------------------- Star Kiss(TM)
Super Dog Home Pak
w/Chili
w/Cheese
Chili Bowl
Barbecue Sandwich National Optional
Dairy Queen(R) Soft Serve Items
--------------------------------
Hot Fudge Brownie Delight(TM)
Strawberry Shortcake
Banana Supreme(TM)
Shake 'n Sundae
Parfait
Special Category Brazier(R) Items Soda
---------------------------------- Low Fat Frozen Yogurt
Brazier(R) Crispy Fried Chicken Frozen Cakes and Logs
(Licensee may sell frozen cakes and logs
subject to meeting the special requirements
as set forth from time to time by company
and by obtaining prior certification
of eligibility from company.)
</TABLE>
* Special Category Brazier Items may be sold by Licensee if Licensee desires to
do so, but they are not required. Notwithstanding the foregoing, Licensee may
only continue to sell a special category item by substantiating to Company that
the sale of each item amounts to at least 2% of the stores total annual retail
sales.
** A minimum of three carbonated soft drinks must be provided by Licensee. All
carbonated soft drinks must be of high quality in national distribution and made
by a primary manufacturer.
Note: The Dairy Queen soft serve, Brazier food and beverage items listed on the
National Optional Menus shown above may be sold by Licensee if Licensee desires
to do so, but are not required to be sold.
7/6/81
<PAGE>
APPENDIX "A"
Licensee has the right and privilege to use the following trademarks
and service marks in accordance with the attached Operating Agreement.
This Appendix "A" may be amended by Company from time to time in order
to make available additional trademarks or --ice marks or to delete those which
become unavailable. Licensee agrees to use only those trademarks and service
mark.,, which are then currently authorized.
DAIRY QUEEN BUSTER BAR
BRAZIER DILLY
MR. MISTY DQ
MR. MISTY KISS THE ELLIPSE DESIGN
ROOF DESIGN BROWNIE DELIGHT
LET'S ALL GO TO THE THE CONE WITH THE
DAIRY QUEEN CURL ON TOP
FIESTA DESIGN: THE CONE
WITH THE
CURL ON TOP
Each of the above trademarks and/or service marks must be used only in
the manner specified by the Company and in connection with the goods and/or
services specified by the Company. No deviations will be permitted.
<PAGE>
Appendix "C"
Licensee shall pay to Licensor as a service and set-up fee $10,000 of which
$5,000 has been paid upon the :execution of this Agreement and a balance of
$5,000 is payable as follows: $1,000 principal payable each :October 1st
(beginning October 1, 1983 and ending October 1. 1987) and.12% interest per
annum on the unpaid principal payable each October lst.
<PAGE>
APPENDIX "D"
RESERVATIONS TO CERTAIN ITEMS IN
"DAIRY QUEEN" OPERATING AGREEMENT
1. Paragraph 4.6. Licensor advises that the purpose of this paragraph is full
disclosure.
2. Paragraph 5.1. Licensee and American will agree on the plans for remodeling
the existing building to conform to requirements of Paragraph 5.1.
3. Paragraph 6.1. Licensee operates a full line novelty and curio store in the
building adjoining Licensee's "Dairy Queen"/"Brazier" operation. Licensee
maintains separate accounting for sales from adjoining store and "Dairy
Queen"/"Brazier" operations. Sales In Licensee's merchandise, novelty, and
curio store shall not be subject to continuing license fees or sales
promotion fees.
4. Paragraph 6.1. Licensee may sell the Traditional or Biscuit Breakfast as
provided for by American in the breakfast test program until the test Is
discontinued at which time Licensee may apply for a menu deviation which
may or may not be granted by Licensor.
5. Paragraph 9.l. 'Licensee is obligated to pay monthly sales promotion fees
as provided for in paragraph 9.1. Any deviation or variance from the
required monthly payment shall be of a temporary nature and shall not in
any way prejudice Licensee's obligation to strictly follow Paragraph 9.1
and make monthly sales promotion fee payments if requested at a later date
by Licensor..
In recognition that Interstate Licensees in the past have expended more than 3%
of sales on advertising (primarily in outdoor, the most Effective medium .for
communicating to highway travelers), American and Interstate have temporarily
without prejudice allowed Licensees to credit monthly advertising expenditures
to sales promotion fee payments each month. if a Licensee does not expend the
required sales promotion fee percentage monthly, the balance must be remitted.
American reserves the right to discontinue this special arrangement at anytime.
Development of national advertising program and other events in American's and
Interstate's exclusive discretion and judgment may require ' , and Licensee
hereby agrees to make, full and regular monthly payments of the sales promotion
fee to Interstate.
Licensee is obligated to pay and participate annually in the Annual Marketing
Program (AMP). In cases where Licensee pays sales promotion fee monthly to
Interstate, the AMP fee will be paid from amounts remitted to Interstate. In
cases where Licensee does not pay sales promotion fee monthly to Interstate,
Licensee shall remit the annual fee to Interstate.
6. Paragraph 9.4. Licensee has requested that for reasonable and orderly
availability of data that if Licensor or American wishes to audit or look
at Licensee's books, that Licensor give Licensee at least 10 days notice
prior to date so data may be readily available to Licensor. Licensor and
American, in accordance with generally accepted auditing standards, decline
to give such notice.
7. Paragraph 9.5. Licensee already owns an in-house computer that generates a
profit and loss statement for a profit center such as Licensee's "Dairy
Queen". Licensee hereby requests that Licensor accept Licensee's profit and
loss report, as already programmed which uses profit center identification
and consolidated balance sheet. Licensor has requested and shall be
furnished with a "dummy" statement for consideration.
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8. Paragraph 10.1, 10.2, and 13.4. Licensee requires and Licensor agrees that
any notices under any contract or agreement shall be mailed certified mail,
return receipt, and that for purposes of this Agreement notice shall be
deemed to have been received on the earlier of the date of delivery or
first attempted delivery as indicated on the return receipt (or in the
absence of a noted delivery date, or noted attempted delivery date, 15 days
from noted date of mailing).
"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 29th day of July , 1976, by and between Richard
G. Kassel and G. Leone Kassel of the city of Albuquerque, county of Bernalillo,
and state of New Mexico, herinafter referred to as "Licensor," and Garland
Sarratt and Virginia Sarrat of the city of Deming, county of Luna, and state of
New Mexico, herein after referred to as "Licensee":
WHEREAS, Licensor is the exclusive licensee of American Dairy Queen
Corporation in certain geographical areas including the territory hereinafter
defined of the right to use, license and permit others to use the "Dairy Queen"
trademark, service mark and trade name which has been registered in the United
States Patent Office, in each state of the union and in foreign countries as
well as those trademarks and service marks (hereinafter collectively referred to
as "Trademarks"), a list of which is attached hereto and made a part hereof as
Appendix A; and
WHEREAS, Licensor and its predecessors in interest acting under said
exclusive license instituted, developed, promoted, and established the "Dairy
Queen" franchise business and system in the aforesaid territory which consists
of the sale of dairy products, food products, beverages and other products and
services under said trademarks and utilizing in connection therewith certain
types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods together with advertising and promotion programs
developed from time to time; and
WHEREAS, it is the purpose of Licensor to provide to Licensee in a retail
store outlet an organization to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the trademarks and to make available uniform and approved
equipment, supplies, ingredients, merchandising and business techniques and the
advertising and promotional programs of American Dairy Queen Corporation, and
WHEREAS, Licensee desires to engage in the "Dairy Queen" business and system
and to enter into this operating Agreement subject to the conditions and
controls herein prescribed for the purpose of offering to the public products
and services of uniformly high quality and standards to the end of protecting
the interests of Licensee, of Licensor, of American Dairy Queen Corporation and
all other persons engaged in said business.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the grant by Licensor of this Operating Agreement and the payment by
Licensee of the participation fees provided in Paragraph 9 hereof, it is agreed
by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject to all the
Grant to terms, conditions and provisions hereof the right and
License license to
1.1 Establish and operate a retail store under the name
"Dairy Queen" at 1414 E. Spruce Deming, New Mexico,
88030 and Licensor agrees that it will not establish
another "Dairy Queen" retail store within the following
defined territory: County of Luna, New Mexico
1.2 Use the trademark "Dairy Queen" and the other
trademarks identified in Appendix A on and in
association with the advertising, promotion and sale of
all uniform and approved products and services as
Licensor may authorize from time to time.
1.3 Use the trademark "Dairy Queen" and the other
trademarks identified in Appendix A on and in
association with the uniform equipment, supplies, and
ingredients for the products approved by Licensor.
1.4 Employ in the business of said store the merchandising,
advertising, promotion and business methods and
techniques developed, adopted and approved by Licensor.
1.5 Receiving the assistance, materials, and services of
Licensor as expressly provided for in this Operating
Agreement.
Acceptance 2. Licensee hereby accepts the above license from Licensor
by Licensee subject to all the terms, provisions and conditions hereof
and agrees that Licensee shall cause to have a "Dairy
Queen" store established and maintained at the address
given above, under Licensee's active and continuous
supervision and management and upon the standards
hereinafter provided. Licensee further expressly
acknowledges and agrees:
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2.1 Licensor is the exclusive licensee of the right to use
the trademark and trade name "Dairy Queen" and the
trademarks set forth in Appendix A in the aforesaid
territory.
2.2 Said trademarks are valuable property rights owned by
American Dairy Queen Corporation and exclusively
licensed to Licensor in said territory.
2.3 Said trademarks shall be used only in connection with
such products and services as may be approved or
specified by Licensor and shall at all times be used
only in a manner approved by Licensor.
2.4 Licensee's rights to the use of trademarks is
specifically limited to Licensee's retail store
operation at said location.
2.5 Licensee shall use no other trademarks, trade names or
service marks in said business except those authorized
by Licensor and as set forth in Appendix A except with
the written consent of Licensor.
2.6 Licensee shall not use the words "Dairy Queen" as a
part of its corporate or business name unless first
approved in writing by Licensor, and shall use only
the word "Dairy Queen" (and no other words whatsoever)
as the trade name on the store from which the said
products and services are sold.
2.7 Licensee shall adopt and follow in good faith the
systems, programs and methods prescribed by Licensor
for Licensee's retail operation in accordance with
this Operating Agreement
Term 3. The License granted herein shall be for a term of twenty
years unless sooner terminated in accordance with the
provisions hereof. This Operating Agreement shall be
automatically renewed for successive five year periods
unless either party shall give the other six months
written notice of intention not to renew.
TRADEMARK STANDARDS AND REQUIREMENTS
General 4. Licensee agrees that nothing herein contained gives him
Declarations, any title to or interest in the trademark and trade name
Uniformity and "Dairy Queen" or any of the trademarks set forth in
Quality Control Appendix A except the right to use the sametunder the
terms and conditions of this Agreement and that
Licensee's use thereof inures to the benefit of the owner
thereof.
Licensee shall use said trademarks and trade names
only on and in association with the advertising and sale
of products and services which shall in quality, mode and
conditions of manufacture and sale, comply with such
standards as are established or approved by Licensor. In
order to promote and protect the business interests of
each of the parties, the value of the "Dairy Queen"
business and the business interests of other persons
engaged therein, uniformity shall be maintained in the
type, standard and quality of stores, equipment, supplies
and ingredients used therein, and the conditions of
preparation and the procedures employed in the sale of
said products and services. To this end, it is agreed that
the rules and controls contained in this Agreement shall
prevail in the use of the "Dairy Queen" trademark and in
the conduct of Licensee's said business.
Licensee agrees that the provisions, restrictions and
controls provided in this Operating Agreement are all
necessary, reasonable and desirable for such purposes and
that Licensee's said business shall be conducted in
accordance with Licensor's uniform requirements with
respect to quality, production, appearance, cleanliness,
service, merchandising and advertising standards.
These controls shall include the specific
requirements hereinafter provided. Nothing herein shall be
construed to limit the sources from which Licensee may
procure equipment, supplies, ingredients or services
provided that such items conform to the Licensor's
standards and specifications of consistent quality and
uniformity, and provided further that any such supplier
shall have reliable production and delivery capabilities
as well as such financial responsibility as may be
necessary to adequately provide the same on a continuing
basis. Nothing contained herein shall be deemed to require
Licensor to approve an inordinate number of suppliers of a
given item or service so as to render the same
economically detrimental to Licensees of Licensor or
incapable of proper supervision by Licensor. Requests for
approval of suppliers shall be in writing and shall
contain such information as Licensor may reasonably
request.
Approved 4.1 Complete and detailed uniformity under many varying
Adaptations conditions may not be possible or practical and
Licensor reserves the right and privilege, at
Licensor's sole discretion and as Licensor may deem in
the best interests of all concerned in any specific
instance, to vary standards for any other like
business based upon the peculiarities of a particular
site or location, density of population, business
potential, population of trade area, existing business
practices, or any other condition which Licensor deems
to be of importance to the successful operation of a
like business. Licensee hereunder shall not be heard
to complain on account of any variation from standard
specifications and practices granted to any other like
licensee and thereby shall not be entitled to require
Licensor to grant to Licensee a like or similar
variation hereunder.
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Litigation 4.2 In the event that any person, firm or company, who is
not a licensee or franchisee of Licensor, uses or
infringes upon the "Dairy Queen" trademark or trade
name, Licensor shall, at its expense, cause a
trademark infringement or any other appropriate suit
to be instituted against such offending party.
4.3 With respect to all other situations, as between
Licensor and Licensee, Licensor shall control all
litigation relating to the trademarks listed in
Appendix A and shall be the sole judge as to whether
or not suit shall be instituted for the infringement
thereof.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall control
with respect to Licensee's store site and unit.
Store 5.1 Pursuant to separate written agreement between the
Facility parties Licensor shall construct and deliver to
Licensee possession of a completed "Dairy Queen"
retail outlet at the aforesaid location (or in the
alternative, Licensee shall cause to be constructed
and completed on or before not applicable a "Dairy
Queen" retail outlet at said location). Said outlet
shall be constructed and equipped in accordance with
Licensor's currently approved specifications and
standards as respects building, equipment, inventory,
signage and accessory features.
Future 5.2 Any replacement, reconstruction, addition or
Alteration modification in building, equipment or signage, to be
made hereafter, whether at the request of Licensee or
of Licensor, shall be made in accordance with written
specifications approved by Licensor.
Maintenance 5.3 The building, equipment and signage employed in the
conduct of Licensee's business shall be maintained in
accordance with an annual maintenance list prepared by
Licensor and based upon periodic inspections of the
premises by Licensor's representatives. Within a
period of ninety (90) days after the receipt of such
annual maintenance list, Licensee shall effect the
items of maintenance reasonably provided therein
including the repair of defective items and/or the
replacement of unrepairable or obsolete items of
equipment and signage.
Relocation 5.4 Should it become necessary, on account of
condemnation, sale, or other cause, including
expiration or cancellation of lease or rental
contract, to relocate said store within territory, any
new store site shall be designated, approved,
improved, and equipped in accordance with the current
standards of Licensor at that time.
5.5 Each and every renewal or extension of this operating
agreement as provided in Paragraph 3 hereof and each
every transfer as provided in Paragraph 9.11 hereof
shall be expressly conditioned upon Licensee promptly
performing and effecting such items of modernization
and/or replacement of building, equipment, and signage
as may be necessary to permit the same to conform to
the standards then prescribed by Licensor for
similarly situated store operations. Licensee
recognizes and acknowledges that the requirements of
this paragraph are both reasonable and necessary to
insure continued public acceptance and patronage and
to avoid deterioration or obsolescence in connection
with the operation of the business.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with respect to
products and operations:
Authorized 6.1 Licensee's business shall be confined to the
Product Line preparation and sale of only such products as from
time to time are designated or approved by Licensor.
The premises upon which said business is operated
shall not be used for any other business and there
shall not be sold or offered for sale therefrom any
other product or service without the written consent
of Licensor which shall not be withheld unreasonably
with respect to the sale of any non-competitive
product which may complement and promote additional
sales of the products which are authorized hereunder.
Alcoholic or intoxicating beverages shall not be sold
or offered for sale or otherwise handled upon said
premises.
Approved Menu 6.2 Attached hereto as Appendix B is the currently
approved menu for Licensee's outlet. Variations
therefrom shall only be made with the written consent
of the Licensor.
Authorized 6.3 Licensee shall use in preparing products only such
Ingredients, ingredients, formulas, and supplies as are specified
Formulas, by Licensor and in such portions, sizes and appearance
Supplies, and packaging as set forth in a "Store Management
Preparation Operations Manual" published by American Dairy Queen
Corporation which shall be supplied to Licensee by
Licensor upon the execution of this Operating
Agreement. All other supplies, including cones, cups,
containers, eating utensils, napkins, and all other
customer service materials of all description and
types, shall meet the standards of
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uniformity and quality as now or hereafter set by
Licensor. Licensee shall be furnished with lists of
approved sources of supply annually.
Serving and 6.4 All advertising material, customer "goodwill" items,
Promotion Items cartons, containers, wrappers and paper goods, eating
and serving utensils, customer convenience items
(including napkins, baby bibs, and disposal
containers), used in the advertising, sale and
distribution of all products covered by this Operating
Agreement shall, where practicable, indicate that it
is produced and sold under the authority of American
Dairy Queen Corporation and shall be subject to
approval by Licensor before being used.
Maintenance and 6.5 Licensee's said business shall be operated and
Sanitation maintained at all times in compliance with any and all
reasonable health and sanitary standards prescribed by
Licensor or by governmental authority. If said store
shall be subject to any sanitary or health inspection
by any governmental authorities under which it may be
rated in one or more than one classification, it shall
be maintained and operated so as to be rated in the
highest available health and sanitary classification
with respect to each governmental agency inspecting
the same.
Inspection and 6.6 Licensor or its authorized representative shall have
Recommendation the right from time to time to enter Licensee's store
at all reasonable times during the business day for
the purpose of making periodic inspections to
ascertain if all the provisions of this Operating
Agreement are being observed by Licensee and to
inspect Licensee's said store, lands, equipment, and
to test, sample and inspect his supplies, ingredients
and products, as well as, the preparation and
formulation thereof and the conditions of sanitation
and cleanliness in the production, handling and
serving thereof. The foregoing shall include the right
to review, analyze, and make corrective
recommendations on all phases of business management,
from purchasing and inventory control through
financial, personnel, and merchandising management.
Operational 6.7 Whenever it shall appear in Licensor's reasonable
Aid by Licensor judgment that Licensee's said business is not being
operated in compliance with the requirements hereof,
that the volume of business being done is not equal to
the average volume of other businesses similarly
situated, or that the business is not being operated
profitably or efficiently, Licensor, at Licensor's
option:
(a) May place one or more representatives at said
store for a reasonable time to observe or examine
any or all phases of the operation thereof and
may make any reasonable recommendation to
Licensee as to any operational change or
procedure considered necessary or proper for an
efficient and profitable operation, which may
include the placing by Licensor of a qualified
representative at Licensee's place of business to
train, instruct and familiarize Licensee or
Licensee's employees with standard "Dairy Queen"
business operations and procedures, or
(b) Licensor may require Licensee or any operating
employee of Licensee to spend a reasonable amount
of time at another like place of business or at a
training center designated by Licensor at
Licensee's expense for the purpose of observing
and receiving training and instruction (including
periodic refresher training), and the practice of
standard "Dairy Queen" business operations and
procedures. Licensee shall effect promptly any
such operational change or procedure so
recommended.
Period of 6.8 Licensee's store shall be opened and operated during a
Operation period of at least eleven (11) consecutive months in
each calendar year and shall be open to the public at
least twelve (12) hours each day during said period.
Acts of God, war, strikes or riots preventing Licensee
from temporarily complying with the foregoing shall
exempt compliance therewith.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall control
with respect to personnel, training and supervision:
Management 7.1 Licensee shall adopt and use as his continuing
System operational routine the standard "Dairy Queen"
management system as well as Licensor's standard with
respect to product preparation, merchandising,
employee recruitment, training, equipment and facility
maintenance and sanitation. Licensee shall also
utilize aids supplied or made available by Licensor to
all licensees for this purpose. From time to time the
Licensor will revise these programs to meet changing
conditions of retail operation in the best interests
of Licensee.
Training 7.2 Licensee shall attend Licensor's store management
training program at a place to be designated by the
Licensor prior to the opening of Licensee's store. If
during the term hereof Licensee operates said store
with a manager other than himself, Licensee shall at
his expense send such manager through the same
program.
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Staffing 7.3 Licensee shall hire and supervise efficient,
competent, sober and courteous operators and employees
for the operation of the business and set and pay
their wages, commissions and incentives with no
liability therefor on Licensor. Licensee shall require
all his employees to work in clean uniforms approved
by the Licensor but furnished at the cost of Licensee
or the employees as Licensee may determine.
Internal 7.4 Licensor shall provide or make available to Licensee
Training an in-store training program for all store employees.
Program Licensee shall train and periodically re-train all
store employees using the training aids made available
by Licensor. From time to time, training material will
be updated and added to as required by Licensor, with
such training materials and aids available for
purchase by Licensee.
Attendance 7.5 Licensee, at his expense, shall attend at least one
at Meetings national or regional meeting each year which Licensor
or American Dairy Queen Corporation originates for and
on behalf of "Dairy Queen" operations to set forth new
methods and programs in store operation, training,
management, sales, advertising, and promotion.
ADVERTISING AND PROMOTION
Advertising and 8.1 Licensor and Licensee, together with other licensees
Promotional of Licensor, and of American Dairy Queen Corporation,
Programs shall cooperate in the promotion and advertising of
approved products. To this end, Licensor reserves the
right in its sole discretion to establish and organize
advertising and promotional programs from time to time
and Licensee agrees to participate in the cost and
expense thereof by the payment to Licensor of an
advertising fee as set forth in paragraph 9.5 hereof.
Each year Licensor shall notify Licensee of the
advertising and promotional programs to be conducted
during the year and shall further notify Licensee of
the advertising fee to be paid by him during such
period. Licensor shall from time to time expend all
sums received as and for advertising fees for consumer
advertising and the promotion of said products through
any materials and any media such as radio, television,
newspapers, billboards or special promotions, or point
of purchase materials, originating, appearing,
furnished or received in whole or in part in said
territory.
8.2 Licensee shall only use such advertising and
promotional materials as Are furnished, approved, or
made available by or through Licensor. Said materials.
shall be used only in a manner prescribed by Licensor.
PARTICIPATION FEES, REPORTING AND FINANCIAL MANAGEMENT
Franchise 9.1 In consideration of the rights granted herein, and
and License during the full term of this Operating Agreement or
Fees any renewal or extension hereof, Licensee shall pay to
Licensor as a license fee in respect of the rights
granted herein a sum equal to four percent (4%) of
gross retail sales, exclusive of retail sales taxes,
of all products, goods and wares of every kind and
nature sold from or in connection with the operation
of said store, including sales of all products under
any of the trademarks set forth in Appendix A as well
as sales of other approved merchandise bearing other
brand names which may be authorized for sale by the
Licensor from time to time.
9.2 All amounts due and owing hereunder shall be computed
at the end of each month's operation and remittance
for the same shall be made to the Licensor on or
before the tenth day of the following month
accompanied by the reports provided for in paragraph
9.4 hereof.
Surcharge 9.3 At the option of Licensor, Licensor may require
Method of Licensee to pay to the suppliers of mix, meat, and
Pre-Collection other ingredients used in the conduct of the business
a surcharge on all units of such commodities purchased
by Licensee to be paid to such supplier by Licensee at
the time of purchase of such commodities. Said
surcharge shall be paid to said supplier or suppliers
for the account of Licensor, the same to be regarded
by the parties as a method of collection of said
license fee. The amounts so collected shall be
credited by Licensor against the license fee due from
Licensee to Licensor at the end of each month's
operations. Licensor shall submit to Licensee within a
period of ten days after the receipt of Licensee's
monthly report and remittance a reconciliation setting
forth the credits to Licensee's account by reason of
the amounts collected for the Licensor by suppliers by
way of the aforesaid surcharge method.
Records and 9.4 Licensee shall keep true records from which all sums
Reports payable under this Agreement and the dates of accrual
thereof may be readily determined and said records
shall be open to inspection by Licensor or its
authorized representatives at all reasonable times.
Licensee shall make written
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reports to Licensor in such form as Licensor may from
time to time prescribe within ten days after the end
of each month's operation setting forth the amount of
gross sales of all products from or in connection with
the operation of said store and the business thereof
during said month. In addition to the foregoing and in
addition to such other information as Licensor may
from time to time reasonably require, said monthly
report shall accurately set forth the total number of
gallons of mix, the total number of pounds of meat,
and the quantity of other basic commodities used
during said month and the sources where said mix, meat
and other commodities were purchased. For the purpose
of said reports the date of use of such mix, meat and
other commodities shall be the date of receipt at the
store from the approved source.
Advertising 9.5 Pursuant to paragraph 8.1 hereof, Licensee shall
Contribution participate with Licensor and with other licensees of
Licensor in the cost and expense of advertising and
promotional programs. To this end Licensee shall pay
to Licensor in the cost and expense of advertising and
promotional programs. To this end Licensee shall pay
to Licensor as an advertising and particiapation fee
an annual sum not to exceed three percent (3%) of
gross retail sales in connection with the operation of
said store. All of the provisions of this paragraph 9
shall apply with respect to the determination,
reporting, collection and payment of advertising
participation fees.
Financial 9.6 Licensee agrees to employ sound financial management
Planning and practices in connection with the operation of said
Management business and to that end Licensee shall maintain on
forms approved or provided by Management Licensor a
monthly profit plan, a monthly profit and loss
statement and a monthly balance sheet accurately
reflecting the operations of said business. In
addition to the foregoing, Licensee shall employ such
methods of record keeping, bookkeeping and reporting
as the Licensor shall from time to time reasonably
require and copies of all monthly profit plans, profit
and loss statements and balance sheets shall be
forwarded to Licensor on or before the tenth day of
each month. In the event that an accounting and/or
bookkeeping service shall be made available to other
similarly situated licensees of Licensor. Licensee
shall have the right to request that the same be
provided to him by Licensor at a level of charges
equivalent to charges made to such other similarly
situated Licensees.
Payment of 9.7 Licensee covenants and agrees to pay promptly when due
Debts all taxes and assessments that may be assessed against
said premises or the equipment used in connection with
Licensee's business, all lien and encumbrances of
every kind and character created or placed upon or
against any of said property and all accounts and
other indebtedness of every kind incurred by Licensee
in the conduct of said business. In the event Licensee
should default in making any such payment, Licensor
shall be authorized, but not required, to pay the same
on Licensee's behalf and Licensee covenants promptly
to reimburse Licensor on demand for any such payment.
Any and all amounts owing to Licensor by Licensee
hereunder whether the same arise under the provisions
of this paragraph 9.7 or under any other provision of
this Agreement shall bear interest at the maximum
legal rate from and after the date of accrual thereof.
9.8 The default by Licensee in the timely payment of any
indebtedness owing to Iicensor hereunder or the
default by Licensee in the payment of any indebtedness
with respect to which Licensor or any of Licensor's
affiliated entities is a guarantor, co-signer, or
endorser or obligor shall constitute a breach of this
operating agreement rendering the same subject to
termination in accordance with the provisions of
paragraph 11 hereof.
9.9 In the event that Licensee be declared insolvent or
bankrupt; or in the event a receiver is appointed, or
that any proceeding is taken, by, for, or against
Licensee under any provisions of the Federal
Bankruptcy Act or any amendment thereof, this
Operating Agreement may be terminated forthwith by
Licensor.
Liability and 9.10 Licensee hereby waives all claims against Licensor for
Insurance damages to property or injuries to persons arising out
of the operation of said business, and Licensee shall
indemnify and save Licensor harmless of and from any
damage or injury to property or persons arising from
or growing out of the operations of said business or
the consumption of the product thereof. Licensee
further covenants and agrees to purchase and maintain
in full force and effect, at Licensee's sole expense,
liability insurance in an amount not less than
$100,000 insuring both parties hereto from liability
for any and all such damage or injury and Licensee
further agrees to deliver to Licensor a proper
certificate evidencing the existence of such insurance
coverage and Licensee's compliance with the provisions
of this paragraph.
Assignment and 9.11 Licensee agrees that the interest of Licensee
Transfer Fee hereunder may not be transferred, assigned or
alienated in whole or in part without the written
consent of Licensor. which consent shall not be
withheld unreasonably, but Licensor may insist that
any proposed assignee be a person, in Licensor's
judgment, qualified to provide active supervision over
the operation of said store in compliance with
Licensee's obligations hereunder. In the event
Licensee's said interest should be so transferred or
assigned, Licensee shall pay to Licensor
contemporaneously therewith the
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sum of One Thousand Five Hundred Dollars ($1,500) as
and for a transfer fee, for the preparation of a new
operating Agreement in assignee's name, and for any
and all such expenses incurred by Licensor in
effecting said transfer, including attendance by the
assignee at Licensor's training center.
Right of 9.12 Licensee hereby grants to Licensor the right of first
First Refusal refusal to purchase all of Licensee's right, title and
interest in and to said "Dairy Queen" store and the
within Operating Agreement in the event Licensee
should desire to sell the same. In such event,
Licensee shall notify Licensor in writing that he has
received and is prepared to accept a good faith offer
from a qualified buyer, shall identify the buyer and
state the terms of such offer. Licensor shall have
thirty (30) days after receipt of said notice to
exercise its right of first refusal, the same to be in
writing and subject to the same terms and conditions
as have been offered to Licensee by said qualified
buyer. If Licensor does not exercise said right of
first refusal within said thirty (30) days, Licensee
may then sell or transfer his said interest to such
qualified buyer, subject, however, to Licensor's
written consent to such assignment and the payment of
transfer fee, all as provided in paragraph 9.11
hereof.
CONTRACT VIOLATION
Remedies 10. Licensee recognizes that his "Dairy Queen" store is one
of a large number of stores similarly built and selling
to the public similar products. and hence the failure on
the part of a single licensee to comply with the terms of
this Operating Agreement, could cause irreparable damage
to some or all other "Dairy Queen" licensees. 'Therefore,
it is mutually agreed that in the event of a breach or
threatened breach of any of the terms of this Operating
Agreement by either party, the other party shall
forthwith be entitled to an injunction restraining such
breach and/or a decree of specific performance without
showing or proving any actual damage, but such injunctive
relief or decree shall not preclude any judgment for
damages sustained.
Breach of 10.1 In the event that Licensor deter-mines that Licensee
Contract has failed to meet the requirements and specifications
established with respect to quality, physical
properties, or condition of equipment or materials
used or products manufactured, or with respect to
packages or advertising, or any other provisions of
this Operating Agreement, Licensor shall notify
Licensee in writing of that fact, and shall set forth
the conditions to be corrected, and if Licensee shall
fail -to take positive steps to correct the conditions
specified in any such notice within seven (7) days
from the date of sending such notice by mail addressed
to said Licensee at his last known- address as shown
by the records of Licensor, Licensor shall thereupon
have the right to cancel and terminate this Agreement
upon delivery to Licensee, personally or by mail, of
written notice of such cancellation.
Indemnity 10.2 Licensee expressly agrees to save Licensor harmless
from any loss, damage or liability incurred by
Licensor by reason of any violation of this Operating
Agreement by Licensee.
Land or Building 10.3 Any termination of the land or building lease for
Lease Licensee's store shall automatically terminate this
Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination or expiration of this Operating
Agreement:
Reversion 11.1 All rights to the use of the trademark and trade name
of Trademark "Dairy Queen" and to the trademarks and trade names
Rights listed in Appendix A. and the right and license to
conduct said business in the territory described
hereinabove, shall revert to Licensor and Licensee
shall immediately cease all use of said trademarks and
trade names, or any other similar trade names or
trademarks and pay all monies due at said date;
11.2 All right, title and interest of Licensee in and to
this Operating Agreement shall become the property of
Licensor.
Purchase 11.3 Licensor shall have the first option to purchase any
Option or all equipment or supplies, of whatever kind, owned
by Licensee and used by him in the production of the
"Dairy Queen" product, or any of the other authorized
products under any of the trademarks hereunder at a
price determined by a qualified appraiser selected
with the consent of both parties. If the parties
cannot agree upon the selection of such an appraiser
he shall be appointed by a Judge of the United States
District Court for Licensee's territory. Said option
to purchase may be exercised by Licensor at any time
within 30 days from the date of such termination and
shall not be abated or terminated by the sale or other
transfer of any such equipment or supplies by Licensee
to a third party. Upon-the exercise of such option and
tender of payment for any such equipment or supplies,
Licensee agrees to sell and deliver the same to
Licensor, free and clear of all encumbrances, and to
execute and deliver a bill of sale therefor to
Licensor.
-7-
<PAGE>
Non 11.4 Licensee shall not directly or indirectly engage in
Compete any competitive business within the territory set
forth in paragraph 1.1 for a period of one year after
said date of termination or expiration.
GENERAL PROVISIONS
12.1 In the event at any future time one or more clauses of
this Agreement shall be held to be void by any court
of competent jurisdiction for any reason, such clauses
shall be deemed to be separable and the remainder of
this Agreement shall be deemed to be valid and in full
force and effect.
12.2 Any waiver by Licensor of any breach by Licensee shall
not be deemed to be a waiver of any subsequent breach
nor an estoppel to enforce its right for a subsequent
breach.
12.3 This Agreement constitutes the sole agreement between
the parties with respect to the entire 'subject matter
of this Operating Agreement and embodies all prior
agreements and negotiations with respect to the "Dairy
Queen" business. There are no representations of any
kind except as contained herein.
12.4 It is agreed and understood that Licensee is an
independent contractor and is not in any manner the
agent or employee of Licensor nor has Licensor any
interest in the business of Licensee, except to the
extent set forth in this Agreement.
12.5 If the Licensee consists of two or more individuals,
such individuals shall be jointly and severally liable
and references to Licensee in this Agreement shall
include all such individuals. Reference to Licensee as
male shall also include a female licensee or
corporation or any other business entity.
12.6 This Agreement shall be binding upon and inure to the
benefit of the administrators, executors, heirs,
successors and assigns of the parties.
12.7 Licensee hereby acknowledges receipt of "Store
Management Operations Manual(s)" bearing issue
number(s) ............ and ............ published by
American Dairy Queen Corporation.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing, "Dairy
Queen" Operating Agreement the date first above written.
/s/ Garland A. Sarratt
------------------------------
WITNESS:
/s/ Virginia A. Sarratt
------------------------------
- ----------------------------------- LICENSEE
- ----------------------------------- LICENSOR
ATTEST:
/s/ Richard G. Kassel
- ----------------------------------- ------------------------------
/s/ G. Leone Kassel
APPROVED: ------------------------------
AMERICAN DAIRY QUEEN CORPORATION
By: /s/ H.E. Nelson
-------------------------------
NOTE:IF LICENSEE IS A CORPORATION EACH OF THE STOCKHOLDERS THEREOF MUST EXECUTE
THE FOLLOWING UNDERTAKING.
The undersigned persons hereby represent to Licensor that they are all of
the stockholders of Licensee. In consideration of the grant by Licensor to
Licensee as herein provided each of the undersigned hereby agree, jointly and
severally, and for themselves, their heirs, legal representatives and assigns
that they, and each of them, shall be firmly bound by all of the terms,
provisions and conditions of the foregoing "Dairy Queen" Operating Agreement;
that they and each of them do hereby unconditionally guarantee any indebtedness
of Licensee arising under or by virtue of the aforesaid Operating Agreement and
that they and each of them will not permit or cause the voting control of
Licensee to be modified or altered by stock transfer without first notifying
Licensor of said proposed transfer. and obtaining Licensor's prior written
consent thereto.
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
#202 - For use by territory operators other than American Dairy Queen
Corporation. Execute in 5 counterparts.
-8-
<PAGE>
October 19, 1988
Dairy
Queen
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Store Number: 13673
District Number: 3602
District Manager: Gary Gipson
Regional Manager: Brad Davis
Location: Deming, NM
Bowlin's Inc.
Chris Bess, etal
136 Louisiana N.E.
Albuquerque, NM 87108
Dear Mr. Bess:
We are very pleased to enclose your Assignment and Consent to Assignment
documents for the above store location. I would suggest that you keep this in a
safe place, at it is a very valuable document.
Please be reminded that this consent to transfer by American Dairy Queen
Corporation does not in any way include an assurance of profitability in the
"Dairy Queen" business.
We are very happy that you have become another valued member of the "Dairy
Queen" system. Please don't hesitate to call on us or your District Manager if
we can serve you in any way.
Sincerely,
AMERICAN DAIRY QUEEN CORPORATION
(Signature)
Rhonda L. Duncan
Legal Assistant
612/830-0385
Enclosures
cc: Brad Davis
Gary Gipson
Certified # P 840 783 646
International Dairy Queen, Inc.
Mail To: P.O. Box 35286, Minneapolis, Minnesota 55435 / Tel. (612)830-0200
<PAGE>
ASSIGNMENT AND CONSENT TO ASSIGNMENT
------------------------------------
"Dairy Queen" Store #13673
--------------------------
1414 East Spruce Street, Deming, New Mexico 88030-9601
------------------------------------------------------
KNOW ALL MEN BY THESE PRESENTS;
THAT,
Garland Sarratt and Virginia Sarratt hereinafter designated as
"ASSIGNORS," in consideration of the sum of One Dollar ($1.00) and other good
and valuable considerations, the receipt and sufficiency of which is hereby
acknowledged, do hereby sell, assign, set over and deliver unto
Bowlin's, Inc., hereinafter designated as "ASSIGNEE," all of the.
Assignors' rights, title, and interests, as the same may exist in and to that
certain
"Dairy Queen" Operating Agreement dated July 29, 1976, copies of which
have been delivered by Assignors to Assignee and receipt thereof is acknowledged
by Assignee.
Assignee hereby assumes and agrees to make all the payments required by
the above-mentioned Agreement, from and after the 1st day of August, 1988, and
to perform and abide by all the covenants and conditions of said Agreement.
Assignors hereby acknowledge that they have read the following Consent
to Assignment and understand that they are thereby made contingently liable to
American Dairy Queen Corporation, if Assignee fails to pay, perform, and abide
by all the covenants and conditions of said Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment and Consent to Assignment in triplicate the day and year as set forth
below.
WITNESS: ASSIGNORS:
/s/ Signature Illegible /s/ Garland Sarratt
- ------------------------------ -------------------------------
Garland Sarratt
/s/ Eduardo Ray Flores /s/ Virginia Sarratt
- ------------------------------ -------------------------------
Virginia Sarratt
DATED: This 20th day of July, 1988
WITNESS: ASSIGNORS:
Bowlin's, Inc.
/s/ William J. McCabe
- ------------------------------
(Signature) By /s/ C.Chris Bess
-------------------------------
Its Execu. V. Pres.
DATED: This 27th day of July, 1988.
-1-
<PAGE>
GUARANTY
The undersigned persons hereby represent to AMERICAN DAIRY QUEEN
CORPORATION that they are all of the stockholders of Assignee referred to above.
In consideration of the Consent to Assignment granted by AMERICAN DAIRY QUEEN
CORPORATION and as herein provided, each of the undersigned hereby agrees,
jointly and separately, for themselves, their heirs, legal representatives, and
assigns that they and each of them., shall be firmly bound by all of the terms,
provisions and the conditions of the Agreement assigned; that they and each of
them do unconditionally guarantee any indebtedness of Assignee arising under or
by virtue of said Agreement; and that they and each of them will not permit or
cause the voting control of Assignee to be modified or altered by stock transfer
without first notifying AMERICAN DAIRY QUEEN CORPORATION of said proposed
transfer and obtaining prior written consent thereto, which consent shall not be
unreasonably withheld, and without first paying or causing to be paid to
AMERICAN DAIRY QUEEN CORPORATION the transfer fee provided for in Paragraph 9.11
of said "Dairy Queen" Operating Agreement dated July 29, 1976. GUARANTORS:
/s/ M. L. Bowlin
----------------------------
M.L. Bowlin
DATED: This 26th day of July, 1988.
CONSENT TO ASSIGNMENT
AMERICAN DAIRY QUEEN CORPORATION, a Delaware Corporation, with its
principal offices at 5701 Green Valley Drive, Bloomington, Minnesota 55437,
hereby consents to the foregoing Assignment by Assignors to Assignee, in
consideration of the Assignee's agreement to make all payments and to perform
-2-
<PAGE>
and abide by all the covenants and conditions of said Agreement subject to the
following:
The Assignors,
Garland Sarratt and Virginia Sarratt guarantee all of the obligations
of the Assignee,
Bowlin's, Inc., incurred under said Agreement during the first two
years from the date of transfer.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment and Consent to Assignment in triplicate the day and year set forth
below.
WITNESS AMERICAN DAIRY QUEEN CORPORATION
(Signature) By /s/ Herman E. Nelson
- --------------------------------- -------------------------------
Herman E. Nelson
(Signature)
- --------------------------------- Its V.P.
DATED: This 14th day of Oct., 1988. -------------------------------
-3-
"DAIRY QUEEN"
STORE OPERATING LICENSE AGREEMENT
THIS AGREEMENT entered into this 1st day of February, 1984 , by and
between DAIRY QUEEN OF ARIZONA, INC., an Arizona corporation, hereinafter
referred to as "Company", and BOWLIN'S INCORPORATED, A New Mexico Corporation ,
hereinafter referred to as "Licensee", "Store Owner", "0perator".
I. PREMISES OF THIS AGREEMENT.
--------------------------
1. Licensee hereby agrees that this Agreement is premised upon the
following of facts which are accepted, and specifically agreed upon by Licensee:
a. Company is the exclusive Licensee of Dairy Queen in the
territory comprising the subject matter of this Agreement entitled to use,
license, and permit others to use the trademark and trade name "Dairy Queen" and
certain other trademarks (hereinafter referred to as "derivative trademarks")
which are derived from the words "Dairy Queen" or either of said words or
abbreviations thereof, including by way of example and not limitation trademarks
employing the use of the word "Queen", the letters - "Q" or "D.Q."; said "Dairy
Queen" trademark having been registered in the State of Arizona and in the
United States Patent Office as Registrations Nos. 728,531 and 728,894. This
Agreement and undertaking by License includes every single use or derivation of
the trademark, the method, or of operation, or any information or material or
items derived therefrom.
b. Company and its predecessors in interest have promoted,
developed and established within said areas a franchise business under said
exclusive license, which comprises the selling of a frozen and/or semi-frozen
dairy product in various forms (including for example such items as buster and
dilly bars) under the trademark "Dairy Queen" from retail stores bearing the
trade name "Dairy Queen", has used the trademark "Dairy Queen" or freezers used
in the preparation of and dispensing
<PAGE>
said product and has employed certain other equipment, items, designs, logos,
promotional material, merchandising methods, techniques, standards,
requirements, uniforms, supplies, ingredients, methods, and other techniques,
which are to remain the specific property of Company, and, after this Agreement
ends, are to be returned to Company, and for which Licensee has no right to
utilize said items.
c. In entering this Agreement, Licensee agrees that Licensee
desires to engage in the "Dairy Queen" business and further desires to enter
into this written franchise and license agreement with Company for the use of
the trademark and trade name and any derivative trademarks, and to become
involved in a business subject to the covenants set forth herein, the use of the
merchandising methods employed herein, said use by Licensee to be subject to
conditions and controls herein prescribed for the purposes of offering to the
public wholesome products of a uniform quality and standard and of protecting
the interests of all persons engaged in said business.
d. That by entering this Agreement, Licensee specifically agrees
to become subject to all regulations, policies, and standards as set forth by
Company from time to time.
e. Further, Licensee agrees to provide only those services and
sell only those products specifically approved and authorized by the Company.
II. LICENSE.
-------
Company hereby grants to Licensee, subject to the terms, conditions and
provisions hereof, and subject to any and all policies of Company to be
enunciated during the term of this Agreement, and any which are in existence at
this time, an exclusive right and license to operate a "Dairy Queen" Store at
the following location only:
Located approximately 70 Miles East of Phoenix, Arizona and
46 Miles West of Tucson, Arizona on Interstate I-10,
Pinal County.
With a protected area of ONE and ONE-HALF MILES in any
-2-
<PAGE>
and all directions from the above address by ways of
public streets as set forth in paragraph 18 herein.
said license to include the rights to:
1. Establish and operate a "Dairy Queen" store employing "Dairy Queen"
merchandising methods, materials, and using the trademark "Dairy Queen", and
said derivative trademark on and in association with the advertising and sale of
the frozen dairy products, and the trade name "Dairy Queen" on the said store
from which the product is sold, and further subject to the further provisions of
this Agreement.
2. To use in said store only approved machines, and items of any and
all kind approved by Company. As to freezers, "Dairy Queen" freezers must be
used in producing and dispensing said "Dairy Queen" products, it being clearly
understood and agreed by Licensee that no approved "Dairy Queen" freezer shall
be moved or caused or permitted to be removed from said authorized location for
the purpose of operating same.
3. Use of the trademark "Dairy Queen" on said approved freezers
produced by authorized manufacturers.
4. Use at the authorized location on, and in association with,
production, packaging, and sale of uniform and approved products and services
designated periodically by Company, involving the related sales promotion
programs and materials approved periodically by Company, and utilizing any form
equipment, uniforms, merchandising means, fixtures, supplies, ingredients, and
other items as approved by Company for use in the storage, preparation,
packaging, merchandising, and sale of such products.
III. LICENSEE'S ACCEPTANCE AND ACKNOWLEDGMENTS.
-----------------------------------------
1. Licensee hereby accepts said License subject to the terms,
provisions and conditions hereof, and agrees to cause one "Dairy Queen" store to
be established and maintained at the
-3-
<PAGE>
authorized location and agrees to provide active and continuous supervision and
management upon standards and policies as set by the Company.
2. Company is the exclusive licensee of the right to use the trademark
names at the location for and in which the within franchise and license
agreement is operative, and has the exclusive right to grant to Licensee the use
of said trade names.
3. The trade names and trademarks have valuable good will to Company,
and are a valued property right, the use of which has been licensed to Company.
4. The authorized location, the Dairy Queen Store, and the use of
trademarks and trade name shall be used only in connection with such products as
may be specified by Company and not otherwise, and shall at all times be used
and only in a manner approved by the Company. In years of technological change,
new products and services :are of ten developed. It is the specific purpose of
this Agreement, that in the event there are merchandising changes, technological
changes, and changes in merchandising, the approval of Company must be received
in writing prior to offering any such goods, or service. Otherwise, this
Agreement will be declared null and void. As a specific example of the purpose
of this provision, Licensee agrees that it is the purpose of this Agreement that
present "Dairy Queen" products are to be sold to members of the general
-4-
<PAGE>
public from standardized "Dairy Queen" locations. That the "Dairy Queen"
locations are built for a specific purpose in mind, and not for the use or sale
or development of such specific items as video games and arcades. Such uses of
the premises are not allowed pursuant to the terms of this Agreement, and
Licensee hereby agrees to same.
5. Licensee shall use no trade name or trademark other than "Dairy
Queen" in said business except with the written consent of Company. Similarly,
Licensee shall link no other trademarks or trade names belonging to others with
"Dairy Queen" in a "Dairy Queen" authorized location. For example, Licensee is
only entitled to sell "Dairy Queen" products or services at their location. They
cannot sell items of food, or otherwise, without the authorization of Company.
See Addendum 4A-1 Attached.
6. Licensee specifically agrees that this Agreement, at the sole option
and discretion of Company, may be declared null and void if Licensee breaches
any provisions of this Agreement, and, if after having seven (7) days written
notice of breach by mail, the conditions specified have not been corrected by
Licensee. Then, Company, at its own option, may, terminate this Agreement. See
Addendum 4A-11 attached.
7. Licensee further and specifically agrees that under no circumstances
may breaches of this Agreement, whether continuing or otherwise, at any time, in
any way, be regarded as waived by Company.
8. As to Licensee's obligations, time is always of the essence in this
Agreement.
IV. TERM.
-----
1. The license granted herein shall be for a term of twenty-five (25)
years, unless sooner terminated in accordance with the provisions hereof.
-5-
<PAGE>
V. MONETARY AGREEMENTS.
-------------------
1. Licensee shall pay to Company as a franchise fee (see attached
Addendum to "Dairy Queen" License) the sum of Agreement No. 4 upon the execution
of this Agreement. Said fee is a fee paid to Company for granting and entering
into this Agreement. Said fee is earned when paid, and is not refundable under
any circumstances whatsoever.
2. In addition to the franchise fee, and during the term of this
Agreement, Licensee shall pay to Company, as a royalty, a sum of 29 cents for
each gallon of liquid "mix" used in the preparation of the frozen "Dairy Queen"
product sold under the trademark and trade name "Dairy Queen". It is mutually
understood and agreed that in the event Company should ever authorize the use of
powdered, concentrated, or substitute mixes, the payment shall be based on the
equivalent in liquid mix.
a. At the commencement of each 2 (two) year term of this
Agreement, the Company reserves the right and has an option to increase the
royalty fee per gallon as follows: By an additional five (5) cents per
gallon.
b. All amounts due and owing shall be paid on a monthly basis and
shall be computed at the end of each month's operation and remittance for same
shall be made to Company on or before the third (3rd.) of the following month
accompanied by r b. All amounts due and owing shall be paid on a monthly basis
and shall be reports required by said Company. The computation of said amount
shall be certified and sworn to by Licensee in a manner or form prescribed by
Company and Licensee shall supply to Company all self-supporting or
supplementary materials as Company may require to verify the accuracy of such
remittances. Furthermore, Licensee grants to Company the right to check with any
suppliers, Company's or others, with whom Licensee is doing business to check on
the operation of the business.
c. Payment dates as set forth herein are specifically agreed to be
the dates upon which said items are to be
-6-
<PAGE>
received by the Company. Any payments of any nature or kind received after the
due date subjects Licensee to default. THE ACCEPTANCE OF LATE PAYMENTS SHALL
NOT, UNDER ANY CIRCUMSTANCES BE DEEMED A WAIVER BY COMPANY OF THE RIGHT TO
PROMPT AND APPROPRIATE PAYMENT. Any payments received after the eighth of any
month shall be subject to a late fee equal to five (5%) percent of the amount of
said sum due. In addition, any sums paid after the eighth shall be subject to
interest at the rate of one and one-half (1-1/2%) percent per month. In
addition, Licensee agrees to compensate Company for any and all collection
efforts or activities on any payments made after the due dates contained herein.
These expenses shall include office expenses, telephone expenses, expenses of
time and effort of employees to write letters, make phone cal1s, and attempt
contact with Licensee or Licensee's agents and shall include any and al1 costs
and expenses in contacting collection agencies, lawyers, or other personnel in
an attempt to speed payment. The amount of any and all expenses shall be
determined by Company, in Company's sole discretion, and Licensee hereby agrees
to grant Company the right to determine the amount of said expenses, and hereby
agrees to be bound by said decision of Company. Any failures to pay said amounts
as set by Company shall also be regarded as a breach of this Agreement
subjecting Licensee to forfeiture, pursuant to page 18, Section XXII.
d. In addition to any and all other options as required, or allowed by law, or
as provided in this Agreement, Company shall have the right to require Licensee,
if delinquent at any time, to make a pre-payment equal to three month's
royalties as security for the prompt payment of any and all obligations.
-7-
<PAGE>
e. Company shall further have the option to require Licensee to
make pre-payments on royalty and advertising and merchandising fees by requiring
Licensee to pay a surcharge on each gallon of mix, and on other products and
ingredients used in the conduct of business at the authorized location to the
respective suppliers thereof. Licensee shall pay the surcharge to the suppliers
at the time of purchase of such commodities. The surcharge shall be established
by Company in such amounts as determined by Company, which amounts shall not
substantially exceed the monthly continuing royalty, advertising, and
merchandising fees due hereunder.,. The surcharge shall be paid to the supplier
or suppliers for the account of the Company. The amount so prepaid and remitted
to Company from suppliers will be credited against the continuing license and
advertising and merchandising fees at the end of each month.
3. Licensee further agrees to pay to Company the amount of not less
than three (3%) percent, nor more than six (6%) percent, of all gross sales,
excluding sales taxes, as and for the promotion and advertising of "Dairy Queen"
products. To this end, Company reserves the sole right in its sole discretion to
establish and organize advertising and promotional programs from time to time.
Payments of advertising and merchandising fund money shall be subject to the
same terms and conditions as royalty fee payments required in this Agreement.
See Addendum 4A-III attached.
4.In addition, Licensee agrees to spend additional monies in
merchandising and marketing of their individual "Dairy Queen" store.
VI. TRANSFER OF AGREEMENT.
---------------------
1. Company reserves the right to know specifically at all times with
whom Company is doing business.
2. Licensee shall not transfer, assign, encumber, or in any way
alienate this Agreement, or the rights, duties, or obligations under this
Agreement without the written approval of Company.
-8-
<PAGE>
Licensee shall give Company written notice of intent to sell. Any
attempt to transfer, assign, sell, or alienate without the express written
approval of Company shall immediately breach this Agreement. No party without
the express written permission of Company shall have the right to sell "Dairy
Queen" products at the location specified in this Agreement, or at any other
location.
3. If any sale, transfer, or assignment of any nature or kind is agreed
upon by Company, Company is hereby given the right of first refusal to any such
agreed upon transfer or sale. Notwithstanding anything the contrary contained
above in this part 2 hereof, Licensee hereby grants to Company the right of
first refusal to purchase all of Licensee's right, title and interest in and to
Licensee's "Dairy Queen" business located at the Authorized Location in this
Agreement in the event Licensee should desire to sell the same. In such event,
Licensee shall notify Company in writing that he has received and is prepared to
accept a good faith offer from a third party who is financially able and
otherwise qualified to become a licensee of Company. The said notice shall
identify proposed purchaser and be signed by Licensee and proposed purchaser and
precisely set forth all of the terms of the written offer which Licensee shall
have received from the proposed purchaser. Company shall then have thirty (30)
days after the receipt of such notice to exercise its right of first refusal,
the same to be in writing and on the same terms and conditions, MINUS any
realtor's fees, as have been offered to Licensee by the proposed purchaser.
4. In the event of any assignment agreed upon by Company Licensee shall
pay to Company contemporaneously therewith the sum of TWO THOUSAND DOLLARS
($2,000-00) or a sum equal to one half of the license fees paid for the previous
calendar year, whichever is greater, as and for a transfer fee.
-9-
<PAGE>
This agreement may be transferred to any proposed new assignee,
transferee, or purchaser in it's entirety: Should proposed new assignee,
transferee, or purchaser desire to extend the duration of, or modify the terms
of this agreement such modification would be contingent upon and subject to the
new party entering into a new agreement with Company. If, for any reason,
Company, and the proposed assignee, transferee, or purchaser cannot agree to the
terms and conditions of a new contract, then any attempt at assignment,
transfer, sale, no matter how enumerated, shall be void.
VII. DEATH OR DISABILITY.
-------------------
In the event of the death, disability or incapacity of any individual
Licensee or principal officer or director of an incorporated Licensee or partner
in a partnership Licensee, should the decedent's heir or successor in interest,
or the corporation or partnership, as the case may be, wish to continue as
Licensee hereunder, such person shall apply for Company's consent thereto,
successfully complete Company's training program and pay the applicable transfer
fee, in accordance with this paragraph VII as in any case of a proposed transfer
of Licensee's interest in this Agreement.
VIII. BUSINESS NAME.
-------------
Licensee shall not use the word "Dairy Queen" as a part of its
corporate or business name unless first approved in writing by Company, and
shall use only the words "Dairy Queen" (and no other words whatsoever) as the
trade name on the store from which the product is sold.
IX. FURTHER LICENSEE DECLARATIONS.
-----------------------------
1. Licensee agrees that nothing contained herein gives him any right,
title or interest in the trademark and trade name "Dairy Queen" nor in said
derivative trademarks except the right to use same under the terms and
conditions of this Agreement and that Licensee's use thereof inures to the
benefit of the owner
-10-
<PAGE>
hereof. Licensee hereby acknowledges the validity of the trademark and trade
name "Dairy Queen" and any derivative trademarks therefrom and further agrees to
do nothing or use the trademark and trade name or said derivative trademarks in
any way to infringe the rights of Company or Company's licensor. Licensee shall
use only the trademark and trade name "Dairy Queen" and said derivative
trademarks on and in association with the advertising and sale of a frozen dairy
product, and no other product, which shall in quality and mode and condition of
manufacture and sale comply with such standards as may be fixed or approved by
Company. It is further agreed by the parties hereto that in order to promote and
protect the business interests of each of the parties, the good will of the
"Dairy Queen" business and the business interests of other persons engaged in
the "Dairy Queen" business, requires substantial uniformity to be maintained in
the type, standard and quality of the "Dairy Queen" stores, the mix, the
freezers, and products used therein, the conditions of preparation and
merchandising and sale of the product. To this end, it is agreed that the rules
and controls and policies of Company, those contained in this Agreement, and
enacted by Company shall prevail. Licensee agrees that the provisions,
restrictions, and controls and agreements provided in this document are all
necessary, reasonable, and desirable for such purposes and that Licensee's
"Dairy Queen" business shall be conducted in accordance with Company's standards
and requirements. The standards and requirements include requirements of
quality, production, appearance, cleanliness, service, merchandising and
advertising. The setting forth of specific items is not in any way meant to
limit the specific items to which this Agreement applies. it is mutually
understood and agreed that these controls include the specific requirements
without limiting any general statement or policy or controls expressed.
-11-
2. Licensee further agrees to utilize only such "mix" in the
preparation of "Dairy Queen" products which conforms to the standards prescribed
by Company. Licensee shall strictly observe the product overrun limitations
which shall be made known to Licensee by Company from time to time during this
Agreement as guidance to Licensee in formulating products for sale. "Product
overruns" is defined by the parties as being the amount of air incorporated into
the "Dairy Queen" mix in the course of producing "Dairy Queen" products. To
avoid misunderstanding, Company and Licensee acknowledge that neither shall
expect the other to be agreeable to a product overrun exceeding forty-five (45%)
percent.
3. Licensee further agrees to utilize only such supplies used in the
production, handling, serving garnishing of "Dairy Queen" products and ancillary
lines and related goods conforming to standards prescribed by Company from time
to time.
4. Company shall have the sole right to approve the supplies and
ingredients used in the business.
5. Licensee shall use only approved "Dairy Queen" freezers produced by
authorized manufacturers.
6. Licensee shall produce and sell the "Dairy Queen" product line only
in a store constructed in accordance with plans furnished by Company and
containing approved "Dairy Queen" signs; said plans to remain the property of
Company at all times; and shall maintain the store in a high state of repair,
cleanliness and sanitation at all times. Before any store for the sale or
distribution of "Dairy Queen" is constructed, the location thereof shall be
subject to the approval, in writing, of Company. Licensee further agrees to
acquire the right to use or to commence promptly the construction of one such
building at the authorized location hereinabove described and complete or
contract for the completion the same on or before July 1984. Upon completion of
said building Licensee shall, at his own expense, install freezers and equipment
therein in a manner approved by Company. The parking area shall be
-12-
<PAGE>
black-topped or paved in a manner approved by Company. No material alterations
to or changes in said building or premises shall be made during the period of
this contract or any renewal hereof without the prior approval in writing by the
Company.
7. Licensee shall hire and supervise efficient, competent, sober and
courteous operators and employees wearing uniform Company dress for the purpose
of operating the business. Licensee shall set their wages and commissions and
pay all such wages and commissions due them with no liability therefor on the
Company. Licensee shall require all its employees to work in clean uniforms
approved by the Company but furnished at the cost of Licensee or the employee as
Licensee may determine.
8. Licensee agrees at all times to repaint the buildings on said
premises at least annually and to maintain said buildings and said entire
premises in a high state of repair, cleanliness and sanitation. Should
Licensee's "Dairy Queen" store be rated other than the highest rating given by
any local, state or federal sanitation or health authorities, said store shall
immediately be closed and such steps or measures shall be taken by Licensee as
may be necessary to obtain the highest rating before it is reopened for
business. Any such closing shall be regarded as a material breach of this
Agreement. It is agreed between the parties that cleanliness and sanitation are
two of the most important ingredients in general public acceptance of "Dairy
Queen" products. Any action by any authority closing a "Dairy Queen" store is
regarded as a serious dereliction by Licensee.
9. Licensee further covenants that in the event Company standards are
not met, the store may be closed until steps are taken to remedy this situation,
or at company's option, this Agreement may terminate, as to page 18, Section
XXII.
10. All advertising cartons, containers, wrappers and papergoods used
in the advertising, sale and distribution of the
-13-
<PAGE>
"Dairy Queen" products shall, where practicable, indicate that it is produced
and sold on the authority of Company and shall be subject to approval by Company
before being used.
11. All portions of "Dairy Queen" products sold or offered for sale
shall comply with requirements established from time to time by Company as to
weight, size, and appearance and all such products shall be processed in strict
accordance with the formula and methods furnished by Company.
12. From time to time as Company shall deem desirable, Company may
place a qualified representative at Licensee's place of business to train,
instruct, and familiarize employees thereof with the standard business methods
and procedures of Company, or, may require Licensee or any supervisory or
operating employee of Licensee to spend a reasonable amount of time at another
like place of business designated by Company for the purpose of observing,
receiving training and instruction, and practicing standard business methods and
procedure.
13. Licensee further agrees, that at any time company may send a
representative to Licensee's location to review documents, records, the physical
facilities, and the operation of the business.
14. Licensee agrees to comply with all applicable federal state, local,
county, and municipal laws, statutes, ordinances and regulations pertaining to
the conduct of the "Dairy Queen" business and the sale of the "Dairy Queen"
products.
15. As noted previously, Licensee agrees that technology may develop
new forms of amusement such as video games. Nothing in this Agreement authorizes
the use of any items developed by time, or technology, or ingenuity, which are
not authorized by this Agreement, or by Company in writing.
16. Licensee further agrees to appear at and attend the annual Company
store operator's meeting and convention, and to appear and attend at any and all
conferences, meetings, or other functions as are designated by Company.
-14-
<PAGE>
X. SIGNS.
-----
1. Licensee shall prominently identify the store with one or more of
the trademarks specified by Company, and with no other name or mark, said signs
shall as to color, lettering, size, design and general appearance be approved by
company prior to construction and erection.
2. Licensee shall at his own expense cause such signs to be
constructed, erected, and maintained throughout the term of this Agreement. All
signs must be approved by Company.
3. Company is hereby given the right to designate any additional signs
to be placed at the premises, at Licensee's expense. Such signs shall include,
where appropriate, highway signs and other similar sign items. Company shall be
the sole arbitor of when such signs, or additional signs, are appropriate or in
need of maintenance.
XI. FREEZERS.
--------
All approved "Dairy Queen" freezers used in producing and dispensing
the "Dairy Queen" product shall have a nameplate fastened thereto identifying
the same as "Dairy Queen" freezers, and shall be first approved by Company for
use in "Dairy Queen" stores.
XII. RELATED GOODS.
-------------
1. Licensee may sell in said "Dairy Queen" store only such products
permitted and approved in writing by Company.
2. No food, sandwiches, hamburgers, cigarettes, potato chips, gum, or
other like products are to be sold from said "Dairy Queen".
3. Similarly, no unauthorized services, including games are to be
allowed.
XIII. BUSINESS HOURS.
--------------
1. Licensee shall operate its "Dairy Queen" business during a period-of
at least nine (9) consecutive months in each calendar year and such place of
business shall be opened to the public at least twelve (12) hours during each
day of said period.
-15-
<PAGE>
Acts of God, war, strikes or riots preventing Licensee from temporarily
complying with the foregoing shall exempt compliance therewith.
2. Licensee shall close said "Dairy Queen" business for a period of not
less than two (2) weeks of each calendar year for the purpose of necessary
maintenance and repairs - painting and general cleaning. See Addendum 4A-IV
attached.
XIV. INSPECTION.
----------
Company, or its authorized representative, shall have the right to
inspect the premises, and every portion of its operation for the purpose of
making inspections to ascertain if all the provisions of this Agreement are
being observed. Furthermore, Company is entitled to test, sample, and inspect
all supplies, products, and materials of all kinds, the preparation and
formulation thereof, and the conditions of sanitation and cleanliness in the
production, handling, and serving thereof.
XV. RECORDS AND REPORTS.
-------------------
Licensee agrees to keep a complete set of books and records from which
all sums payable under this Agreement may be determined. Such books and records
shall include a monthly profit and loss statement reflecting the operations of
Licensee's business, copies of which Licensee shall furnish to Company within 25
days after the end of each month's operation. The aforesaid books, records, and
financial statements shall be maintained by Licensee on forms meeting the
specifications of Company. All such records shall be open and available to
Company for inspection at all times. Company shall have the right to cause an
audit of the business of Licensee to be made for a determination of gross sales.
If any statement of gross sales previously submitted by Licensee to Company
shall be found to be incorrect by audit or otherwise, in an amount in excess of
two (2%) percent of gross sales, Licensee shall be subject to immediately pay
the cost of such audit as well as any additional fees found to be payable by
Licensee to company; and may be subject to termination, otherwise, the cost of
audit shall be paid by Company.
-16-
<PAGE>
XVI. LITIGATION.
----------
As between Company and Licensee, Company shall control all litigation
relating to the trademark and trade name "Dairy Queen" and said derivative
trademarks and shall be the sole judge as to whether or not suit shall be
instituted for the infringement thereof, the expense for any such litigation in
the territory stated herein shall be borne by Company and Licensee and any
others, in manner and extent to be agreed upon in each instance by the said
parties. Licensee shall promptly notify Company of any such use or infringement
of which he becomes aware.
XVII. LIABILITY INSURANCE.
-------------------
Licensee hereby waives all claims against Company for damages to
property or injuries to persons arising out of the operation of said business,
and Licensee shall indemnify and save Company harmless of and from any damages
or injury to property or persons arising from or growing out of the operations
of said business in any way, or the consumption of the product hereof. Licensee
further covenants and agrees to purchase and maintain in full force and effect,
at Licensee's sole expense, liability insurance in an amount of not less than
$300,000.00 insuring both parties hereto from liability for any and all such
damage or injury and Licensee further agrees to deliver to Company a certificate
evidencing the existence of such insurance coverage and Licensee's compliance
with the provisions of this paragraph.
XVIII. COMPETITIVE LICENSE.
-------------------
Company shall not license the establishment of any competitive business
under said trademarks and trade name within the protected area covered by this
Agreement during the term hereof. Similarly, Licensee shall not license,
establish, or operate any competitive business within the protected area covered
by this Agreement during the term hereof without written consent of Company.
-17-
<PAGE>
XIX. PAYMENT OF DEBTS.
----------------
Licensee covenants and agrees to pay promptly when due, all taxes And
assessments that may be assessed against said premises or equipment used in
connection with Licensee's "Dairy Queen" business, all liens and encumbrances of
any kind and character created, or placed upon or against any of said property,
as well as all accounts and other indebtedness of every kind incurred by
Licensee in the conduct of said business; and should Licensee default in making
any such payment, Company shall be authorized to pay same and Licensee covenants
promptly to reimburse Company on demand of such payment. By undertaking any such
payments, Company is not under any circumstances obligating itself to pay any
said sums, but is doing so only to protect Company's good name and Licensee
under this Agreement. Company, by doing so, shall not be undertaking or
sustaining any liability for any such debts or obligations or liabilities in any
way, shape or form.
XX. INDEPENDENT CONTRACTOR.
----------------------
It is agreed and understood that Licensee is an independent agency, and
independent contractor, not in any manner the agent or employee of Company, nor
has Company any interest in the business of Licensee except to the extent set
forth in this Agreement.
XXI. INDEMNITY
---------
Licensee agrees to save and hold Company harmless from any loss, damage
or liability incurred by Company by reason of any violation of this Agreement by
Licensee.
XXII. NOTICES OF BREACH.
-----------------
1. In the event that Company determines that Licensee has failed to
meet the requirements and specifications established in this Agreement, or any
of the terms and conditions hereof, Company shall notify Licensee in writing of
that fact, and shall. set forth the terms and conditions to be corrected. If
Licensee fails to correct such problems, violations, or conditions within seven
(7) days from the date of mailing of said notice, by certified mail/to the
address of the authorized location, Company shall thereupon have the right to
cancel and terminate this Agreement.
-18-
<PAGE>
XXIII. MODERNIZATION.
-------------
1. Because business advances, and because society changes, and methods
of doing business change, it is the duty of Licensee to modernize, refurbish,
the building, equipment, signage, and all other items as may be reasonably
necessary to permit the business to conform to the standards then existing, and
to cause such repairs or remodeling, at his expense as are necessary to keep
Licensee in compliance with all of the terms and conditions of this Agreement.
Failure to do so will be regarded as a breach of this Agreement.
2. In any event, at the time of any proposed transfer, the Licensee
must modernize, refurbish, and/or replace building, equipment and any other
items from the store as are necessary to be in compliance with the requirements
of the Company as then existing.
XXIV. BANKRUPTCY.
----------
In the event that Licensee shall be declared insolvent or
bankrupt, or in the event a receiver be appointed, or that any proceedings taken
by, for, or against Licensee under any provision of the Federal Bankruptcy Act
or any amendment thereof, or make an assignment for the benefit of creditors
under any State law, this Agreement shall be terminated and all rights of
License shall be forfeited forthwith to the Company.
XXV. NON-COMPETE CLAIMS.
------------------
Neither Licensee nor any principal of an incorporated Licensee shall
directly or indirectly engage in any competitive business with the protected
area of the authorized location for a period of two and one-half (2-1/2) years
after the date of termination by either party with or without cause. Licensee
shall not assert any claim or cause of action against Company after one (1) year
following the effective date of termination of this Agreement.
XXVI. TERMINATION.
-----------
1. Termination by Licensor.
-----------------------
Upon termination of this Agreement:
a. All rights of Licensee to the use of the trademarks and
all other rights and licenses granted herein including a right
-19-
<PAGE>
to license and conduct the "Dairy Queen" business at the authorized location
shall revert to Company without further act or deed of any party.
limited solely to DAIRY QUEEN stores owned or franchised by it, in connection
with a particular and unique semi-frozen confection, of the nature generically
of what is sometimes known in the trade as a slush drink and novelty confection,
made in accordance with prescribed secret formulae, standards and specifications
(hereinafter sometimes referred to as PRODUCT):, and
WHEREAS, the parties are desirous of providing for a sub-license of
TRADEMARKS so that LICENSEE is authorized and entitled to use TRADEMARKS at
LOCATION in a manner which is consistent and uniform with the use of TRADEMARKS
at other DAIRY QUEEN stores throughout the country; and
WHEREAS, the parties agree and acknowledge that TRADEMARKS are a
valuable and subsisting property right, that PRODUCT is a unique and superior
confection heretofore sold at retail only in DAIRY QUEEN stores, and that the
provisions herein respecting the standards and specifications for PRODUCT and
for the use of TRADEMARKS are reasonable and necessary to protect their
respective rights, and the rights of those having superior and similar rights
therein.
NOW, THEREFORE, in consideration of the premises and of the mutual
undertakings and obligations herein set forth, it is agreed:
1. LICENSOR hereby licenses to LICENSEE the exclusive privilege to use
TRADEMARKS, provided that such is limited solely to use at LOCATION in
connection with PRODUCT and is subject to the provisions hereof.
2. Nothing herein shall be understood to be a sale, assignment or grant
to LICENSEE of any right, title or interest in and to TRADEMARKS.
3. For this license, LICENSEE shall pay to LICENSOR, or to whoever is
designated in writing by LICENSOR to receive payment in LICENSOR'S behalf, a
service fee as specified in Exhibit 1 hereto. LICENSEE understands and agrees
that the AMERICAN DAIRY QUEEN CORPORATION (from which LICENSOR has received its
rights in and to TRADEMARKS) may buy and sell some or all of the ingredients,
equipment, or containers used in the making of PRODUCT and in so doing may
b. Any right, title and interest of Licensee in, to and under this
operating Agreement shall become the property of Company. Licensee shall
immediately cease all use and display of trademarks, materials, and any and all
ancillary items, services or products, and shall pay all sums due to Company or
its affiliate or whose payment by Company or its affiliate has guaranteed.
c. Company shall have first option to purchase any and all freezers of
any kind whatsoever owned by Licensee and used by him in the production of the
"Dairy Queen" product at and for an amount equal to the original price paid for
each such freezer less fifty (50%) percent for use and depreciation for first
year.
d. Less twenty (20%) percent per year after first twelve (12) month
period.
2. Termination by Licensee.
-----------------------
Licensee shall not be entitled to terminate this agreement for cause
unless he shall have given Company written notice of the grounds for such
termination and Company shall have failed to cure such grounds to the reasonable
satisfaction of Licensee within thirty (30) days of Company's receipt of such
notice. As a condition to Licensee or his successor terminating this Agreement
without cause at any time prior to the tenth anniversary of Licensee's first
opening the store for business, Licensee shall pay to Company an amount equal to
two times the license fee payable to Company in respect to (1) the last twelve
(12) months of the store's active operations, or (2) the entire period the store
has been open for business, whichever is the shorter period.
-20-
<PAGE>
XXVII. MISCELLANEOUS CLAUSES.
---------------------
1. In the event at any time one or more clauses of this Agreement shall
be held to be void by any court, such clauses shall be deemed to be separable
and the remainder of this Agreement shall be deemed to be valid and in full
force and effect.
2. Any waiver by Company of any breach by Licensee shall not be deemed
to be a waiver of any subsequent breach nor an estoppel to enforce its right for
any subsequent breach.
3. This Agreement constitutes the agreement between the parties, and is
the sole agreement between the parties, an embodies all prior agreements and
negotiations with respect to the "Dairy Queen" business. Licensee agrees that
there are no representations of any kind made by Company except as contained
herein.
4. If Licensee consists of two or more individuals, such individuals
shall be jointly and severally liable, and references to Licensee in this
Agreement shall include all such individuals.
5. This Agreement shall be binding upon and inure to the benefit of the
administrators, executors, heirs, successors, and assigns of the parties.
XVIII. ADMINISTRATIVE AND PROMOTIONAL FEES.
-----------------------------------
1. Licensee acknowledges and agrees that Company may compensate itself
and/or it's affiliated companies for the expense of administering and promoting
the sales promotion programs set forth herein.
XXIX. DIFFERENT FORMS OF LICENSE AGREEMENTS.
-------------------------------------
1. Licensee acknowledges that he is aware of the fact that some
existing licensees of Company operate under different forms of Agreement and
that consequently, Company's obligations an rights with respect to the various
licensees may differ.
XXX. RULES OF COMPANY.
----------------
1. Company is the sole judge of that which is compatible with the
sale of "Dairy Queen" products, and Licensee shall not look beyond Company in
such matters as rules and controls. These
-21-
<PAGE>
matters are left to the sole discretion of Company, and Licensee hereby
specifically agrees.
IN WITNESS WHEREOF, the parties have caused the foregoing "Dairy Queen"
Store Operating License Agreement to be executed all as of the date first above
written.
DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
First Party
By /s/ Mildred L. Hanigan
--------------------------------------------
MILDRED L. HANIGAN, President
BOWLIN'S CORPORATION, a New Mexico Corporation
----------------------------------------------
LICENSEE
By: /s/ C.C. Bess, Exec. V. Pres.
--------------------------------------------
C. C. BESS, Executive Vice-President
ATTEST:
/s/ Tom Hanigan
- --------------------------------------------------
WITNESS:
/s/ Signature Illegible
- ---------------------------------------------------
-22-
<PAGE>
ADDENDUM TO "DAIRY QUEEN" LICENSE AGREEMENT
NO. 4A
This Addendum made and entered into, in duplicate, at Douglas, Arizona,
on this 1st day of February , 1984 , by and between DAIRY QUEEN OF SOUTHERN
ARIZONA, INC., an Arizona Corporation, hereinafter called "Company", and
BOWLIN'S INCORPORATED Of 136 Louisiana NE, Albuquerque, New Mexico, 87108
hereinafter called "Licensee".
WHEREAS, the parties hereto have executed a "DAIRY QUEEN LICENSE
AGREEMENT" (duplicate copy of which agreement is attached hereto) dated this 1st
day of February , 1984 , and covering the following "Authorized Location":
Located approximately 70 Miles East of Phoenix, Arizona and 46 Miles West of
Tucson, Arizona on Interstate I-10, Pinal County
I
WHEREAS, the parties have mutually agreed to the following:
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is agreed by and between the parties hereto as follows:
DAIRY QUEEN OF SOUTHERN ARIZONA, INC, acknowledges with BOWLIN'S INCORPORATED
that at present there is already a system of food and gift items offered to the
public in their establishment. it is also fully understood and agreed that this
present business is physically and factually a separate and independent entity
from the DAIRY QUEEN addition. Granted, there will be common entrance and access
to both businesses.
HOWEVER, it is mutually understood and agreed upon, since Licensee operates a
full line novelty and curio business in a store building with gasoline and other
automotive items sold on the premises with said store building adjoining
Licensee's DAIRY QUEEN operation, the sales in Licensee's merchandise, novelty
and curio plus gasoline and automotive items shall not be subject to the sales
continuing Licensee fees or promotional fees as is provided in said DAIRY QUEEN
LICENSE AGREEMENT.
WITH RESPECT TO Page 5, Article 5, of the DAIRY QUEEN LICENSE AGREEMENT, the
company hereby authorizes and approves of the continued sales of the usual food
products sold heretofore by the Licensee at his existing fast food snackbar
operation and elsewhere in the main store building, provided such products are
not identical to those offered by the Company.
HOWEVER, if Company becomes a "BRAZIER SYSTEM FOOD APPROVED TERRITORY OPERATOR,
then and at such time Licensee will convert the above existing food service to a
"DAIRY QUEEN BRAZIER FOOD SYSTEM" standards and all BRAZIER FOOD SYSTEM" sales
would become subject to the Franchise and Royalty fees agreed to in the above
referred to DAIRY QUEEN LICENSE AGREEMENT.
II
WITH RESPECT TO: Page 5, Article 6, of the DAIRY QUEEN LICENSE
AGREEMENT, notification of any breach or default must be by Certified mail,
Return Receipt Requested, to the Licensee
<PAGE>
at:
Bowlin's Incorporated
136 Louisiana NE
Albuquerque, New Mexico 87108
And Licensee shall have at least seven (7) days to cure such default.
III
WITH RESPECT TO: Page 8, Paragraph V, 3, of the DAIRY QUEEN LICENSE
AGREEMENT, Company agrees to waive the payment of promotion and advertising fees
by the Licensee, upon demonstration by the Licensee that he is providing outdoor
advertising through the use of billboards located along Interstate 10 in
Arizona, such advertising being to the mutual benefit of both Company and
Licensee.
IV
WITH RESPECT TO: Paragraph XIII, 2: IT IS FURTHER AGREED that such
closing shall be at the Licensee's option, but the necessary repairs,
maintenance, painting, and cleaning shall be promptly accomplished to the
satisfaction of the Company on a regular and routine basis.
IN WITNESS WHEREOF, the parties have caused the foregoing Amendment to
be executed all as of the date first written above.
ATTEST DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
An Arizona Corporation
BY: /s/ Tom Hanigan BY: /s/ Mildred L. Hanigan
-------------------------------- ----------------------------------
Mildred L. Hanigan - President
ATTEST
BY: /s/ Signature Illegible BOWLIN'S INCORPORATED
--------------------------------- 136 Louisiana NE
Albuquerque, New Mexico 87108
BY: /s/ C.C. Bess, Exec. V. Pres.
----------------------------------
C.C. Bess-Executive Vice-President
-2-
<PAGE>
ADDENDUM TO "DAIRY QUEEN" LICENSE AGREEMENT
NO. 4
This Addendum made and entered into, in duplicate, at Douglas Arizona, on this
1st day of February 1984 by and between DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
and Arizona Corporation, hereinafter called "Company", and BOWLIN'S INCORPORATED
of 136 Louisiana NE, Albuquerque, NM 87108 hereinafter called "Licensee".
WHEREAS, the parties hereto have executed a "DAIRY QUEEN LICENSE AGREEMENT"
(duplicate copy of which agreement is attached hereto) dated 1 February 1984,
and covering the following "Authorized Location".
Located approximately 70 Miles East of Phoenix, Arizona and 46 Miles
West of Tucson, Arizona on Interstate 1-10, Pinal County
WHEREAS, the parties hereto wish to amend such agreement heretofore executed
to provide for a single combination Franchise Fee and Royalty Fee in
consideration of the rights granted Licensee under said Agreement and in lieu of
the separate Franchise Fee and Royalty Fee provided for in said Agreement:
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is agreed by and between the parties hereto as follows:
1. Paragraph 5 of the said "Dairy Queen" License Agreement, between the
parties hereto, is amended to read as follows;
Licensee shall pay to Company, as a total combined Franchise Fee and Royalty
Fee in respect of ,the rights granted Licensee under the terms of said "Dairy
Queen" License Agreement, a sum computed upon a percentage of the total combined
gross retail sales, exclusive of sales taxes, of all products sold under said
License Agreement, the same to be computed in accordance with the following
schedule:
Four Percent (4%) of all gross sales in each calendar year.
It is hereby fully understood and agreed the aforesaid computed sum is to, and
does, include a Royalty Fee of Twenty-Nine Cents (29 cents) per gallon of liquid
"mix" used, the balance being the separate continuing Franchise Fee.
Gross Sales shall include sales of every kind and nature from and in
connection with said store, including the sale of "Dairy Queen" products and all
other products and related goods which may be authorized for sale therein.
IN WITNESS WHEREFOF, the parties have caused the forgoing Amendment to be
executed all as of the date first above written.
ATTEST: DAIRY QUEEN OF SOUTHERN ARIZONA, INC.,
an Arizona Corporation
/s/ Tom Hanigan By: /s/ Mildred L. Hanigan
- -------------------------- -----------------------------------
Mildred L. Hanigan President
WITNESS:
/s/ David B. Raybold BOWLIN'S INCORPORATED
- -------------------------- -------------------------------------
A New Mexico corporation
/s/ C.C. Bess Exec. V. Pres.
- -------------------------- --------------------------------------
C.C. Bess Exec. V. Pres. LICENSEE
<PAGE>
"MR. MISTY"
STORE SUBLICENSE AGREEMENT
BETWEEN STATE OR DISTRICT OPERATOR AND STORE OPERATOR
THIS AGREEMENT is executed in quadruplicate this 1st day of February,
1984, by and between DAIRY OUEEN OF SOUTHERN ARIZONA, INC. (hereinafter referred
to as LICENSOR),and BOWLIN'S INCORPORATED of 136 Louisiana NE, Albuquerque, New
Mexico, 87108 (hereinafter referred to as LICENSEE):
WHEREAS, LICENSEE is the operator of the DAIRY QUEEN* store located at
Approximately 70 Miles East of Phoenix, AZ and 46 Miles West of Tucson, AZ,
Pinal County (hereinafter referred to as LOCATION), under and by virtue of
written authority granted by LICENSOR; and
WHEREAS, LICENSOR has been licensed the exclusive right and license
within its DAIRY QUEEN Franchise Territory to use and to sub-license the use of
the following described trademarks, hereinafter referred to as TRADEMARKS:
(a) The words "MR. MISTY" and "MR. MISTY KISS," and
(b) The fanciful caricature used in connection with "MR. MISTY" and
"MR. MISTY KISS"; and
WHEREAS, LICENSOR'S said right and license to use said TRADEMARKS is
limited solely to DAIRY QUEEN stores owned or franchised by it, in connection
with a particular and unique semi-frozen confection, of the nature generically
of what is sometimes known in the trade as a slush drink and novelty confection,
made in accordance with prescribed secret formula, standards and specifications
(hereinafter sometimes referred to as PRODUCT):, and
WHEREAS, the parties are desirous of providing for a sub-license of
TRADEMARKS so that LICENSEE is authorized and entitled to use TRADEMARKS at
LOCATION in a manner which is consistent and uniform with the use of TRADEMARKS
at other DAIRY QUEEN stores throughout the country; and
WHEREAS, the parties agree and acknowledge that TRADEMARKS are a
valuable and subsisting property right, that PRODUCT is a unique and superior
confection heretofore sold at retail only in DAIRY QUEEN stores, and that the
provisions herein respecting the standards and specifications for PRODUCT and
for the use of TRADEMARKS are reasonable and necessary to protect their
respective rights, and the rights of those having superior and similar rights
therein.
NOW, THEREFORE, in consideration of the premises and of the mutual
undertakings and obligations herein set forth, it is agreed:
1. LICENSOR hereby licenses to LICENSEE the exclusive privilege to use
TRADEMARKS, provided that such is limited solely to use at LOCATION in
connection with PRODUCT and is subject to the provisions hereof.
2. Nothing herein shall be understood to be a sale, assignment or grant
to LICENSEE of any right, title or interest in and to TRADEMARKS.
3. For this license, LICENSEE shall pay to LICENSOR, or to whoever is
designated in writing by LICENSOR to receive payment in LICENSOR'S behalf, a
service fee as specified in Exhibit 1 hereto. LICENSEE understands and agrees
that the AMERICAN DAIRY QUEEN CORPORATION (from which LICENSOR has received its
rights in and to TRADEMARKS) may buy and sell some or all of the ingredients,
equipment, or containers used in the making of PRODUCT and in so doing may
realize some profit.
-1-
<PAGE>
4. LICENSEE admits and agrees not to contest the validity or ownership
of TRADEMARKS or LICENSOR'S superior right to the use thereof during the
duration of this agreement and for a period of two (2) years after the
termination of this agreement.
5. LICENSEE'S use of TRADEMARKS on PRODUCT enclosure and on advertising
and promotional literature with respect thereto, will conform in every respect
to samples which LICENSOR provides to LICENSEE or expressly approves in writing.
6. LICENSEE acknowledges that it is of the utmost importance that
PRODUCT sold at LOCATION under TRADEMARKS shall conform strictly to said
prescribed standards and specifications emanating through, from or provided by
LICENSOR for the quality, flavor, appearance and texture of PRODUCT, for the
ingredients used in the production of PRODUCT, for the equipment necessary,
including dispensing freezers, to make PRODUCT at LOCATION, and for the
containers in which PRODUCT is sold, as determined from time to time. A copy of
the current standards and specifications is attached and made a part hereof as
Exhibit 2. PRODUCT purchased by LICENSOR or its representatives from LICENSEE or
from any store licensed hereunder during the normal course of business shall be
considered as representative of PRODUCT sold by LICENSEE in determining
LICENSEE'S conformance with said standards and specifications. Failure on
LICENSEE'S part to conform to said standards and specifications shall constitute
a material breach of this agreement entitling LICENSOR to terminate the same
upon giving thirty (30) days written notice. This paragraph, however, shall not
be construed to mean that LICENSEE is required to purchase any of the
ingredients, or equipment, or containers used in making and selling PRODUCT from
LICENSOR or from sources designated by LICENSOR, if there is another source or
sources available which can provide ingredients, or equipment, or containers
which satisfy LICENSOR'S standards and specifications. Said standards and
specifications may include suggestions as to retail prices for PRODUCT sold at
LOCATION, but, if so, such are no more than suggestions, are not binding or
mandatory, and nothing herein or therein contained shall require or obligate
LICENSEE or anyone licensed hereunder in any way to sell PRODUCT at any price
other than that which the seller voluntarily determines.
7. Each reproduction, publication and use of TRADEMARKS pursuant hereto
shall bear the statutory notice of trademark registration adjacent thereto, as
required or approved by LICENSOR.
8. Any use which LICENSEE may make of TRADEMARKS shall inure to the
benefit of LICENSOR.
9. This license shall be in effect until terminated by mutual agreement
of the parties, provided that LICENSOR shall have the right to terminate this
license upon giving thirty (30) days prior written notice to LICENSEE if
LICENSEE (a) fails to carry out any of the provisions of this agreement, or (b)
ceases or refuses for any reason to continue to participate in the DAIRY QUEEN
service programs of the AMERICAN DAIRY QUEEN CORPORATION or its affiliated
companies. LICENSEE shall have the right to terminate this license and to cease
using TRADEMARKS and PRODUCT effective at the end of any calendar year upon
giving at least thirty (30) days prior written notice to LICENSOR.
10. In the event that LICENSOR'S rights in and to TRADEMARKS and
PRODUCT are terminated for any reason, whether by LICENSOR'S own action or
otherwise, this agreement and LICENSEE'S rights hereunder shall automatically
terminate.
11. Upon the expiration or termination of this license for any reason,
LICENSEE will promptly and completely cease and desist in the use of TRADEMARKS
or of any similar trademark, as well as the secret formulation for the base of
PRODUCT.
12. LICENSEE admits and acknowledges that it enters into this agreement
freely and voluntarily, understanding all the provisions hereof, and
understanding further that it is not necessary for it to enter into this
agreement in order to continue to enjoy any existing right and interest licensed
to it by LICENSOR in connection with LOCATION.
13. LICENSEE is fully and solely responsible for any and all claims
made on account of injuries to persons or otherwise, arising from or as a result
of the manufacture, use, or consumption of PRODUCT sold at LOCATION and shall
hold LICENSOR completely harmless therefrom.
14. The waiver of any breach hereof shall not be effective to waive any
subsequent breach hereof.
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<PAGE>
15. The authorization hereby granted to LICENSEE to use and sell
TRADEMARKS and PRODUCT at LOCATION is limited as provided herein and does not
include, by implication or otherwise, authorization to use or sell any other
non-DAIRY QUEEN product or non-DAIRY QUEEN trademark not previously approved by
LICENSOR.
16. This agreement is to be governed by and interpreted in accordance
with the laws of the State of Illinois, embodies the entire agreement and
understanding of the parties relating to the subject matter hereof, and may be
amended or modified only by an instrument executed by both parties. The making,
execution and delivery hereof has been induced by no representation, statement,
warranty, or agreement other than expressed herein.
17. This agreement is binding on the successors and assigns of the
parties, and LICENSEE shall not assign or lease this agreement or any of the
rights granted hereunder without prior written consent of LICENSOR.
IN WITNESS WHEREOF the parties hereto have caused their signatures to be affixed
the day, month and year first above written.
DAIRY QUEEN OF SOUTHERN ARIZONA, INC.
/s/ Mildred L. Hanigan
-----------------------------------------
LICENSOR Mildred L. Hanigan, President
BOWLIN'S INCORPORATED
136 Louisiana NE
Albuquerque, New Mexico 87108
-----------------------------------------
LICENSEE
/s/ C.C. Bess, Exec. V. Pres.
-----------------------------------------
LICENSEE C. C. Bess, Executive V. Pres.
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<PAGE>
DESCRIPTION OF EXHIBITS TO
STORE SUBLICENSE AGREEMENT
BETWEEN STATE OR DISTRICT
OPERATOR AND STORE OPERATOR
Exhibit 1: Statement of amount of and method of computing service
fee; to which should be added a designation by LICENSOR of
who is authorized to collect service fees paid pursuant to
the agreement.
(See attached Draft of Exhibit 1)
Exhibit 2: Copy of current standards and specifications for PRODUCT,
including such for ingredients, processing, equipment, and
containers.
<PAGE>
EXHIBIT # 1
LICENSEE shall pay a service fee of 74 cents per gallon of mix
processed by LICENSEE, either through his equipment or otherwise, into "Mr.
Misty" products. Said service fee is to be included as a part of the purchase
price of the basic ingredients (i.e., mix and flavors) used in the preparation
of "Mr. Misty" Products. Said service fee shall be paid to American Dairy Queen
Corporation at the time of purchase of said ingredients by LICENSEE. Regardless
of the form in which this basic ingredient is purchased, whether dry, fluid,
concentrated, flavored, or unflavored, the number of gallons of the mix which,
according to the current standards and specifications, the quantity purchased
will make, shall be calculated at the time of purchase, and said fee shall be
paid on the number of gallons of mix so calculated. American Dairy Queen
Corporation is acting as the agent of LICENSOR in collecting said fee and upon
making payment to it, LICENSEE is no longer responsible for the ultimate payment
thereof to LICENSOR. LICENSEE shall keep at location a record by dates, nature
and quantities of all of its purchases of such basic ingredient and shall make
such record available for inspection by LICENSOR or its representatives at any
time and from time to time during LICENSEE'S regular business hours.
LICENSOR may from time to time in writing specify some other person or
entity to whom or which said service fee shall be paid by LICENSEE.
<PAGE>
EXHIBIT # 2
STANDARDS AND SPECIFICATIONS FOR
"MR. MISTY" PRODUCTS
The following standards and specifications are effective until further written
notice from the American Dairy Queen Corporation. The "Mr. Misty" license
agreements to which this exhibit pertains require strict compliance with the
standards and specifications here set forth. Should any store operator have any
question about the interpretation of the standards and specifications, he is
requested to contact either American Dairy Queen Corporation or his regional
franchise operator from whom he received his rights to use the "Mr. Misty" and
"Mr. Misty Kiss" trademarks.
The sources for approved freezers and for approved base and concentrated
flavors, which are recommended below, are the only sources of such which are
known at this time and which when used as provided herein will produce "Mr.
Misty" products meeting the required standards of quality, taste, appearance,
temperature, texture, and consistency. If and when other sources of freezers, or
of base and concentrated flavors become known to or are made known to American
Dairy Queen Corporation, these sources will be reviewed to ascertain if their
product satisfies these standards and specifications. If so, these sources will
be added to those approved below.
I-FREEZER:
Freezers approved for dispensing "Mr. Misty" products are those
manufactured for this purpose by the following manufacturers: H. C.
Duke and Son, East Moline, Illinois, and Stoelting Bros.
Manufacturing Company, Kiel, Wisconsin. The steps in maintaining,
cleaning and operating the freezers of either of said manufacturers
must be adhered to as stated in the manufacturer's instructions. The
additional steps for the operation of an approved freezer which are
stated below must also be complied with.
II-"MR. MISTY" BASE INGREDIENT AND FLAVORED CONCENTRATES:
The unflavored base ingredient to be used in making "Mr. Misty"
products is made in accordance with the secret formulae and
specifications of the owner of the "Mr. Misty" and "Mr. Misty Kiss"
trademarks. Only the base ingredient so made may be used in making
products sold under these trademarks. American Dairy Queen
Corporation has arranged for the manufacture of such base ingredient,
and the store operator will know he has the proper base ingredient if
the label thereon indicates that it is approved by American Dairy
Queen Corporation. The foregoing also applies to the flavored
concentrates for use in making flavored "Mr. Misty" products. At this
time, both the approved base ingredient and the approved flavored
concentrates are available through American Dairy Queen Corporation.
If and when the owner of the trademarks authorizes a different or
additional source for either the base ingredient or the flavored
concentrates, these standards and specifications will be modified
accordingly.
III-"MR. MISTY" PRODUCTS FORMULA AND SPECIFICATIONS:
A.-LIQUID BASE:
1. UNFLAVORED BASE INGREDIENT AND ADDITION OF FLAVORS UPON
SERVING:
(a) To five (5) pounds of sugar,
(b) Add one (1) pint of approved unflavored base ingredient.
(c) Add sufficient water to make five (5) gallons of mix.
(d) Stir the resulting mix thoroughly and place into an
approved dispensing freezer.
(e) Add desired flavor upon serving as follows:
(i) Place the correct amount of the desired flavored
concentrate in the bottom of the cup in the proportions
indicated below, and
(ii) Fill the balance of the cup with the unflavored mix
dispensed from the approved freezer.
<PAGE>
(f) The proportions of the desired flavor concentrate to be
added upon serving are:
<TABLE>
<CAPTION>
"MR. MISTY" "MISTY KISS"
<S> <C> <C>
(i) Four (4) oz. cup: (sample size) (i) Quart container:
1/2 pumpstroke (1/8 oz.) 6 pumpstrokes(1 1/2 oz)
(ii) Nine (9) oz. cup: Fill to 24 oz.level with
1 pumpstroke (1/4 oz.) unflavored mix.
(iii) Twelve (12) oz. cup:
1 1/2 pumpstrokes (3/8 oz.)
(iv) Sixteen (16) oz. cup:
2 pumpstrokes (1/2 oz.)
</TABLE>
2. PREFLAVORING TO SERVE ONE FLAVOR DIRECT FROM DISPENSER
FREEZER:
"Mr. Misty" products may be preflavored in order to serve a
single-flavored product directly from the freezer, at the option
of the store operator, in accordance with the following: add
twenty (20) ounces of approved flavored concentrate to five (5)
gallons of unflavored mix made as specified above, stir
thoroughly, and place in an approved freezer.
IV-FREEZER OPERATION:
Proper sanitation instructions for use in the dispensing freezer
are available from the authorized freezer manufacturers; however,
all freezers will be cleaned and sanitized at least weekly. The
operating temperature of the freezing compartment must be within
one (I(Degree)) degree, more or less, of twenty-seven
(27(Degree)) degrees at all times.
V-APPROVED CUPS AND CONTAINERS:
"Mr. Misty" products may be served only in cups and containers
which are imprinted with the "Mr. Misty" trademarks in the format
and style appearing on cups and containers approved or
distributed by or obtained through American Dairy Queen
Corporation or an approved source. Samples of such format and
style will be furnished by American Dairy Queen Corporation upon
request.
VI-ADVERTISING AND DISPLAY MATERIALS:
The approved format for signs, posters and other advertising
materials to promote "Mr. Misty" products shall be as appear in
signs, posters and advertising materials approved or distributed
by or obtained through American Dairy Queen Corporation. Samples
thereof will be provided upon request.
The above standards and specifications supersede any previously issued by the
Dairy Queen National Development Company and American Dairy Queen Corporation.
AMERICAN DAIRY QUEEN CORPORATION
By: /s/ Signature Illegible
--------------------------------------
President
<PAGE>
APPENDIX "B-2"
APR 1985 RECEIVED
RECEIVED FEB 28 1985
FOOD SERVICE ADDENDUM
TO "DAIRY QUEEN" SUBFRANCHISE
AND/OR SUBLICENSE AGREEMENT
Food Service Addendum entered into this 21st day of February, 1985 , between
DAIRY QUEEN OF SO. AZ., INC. of the city of Douglas, County of Cochise and State
of Arizona, hereinafter referred to as "Licensor", and BOWLIN'S INC., a New
Mexico Corporation of the City of Albuquerque, county of Bernalillo and State of
New Mexico, hereinafter referred to as "Licensee":
WHEREAS, Licensor is a licensee of American Dairy Queen Corporation
(hereinafter referred to as "American") in certain areas of the right to license
others to use a distinctive food service system (the "System") identified by the
"Brazier" or other trademarks owned by American and listed on Appendix A
(hereinafter collectively referred to as "Trademarks"); and,
WHEREAS, Licensor has been licensed by American to develop, promote and
establish the System as an adjunct to the "Dairy Queen" business conducted
within Licensor's Territory, and to license "Dairy Queen" sublicensees to use
the System and one or more of the Trademarks designated periodically by American
to identify the System and its various products; and
WHEREAS, Licensor and Licensee are parties to a certain "Dairy Queen"
Franchise and/or License Agreement executed by Licensee and Licensor or its
predecessor whereby Licensee is authorized to operate a "Dairy Queen" retail
store (hereinafter referred to as "the Store") at the address set forth in
Paragraph 2.1 of this addendum; and,
WHEREAS, Licensor and Licensee each desire that all products sold under
the System or any of the Trademarks consistently conform to the quality
standards of the system as well as the highest expectations of consumers;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants herein contained, the parties hereby agree as follows:
1. AMENDMENT.
---------
1.1 Coordination of Agreements. This Amendment shall be
attached to, made a part of and wholly merged into that certain "Dairy
Queen" franchise, License or Operating agreement dated the 1st day of
D.Q.S.A., INC. Form Food Service
Appendix "B-2" - 1 February 1985
<PAGE>
February 1984, between the undersigned parties (the "Agreement"). The
Agreement supplemented by this Addendum, is to remain in full force,
and effect and is to be deemed superseded by this Amendment only to the
extent necessary to implement the terms hereof in connection with
Licensee's use of the System for the "food service" aspect of his
business. The Agreement shall continue to, govern the "Dairy Products"
aspect of Licensee's business. As used herein, the term "dairy
products" and references to Licensee's "Dairy Queen" business as
conducted prior to execution of this Addendum refer to frozen or
semi-frozen or other dairy or confectionery products, including
beverages, and the "Dairy Queen" trademarks, now or hereafter created,
whose use is licensed to Licensee by the Agreement. The term "food
service" and references to the "System" defined herein and licensed
hereunder refer to all other prepared or ready-to-eat foods, and the
related "Dairy Queen", "Brazier" and other trademarks, now or hereafter
created, whose use is licensed to Licensee by this Addendum or that are
registered for foods or restaurant services other than those defined
above as "dairy products" and related marks. In all other cases and for
all purposes the Agreement and this Addendum shall be construed and
treated as a single instrument and, to the extent that they are not
inconsistent therewith, all the terms and provisions hereinafter
contained shall be defined and interpreted in conjunction with all of
the terms and provisions of said Franchise and/or License Agreement.
1.2 Preservation of Rights. The license granted by this
Addendum shall continue until terminated by either Licensee or Licensor
in accordance with the provisions of this Amendment. Under no
circumstances shall this Addendum remain in effect after any
termination or expiration of the Agreement. Upon any termination or
expiration of this Addendum, Licensee shall revert to no lesser nor
greater status or rights than Licensee is entitled to under the
Agreement as it existed immediately prior to the execution of this
Addendum. Each party shall have the same rights and duties in respect
to the "Dairy Queen" trademark as each had immediately prior to
execution of this Addendum. Termination or expiration of the Agreement
in accordance with its terms, however, shall automatically terminate
this Addendum without further notice or action of either party.
2. LICENSE. Licensor hereby grants to Licensee, subject to all the
terms, conditions and provisions hereof, the right and license to:
2.1 Store Identification. Use the Trademarks at or about the
Store located at Picacho Peak exit, approx. 70 mi. E. of Phoenix, AZ
and 46 mi. West of Tucson, On I-10, Pinal County on and in association
with the advertising, promotion and sale of all uniform and approved
food service products and services as Licensor periodically may
authorize.
2.2 Trademark Usage. Use the Trademarks at the Store on and in
association with the uniform equipment, supplies, containers and
ingredients for the food service and other products approved
periodi
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<PAGE>
cally by Licensor, and to use one or more of the Trademarks designated
periodically by American on signage used to identify the Store.
2.3 Business Method. Employ in the business of the Store the
merchandising, sales promotion programs and business methods and
techniques developed and approved by American and adopted and approved
by Licensor.
2.4 Assistance. Receive the assistance and services of
Licensor provided for in this Addendum.
3. ACCEPTANCE OF LICENSE. Licensee hereby accepts the above license
from Licensor subject to all the-t'erms, provisions and conditions hereof and
agrees to implement the System as Licensee's sole food service system and menu
within ninety days of the date of this Addendum. Licensee further expressly
acknowledges and agrees:
3.1 Trademark Ownership. American is the owner of all right,
title and interest in and to the Trademarks together with the good
will, associated with or attributable to the Trademarks, of the
business with which said Trademarks have been and. are used at and
about Licensee's Store. Said trademarks are valuable property rights
owned by American. Licensee shall not contest or challenge American's
ownership or registration of the Trademarks.
3.2 Trademark Use. The Trademarks shall be used only on or
with such products and services as may be approved or specified by
Licensor and shall at all times be used only in a manner approved by
Licensor.
3.3 Location of Use. Licensee's right to the use of the
Trademarks is specifically limited to the site of the Store under the
Agreement, and in connect ion with sales promotion programs approved by
Licensor.
3.4 Other Marks. Licensee shall use no other trademarks, trade
names or service marks in the food service business at the Store except
those authorized periodically by Lisensor except with the prior written
consent of Licensor.
3.5 Changes in Marks. Licensee acknowledges that Licensor
shall, have the right and power in its sole discretion within the
Territory to select, adopt, alter, amend or discontinue the use of one
or more words, phrases, trademarks, trade names, service marks or, the
like, heretofore or hereafter in use in connection with the food
service business hereby licensed to Licensee, from time to time as
Licensor may deem expedient or as may be required by American; and
Licensee further acknowledges that no such usage, terminology, or
adoption, change or discontinuance thereof, shall in any manner or
degree have any effect upon the remainders of this Addendum or upon
Licensee's original "Dairy Queen" franchise agreement. Any such new or
altered
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<PAGE>
word(s), trademarks, trade names or service marks or the like shall be
deemed subsumed under the definition of the Trademarks hereinabove
contained. Licensor engages that it will not make an unreasonable
number of such changes, or make such changes at unreasonably close
intervals.
3.6 Authorized Trademarks. Licensor shall keep Licensee
informed by means of revisions to the attached Appendix A, which is
hereby incorporated herein, as to the full list of currently authorized
food service trademarks, trade names and service marks. Licensee
shall., upon notice of any alteration therein, forthwith conform his
operations to such enumeration as revised.
3.7 Business Identification. Licensee shall not use the
Trademarks or any of them as a part of his corporate or business name
and shall use in connection with his food service business only one or
more of the Trademarks as may be designated periodically by American as
the trade name on the store from which the said food service products
and services are sold, but Licensee shall also display the "Dairy
Queen" Trademark on said store.
3.8 Business Method. Licensee shall adopt and follow in good
faith the systems, programs and methods prescribed for Licensee's food
service operation pursuant to this Addendum.
3.9 Conflicts of Interest. Neither Licensee nor any person
owning an interest directly or indirectly in Licensee shall directly or
indirectly operate or permit to be operated or hold any interest (other
than 1% or less of the outstanding stock or debt of any class of any
public company) in any restaurant or fast-food business other than
Bowlin's or its affiliates at the time of signing or one authorized by
this agreement without the prior written consent of Licensor.
4. TRADEMARK STANDARDS AND REQIJIREMEMENTS. Licensee agrees that
nothing herein contained gives him any right, title or interest in the
Trademarks except the right to use the same under the terms and conditions of
this Addendum and that Licensee's use thereof inures to the benefit of American.
American and Licensor have the right to distribute for their own account
products identified by the Trademarks through other methods of distribution that
may be established periodically.
4.1 Uniform Use of Marks. Licensee shall confine his use of
the food service Trademarks to the sales promotion programs and sale of
food service products and services which shall in quality, mode and
conditions of manufacture and sale, comply with such reasonable
standards as are established or approved from time to time by Licensor.
In order to promote and protect the business interests of each of the
parties, the value of the "Dairy Queen" business and the business
interests of other persons engaged in such business, Licensee shall
adhere to system standards of uniformity prescribed by Licensor in the
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<PAGE>
type, standard and quality of stores, equipment, supplies and
ingredients used therein, and the conditions of preparation and the
procedures employed in the sale of said products and services. Licensor
shall not make an unreasonable number of changes with respect to such
matters.
4.2 Uniform Facilities. Licensee agrees that the food service
business hereunder be conducted in accordance with Licensor's uniform
requirements with respect to quality, prodcution, appearance,
cleanliness, service, merchandising and sales promotion standards.
Licensee acknowledges and agrees that substantial uniformity in
facilities, products, services and operations are essential to the
conduct of a system such as the "Dairy Queen" system, and therefore
further agrees to honor and implement recommendations of Licensor
directed to enhancing and furthering such uniformity.
4.3 Equipment and Supplies. Licensee agrees to purchase and
use, in the operation of the food service portion of Licensee's Store,
only equipment, supplies and ingredients which are approved by
Licensor. Nothing herein shall be construed as an attempt to limit
unreasonably the sources from which Licensee may procure equipment,
supplies and ingredients. Rather it is the intention of the parties
that such items conform to Licensor's standards and specifications of
consistent quality and uniformity. Nothing contained herein shall be
deemed to require Licensor to approve an inordinate number of suppliers
of a given item or service which in the reasonable judgment of Licensor
would result in higher cost generally to Licensor's licensees or
prevent effective and economical supervision of suppliers by Licensor,
Requests for approval of additional suppliers shall be in writing and
shall contain such information as Licensor may reasonably request.
Licensor reserves the right to charge back to Licensee or the proposed
supplier all reasonable expenses incurred in considering requests for
approval.
4.4 Approved Adaptations. Complete and detailed uniformity
under many varying conditions may not be possible or practical and
Licensor reserves the right and privilege, at Licensor's sole
discretion and as Licensor may deem in its best interests to vary
standards for any other licensee based upon the peculiarities of a
particular site or circumstance, density of population, business
potential., population of trade area, existing business practices or
any other condition which Licensor deems to be of importance to the
successful operation of such licensee's. business. Licensee shall not
be entitled to any variation from specifications or standards
prescribed hereunder by reason of any variation granted to any other
person. Licensee acknowledges that he is aware that other licensees of
Licensor or American operate under a number of different forms of
agreement and that, consequently, the obligations and rights of the
parties to such agreements may differ materially in certain instances
from those provided herein. Licensee further agrees that any
requirement, standard
-5-
<PAGE>
or specification prescribed hereunder is subject to reasonable periodic
modification or recission by Licensor or American to adapt the System
to changing conditions and competitive circumstances.
4.5 Litigation. In the event any person who is not a licensee
of Licensor or American, uses or infringes upon the Trademarks,
American shall control all litigation and shall be the sole judge as to
whether or not suit shall be instituted, prosecuted or settled, the
terms of settlement and whether or not any other action is taken.
Licensee shall promptly inform Licensor of any litigation or threatened
litigation by or against Licensee which arises out of the operation of
Licensee's business or pertains to the Trademarks. Thereafter, Licensee
shall keep Licensor informed of the status of any such litigation or
threatened litigation and cooperate with any action reasonably
undertaken by Licensor or American with respect thereto.
4.6 Notice of Potential Profit. American and Licensor hereby
advise Licensee that American, Licensor and/or the affiliates of either
of them may from time to time make available to Licensee goods,
products, and/or services for use in Licensee's Store on whose sale
American, Licensor and/or such affiliates may make a profit. American
and Licensor further advise Licensee that American, Licensor or the
affiliates of either of them may from time to time receive
consideration from suppliers and/or manufacturers in consideration of
rights licensed or services rendered to such persons. Licensee agrees
that American, Licensor and/or such affiliates shall be entitled to
said profits and/or consideration.
5. PRODUCT AND OPERATIONS STANDARDS. The following provisions shall
control with respect to products and operations of Licensee's food service
operations:
5.1 Authorized Product Line. Licensee's food service business
at the Store shall be 'confined to the preparation and sale of only
such products as Licensor periodically designates and approves. The
Store shall not be used for any other business than the food service
business licensed hereunder and Licensee's current "Dairy Queen"
business, and Licensee shall not offer for sale therefrom any other
product or service of any description without the written consent of
Licensor. Specifically but without limiting the foregoing, alcoholic or
intoxicating beverages shall not be sold or offered for sale or
otherwise handled upon said premises. RE: Sect. 1, paragraph 4 of pg.1,
Addendum 4A to the "Agreement".
5.2 Approved Menu. Attached hereto as Appendix B is the
currently approved menu for Licensee's food service business. Licensor
may from time to time make reasonable modifications to said approved
menu provided said modifications are made in respect to all licensees
which have this or a comparable agreement and are located in similar
marketing areas. In addition, Licensee may from time to time request
variation from the currently approved menu. Proposal for such
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<PAGE>
variation shall be submitted in writing to Licensor for its approval
and shall be in the form (if any) prescribed by Licensor. Said proposal
shall contain sufficient information to permit Licensor to evaluate the
proposal fairly and fully. Such variations shall only be made with the
prior written consent of Licensor.
5.3 Authorized Ingredients, Formulas, Supplies, Preparation.
Licensee shall use in preparing food service products only such
ingredients, formulas and supplies as specified by Licensor and in such
portions, sizes, appearance and packaging as set forth in the most
current "Store Management Operations Manual" and "Product Preparation
Charts". Licensee acknowledges and agrees that these may be changed
from time to time by Licensor and that Licensee is obligated to conform
to the requirements as so changed from time to time. All other
supplies, including containers, eating utensils, napkins and all other
customer service materials and promotional items of all descriptions
and types shall meet the reasonable standards of uniformity and quality
as now or hereafter are approved by Licensor for the Territory.
Licensee. shall be furnished with current lists of approved equipment,
supplies, ingredients, services and applicable standards of uniformity
and quality.
5.4 Serving and Promotional Items. All sales promotion
material, customer "good will" items, cartons, containers, wrappers and
paper goods, eating and serving utensils, customer convenience items
(including napkins, baby bibs, and disposal containers) used in the
sales promotion, sale and distribution of all food service products
shall, where practicable, contain one or more of the Trademarks
authorized for use by Licensee as appropriate to the product in
question, and indicate that it is produced and sold under the authority
of American and shall be subject to approval by American before being
used.
5.5 Health and Sanitation. Licensee's food service business
shall be operated and maintained at all times in compliance with any
and all applicable health and sanitary standards prescribed by Licensor
and by governmental authority including any standards prescribed by
Licensor that are more, restrictive than-those set by governmental
authority. In addition to complying with such standards, if the Store
shall be subject to any sanitary or health inspection by any
governmental authorities under which it may be rated in one or more
than one classification, it shall be maintained and operated so as to
be rated in the highest available health and sanitary classification
with respect to each governmental agency inspecting the same.
5.6 Inspection. Licensor, American or their authorized
representative shall have the right to enter Licensee's Store at all
reasonable times during the business day for the purpose of making
periodic inspections to ascertain if all the provisions of this
Adden-
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<PAGE>
dum are being observed by Licensee and to inspect Licensee's Store,
lands and equipment, and to test, sample and inspect his supplies,
ingredients and products, as well as the storage, preparation and
formulation thereof and the conditions of sanitation and cleanliness in
the storage, production, handling and serving thereof.
6. SALES PROMOTION PROGRAMS AND FEES.
6.1 Sales Promotion Programs and Payment of Administrative
Expenses. Licensee shall cooperate in sales promotion programs of
approved food service products. To this end Licensor reserves the right
to establish and organize sales promotion programs from time to time
and Licensee agrees to pay to Licensor a sales promotion program fee as
set forth in Paragraph 6.3 hereof. Licensee acknowledges and agrees
that Licensor has had in the past, and shall have in the future, the
discretion to determine expenditures of funds collected in respect to
sales promotion programs and as to the timing and selection of the
promotional materials and programs for which said expenditures are
made, provided, however, that Licensor shall make a good faith effort
to expend such funds in the general best interests of participating
licensees. Licensor shall expend sales promotion funds as provided
herein. Licensee acknowledges and agrees that Licensor may compensate
itself and/or its affiliated companies for the expense of administering
and promoting such food service sales promotion programs. Licensor
shall advise Licensee annually of the receipts and expenditures of
sales promotion programs and of Licensor's expense of administering and
promoting said programs.
6.2 Approved Materials. Licensee shall use only such sales
promotion program materials or other advertising materials as are
furnished, approved or made available by or through Licensor and/or
American. Said materials shall be used only in a manner prescribed by
Licensor and/or American.
6.3 Sales Promotion Program Fee. Licensee shall pay to
Licensor a sales promotion fee to be expended in accordance with the
provisions of Paragraph 6.1. The sales promotion fee shall be a sum
equal to not less than 3% nor more than 6% of Licensee's gross retail
sales (net of sales taxes), including both dairy product and food
service sales, from Licensee's Store. Licensor shall notify Licensee of
the exact percentage by January of each year. (Except no notification
will be given with respect to any year for which the percentage is to
be unchanged from the preceding year). Such percentage shall be the
same as that to be employed during such succeeding year by the majority
of "Dairy Queen" licensees within the marketing area as determined by
Licensor within which Licensee's Store is located. This sales promotion
fee (and the license
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fee provided for in Paragraph 8.1) are in addition to, and not in lieu
of, any fees (other titan sales promotion or advertising fees) required
to be paid pursuant to Licensee's above-referenced "Dairy Queen"
franchise agreement; the sales promotion herein provided for shall
supersede and replace any sales promotion or advertising fees required
to be paid by Licensee to Licensor under any other such franchise or
License agreement. RE: Sect. III of page 2 Addendum 4A to the
"Agreement".
6.4 Yellow Pages. Licensee shall, if requested by Licensor,
list separately, or participate in a listing, in the Yellow Pages of
his local telephone directory containing such copy as may reasonably be
specified by Licensor. The cost of listing shall be paid by Licensee,
or by Licensee and other participating licensees in the case of a joint
listing. Licensor shall not specify an unreasonably expensive listing.
7. FACILITY STANDARDS. The following shall control with respect to
Licensee's facilities at his Store:
7.1. Store Facility. Licensee agrees that the food service
facilities shall be constructed and equipped in accordance with
Licensor's currently approved specifications and standards for
building, equipment, signage, fixtures, location and design and
accessory features.
7.2 Future Alteration. Any replacement , reconstruction,
addition or modification in building, interior or exterior decor or
image, equipment or signage, to be made after consent is granted by
Licensor for the initial plans, whether at the request of Licensee or
of Licensor, shall be made in accordance with written specifications
which have received the prior written consent of Licensor, which shall
not be unreasonably withheld.
7.3 Maintenance. The building, equipment and signage employed
in the conduct of Licensee's food service business shall be maintained
in accordance with specific lists prepared by Licensor and based upon
periodic inspections of the premises by Licensor's representatives.
Within a period of ninety (90) days after the receipt of any particular
maintenance list, Licensee shall effect the items of maintenance
designated therein including the repair of defective items and/or the
replacement of unrepairable or obsolete items of equipment and signage.
Routine maintenance shall be conducted in accordance with general
schedules published by Licensor or American and made available to
Licensee.
7.4 Relocation. Should it become necessary, on account of
condemnation, sale or other cause, including expiration or cancellation
of lease, to relocate the entire Store, Licensor shall grant Licensee
authority to do so at a site, acceptable to I.icensor, that is within a
radius of 1,000 meters of the Authorized Location, is reasonably
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suited for a "Dairy Queen" retail store, does not infringe on rights of
another licensee, is reasonably distant from other "Dairy Queen" retail
stores, and provided that the new retail store is constructed, equipped
and fully ready to be opened for business within one year after
discontinuing operation of a "Dairy Queen" Store at the Authorized
Location, all in accordance with the current standards of American and
Licensor at that time. If the need to relocate the Store is
attributable to the voluntary act or omission of Licensee, Licensee's
right to relocate the Store as provided herein shall be void and
Licensee's interest in this Agreement shall be abandoned unless
Licensee shall have given Licensor notice of his intent to relocate not
less than sixty (60) days prior to closing the Store, shall have
procured a site acceptable to Licensor within 60 days after closing the
prior Store, and shall have opened the new retail Store for business
within 180 days of such closure.
7.5 Modernization and Refurbishment Upon Transfer. Each and
every transfer of any interest in this Agreement or business conducted
hereunder is expressly conditioned upon Licensee promptly effecting
such items of modernization, refurbishing and/or replacement of
building, equipment, fixtures and signage as may be reasonably
necessary to permit the same to conform to the standards then
prescribed by American for similarly-situated new "Dairy Queen" store
operations. Licensee acknowledges and agrees that the requirements of
this Paragraph are both reasonable and necessary to insure continued
public acceptance and patronage of the "Dairy Queen" system, and to
avoid deterioration or obsolescence in connection with the operation of
the business.
8. PERSONNEL AND SUPERVISION STANDARDS. The following shall control
respect to personnel, training and supervision:
8.1 Training. Licensee shall, at Licensee's expense, attend
and complete American's training program, at Minneapolis, Minnesota,
(or at another location designated by Licensor) prior to opening of
Licensee' s food service operations. If Licensee operates the Store
principally through a hired manager, Licensee shall, at Licensee's
expense, also cause such person to attend and complete American's, or
Licensor's, training program. Under no circumstances shall Licensee
permit management of the Store's operations on a regular basis by a
person who has not successfully completed American `s or Licensor's
training program.
8.2 Staffing. Licensee shall hire and supervise efficient,
competent, sober and courteous persons as his employees for the
operation of his food service business and set and pay their wages,
commissions and incentives with no liability therefor on American or
Licensor. Licensee shall require all his employees to work in clean
uniforms approved by Licensor but furnished at the cost of Licensee or
his employees as Licensee may determine. No employee of Licensee shall
be deemed to be an employee of Licensor or American for any purpose(s)
whatsoever.
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8.3 Internal Training Program. Licensor shall provide or make
available to Licensee an in-store. training program for all store
employees. Licensee still train and periodically re-train all store
employees using the training aids made available by Licensor. American
periodically will revise such training materials and aids and it or
Licensor will make the same available for purchase by Licensee.
8.4 Attendance at Meetings. Licensee, or Licensee's manager,
at Licensee's expense, shall attend at least one national, regional or
approved local marketing area meeting each year which American
originates for and on behalf of "Dairy Queen" operators to set forth
new methods and programs in store operation, training, management,
sales and sales promotion programs. Licensor further strongly
recommends that key employees of Licensee also attend such meetings.
9. FEES, REPORTING AND FINANCIAL MANAGEMENT
9.1 Continuing Franchise License Fee. During the full term of
this Operating Agreement, and in consideration of the rights licensed
hereunder, Licensee shall pay to Licensor as license fee in respect to
the rights licensed herein a sum equal to 4% of gross retail sales,
exclusive of retail sales taxes of all products, goods and wares of
every kind and nature sold from; or in connection with the food service
portion of, Licensee's "Dairy Queen" Store, including, but without
limiting the generality of the foregoing, sales of all products under
any of the Trademarks as well as sales of other food service
merchandise whether or not identified by other brand names.
9.2 Computations and Remittances. All amounts due and owing
hereunder shall be computed at the end of each month's operation and
remittance for the same shall be made to Licensor on or before the
tenth day of the following month accompanied by the reports provided
for in Paragraph 9.4 hereof. The computation of said amounts, shall be
certified by Licensee in the manner and form specified by Licensor and
Licensee shall supply to Licensor such supporting or supplementary
materials as Licensor may reasonably require to verify the accuracy of
such remittances.
9.3 Surcharge Method of Precollection. At Licensor's option
Licensor may require Licensee to pay to suppliers of food service
products and ingredients a surcharge on all units of such commodities
purchased by Licensee. Said surcharge shall be established by Licensor
at a reasonable, rate so as to approximate the amount of license fee
and sales promotion fee which will be payable by Licensee. Said
surcharge shall be paid to said supplier or suppliers for the account
of Licensor, and be regarded by the parties as a method of
precollection of said license and sales promotion fees. The amounts so
collected shall be credited by Licensor against the license and sales
promotion fees due from Licensee to Licensor at the end of each month's
operations. Licensor shall submit to License on Licensor's
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choice of a monthly or quarterly basis a reconciliation of Licensee's
license and sales promotion fees account setting forth the credit to
Licensee's account from amounts collected for Licensor by suppliers by
way of the aforesaid surcharge method. Should Licensee fail to submit
reports in accordance with Paragraph 9.4, Licensor may make said
reconciliation of amounts due in conformance with its best judgment as
to amounts due and Licensor's reconciliation shall be conclusive as to
the amounts due Licensor from Licensee within, a period of ten (10)
days after mailing of said reconciliation to Licensee by Licensor,
Licensee provides evidence in a form satisfactory to Licensor of the
correct amounts due. Licensee shall pay such amounts, if any determined
to be owed pursuant to Licensor's reconciliation within ten (10) days
after a mailing of notice to Licensee by Licensor. If Licensor
determines that Licensee has over-paid license or sales promotion fees
on the surcharge basis, Licensor shall remit to Licensee an amount
equal to the excess fees collected at the time the monthly or quarterly
reconciliation is provided Licensee.
9.4 Records and Reports. Licensee shall keep true records from
which all sums payable under this Agreement and the dates of accrual
thereof may be readily determined including but not limited to a
monthly statement or profit and loss; an annual balance sheet,
statement of profit and loss and statement of changes in financial
position; records of purchases, special sales and promotions, check
registers, sales tax returns, daily cash register tapes or similar
records showing all sales and such other related information as
Licensor may reasonably specify. Licensee shall make written reports to
Licensor in such form as Licensor periodically may reasonably
prescribe, within ten (10) days after the end of each month's operation
setting forth such information and data as may be reasonably necessary
to determine the sums payable to Licensor by Licensee during said
month. In addition to the foregoing and in addition to such other
information as Licensor may from time to time reasonably require, said
monthly report shall accurately set forth the gross retail sales of the
Store as well as the total of number of gallons of mix, the total
number of pounds of meat, and the quantity of other basic commodities
used by the Store during said month and the sources where .said mix,
meat and other commodities were purchased. For the purpose of said
reports, the date of use of such mix, meat and other commodities shall
be deemed to be the date of receipt at the Store.
9.5 Inspection and Audit. Licensee shall keep all books and
records relating to the Store at a location where they shall be readily
accessible to Licensor and American. Licensor, American or the
authorized representative of either shall have the right at all times
during the business day to enter the premises where Licensee's books
and records relative to the Store are kept, and to inspect, copy and
audit such books and records. In the event that any such inspection or
audit reveals an understatement of Licensee's gross sales, continuing
license fees or sales promotion fee of 2-1/2%. or more, or a
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variance of 5% or more from other data reported to Licensor in respect
to any other material item, in addition to any other rights it may
have, Licensor or American may conduct such further periodic audits
and/or inspections or Licensee's books and records as it reasonably
deems necessary for up to two years thereafter and such further audits
and/or inspections shall be at Licensee's sole expense including
professional fees, travel and living expenses directly related thereto.
9.6 Financial Responsibility and Insurance. Licensee hereby
waives all claims against Licensor and American for damages to property
or injuries to persons arising out of the operation of Licensee's
business and Licensee shall indemnify and save Licensor and American
harmless of and from any damage or injury to property or persons
arising from or growing out of the operations of Licensee's business.
Licensee further agrees to purchase and maintain in full force and
effect, at Licensee's expense, public liability insurance in an amount
not less than $500,000, or such greater amount as Licensor periodically
may reasonably specify taking into account inflation, risk levels or
other factors deemed important by Licensor, insuring both parties
hereto, and American, by name, from liability for any and all such
damage or injury and waiving the insurer's rights or subrogation
against Licensor and American. Licensee agrees to deliver to Licensor
periodically a certificate evidencing the existence of such insurance
coverage and which provides that Licensor will be given not less than
thirty (30) days written notice of material change of or termination or
cancellation of the policy.
9.7 Offsets. Licensee waives any and all existing and future
claims and offsets against any amounts due hereunder, which amounts
shall be paid when due, Licensor and American shall be entitled to
apply or cause to be applied against amounts due to either of them or
any of their respective affiliated companies any amounts which may from
time to time be held by either of them or their respective affiliates
on Licensee's behalf or be owed to Licensee by Licensor or American or
their respective affiliates. All amounts owed by Licensee to Licensor
hereunder shall bear interest from their due date(s) until paid at the
lesser of 18% per annum 9 the maximum contract rate of interest
permitted by the law of the state of the Authorized Location of
Licensee's Store.
10. RESOLUTION OF DISPUTES; TERMINATION. Except as qualified below, in
the event of any dispute between the parties, hereto arising under, out of, in
connection with or in relation to this Agreement, said dispute shall be settled
in a court of law. However, at the agreement of both parties, said dispute shall
be submitted by the parties to binding arbitration in accordance with the Rules
and Procedures and under the auspices of the American Arbitration Association.
The arbitration shall take place at the capital of the state of the Authorized
Location of Licensee or at such other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be final, and binding on all
parties. Notwithstanding the foregoing,. Licensee recognizes that his Store is
one of a large number of stores similarly situated and selling to the public
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similar products, and hence the failure on the part of a single License or
sublicensee to comply with the terms of his Agreement could cause irreparable
damage to Licensor, American and/or to some or all other "Dairy Queen"
licensees. Therefore, it is mutually agreed that in the event of a breach or
threatened breach of any of the terms of this Addendum by Licensee, Licensor
shall forthwith be entitled to an injunction restraining such breach and/or to a
decree of specific performance without having to show or prove any actual
damage, together with recovery of reasonable attorney's fees and other costs
incurred in obtaining said equitable relief, until such time as a final and
binding determination is made by the arbitrators and/or the court of law. The
foregoing equitable remedy shall be in addition to, and not in lieu of, all
other remedies or rights which Licensor might otherwise have by virtue of any
breach of this Agreement by Licensee. Licensor also reserves the right to
commence a civil action against Licensee or take other appropriate action to
collect sums of money due to Licensor , and to compel Licensee to compile and
submit required reports to Licensor or to permit inspections or audits
authorized by this Addendum. The prevailing party in any action or proceeding
hereunder shall be entitled to recover its reasonable attorney's fees and costs
therein.
10.1 Breach of Contract. Licensee shall be in default
hereunder if he does any act that manifests his intent to abandon the
license granted herein, or if Licensor reasonably determines that
Licensee has breached any of the terms of this Addendum, which without
limiting the generality of the foregoing shall include making any false
report to Licensor; failure to pay when due any amounts required to be
paid to Licensor or American or the affiliates of either whether
pursuant to this Addendum or to any third party as required by this
Addendum; conviction of Licensee of any felony or misdemeanor which
brings or tends to bring the Trademarks or the "Dairy Queen" system
into disrepute or impairs or tends to impair the goodwill of the
Trademarks, failure to abide, by "Dairy Queen" system standards and
requirements in connection with the operation of Licensee's business or
failure to meet any requirements or specifications established with
respect to product quality, physical property, conditions or equipment
or materials used, products manufactured, menu or use of approved
products, packages or promotional materials. Failure of Licensee to pay
to, Licensor any past due, amount owed within seven (7) days of
Licensor's written notice of default therein shall be construed as
Licensee's voluntary abandonment of this Addendum and the food service
business operated hereunder.
10.2 Termination by Licensor. Except as hereinafter provided,
failure of Licensee to cure a default by Licensee hereunder within
seven (7) days from the date of a written notice of default mailed or
delivered to Licensee, which notice states such default, shall give
Licensor good cause to terminate this Addendum. Termination shall be
accomplished by mailing or delivering to Licensee written notice of
termination, which notice shall state the grounds therefore and shall
be effective (i) immediately in any case of voluntary abandonment of
this Addendum by Licensee or conviction of Licensee of an offense
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directly related to the business conducted hereunder; or (ii) sixty
(60) days after the date of such notice of termination in all other
cases; provided, however, that notwithstanding any other provision of
this Paragraph 10, this Addendum may be terminated immediately upon
failure of Licensee to cure within twenty-four (24) hours of notice
thereof any default under this Addendum which materially impairs the
good will associated with any of the Trademarks. In addition to the
foregoing, this Addendum may be terminated, by Licensor upon any ground
or by any shorter period of notice (but not less than seven days except
as provided above) as may be expressly permitted from time to time by
applicable law or regulation. The provisions of any applicable law or
regulation prescribing permissible grounds, or minimum periods of
notice, for termination of this franchise shall supersede any provision
of this Addendum that is less favorable to Licensee than such law or
regulation. This Addendum shall terminate automatically without notice
or any act by any party upon any termination or expiration of
Licensee's "Dairy Queen" franchise agreement referred to in Paragraph
1.1.
10.3 Loss of Lease; Failure to Reopen. Subject to the
provisions of Paragraph 5.4 hereof, any termination of the land or
building lease for Licensee's Store, or any failure to rebuild or
repair and reopen for operation Licensee's destroyed or damaged store
within one year of the date of occurrence of such destruction or
damage, shall be construed as Licensee's voluntary abandonment of this
franchise and Addendum.
11. TERMINATION CONSEQUENCES. Upon termination of this Addendum:
11.1 Reversion of Rights. All rights, title and interest of
Licensee in and to this Addendum shall become the property of Licensor.
11.2 Discontinuation of Use of Marks. All of Licensee's rights
to the use of the Trademarks and the right and license to conduct the
franchised food service business shall revert to Licensor and Licensee
shall immediately cease all use of all such Trademarks and pay all,
monies due at said date. Licensee shall promptly and at his own expense
remove or obliterate all store signage and displays furnished to
Licensee by Licensor and shall remove or obliterate any signage or
displays at Licensee's Store or in his possession bearing any of said
Trademarks or names or material confusingly similar to any of said
Trademarks.
12. MISCELLANEOUS.
12.1 Severability. In the event at any future time one or more
clauses of this Addendum shall be held to be void or unenforceable for
any reason by any court of competent jurisdiction, such clause or
clauses shall be deemed to be separable and the remainder of this
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Addendum shall be deemed to be valid and in full force and effect and
the terms of this Addendum shall be equitably adjusted so as to
compensate the appropriate party for any consideration lost because of
the elimination of such clause or clauses.
12.2 Waivers. Any waiver by Licensor of any breach by Licensee
shall not be deemed to be a waiver of any other or subsequent breach
nor an estoppel to enforce its rights in respect of any other or
subsequent breach.
12.3 Joint Liability; Pronoun References. If Licensee consists
of two or more individuals, such individuals shall be jointly and
severally liable and references to Licensee in this Addendum shall
include all such individuals. Reference to Licensee as male shall also
include a female licensee, partnership or corporation or any other
business entity as relevant in the context.
12.4 Conformance with Law. This Addendum shall be deemed to be
amended from time to time as may be necessary to bring any of its
provisions into conformity with valid applicable laws or regulations.
12.5 Transfer Prohibited. This Addendum is not assignable or
transferable in whole or in part to any party except in connection with
a transfer or assignment of the `Dairy Queen" franchise referred to in
Paragraph 1.1 to which Licensor has given its prior written consent.
Regarding transfer fee as set forth in the "Agreement", gross sales
amounts shall include all gross sales of "Dairy Queen" Soft Serve
Products and Brazier Food line, in computing transfer fee.
12.6 Entire Agreement. Subject to the exceptions set forth in
this Addendum, this Addendum constitutes the sole agreement between the
parties with respect to its subject and embodies all prior agreements
and negotiations with respect to the System. There are no
representations of any kind except as contained herein. Paragraph
captions are for ease of reference and do not alter or limit the
provisions of this Addendum.
12.7 Relationship. Licensee is an independent contractor and
is not in any manner the agent, partner or employee or Licensor nor has
Licensor any interest in, or power over, the business of Licensee,
except to the limited extent expressly set forth in this Agreement.
12.8 Parties Bound. This Agreement shall be binding upon, and
inure solely to the benefit of, the administrators, executors, heirs,
successors, and assigns of the parties. No person who is not a named
party to this Agreement is, or is intended to be, a beneficiary hereof.
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IN WITNESS WHEREOF, the parties hereto have executed the foregoing
Addendum the date first above written.
LICENSOR:
Dairy Queen of Northern Arizona, Inc.
---------------------------------------
By: /s/ Mildred L. Hanigan, President
-------------------------------------
LICENSEE:
/s/ Michael L. Bowlin
---------------------------------------
Bowlin's, Inc.
---------------------------------------
---------------------------------------
ACCEPTED:
AMERICAN DIARY QUEEN CORPORATION
By /s/ Signature Illegible
-------------------------------------
Its V.P.
---------------------------------
D.Q.S.A., INC. Form Food Service
Appendix "2-B" - 1 February 1985
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"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 30th day of October, 1985, by and between
Interstate Dairy Queen Corporation of the city of Atlanta, county of Dekalb, and
state of Georgia, herinafter referred to as "Licensor" and McClure Investments
of the city of Albuquerque county of Bernalillo, and State of New Mexico herein
after referred to as "Licensee":
WHEREAS, Licensor is the exclusive licensee of American Dairy. Queen
Corporation in certain geographical areas including the territory hereinafter
defined of the right to use, license and permit others to use the "Dairy Queen"
trademark, service mark and trade name which has been registered in the United
States Patent Office, in each state of the union and in foreign countries as
well as those trademarks and service marks (hereinafter collectively referred to
as "Trademarks"), a list of which is attached hereto and made a part hereof as
Appendix A; and
WHEREAS, Licensor and its predecessors in interest acting under said
exclusive license instituted, developed, promoted, and established the "Dairy
Queen" franchise business and system in the aforesaid territory which consists
of the sale of dairy products, food products, beverages and other products and
services under said trademarks and utilizing in connection therewith certain
types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods together with advertising and promotion programs
developed from time to time; and
WHEREAS, it is the purpose of Licensor to provide to Licensee in a
retail store outlet an organization to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the trademarks and-to make available uniform and approved
equipment, supplies, ingredients, merchandising and business techniques and the
advertising and promotional programs of American Dairy Queen Corporation, and
WHEREAS, Licensee desires to engage in the "Dairy Queen" business and
system and to enter into this operating Agreement subject to the conditions and
controls herein prescribed for the purpose
<PAGE>
of offering to the public products and services of uniformly high quality and
standards to the end of protecting the interests of Licensee, of Licensor, of
American Dairy Queen Corporation and all other persons engaged in said business.
WHEREAS, it is the intent of both Licensor and Licensee to preserve
within the context of a "Dairy Queen" retail store continuing consumer
confidence in the reliability and quality of all products sold under any of the
Trademarks, and, each party desires that all products sold under any of the
Trademarks, consistently conform to the highest expectations of consumers of
such products, and, whereas, by this Agreement the parties contemplate that
Licensee's store, in addition to the normal "Dairy Queen" food and beverage
products may also sell Permitted Products, as defined hereinafter.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the grant by Licensor of this Operating Agreement and the
payment by Licensee of the participation fees provided in Paragraph 9 hereof, it
is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject to all the
Grant to terms, conditions and provisions hereof, the right and
License license to:
1.1 Establish and operate a retail store under the name
"Dairy Queen" at I-40and Rio Puerco (exit 140)
Albuquerque, New Mexico 87005
hereinafter referred to as the "Authorized
Location" (provided, however, in the event an
Authorized Location is not designated on the date
hereof, and such location is not designated herein
by Licensor within ninety (90) days after such
date, this Agreement shall become null and void and
all deposit is including the franchise fee shall be
returned to Licensee).
1.2 Use at the Authorized Location the trademark on and
in association with sale of all uniform and
approved products and services as American may
authorize from time to time, with all approved
sales promotion programs relative thereto.
1.3 Use at the Authorized Location the on and in
association with the uniform equipment, supplies,
and ingredients for the products approved by
American.
1.4 Employ in the business of said store the
merchandising, advertising, promotion and business
methods and techniques developed, adopted and
approved by American.
Acceptance 2. Licensee hereby accepts the above license from
by Licensee Licensor subject to all the terms, by Licensee
provisions
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and conditions hereof and agrees that Licensee shall
cause to have a "Dairy Queen" store established within
180 days of the date hereof (unless an extension of
time is expressly authorized in writing by Licensor),
and thereafter maintained and operated at the
Authorized Location, under Licencee's active and
continuous supervision and management and upon the
standards hereinafter provided. Licensee further
expressly acknowledges and agrees:
2.1 American is the owner of all right, title and
interest in and to the trademark, and the good will
attributable thereto of the business in connection
with which said Trademarks have been, and are and
will be used at the Authorized Location. Licensor
is the licensee of the right to use the Trademarks
in the territory which includes the Authorized
Location. Specifically, but without limiting the
foregoing, Licensee disclaims any and all right,
title and interest in or to the Trademarks and to
the good will associated with the Trademarks of the
"Dairy Queen" retail store at the Authorized
Location and acknowledges and agrees that all such
good will is the exclusive property of American.
2.2 The trademarks are valuable property rights owned
by American.
2.3 The trademarks shall be used only in connection
with such products and services as may be approved
or specified by American and shall at all times be
used only in a manner approved by American.
2.4 Licensee's rights to the use of trademarks is
specifically limited to Licensee's retail store
operation at Authorized Location.
2.5 Licensee shall use no other trademarks, trade names
or service marks in said business except those
authorized by American and as set forth in Appendix
A except by the prior written consent of American.
2.6 Licensee shall not use the words "Dairy Queen" as a
part of its corporate or business name unless first
approved in writing by American, and shall use only
the word "Dairy Queen" (and no other words
whatsoever) as the trade name on the store from
which the said products and services are sold. In
the event American does approve the use of the
words "Dairy Queen", or any of the Trademarks, as a
part of Licensee's corporate or business name
Licensee shall cause such name to be changed so as
to eliminate those works and Trademarks from the
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name within thirty (30) days after termination of
this Agreement.
2.7 Licensee shall adopt and follow in good faith the
systems, programs and methods prescribed by
Licensor for Licensee's retail operation in
accordance with this Operating Agreement.
2.8 Neither Licensee nor any person owning an interest
directly or indirectly in Licensee shall directly
or indirectly operate or permit to be operated or
hold any interest (other then 1% or less of any
outstanding stock or debt of any class of any
public company) in any restaurant or fast-food
business other than a Stuckey's Pecan Shoppe or its
affiliates at the time of signing or one authorized
by this Agreement without the prior written consent
of Licensor.
TERM
Term 3. The License granted herein shall continue until
terminated by Licensee, with or without cause, on
sixty (60) days prior written notice to Licensor, or
until otherwise terminated by either Licensee or
Licensor in accordance with the provisions of this
Agreement.
TRADEMARK STANDARDS AND REQUIREMENTS
General 4. Licensee agrees that nothing in this agreement gives
Declarations him the right to use the Trademarks except the right
to use the same under the terms and conditions of this
Agreement and that Licensee's use there of injures to
the benefit of American. Specifically, but without
limiting the foregoing, Licensee acknowledges and
agrees that American has the right and may distribute
for its own account products identified by the
Trademarks through not only "Dairy Queen" retail
stores but through any other distribution method which
may from time to time be established.
Use of 4.1 Licensee shall confine his use the trademarks to
Trademarks the sales promotion programs, sale of products and
services which shall in quality, mode and
conditions of manufacture and sale, comply with
such standards as are established or approved by
American. In order to promote and protect the
business interests of each of the parties, the
value of the "Dairy Queen" business and the
business interests of other persons engaged
therein, uniformity shall be maintained in the
type, standard and quality of stores, equipment,
supplies and ingredients used therein, and the
conditions of preparation and the procedures
employed in the sale of said products and services.
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Acknowledge 4.2 Licensee agrees that the provisions, restrictions
of and controls provided in this Operating Agreement
Necessity of are all necessary, reasonable and desirable for
Uniformity such purposes and that Licensee's said business
shall be conducted in accordance with American's
uniform requirements with respect to quality,
production, appearance, cleanliness, service,
merchandising and advertising standards. Licensee
acknowledges and agrees that substantial uniformity
in facilities, products, services and operations
are essential to the conduct of a system such as
the "Dairy Queen" system, and therefore further
agrees to honor and implement recommendations of
American and Licensor directed to enhancing and
furthering such uniformity.
Equipment 4.3 Licensee agrees to purchase and use, in the
and Supplies operation of Licensee's "Dairy Queen" retail store,
only equipment, supplies, ingredients and services
which are approved by American or by Licensor.
Nothing herein shall be constructed as an attempt
to limit unreasonably the sources from which
Licensee may procure equipment, supplies,
ingredients or services. Rather, it is the
intention of the parties that such items conform to
American's standards and specifications of
consistent quality and uniformity. Nothing
contained herein shall be deemed to require
Licensor to approve an inordinate number of
suppliers of a given item or service w3hich in the
reasonable judgment of American or licensor would
result in licensees or prevent effective and
economical supervision of suppliers by approval of
additional suppliers shall be in writing and shall
contain such information as American and Licensor
may reasonably request. American and Licensor
reserve the right to charge back to Licensee or the
proposed supplier all reasonable expenses incurred
in considering requests for approval.
Approved 4.4 Complete and detailed uniformity under many varying
Adaptations conditions may not be possible or practical and
Licensor reserves the right and privilege, at
American's sole discretion and as American may deem
in the best interests of all concerned in any
specific instance, to accommodate special needs of
Licensee's Authorized Site or that of any other
like based on the peculiar site or location,
density of population, business potential,
population of trade area, existing business
practices, requirements of local law, or any other
condition which Licensor deems to be of importance
to the successful operation of a like business.
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Litigation 4.5 In the event that any person, firm or company, who
is not a licensee or franchisee of American or
Licensor, uses or infringes upon the Trademarks,
American shall control all litigation and shall be
the sole judge as to whether or not suit shall be
instituted or other action taken.
Notice of 4.6 Licensor and American hereby advise Licensee the
Potential licensor, American and /or affiliates of American
American and/or and/or Licensor may from time to time make
Licensor Profit available to Licensee goods, products and/or
services for use in Licensee's "Dairy Queen" retail
store in respect to the sale or provision of which
Licensor, American and/or affiliates of American
and/or Licensor may make a profit. Licensor further
advises Licensee that Licensor, American and/or
affiliates of American and/or Licensor may from
time to time receive consideration from suppliers
and /or manufactures in consideration of such
services provided or rights licensed to such
persons by American, Licensor or their respective
affiliates.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall control
with respect to Licensee's Authorized Location and
retail store:
Store Facility 5.1 Licensee agrees that the retail store shall
constructed and equipped in accordance with
American's currently approved specifications and
standards in respect to building, equipment,
inventory, signage, fixtures, location and design
and accessory features.
Future 5.2 Any replacement, reconstruction, addition or
Alteration modification in building, equipment or signage, to
be made hereafter, whether at the request of
Licensee or of Licensor, shall be made in
accordance with written specifications approved by
Licensor or American. Licensor and American shall
not unreasonably withhold such approval.
Maintenance 5.3 The building, equipment and signage employed in the
conduct of Licensee's business shall be maintained
in accordance with an annual maintenance list
prepared by Licensor and based upon periodic
inspections of the premises by Licensor's
representatives. Within a period of ninety (90)
days after the receipt of such annual maintenance
list, Licensee shall effect the items of
maintenance reasonably provided therein including
the repair of defective items and/or the
replacement of unrepairable or obsolete items of
equipment and signage. Routine maintenance shall be
conducted in accordance with general schedules
published by Licensor or American and made
available to Licensee.
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Relocation 5.4 Should it become necessary, on account of
condemnation, sale, or other cause, including
expiration or cancellation of lease or rental
contract, to relocate said store, Licensor shall
grant Licensee authority to do so within a radius
of 1,000 yards of the Authorized Location, provided
the new site is reasonably suited for a "Dairy
Queen" retail store in accordance with Licensor's
standards for store sites, does not infringe on
rights of another licensee, is reasonably distant
from other "Dairy Queen" retail stores, and the new
retail store is constructed, equipped and opened
for business in accordance with the current
standards of American at that time within one year
after discontinuing operation of a "Dairy Queen"
retail store at the previous Authorized Location.
5.5 Each and every transfer as provided in Paragraph
9.10 hereof shall be expressly conditioned upon
Licensee promptly performing and effecting such
items of modernization and/or replacement of
building, equipment, and signage as may be
necessary to permit the same to conform to the
standards then prescribed by American for similarly
situated store operations. Licensee recognizes and
acknowledges that the requirements of this
paragraph 5.5 are both reasonable and necessary to
insure continued public acceptance and patronage
and to avoid deterioration or obsolescence in the
business conducted hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with respect to
products and operations:
6.1 Licensee's business shall be confined to the
preparation and sale of only such products as from
time to time are designated or approved by American
for sale by Licensees which are parties to this
form of Operating Agreement. The premises upon
which said business is operated shall not be used
for any other business and there shall not be sold
or offered for sale therefrom any other product or
service (excepting the preparation, storage and
sale of Permitted Products) without the written
consent of American. Specifically, but without
limiting the foregoing, alcoholic or intoxicating
beverages shall not be sold or offered for sale or
otherwise handled upon said premises.
Approved Menu 6.2 Attached hereto as Appendix B is the currently
approved menu for Licensee's retail store. American
may from time to time make reasonable modifications
to said approved menu provided said modifications
are made in respect to all licensees which have
this form of Operating Agreement and are located in
similar areas of the country. In addition, Licensee
may from time to time request variation from
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the currently approved menu. Such variations shall
only be made with the written consent of the
American.
Authorized 6.1 Licensee shall use in preparing products only such
Ingredients, as are specified by American and in such portions,
Formulas, sizes and appearance and packaging as set forth in
Supplies, American's most current "Store Management
Preparation; Operations Manual" and "products preparation
Subject to Change charts". Copies of the current "Store management
by American Operations Manual" and "products preparation
Preparation; Subject to Change by American charts"
have been supplied to Licensee by Licensor
temporaneously with execution of this Operating
Agreement. Licensee acknowledges and agrees that
these may be changed from time to time by American
and that Licensee is obligated to conform to the
requirements as so changed from time to time. All
other supplies, including cones, cups, containers,
eating utensils, napkins, and all other customer
service materials of all description and types,
shall meet the standards of uniformity and quality
as now or hereafter reasonably set by American.
Licensee shall be furnished with lists of approved
equipment, supplies, ingredients and services.
Serving and 6.4 All sales promotional material, customer "goodwill"
Promotion Items items, cartons, containers, wrappers and paper
goods, eating and serving utensils, customer
convenience items (including napkins, baby bibs,
and disposal containers), used in the sales
promotion, sale and distribution of all products
covered by this Operating Agreement shall, where
practicable, contain one or more Trademarks and
indicate that it is produced and sold under
authority of American and shall be subject to
approval by Licensor or American before being used.
Maintenance 6.5 Licensee's said business shall be operated and
and Sanitation maintained at all times in compliance with any and
all reasonable health and sanitary standards
prescribed by American or by governmental
authority. In addition to complying with such
standards, if such store shall be subject to any
sanitary or health inspection by any governmental
authorities under which it may be rated in one or
more than one classification, it shall be
maintained and operated so as to be rated in the
highest available health and sanitary
classification with respect to each governmental
agency inspecting the same.
Inspection and 6.6 American, Licensor or its authorized representative
Recommendation shall have the right from time to time to enter
Licensee's store at all reasonable times during the
business day for the purpose of making periodic
inspections to ascertain if all the provisions of
this Operating Agreement arc being observed by
Licensee
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and to inspect Licensee's said store, lands,
equipment, and to test, sample and inspect his
supplies, ingredients and products, as well as
storage, preparation and formulation thereof and
the conditions of sanitation and cleanliness in the
storage, production, handling and serving thereof.
Period of 6.7 Whenever it shall appear in Licensor's reasonable
Operation judgment that Licensee's said business is not being
operated in compliance with the requirements
hereof, that the volume of business being done is
not equal to the average volume of other businesses
similarly situated, or that the business is not
being operated profitably or efficiently, Licensor,
at Licensor's option: Period of Operation 6.7
Licensee's store shall be opened to the public and
operated twelve months per year and at least twelve
hours each day of the year. Any variance from this
provision must be authorized in writing by Licensor
Acts of God, war, strikes or riots preventing
Licensee from temporarily complying with the
foregoing shall to that extent suspend compliance
therewith.
Notice of 6.8 Licensee acknowledges that he is aware of the fact
Existence of that present licensees of Licensor and American
Different Forms operate under a number of different forms of
of License agreement and that consequently Licensor's and
Agreements American's obligations and rights in respect to
their respective licenses may differ materially in
certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall control
with respect to personnel, training and supervision:
Management 7.1 Licensee shall adopt and use as his continuing
System operational routine the standard "Dairy Queen"
management system as well as American's standards
with respect to product preparation, merchandising,
employee recruitment and training, equipment and
facility maintenance and sanitation. From time to
time American will revise these programs to meet
changing conditions of retail operation in the best
interest of "Dairy Queen" retail stores, and
Licensee shall adopt and implement any such
changes.
Training 7.2 Licensee shall, at Licensee's expense, attend
American's store management training program, at a
place to be designated by American, prior to the
opening of Licensee's store. In the event Licensee
fails to complete such training to the reasonable
satisfaction of American or Licensor, Licensor may
within thirty (30) days thereafter declare this
Agreement null and void whereupon all deposits
including the franchise fee shall be returned to
Licensee. If during the term hereof Licensee
operates said store with a manager other than
himself, Licensee shall, at Licensee's expense,
cause such person to attend and successfully
complete such training program.
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Staffing 7.3 Licensee shall hire and supervise efficient,
competent, sober and courteous operators and
employees for the operation of the business and set
and pay their wages, commissions and incentives
with no liability therefor on American or Licensor.
Licensee shall require all his employees to work in
clean uniforms approved by Licensor but furnished
at the cost of Licensee or his employees as
Internal 7.4 Licensor shall provide or make available to
Training Licensee an in-store training program for all store
Program employees. Licensee shall train and periodically
re-train all store employees using the training
aids made available by Licensor. From time to time,
American will revise such training materials and
aids and it or Licensor make the same available to
Licensee for purchase.
Attendance at 7.5 Licensee, or manager of Licensee, at Licensee's
Meetings expense, shall attend at least one national,
regional or approved local marketing area meeting
each year which Licensor and/or American originates
for and on behalf of "Dairy Queen" operators to set
forth new methods and programs in store operation,
training, management, sales and sale promotion
programs. Licensor further strongly recommends that
key employees of Licensee also attend such
meetings.
SALES PROMOTION PROGRAMS
Sales Promotion 8.1 Licensor and Licensee, together with other
Programs and licensees of American, shall cooperate in the sales
Payment to promotion programs of approved products. To this
American of end, American has reserved the right to establish
Expenses for and organize sales promotion programs from time to
Administering time and Licensee agrees to pay to Licensor for
Same remittance to American a sales promotion program
fee as set forth in Paragraph 9.1 hereof. Licensee
acknowledges and agrees that American has had in
the past, and shall in the future have, the
discretion to determine expenditures of funds
collected in respect to sales promotion programs
and as to the selection of the promotional
materials and programs for which said expenditures
are made, provided, however, that American shall
make a good faith effort to expend such funds in
the general best interest of participating
licensees. Licensee acknowledges and agrees that
American may compensate itself and/or its
affiliates for the expense of administering such
sales promotion programs. Licensor shall advise
Licensee annually of American's expenses in
administering said sales promotion programs.
Sales Promotion 8.2 Licensee shall only use such sales promotion
Materials program or other advertising materials as are
furnished, approved or made available by or through
American. Said materials shall be used only in a
manner prescribed by American. American shall not
unreasonably withhold approval of any reasonable
sales promotion materials.
Yellow Pages 8.3 Licensee shall, iflrequested by Licensor, list
separately, or participate in a listing, in the
Yellow Pages of his local telephone directory
containing such copy as may reasonably be specified
by Licensor. The cost of such listing shall be paid
by Licensee, or by Licensee and other participating
licensees in the case of a joint listing. Licensor
shall not specify an unreasonably expensive
listing.
FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-up, 9.1 Licensee shall pay to Licensor as a service and
Franchise, set-up fee $3,000 of which $3,000 has been paid
License and upon the execution of this Agreement and a balance
Sales Promotion of $ zero is payable in accordance with the
Program Fees termsrof Appendix C attached hereto. Said service
and set-up fee is intended to compensate Licensor
for its expenses incurred, and services rendered in
establishing and setting up Licensee's initial
operation. In addition to said service and set-up
fee, during the full term of this Operating
Agreement, and in consideration of the rights
granted hereunder, Licensee shall pay to Licensor
as license fee in respect to the rights granted
herein a sums equal to those specified on the
schedule addendum to this paragraph, all of which
sums are based on gross retail sales, exclusive of
retail sales taxes, of all products, goods and
wares of every kind and nature sold from, or in
connection with the operation of, Licensee's "Dairy
Queen" retail store, including, but without
limiting the generality of the foregoing, sales of
all products of any of the Trademarks as well as
sales of other merchandise whether or not
identified by other brand names and which may be
authorized for sale by American or Licensor from
time to time; provided, notwithstanding the
foregoing, that no such continuing license fee
shall be payable with respect to sales of Permitted
Products. In addition, mittance to American a sales
promotion fee to be expended in accordance with the
provisions of Paragraph 8.1. The sales promotion
fee shall be a sum equal to not less than 3% nor
more than 5% of Licensee's gross retail sales net
of sales taxes (excluding sales of Permitted
Products). Licensor shall
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determine and notify Licensee of the exact
percentage prior to the first day of each fiscal
year of Licensor (except no notification will be
given with respect to any year for which the
percentage is to be unchanged from the preceding
year). Such percentage shall be the same as that to
be employed during such succeeding year by the
majority of "Dairy Queen" licensees within the
marketing area as determined by American within
which Licensee's store is located.
Computations 9.2 All amount due and owing hereunder shall be
and Remittances computed at the end of each month's operation and
remittance for the same shall be made to Licensor
on or before the tenth day of the following
month accompanied by the reports provided
for in Paragraph 9.4 hereof. The computation of
said amounts shall be certified and sworn to by
Licensee in the manner specified by Licensor and
Licensee shall supply to Licensor such supporting
or supplementary materials as Licensor may
reasonably require to verify the accuracy of such
remittances.
Surcharge 9.3 At Licensor's option,rLicensor may require Method
Method of of Licensee to pay to suppliers of mix, meat
Precollection Precollection and other products and ingredients
used in the conduct of the business a surcharge on
all units of such commodities purchased by
Licensee. Said surcharge shall be paid to such
supplier by Licensee at the time of purchase of
such commodities. Said surcharge shall be
established by Licensor at a reasonable rate so as
to approximate the amount of license fee and sales
promotion fee which will be payable by Licensee.
Said surcharge shall be paid to said supplier or
suppliers for the account of Licensor, the same to
be regarded by the parties as a method of
precollection of said license and sales promotion
fees. The amounts so collected shall be credited by
Licensor against the license and sales promotion
fees due from Licensee to Licensor at the end of
each month's operations. Licensor shall submit to
Licensee on a monthly or quarterly basis a
reconciliation of said license and sales promotion
fees account setting forth the credits to
Licensee's account by reason of amounts collected
for Licensor by suppliers by way of the aforesaid
surcharge method. In the event Licensee shall fail
to submit reports in accordance with Paragraph 9.4,
Licensor may make said reconciliation of amounts
due in conformance with its best judgment with
regard to said amounts due and same shall be
conclusive as to the amounts due Licensor from
Licensee unless within a period of ten (10) days
after mailing of said reconciliation to Licensee by
Licensor, Licensee provides evidence in a form
satisfactory to Licensor of the correct amounts
due.
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Licensee shall pay such amounts, if any, determined
to be owed pursuant to Licensor's reconciliation
within ten (10) days after a mailing of notice to
Licensee by Licensor. If Licensor determines that
Licensee has overpaid license or sales promotion
fees on the surcharge basis, Licensor shall remit
to Licensee an amount equal to the excess fees
collected at the time the monthly or quarterly
reconciliation is provided Licensee.
Reports and 9.4 Licensee shall keep true records from which all
Record sums payable under this Agreement and the dates of
accrual thereof may be readily determined. Licensee
shall make written reports to Licensor in such form
as Licensor may from time to time prescribe within
fourteen (14) days after the end of each month's
operation setting forth the amount of gross sales
of all products from, or in connection with the
operation of, said store and the business thereof
during said month. In addition to the foregoing,
and in addition to such other information as
Licensor may from time to time require, said
monthly report shall accurately set forth the total
number of gallons of mix, the total number of
pounds of meat, and the quantity of other basic
commodities used during said month and the sources
from which said mix, meat and other commodities
were purchased together with a complete statement
of Licensee's cost of labor, utilities, rent and
each other cost of operation. For the purpose of
said reports the date of use of such mix, meat and
other commodities shall be deemed to be the date of
receipt at the store. Licensor, American or the
authorized representative of either shall have the
right at all times during the business day to enter
Licensee's premises where books and records
relative to said store are kept, and to inspect,
copy and audit such books and records. In the event
that any such inspection or audit reveals a
variance of 3% or more from data reported to
Licensor or American, in addition to any other
rights it may have, Licensor or American may
conduct such further periodic audits and/or
inspections of Licensee's books and records as it
reasonably deems necessary for up to one year
thereafter and such further audits and/or
inspections shall be at Licensee's sole expense
including without limitation reasonable
professional fees, travel and room and board
expenses directly related thereto.
Financial 9.5 Licensee agrees to employ sound financial
Planning and management practices in connection with the
Management operation of said business and to that end Licensee
shall maintain on forms approved or provided by
Licensor or American
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a monthly profit plan, a monthly profit and loss
statement and a monthly balance sheet accurately
reflecting the operations and condition of said
business. In addition to the foregoing, Licensee
shall employ such methods of record keeping,
bookkeeping and reporting as Licensor shall from
time to time reasonably require and copies of all
monthly profit plans, profit and loss statements,
sales summaries and breakdowns for the preceding
month shall be forwarded to Licensor on or before
the fourteenth day of the following month.
Payment 9.6 Licensee agrees to pay promptly, when due, all
of Debts taxes and assessments that may be assessed against
said premises or the equipment or supplies used in
connection with Licensee's business, all liens and
encumbrances of every kind and character created or
placed upon or against any of said property and all
accounts and other indebtedness of every kind
incurred by Licensee in the conduct of said
business. In the event Licensee should default in
making any such payment, Licensor shall be
authorized but not required, to pay the same on
Licensee's behalf and Licensee's covenants promptly
to reimburse Licensor on demand for any such
payment. to Licensor by the same arise this
Paragraph vision of this interest at 12% per Any
and all amounts owing Licensee hereunder, whether
under the provisions of 9.6 or under any other
Agreement, shall bear interannum or the maximum
rate permitted by law, whichever is less, from and
after the date of accrual thereof.
Timely 9.7 The default by Licensee in the timely payment of
Payment any indebtedness owing to Licensor and/or American,
or to any affiliates of Licensor and/or American,
or the default by Licensee in the payment of any
indebtedness of Lice
Insolvency, 9.8 In the event that Licensee be declared insolvent or
Etc. bankrupt, or in the event a receiver is appointed,
this Operation Agreement shall automatically
terminate as of the date of such declaration or
appointment.
Liability and 9.9 Licensee hereby waives all claims against Licensor
Insurance and/or American for damages to property or injuries
to persons arising out of the operation of
Licensee's business, and Licensee shall indemnify
and save Licensor and/or American and/or the
affiliates of either harmless of and from
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any damage or injury to property or persons arising
from or in connection with the operation of said
business or the consumption of the product thereof.
Licensee further agrees to purchase and maintain in
full force and effect during the term of this
Agreement, at Licensee's sole expense, liability
insurance in an aggregate amount not less than
$300,000 insuring Licensee, Licensor and American
from li4 ability for any and all such damage or
injury and Licensee further agrees to deliver to
Licensor a proper certificate evidencing the
existence of such insurance coverage and Licensee's
compliance with the provisions of this paragraph
and which provides that Licensor and American will
be given thirty (30) days prior written notice of
material change, termination or cancellation of the
policy. Said insurance coverage shall commence as
of the date Licensee commences operating a "Dairy
Queen" retail store or as of the date the
Authorized Location is first identified as a site
on which a "Dairy Queen" retail store will be
operated, whichever shall first occur.
Assignment and 9.10 Licensee agrees not to transfer, assign or alienate
Transfer his interest herein or hereunder in whole or in
part without the prior written consent of Licensor,
which consent shall not be withheld unreasonably,
but Licensor may insist that any proposed
assignment be an assignment of all of Licensee's
interest hereunder and that any proposed assignee,
be a person, in Licensor's reasonable judgment,
qualified to provide active supervision over the
operation of said store in compliance with
Licensee's obligations hereunder and who has
sufficient net worth and sources of capital which
meet Licensor's then current requirements for a
store operation of the type contemplated by this
form of agreement. In the event Licensee's said
interest should be so transferred or assigned,
Licensee shall pay to Licensor contemporaneously
therewith the sum of One Thousand Five Hundred
Dollars ($1,500), or an amount equal to one-half of
the license fees paid or payable by Licensee in
respect of operations in the twelve (12) months
ending with the month prior to the month in which
the assignment is approved, whichever is the
greater amount, as a fee for the preparation of a
new Operating Agreement in assignee's name, for
Licensor's assistance in reset-up of the retail
store and for any and all other expenses incurred
and services rendered by Licensor in effecting said
transfer. In the event of any such assignment, the
assignee, as a condition of Licensor approving such
assignment, must attend and to the reasonable
satisfaction of Licensor
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successfully complete, at assignee's expense,
American's training program at American's training
center. In the event Licensee is a corporation,
partnership or other entity, any transfer or
transfers of stock (or other form of ownership
interest) constituting in the aggregate a
controlling interest in Licensee shall be subject
to the consent, transfer fee and all other
applicable provisions of this Agreement. Licensor
may withhold its consent to any proposed transfer
until all amounts owed by Licensee to Licensor,
American, the affiliates or subsidiaries of either
and approved "Dairy Queen" suppliers have been paid
in full.
Offsets 9.11 Licensee waives any and all existing and future
claims and offsets against any amounts due
hereunder, which amounts shall be paid when due.
CONTRACT VIOLATION
Remedies, 10. In the event of any dispute between the parties hereto
Arbitration arising under, out of, in connection with or in
relation to this Agreement, said dispute shall be
submitted by the parties to binding arbitration in
accordance with the Rules and Procedures and under the
auspices of the American Arbitration Association. The
arbitration shall take place at the capital of the
state of the Authorized Location of Licensee or at
such other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be
finally, and binding on all parties. Notwithstanding
the foregoing, Licensee recognizes that his "Dairy
Queen" store is one of a large number of stores
similarly situated and selling to the public similar
products, and hence the failure on the part of a
single licensee to comply with the terms of his
Operating Agreement could cause irreparable damage to
Licensor, American and/or to some or all other "Dairy
Queen" licensees. Therefore, it is mutually agreed
that in the event of a breach or threatened breach of
any of the terms of this Operating Agreement by
Licensee, Licensor shall forthwith be entitled to an
injunction restraining such breach and/or to a decree
of specific performance without having to show or
prove any actual damage, together with recovery of
reasonable attorney's fees and other costs incurred in
obtaining said equitable relief, until such time as a
final and binding determination is made by the
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arbitrators. The foregoing equitable remedy shall be
in addition to, and not in lieu of, all other remedies
and rights which Licensor might otherwise have by
virtue of any breach of this Agreement by Licensee.
Breach of Contract 10.1 Licensee shall be in default hereunder if Licensor
determines that Licensee has made any false report
to Licensor, or has failed to pay when due any
amounts owed to Licensor, or has in Licensor's
judgment in any other way breached any of the terms
of this Agreement, including but not limited to,
failing to submit required reports, failing to meet
any requirements or specification established with
respect to product quality, physical property,
conditions or equipment or materials used, products
manufactured, menu or use of approved products,
packages or promotional materials. Failure of
Licensee to pay to Licensor any past due amount
owed within fourteen (14) days of Licensor's
written notice of default therein shall be
construed as Licensee's voluntary abandonment of
this Agreement and the franchised business
hereunder operated.
10.2 Except as hereinafter provided, failure of Licensee
to cure a default by Licensee hereunder within
fourteen (14) days from the date of a written
notice of default mailed or delivered to Licensee,
which notice states such default, shall give
Licensor good cause to terminate this Agreement.
Termination shall be accomplished by mailing or
delivering to Licensee written notice of
termination, which notice shall state the grounds
therefore and shall be effective (i) immediately in
any case of voluntary abandonment of this Agreement
by Licensee of conviction of Licensee of an offense
directly related to the business conducted
hereunder; or (ii) sixty (60) days after the date
of such notice of termination in all other cases;
provided, however, that notwithstanding any other
provision of this Paragraph 10, this Agreement may
be terminated immediately upon failure of Licensee
to cure within twenty-four (24) hours of notice
thereof any default under this Agreement which
materially impairs the good will associated with
any of the Trademarks. In addition to the
foregoing, this Agreement may be terminated by
Licensor upon any ground or by any period of notice
as may be permitted from time to time by applicable
law or regulation. Any notice of default of
termination shall be personally delivered or be
mailed by certified or registered mail, return
receipt requested, postage prepaid.
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Land, Building 10.3 Subject to the provisions of Paragraph 5.4 hereof,
Lease, or Failure any failure to rebuild or repair and reopen for
to Reopen operation Licensee's destroyed or damaged store or
store whose lease has been terminated or not
renewed within one year of the date of occurrence
of such termination, destruction or damage, shall
automatically terminate this Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this Operating Agreement:
Reverse of Trademark 11.1 All rights to the use of the Trademarks and the
Rights right and license to conduct said business at the
Authorized Location shall revert to Licensor and
Licensee shall immediately cease all use of the
Trademarks and pay all monies due at said date.
Licensee shall promptly and at his own expense
remove or obliterate all store signage and displays
furnished to Licensee by Licensor and shall remove
or obliterate and thereafter discontinue all use of
any signage or displays at the Authorized Location
or in his possession bearing any of the Trademarks
or names or material confusingly similar to any of
the Trademarks.
11.2 All right, title and interest of Licensee in and to
this Operating Agreement shall become the property
of Licensor.
Purchase 11.3 Licensor shall haverthesfirst option to purchase
any or all equipment, fixtures, furnishings or
supplies, of whatever kind, owned by Licensee and
used by him in the production of the "Dairy Queen"
product, or any of the other approved products
under any of the Trademarks hereunder at a price
determined by a qualified appraiser selected with
the consent of both parties. if the parties cannot
agree upon the selection of such an appraiser he
shall be appointed by a Judge of the United States
District Court of Licensee's Authorized Location
upon petition of either party. Said option to
purchase may be exercised by Licensor at any time
within thirty (30) days from the date of such
termination or within thirty (30) days after the
date of the receipt by Licensor of the appraiser's
determination, whichever shall be the later date,
and shall not be impaired or terminated by the
attempted sale or other transfer of any such
equipment or supplies by Licensee to a third party-
Upon the exercise of such option and tender of
payment for any such equipment or supplies,
Licensee agrees to sell and deliver the same to
Licensor free and clear of all encumbrances, and to
execute and deliver to Licensor a bill of sale
therefore.
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<PAGE>
Non-Compete 11.4 Licensee shall notndirectly or indirectly engage in
any competitive business within 2,000 yards of the
Authorized Location for a period of one year after
said date of termination of this Agreement except
through a Stuckey's Pecan Shoppe or an affiliate in
operation at the time of signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that the store
facilities and operations of Licensee hereunder may
include in addition to "Dairy Queen" or "Dairy
Queen/Brazier" food and beverage service the sale
of various other products not identified or
designated by Company's Trademarks, including, but
not limited to, motor vehicle fuel, oil and related
automotive products, souvenir-type products,
tobacco products, sundries, and packaged food
products not intended for consumption on the
premises where sold and which are not competitive
with food and beverage products identified or
designated by the Trademarks (all of said products
collectively referred to in this Agreement as
"Permitted Products"). In order to prevent public
confusion, preserve and protect the Trademarks and
establish the principles which shall govern
Licensee's sale of Permitted Products and usage of
the Trademarks, the parties agree that
notwithstanding any provision of this or any other
Agreement to the contrary, the following provisions
shall control with regard to Permitted Products:
12.1 Licensee may sell Permitted Products from its
licensed store. Licensee may use in the business
operated hereunder in the manner and to the extent
permitted by this Agreement marks and names
identifying Permitted Products.
12.2 The Trademarks shall not under any circumstances be
used to identify or designate Permitted Products or
any other product(s) for which use of the
Trademarks has not been specifically authorized by
American. Permitted Products shall be sold only
from physical facilities (such as a different area,
room or building) which are clearly distinct and
apart from the "Dairy Queen" retail store.
12.3 No product shall be sold from any part of any
sublicensed store's site which detracts or
threatens to detract from the reputation or
goodwill of the "Dairy Queen" trade name or any of
the Trademarks. Licensor shall have the right to
direct Licensee to remove from the store and
discontinue the sale of any product item or items
which in American's good faith judgment violates
the quality standard of the preceding sentence. No
product shall under any circumstances be sold from
the "Dairy Queen" portion of the licensed store
which has not received
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the specific Prior approval of Licensor.
12.4 A building design and related facility standards,
based upon American's existing design and
specifications for "Dairy Queen"/ "Brazier" stores,
shall be developed by mutual consultation and
agreement, which shall take into account the
particular requirements for a "Dairy Queen" or
"Dairy Queen"/"Brazier" facility to be situated
along an Interstate highway. Licensee shall comply
strictly with the design and facility standards
developed hereunder.
12.5 Notwithstanding Paragraph 8.2 hereof, Licensee may
employ off-site advertising media such as
billboards and radio commercials, provided such
advertising is approved by Licensor and American,
and provided further that no such advertising shall
be used which creates or fosters any confusion as
to the identity, source or quality of goods
identified or designated by the Trademarks.
Licensor acknowledges that it may be necessary to
share extant billboard space with an existing
Stuckey's, Wayfara or other store, and Licensor
requires that advertising for the "Dairy Queen"
store be as visually and physically separate from
the other advertising as is feasible.
12.6 Because the "Dairy Queen" store hereunder may also
sell Permitted Products, the parties agree that
notwithstanding any other provision of this
Agreement or any other contract between the
parties, Licensor deems it to be necessary and
desirable, to permit the following:
a. To allow Licensee to sell Permitted Products
in conjunction with a "Dairy Queen" or "Dairy
Queen"/"Brazier" store;
b. To allow the principal shareholders of
Licensee and members of their immediate
families to own any amount or class of stock
or debt in any Stuckey's Pecan Shoppe
business;
c. To the extent and in the manner permitted
hereunder, to allow Licensee to sell and to
advertise Permitted Products in conjunction
with products identified or designated by the
Trademarks;
d. Subject to Paragraph 6-1 hereof, to relieve
Licensee from the obligation with respect to
Permitted Products, to purchase and use
equipment, supplies, ingredients and services
approved by American;
e. To allow Licensee to construct and equip its
retail store in accordance
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<PAGE>
with building design and related facility
standards developed under Paragraph 12.4
hereof;
f. To relieve Licensee: (i) from the obligation
of using, in preparing or selecting Permitted
Products, ingredients, formulas and supplies
specified by American; (ii) from the
obligation to observe, with respect to
Permitted Products, the requirements relative
to portions, sizes, appearance and packaging
set forth in American's "Store Management
Operations Manual" and "product preparation
charts"; and (iii) with respect to Permitted
Products, to allow the use of other supplies
and customer service materials without regard
to standards of uniformity and quality as are
now or hereafter set by American;
g. To allow Licensee its principal shareholders
or members of their immediate families to
engage in a competitive business within 2,000
yards of the Authorized Location of the store
licensed hereunder, as defined in the
Operating Agreement, but only through
a Stuckey's Pecan Shoppe business; and
h. To relieve stockholders of this corporate
Licensee from the obligation of personally
guarantying the obligations of Licensee under
the Operating Agreement. Sale or transfer of
this License to another corporation shall
include the then customary guarantees required
of corporations.
GENERAL PROVISIONS
13.1 In the event any one or more clauses of this
Agreement shall be held to be void or unenforceable
for any reason by any court of competent
jurisdiction such clause or clauses shall be deemed
to be separable and of no force or effect in such
jurisdiction and the remainder of this Agreement
shall be deemed to be valid and in full force and
effect, and the terms of this Operating Agreement
shall be equitably adjusted so as to compensate the
appropriate party for any consideration lost
because of the elimination of such clause or
clauses.
13.2 Any waiver by Licensor of any breach or default by
Licensee shall not be deemed to be a waiver of any
other or subsequent breach or default nor an
estoppel to enforce its rights in the event of any
other or subsequent breach.
13.3 This Agreement, and the application form executed
by Licensee requesting Licensor
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<PAGE>
to enter into this Agreement, constitute the sole
agreement between the parties with respect to the
entire subject matter of this Operating Agreement
and embodies all prior agreements and negotiations
with respect to the "Dairy Queen" business. There
are no representations of any kind except as
contained herein and in the aforesaid application.
13.4 Except as otherwise provided in this Agreement, any
notice, demand or communication provided for herein
shall be in writing, signed by the party giving the
same, deposited in the registered or certified
United States mail, return receipt requested,
postage prepaid, and;
a. If intended for American shall be addressed to
American Dairy Queen Corporation at 5701 Green
Valley Drive, Minneapolis, Minnesota, 55437;
b. If intended for Licensor shall be addressed to
Licensor at the address hereinabove set forth;
C. If intended for Licensee, shall be addressed
to Licensee at the Authorized Location
hereinabove designated;
or to such other address as may have been given to
the other party by notification as herein provided.
Notices for purposes of this Agreement shall be
deemed to have been received one business day after
being mailed as provided in this paragraph, or when
personally delivered.
13.5 If Licensee consists of two or more individuals,
such individuals shall be jointly and severally
liable and references to Licensee in this Agreement
shall include all such individuals. Reference to
Licensee as male shall also include a female
licensee, partnership or corporation or any other
business entity. Headings and captions contained
herein are for convenience of reference only and
shall not be taken into account in construing or
interpreting this Agreement.
13.6 Subject to the terms of Paragraph 9.10 hereof, this
Agreement shall be binding upon and inure to the
benefit of the administrators, executors, heirs,
successors and assigns of the parties.
13.7 This Agreement shall be effective only when
approved by an officer of American and shall be
governed by and interpreted in accordance with the
law of the state in which the Authorized Location
is Located.
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<PAGE>
13.8 This Agreement shall be deemed to be amended from
time to time as may be necessary to bring any of
its provisions into conformity with valid
applicable laws or regulations.
IN WITNESS IVHEREOF, the parties hereto have executed the foregoing "Dairy
Queen" Operating Agreement the date first above written.
LICENSEE
McClure Investments, Incorporated
/s/ Wayne McClure, President
----------------------------------
----------------------------------
-----------------------------------
ATTEST:
/s/ Clark Flynn
- ------------------------------------
LICENSOR
ATTEST: INTERSTATE DAIRY QUEEN CORPORATION
----------------------------------
/s/ Cathy E. Campbell /s/ Signature Illegible
- ------------------------------------ ----------------------------------
Its President
----------------------------------
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
By: /s/ Herman E. Nelson
-----------------------------
Its V.P.
-----------------------------
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<PAGE>
Date: 10/30/85
Initials:
SCHEDULE ADDENDUM TO PARAGRAPH 9.1 OF
THE "DAIRY QUEEN" OPERATING AGREEMENT
Beginning on the first day of operation as a "Dairy Queen"/"Brazier" store and
continuing through the following 12 calendar months:
1% of all "Dairy Queen"/"Brazier" sales not in excess of the
"Stuckey's Pecan Shoppe" restaurant sales for the 12 calendar
months preceding the date of opening as a "Dairy Queen"/ "Brazier"
store (hereinafter referred to as "existing restaurant sales")
4% of all "Dairy Queen"/"Brazier" sales in excess of the "existing
restaurant sales."
Second 12 full calendar months of operation as a "Dairy Queen"/"Brazier" store:
2% of all "Dairy Queen"/"Brazier" sales not in excess of "existing
restaurant sales"
4% of all "Dairy Queen"/"Brazier" sales in excess of "existing
restaurant sales."
Third 12 full calendar months of operation as a "Dairy Queen"/"Brazier" store:
3% of all "Dairy Queen"/"Brazier" sales not in excess of "existing
restaurant sales"
47. of all "t)airy Queen"/"Brazier" sales in excess of "existing
restaurant sales."
Fourth 12 full calendar months of operation as a "Dairy Queen"/ "Brazier" store
and thereafter:
4% of all "Dairy Queen"/"Brazier" sales.
Compute the above service fees monthly as follows:
1. Determine total "Dairy Queen"/"Brazier" sales for the month
(Sales A).
2. Determine total "Stuckey's Pecan Shoppe" restaurant sales for
the same month of the base year (Sales B).
3. If (as in a partial first month of operation as a "DQ"/B
restaurant) Sales A are less than Sales B, the service fee due
for the month is *I% of Sales A (* or the applicable 2%, 3% or 4%
rate as specified in the above schedule).
<PAGE>
4. If Sales A are more than Sales B, the service fee due for the
month is
*I% of Sales B (.1 or the applicable 2%, 3% or 4% rate as specified
(*or the above schedule).
PLUS 4% of the difference between Sales A and Sales B.
"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 7th day of June 1989, by and between INTERSTATE
DAIRY QUEEN CORPORATION of the city of ATLANTA county of DEKALB and state of
GEORGIA hereinafter referred to as "Licensor", and Bowlin's, Inc. dba "DQ" at
Butterfield Location of the city of Albuquerque county of Bernalillo and state
of New Mexico hereinafter referred to as "Licensee".
WHEREAS, Licensor is a licensee of American Dairy Queen Corporation (hereinafter
referred to as "American") in certain geographical areas, including the
territory which includes the Authorized Location hereinafter set forth, of the
right to license others, in accordance with the terms of this Agreement, to use
the "Dairy Queen" trademark, service mark and trade name which have been
registered in the United States Patent Office, in each state of the union and in
foreign countries, as well as those trademarks and service marks, a list of
which is attached hereto and made a part thereof as Appendix A (hereinafter all
of the foregoing collectively referred to as "Trademarks,'); and,
WHEREAS, Licensor and its predecessors in interest acting under said license
instituted, developed, promoted and established the "Dairy Queen" franchise
business and system in the aforesaid territory which consists of the sale of
distinctive dairy products, food products, beverages and other products and
services under American's Trademarks and utilizing in connection therewith
certain types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and method and sales promotion programs developed from time
to time; and,
WHEREAS, it is the purpose of Licensor to provide to Licensee in a retail store
outlet a system to control and make uniform the operation of facilities and
equipment together with the quality of products, the use and protection of the
Trademarks and to make available uniform and approved equipment, supplies,
ingredients, merchandising and business techniques and the sales promotion
programs of American; and,
WHEREAS, Licensee desires to operate a "Dairy Queen" retail store as part of the
"Dairy Queen" system and to enter into this Operating Agreement subject to the
conditions and controls herein prescribed for the purpose
AQ2A 2/77 (c)1976 AM.D.Q.Corp.
Revised Copyright 1977 Am.D.Q.Corporation
Consolidated Operation - Permitted Products
101885'
<PAGE>
of offering to the public products and services of uniformly high quality and
standards to the end of protecting the interests of Licensee, of Licensor, of
American and of all other persons engaged in said business; and,
WHEREAS, it is the intent of both Licensor and Licensee to preserve within the
context of a "Dairy Queen" retail store continuing consumer confidence in the
reliability and quality of all products sold under any of the Trademarks; and,
each party desires that all products sold under any of the Trademarks,
consistently conform to the highest expectations of consumers of such products;
and, whereas, by this Agreement the parties contemplate that Licensee's store,
in addition to normal "Dairy Queen" food and beverage products, may also sell
Permitted Products, as defined hereinafter.
NOW, THEREFORE, in consideration of the promises and of the mutual promises and
covenants herein contained, the grant by Licensor of this Operating Agreement
and the payment by Licensee of the various fees provided in Paragraph 9 hereof,
it is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject to all the
Grant to terms, conditions and provisions hereof, the right and
Licensee license to:
1.1 Establish and operate a retail store under the name
"Dairy Queen" at
I-10 & Exit 62 (Approx 20 Miles West of Deming, NM)
---------------------------------------------------
(Street)
Deming, NM 88030
--------------------------------------------------
(City) (State) (Zip)
hereinafter referred to as the "Authorized" Location"
(provided, however, in the event an Authorized
Location is not designated on the date hereof, and
such location is not designated herein by Licensor
within ninety (90) days after such date, this
Agreement shall become null and void and all deposits
including the franchise fee shall be returned to
Licensee).
1.2 Use at the Authorized Location the Trademarks on and
in association with the sale of all uniform and
approved products and services as American may
authorize from time to time, and with approved sales
promotion programs relative thereto.
1.3 Use at the Authorized Location the Trademarks on and
in association with the uniform equipment, supplies
and ingredients for the products approved by American.
1.4 Employ in the business of said store the
merchandising, sales promotion programs and business
methods and techniques developed and approved by
American.
Acceptance 2. Licensee hereby accepts the above license from Licensor
by Licensee subject to all the terms, provisions
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<PAGE>
and conditions hereof and agrees that Licensee shall
cause to have a "Dairy Queen" store established within
180 days of the date hereof (unless an extension of
time is expressly authorized in writing by Licensor),
and thereafter maintained and operated at the
Authorized Location, under Licensee's active and
continuous supervision and management and upon the
standards hereinafter provided. Licensee further
expressly acknowledges and agrees:
2.1 American is the owner of all right, title and interest
in and to the Trademarks, and the good will
attributable thereto of the business in connection
with which said Trademarks have been, are and will be
used at the Authorized Location. Licensor is the
licensee of the right to use the Trademarks in the
territory which includes the Authorized Location.
Specifically, but without limiting the foregoing,
Licensee disclaims any and all right, title and
interest in or to the Trademarks and to the good will
associated with the Trademarks of the "Dairy Queen"
retail store at the Authorized Location and
acknowledges and agrees that all such good will is the
exclusive property of American.
2.2 The Trademarks are valuable property rights owned by
American.
2.3 The Trademarks shall be used only in connection with
such products and services as may be approved or
specified by American and shall at all times be used
only in a manner approved by American.
2.4 Licensee's right to the use of the Trademarks is
specifically limited to Licensee's retail store
operation at the Authorized Location.
2.5 Licensee shall use no other trademarks, trade names or
service marks in said business except those authorized
by American and as set forth in Appendix A except with
the prior written consent of American.
2.6 Licensee shall not use the words "Dairy Queen" or any
of the Trademarks, or any word or mark similar
thereto, as a part of its corporate or business name
unless first approved in writing by American, and
shall only use the words "Dairy Queen" and no other
words whatsoever except with the express written
consent of American as the trade name on the store
from which the said products and services are sold. In
the event American does approve the use of the words
"Dairy Queen", or any of the Trademarks, as a part of
Licensee's corporate or business name, Licensee shall
cause such name to be changed so as to eliminate those
words and Trademarks from the
-3-
<PAGE>
name within thirty (30) days after termination of this
Agreement.
2.7 Licensee shall adopt and follow in good faith the
systems, programs and methods prescribed by Licensor
for Licensee's retail operation in accordance with
this Operating Agreement.
2.8 Neither Licensee nor any person owning an interest
directly or indirectly in Licensee shall directly or
indirectly operate or permit to be operated or hold
any interest (other than 1% or less of the outstanding
stock or debt of any class of any public company) in
any restaurant or fast-food business other than a
Bowlin's or its affiliates at the time of signing or
one authorized by this Agreement without the prior
written consent of Licensor.
TERM
Term 3. The License granted herein shall continue until
terminated by Licensee, with or without cause, on sixty
(60) days prior written notice to Licensor, or until
otherwise terminated by either Licensee or Licensor in
accordance with the provisions of this Agreement.
TRADEMARK STANDARDS AND REQUIREMENTS
General 4. Licensee agrees that nothing in this Agreement gives
Declarations him any title to or interest in the Trade-marks except
the right to use the same under the terms and
conditions of this Agreement and that Licensee's use
thereof inures to the benefit of American.
Specifically, but without limiting the foregoing,
Licensee acknowledges and agrees that American has the
right: and may distribute for its own account products
identified by the Trademarks through not only "Dairy
Queen" retail stores but through any other distribution
method which may from time to time be established.
Use of 4.1 Licensee shall confine his use of the Trademarks to or
Trademarks in association with the sales promotion programs and
sale of products and services which shall in quality,
mode and conditions of manufacture and sale, comply
with such reasonable standards as are established or
approved by American. In order to promote and protect
the business interests of each of the parties, the
value of the "Dairy Queen" business and the business
interests of other persons engaged therein, uniformity
shall be maintained in the type, standard and quality
of stores, equipment, supplies and ingredients used
therein, and the conditions of preparation and the
procedures employed in the sale of said products and
services.
-4-
<PAGE>
Acknowledgment 4.2 Licensee agrees that the provisions, restrictions and
of, controls provided in this Operating Agree ment are all
Necessity of necessary, reasonable and desirable for the purposes
Uniformity expressed herein and that Licensee's business shall be
conducted in accordance with Licensor's and American's
uniform requirements with respect to quality,
production, appearance, cleanliness, service,
merchandising and sales promotion standards. Licensee
acknowledges and agrees that substantial uniformity in
facilities, products, services and operations are
essential to the conduct of a system such as the
"Dairy Queen" system, and therefore further agrees to
honor and implement recommendations of American and
Licensor directed to enhancing and furthering such
uniformity.
Equipment 4.3 Licensee agrees to purchase and use, in the operation
and Supplies of Licensee's "Dairy Queen" retail store, only
equipment, supplies, ingredients and services which
are approved by American or by Licensor. Nothing
herein shall by construed as an attempt to limit
unreasonably the sources from which Licensee may
procure equipment, supplies, ingredients or services.
Rather, it is the intention of the parties that such
items conform to American's standards and
specifications of consistent quality and uniformity.
Nothing contained herein shall be deemed to require
American or Licensor to approve an inordinate number
of suppliers of a given item or service which in the
reasonable judgment of American or Licensor would
result in higher cost generally to Licensor's
licensees or prevent effective and economical
supervision of suppliers by American or Licensor.
Requests for approval of additional suppliers shall be
in writing and shall contain such information as
American and Licensor may reasonably request. American
and Licensor reserve the right to charge back to
Licensee or the proposed supplier all reasonable
expenses incurred in considering requests for
approval.
Approved 4.4 Complete and detailed uniformity under many varying
Adaptations conditions may not be possible or practical and
Licensor and American reserve the right and privilege,
at Licensor's and American's sole discretion and as
Licensor and American may deem in the best interest of
all concerned in any specific instance, to vary
standards to accommodate special needs of Licensee's
Authorized Site or that of any other licensee based
upon the peculiarities of a particular site or
location, density of population, business potential,
population of trade area, existing business practices,
requirements of local law or any condition which
Licensor and American deem to be of importance to the
successful operation of such licensee's business.
-5-
<PAGE>
Litigation 4.5 In the event any person, firm or company, who is not a
licensee or franchisee of American or Licensor, uses
or infringes upon the Trademarks, American shall
control all litigation and shall be the sole judge as
to whether or not suit shall be instituted or other
action taken.
Notice of 4.6 Licensor and American hereby advise Licensee that
Potential Licensor, American and/or affiliates of American
American and/or and/or Licensor may from time to time make available
Licensor Profit to Licensee goods, products and/or services for use in
Licensee's "Dairy Queen" retail store in respect to
the sales or provision of which Licensor, American
Also See Addendum and/or affiliates of American and/or Licensor may make
to Paragraph 4.6 a profit. Licensor further advises Licensee that
Licensor, American and/or affiliates of American
and/or Licensor may from time to time receive
consideration from suppliers and/or manufacturers in
consideration of services provided or rights licensed
to such persons by American, Licensor or their
respective affiliates.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall control
with respect to Licensee's Authorized Location and
retail store:,
Store Facility 5.1 Licensee agrees that the retail store shall be
constructed and equipped in accordance with American's
currently approved specifications and standards in
respect to building, equipment, inventory, signage,
fixtures, location and design and accessory features.
Future 5.2 Any replacement, reconstruction, addition or
Alteration modification in building, equipment or signage, to be
made hereafter, whether at the request of Licensee or
of Licensor shall be made in accordance with written
specifications approved in advance by Licensor or
American. Licensor and American shall not unreasonably
withhold such approval.
Maintenance 5.3 The building, equipment and signage employed in the
conduct of Licensee's business shall be maintained in
accordance with maintenance schedules and procedures
or specific lists prepared by Licensor and based upon
periodic inspections of the premises by Licensor's
representatives. Within a period of ninety (90) days
after the receipt of such maintenance list, Licensee
shall effect the items of maintenance reasonably
provided therein including the repair of defective
items and/or the replacement of unrepairable or
obsolete items of equipment and signage. Routine
maintenance shall be conducted in accordance with
general schedules published by Licensor or American
and made available to Licensee.
-6-
<PAGE>
Relocation 5.4 Should it become necessary, on account of
condemnation, sale or other cause, including
expiration or cancellation of lease or rental
contract, to relocate said store, Licensor shall grant
Licensee authority to do so within a radius of 1,000
yards of the Authorized Location, provided the new
site is reasonably suited for a "Dairy Queen" retail
store in accordance with Licensor's standards for
store sites, does not infringe on rights of another
licensee, is reasonably distant from other "Dairy
Queen" retail stores, and the new retail store is
constructed, equipped and opened for business in
accordance with the current standards of American at
that time within one year after discontinuing
operation of a "Dairy Queen" retail store at the
previous Authorized Location.
Modernization 5.5 Each and every transfer as provided in Paragraph 9.10
and/or Replacement hereof shall be expressly conditioned upon Licensee
of Time promptly performing and effecting such items of
of Transfer modernization and/or replace ment of building,
equipment and signage as may be reasonably necessary
to permit the same to conform to the standards then
prescribed by American for similarly situated store
operations. Licensee recognizes and acknowledges that
the requirements of this Paragraph 5.5 are both
reasonable and necessary to insure continued public
acceptance and patronage of, and to avoid
deterioration or obsolescence in the business
conducted hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with respect to
products and operations:
Authorized 6.1 Licensee's business shall be confined to the
Product Line preparation and sale of only such products as from
time to time are designated and approved by American
for sale by Licensees which are parties to this form
of Operating Agreement. The premises upon which said
business is operated shall not be used for any other
business and there shall not be sold or offered for
Also See Addendum sale therefrom any other product or service (excepting
to Paragraph 6.1 the preparation, storage and sale of Permitted
Products) without the written consent of American.
Specifically, but without limiting the foregoing,
alcoholic or intoxicating beverages shall not be sold
or offered for sale or otherwise handled upon said
premises.
Approved Menu 6.2 Attached hereto as Appendix B is the currently
approved menu for Licensee's retail store. American
may from time to time make reasonable modifications to
said approved menu provided said modifications are
made in respect to all licensees which have this form
of Operating Agreement and are located in similar
areas of the country. In addition, Licensee may from
time to time request variation from
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the currently approved menu. Such variations shall
only be made with the prior written consent of
American.
Authorized 6.3 Licensee shall use in preparing products only such
Ingredients, ingredients, formulas and supplies as are specified by
Formulas, American and in such portions, sizes, appearance and
Supplies, packaging as are set forth in American's most current
Preparation; "Store Management Operations Manual" and "product
Subject to Change preparation charts". Copies of the current "Store
by American Management Operations Manual" and "product preparation
charts" have been supplied to Licensee by Licensor
contemporaneously with the execution of this Operating
Agreement. Licensee acknowledges and agrees that these
may be changed from time to time by American and that
Licensee is obligated to conform to the requirements
as so changed from time to time. All other supplies,
including cones, cups, containers, eating utensils,
napkins, and all other customer service materials of
all descriptions and types shall meet the standards of
uniformity and quality as now or hereafter are
reasonably set by American. Licensee shall be
furnished with lists of approved equipment, supplies,
ingredients and services.
Serving and 6.4 All sales promotion material, customer "good will"
Promotion Items items, cartons, containers, wrappers and paper goods,
eating and serving utensils, customer convenience
items (including napkins, baby bibs and disposal
containers) used in the sales promotion, sale and
distribution of all products covered by this Operating
Agreement shall, where practicable, contain one or
more of the Trademarks and indicate that it is
produced and sold under the authority of American and
shall be subject to approval by Licensor or American
before being used.
Maintenance 6.5 Licensee's said business shall be operated and
and Sanitation maintained at all times in compliance with any and all
applicable health and sanitary standards prescribed by
American, Licensor and by governmental authority. In
addition to complying with such standards, if such
store shall be subject to any sanitary or health
inspection by any governmental authorities under which
it may be rated in one or more than one
classification, it shall be maintained and operated so
as to be rated in the highest available health and
sanitary classification with respect to each
governmental agency inspecting the same.
Inspection and 6.6 American, Licensor or the authorized representative
Recommendation of either shall have the right to enter Licensee's
store at all reasonable times during the business day
for the purpose of making periodic inspections to
ascertain if all the provisions of this Operating
Agreement are being observed by Licensee
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<PAGE>
and to inspect Licensee's said store land and
equipment, and to test, sample and inspect his
supplies, ingredients and products, as well as the
storage, preparation and formulation thereof and the
conditions of sanitation and cleanliness in the
storage, production, handling and serving thereof.
Period of 6.7 Licensee's store shall be opened to the public and
Operation operated twelve months per year and at least twelve
hours each day of the year. Any variance from this
provision must be authorized in writing by Licensor.
Acts of God, war, strikes or riots preventing Licensee
from temporarily complying with the foregoing shall to
that extent suspend compliance therewith.
Notice of 6.8 Licensee acknowledges that he is aware of the fact
Existence of that present licensees of Licensor and American
Different Forms operate under a number of different forms of agreement
of License and that consequently Licensor's and American's
Agreements obligations and rights in respect to their respective
licenses may differ materially in certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall control
with respect to personnel, training and supervision:
Management 7.1 Licensee shall adopt and use as his continuing
System operational routine the standard "Dairy Queen"
management system as well as American's standards with
respect to product preparation, merchandising,
employee recruitment and training, equipment and
facility maintenance and sanitation. From time to time
American will revise these programs to meet changing
conditions of retail operation in the best interest of
"Dairy Queen" retail stores, and Licensee shall adopt
and implement any such changes.
Training 7.2 Licensee shall, at Licensee's expense, attend
American's store management training program, at a
place to be designated by American, prior to the
opening of Licensee's store. In the event Licensee
fails to complete such training to the reasonable
satisfaction of American or Licensor, Licensor may
within thirty (30) days thereafter declare this
Agreement null and void whereupon all deposits
including the franchise fee shall be returned to
Licensee. If during the term hereof Licensee operates
said store with a manager other than himself, Licensee
shall, at Licensee's expense, cause such person to
attend and successfully complete such training
program.
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<PAGE>
Staffing 7.3 Licensee shall hire and supervise efficient,
competent, sober and courteous operators and employees
for the operation of the busi-. ness and set and pay
their wages, commis- sions and incentives with no
liability there- for on American or Licensor. Licensee
shall require all his employees to work in clean
uniforms approved by Licensor but furnished at the
cost of Licensee or his employees as Licensee may
determine. No employee of Licensee shall be deemed to
be an employee of Licensor or American for any
purpose(s) whatsoever.
Internal 7.4 Licensor shall provide or make available to Licensee
Training an in-store training program for all store employees.
Program Licensee shall train and periodically re-train all
store employees using the training aids made available
by Licensor. From time to time, American will revise
such training materials and aids and it or Licensor
make the same available to Licensee for purchase.
Attendance at 7.5 Licensee, or manager of Licensee, at Licensee's
Meetings expense, shall attend at least one national, regional
or approved local marketing area meeting each year
which Licensor and/or American originates for and on
behalf of "Dairy Queen" operators to set forth new
methods and programs in store operation, training,
management, sales and sale promotion programs.
Licensor further strongly recommends that key
employees of Licensee also attend such meetings.
SALES PROMOTION PROGRAMS
Sales Promotion 8.1 Licensor and Licensee, together with other licensees
Programs and of American, shall cooperate in the sales promotion
Payment to programs of approved products. To this end, American
American of has reserved the right to establish and organize sales
Expenses for promotion programs from time to time and Licensee
Adminstering agrees to pay to Licensor for remittance to American
Same a sales promotion program fee as set forth in
Paragraph 9.1 hereof. Licensee acknowledges and agrees
that American has had in the past, and shall in the
future have, the discretion to determine expenditures
of funds collected in respect to sales promotion
programs and as to the selection of the promotional
materials and programs for which said expenditures are
made, provided, however, that American shall make a
good faith effort to expend such funds in the general
best interest of participating licensees. Licensee
acknowledges and agrees that American may compensate
itself and/or its affiliates for the expense of
administering such sales promotion programs. Licensor
shall advise Licensee annually of American's expenses
in administering said sales promotion programs.
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<PAGE>
Sales Promotion 8.2 Licensee shall only use such sales promotion program
Materials or other advertising materials as are furnished,
approved or made available by or through American.
Said materials shall be used only in a manner
prescribed by American. American shall not
unreasonably withhold approval of any reasonable sales
promotion materials.
Yellow Pages 8.3 Licensee shall, if requested by Licensor, list
separately, or participate in a listing, in the Yellow
Pages of his local telephone directory containing such
copy as may reason- ably be specified by Licensor. The
cost of such listing shall be paid by Licensee, or by
Licensee and other participating licensees in the case
of a joint listing. Licensor shall not specify an
unreasonably expensive listing.
FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-up, 9.1 Licensee shall pay to Licensor as a service and set-up
Franchise, fee $ 0 of which $ 0 has been paid upon the execution
License and of this Agreement and a balance of $ O is payable in
Sales Promotion accordance with the terms of Appendix C attached
Program Fees hereto. Said service and set-up fee is intended to
compensate Licensor for its expenses incurred, and
services rendered in establishing and setting up
Licensee's initial operation. In addition to said
service and set-up fee, during the full term of this
Operating Agreement, and in consideration of the
rights granted hereunder, Licensee shall pay to
Licensor as license fee in respect to the rights
granted herein a sum equal to 4% of gross retail
sales, exclusive of retail sales taxes, of all
products, goods and wares of every kind and nature
sold from, or in connection with the operation of,
Licensee's "Dairy Queen" retail store, including, but
without limiting the generality of the foregoing,
sales of all products of any of the Trademarks as well
as sales of other merchandise whether or not
identified by other brand names and which may be
authorized for sale by American or Licensor from time
to time; provided, notwithstanding the foregoing, that
no such continuing license fee shall be payable with
respect to sales of Permitted Products. in addition,
Licensee shall pay to Licensor for remittance to
Also See Addendum American a sales promotion fee to be expended in
Paragraph 9.1 accordance with the provisions of Paragraph 8.1. The
sales promotion fee shall be a sum equal to not less
than 3% nor more than 5% of Licensee's gross retail
sales net of sales taxes (excluding sales of Permitted
Products). Licensor shall
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determine and notify Licensee of the exact percentage
prior to the first day of each fiscal year of Licensor
(except no notification will be given with respect to
any year for which the percentage is to be unchanged
from the preceding year). Such percentage shall be the
same as that to be employed during such succeeding
year by the majority of "Dairy Queen" licensees within
the marketing area as determined by American within
which Licensee's store is located.
Computations 9.2 All amounts due and owing hereunder shall be computed
and Remittances at the end of each month's operation and remittance
for the same shall be made to Licensor on or before
the fourteenth day of the following month accompanied
by the reports provided for in Paragraph 9.4 hereof.
The computation of said amounts shall be certified and
sworn to by Licensee in the manner specified by
Licensor and Licensee shall supply to Licensor such
supporting or supplementary materials as Licensor may
reasonably require to verify the accuracy of such
remittances.
Surcharge 9.3 At Licensor's option, Licensor may require Licensee to
Method of pay to suppliers of mix, meat and other products and
Precollection ingredients used in the conduct of the business a
surcharge on all units of such commodities purchased
by Licensee. Said surcharge shall be paid to such
supplier by Licensee at the time of purchase of such
commodities. Said surcharge shall be established by
Licensor at a reasonable rate so as to approximate the
amount of license fee and sales promotion fee which
will be payable by Licensee. Said surcharge shall be
paid to said supplier or suppliers for the account of
Licensor, the same to be regarded by the parties as a
method of precollection of said license and sales
promotion fees. The amounts so collected shall be
credited by Licensor against the license and sales
promotion fees due from Licensee to Licensor at the
end of each month's operations. Licensor shall submit
to Licensee on a monthly or quarterly basis a
reconciliation of said license and sales promotion
fees account setting forth the credits to Licensee's
account by reason of amounts collected for Licensor by
suppliers by way of the aforesaid surcharge method. In
the event Licensee shall fail to submit reports in
accordance with Paragraph 9.4, Licensor may make said
reconciliation of amounts due in conformance with its
best judgment with regard to said amounts due and same
shall be conclusive as to the amounts due Licensor
from Licensee unless within a period of ten (10) days
after mailing of said reconciliation to Licensee by
Licensor, Licensee provides evidence in a form
satisfactory to Licensor of the correct amounts due.
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<PAGE>
Licensee shall pay such amounts, if any, determined to
be owed pursuant to Licensor's reconciliation within
ten (10) days after a mailing of notice to Licensee by
Licensor. If Licensor determines that Licensee has
over-paid license or sales promotion fees on the
surcharge basis, Licensor shall remit to Licensee an
amount equal to the excess fees collected at the time
the monthly or quarterly reconciliation is provided
Licensee.
Reports and 9.4 Licensee shall keep true records from which all sums
Records payable under this Agreement and the dates of accrual
thereof may be readily determined. Licensee shall make
written reports to Licensor in such form as Licensor
may from time to time prescribe within fourteen (14)
days after the end of each month's operation setting
forth the amount of gross sales of all products from,
or in connection with the operation of, said store and
the business thereof during said month. In addition to
the foregoing, and in addition to such other
information as Licensor may from time to time require,
said monthly report shall accurately set forth the
total number of gallons of mix, the total number of
pounds of meat, and the quantity of other basic
commodities used during said month and the sources
from which said mix, meat and other commodities were
purchased together with a complete statement of
Licensee's cost of labor, utilities, rent and each
other cost of operation. For the purpose of said
reports the date of use of such mix, meat and other
commodities shall be deemed to be the date of receipt
at the store. Licensor, American or the authorized
representative of either shall have the right at all
times during the business day to enter Licensee's
premises where books and records relative to said
store are kept, and to inspect, copy and audit such
books and records. In the event that any such
inspection or audit reveals a variance of 3% or more
from data reported to Licensor or American, in
addition to any other rights it may have, Licensor or
American may conduct such further periodic audits
and/or inspections of Licensee's books and records as
it reason- ably deems necessary for up to one year
thereafter and such further audits and/or inspections
shall be at Licensee's sole expense including without
limitation reasonable professional fees, travel and
room and board expenses directly related thereto.
Financial 9.5 Licensee agrees to employ sound financial management
Planning and practices in connection with the operation of said
Management business and to that end Licensee shall maintain on
forms approved or provided by Licensor or American
Also See Addendum
to Paragraph 9.5
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<PAGE>
a monthly profit plan, a monthly profit and loss
statement and a monthly balance sheet accurately
reflecting the operations and condition of said
business. In addition to the foregoing, Licensee shall
employ such methods of recordkeeping, bookkeeping and
reporting as Licensor shall from time to time
reasonably require and copies of all monthly profit
plans, profit and loss statements, sales summaries and
breakdowns for the preceding month shall be forwarded
to Licensor on or before the fourteenth day of the
following month.
9.6 Licensee agrees to pay promptly, when due, all taxes
and assessments that may be assessed against said
premises or the equipment or supplies used in
connection with Licensee's business, all liens and
encumbrances of every kind and character created or
placed upon or against any of said property and all
accounts and other indebtedness of every kind incurred
by Licensee in the conduct of said business. In the
event Licensee should default in making any such
payment, Licensor shall be authorized but not
required, to pay the same on Licensee's behalf and
Licensee's covenants promptly to reimburse Licensor on
demand for any such payment. to Licensor by the same
arise this Paragraph vision of this interest at 12%
per annum and all amounts owing Licensee hereunder,
whether under the provisions of 9.6 or under any other
pro Agreement, shall bear annum or the maximum rate
permitted by law, whichever is less, from and after
the date of accrual thereof.
Timely 9.7 The default by Licensee in the timely payment of any
Payment indebtedness owing to Licensor and/or American, or to
any affiliates of Licensor and/or American, or the
default by Licensee in the payment of any indebtedness
of Licensee with respect to which Licensor or American
or any of Licensor's and/or American's affiliates is a
guarantor, co-signer, endorser or obligor, shall
constitute a breach of this Operating Agreement,
rendering the same subject to termination in
accordance with the provisions of Paragraphs 10.1 and
10.2 hereof.
Insolvency, 9.8 In the event that Licensee be declared insolvent or
Etc. bankrupt, or in the event a receiver is appointed,
this Operating Agreement shall automatically terminate
as of the date of such declaration or appointment.
Liability and 9.9 Licensee hereby waives all claims against Licensor
Insurance and/or American for damages to property or injuries to
persons arising out of the operation of Licensee's
business, and Licensee shall indemnify and save
Licensor and/or American and/or the affiliates of
either harmless of and from
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<PAGE>
any damage or injury to property or persons arising
from or in connection with the operation of said
business or the consumption of the product thereof.
Licensee further agrees to purchase and maintain in
full force and effect during the term of this
Agreement, at Licensee's sole expense, liability
insurance in an aggregate amount not less than
$300,000 insuring Licensee, Licensor and American from
li4 ability for any and all such damage or injury and
Licensee further agrees to deliver to Licensor a
proper certificate evidencing the existence of such
insurance coverage and Licensee's compliance with the
provisions of this paragraph and which provides that
Licensor and American will be given thirty (30) days
prior written notice of material change, termination
or cancellation of the policy. Said insurance coverage
shall commence as of the date Licensee commences
operating a "Dairy Queen" retail store or as of the
date the Authorized Location is first identified as a
site on which a "Dairy Queen" retail store will be
operated, whichever shall first occur.
Assignment and 9.10 Licensee agrees not to transfer, assign or alienate
Transfer his interest herein or here- under in whole or in part
without the prior written consent of Licensor, which
consent shall not be withheld unreasonably, but
Licensor may insist that any proposed assignment be an
Also See Addendum assignment of all of Licensee's interest hereunder and
to Paragraph 9.10 that any proposed assignee be a person, in Licensor's
reasonable judgment, qualified to provide active
supervision over the operation of said store in
compliance with Licensee's obligations hereunder and
who has sufficient net worth and sources of capital
which meet Licensor's then current requirements for a
store operation of the type contemplated by this form
of agreement. In the event Licensee's said interest
should be so transferred or assigned, Licensee shall
pay to Licensor contemporaneously therewith the sum of
One Thousand Five Hundred Dollars ($1,500), or an
amount equal to one-half of the license fees paid or
payable by Licensee in respect of operations in the
twelve (12) months ending with the month prior to the
month in which the assignment is approved, whichever
is the greater amount, as a fee for the preparation of
a new Operating Agreement in assignee's name, for
Licensor's assistance in reset-up of the retail store
and for any and all other expenses incurred and
services rendered by Licensor in effecting said
tran@fer. In the event of any such assignment, the
assignee, as a condition of Licensor approving such
assignment, must attend and to the reasonable
satisfaction of Licensor
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<PAGE>
successfully complete, at assignee's expense,
American's training program at American's training
center. In the event Licensee is a corporation,
partnership or other entity, any transfer or transfers
of stock (or other form of ownership interest)
constituting in the aggregate a controlling interest
in Licensee shall be subject to the consent, transfer
fee and all other applicable provisions of this
Agreement. Licensor may withhold its consent to any
proposed transfer until all amounts owed by Licensee
to Licensor, American, the affiliates or subsidiaries
of either and approved "Dairy Queen" suppliers have
been paid in full.
Offsets 9.11 Licensee waives any and all existing and future claims
and offsets against any amounts due hereunder, which
amounts shall be paid when due. Licensor and American
shall be entitled to apply or cause to be applied
against amounts due to either of them or any of their
respective affiliated com- panies any amounts which
may from time to time be held by either of them or
their respective affiliates on Licensee's behalf or be
owed to Licensee by Licensor or American or their
respective affiliates.-
CONTRACT VIOLATION
Remedies, 10. In the event of any dispute between the parties
Arbitration hereto arising under, out of, in connection with or in
relation to this Agreement, said dispute shall be
submitted by the parties to binding arbitration in
accordance with the Rules and Procedures and under the
auspices of the American Arbitration Association. The
arbitration shall take place at the capital of the
state of the Authorized Location of Licensee or at such
other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be
final,and binding on all parties. Notwithstanding the
foregoing, Licensee recognizes that his "Dairy Queen"
store is one of a large number of stores similarly
situated and selling to the public similar products,
and hence the failure on the part of a single licensee
to comply with the terms of his Operating Agreement
could cause irreparable damage to Licensor, American
and/or to some or all other "Dairy Queen" licensees.
Therefore, it is mutually agreed that in the event of a
breach or threatened breach of any of the terms of this
Operating Agreement by Licensee, Licensor shall
forthwith be entitled to an injunction restraining such
breach and/or to a decree of specific performance
without having to show or prove any actual damage,
together with recovery of reasonable attorney's fees
and other costs incurred in obtaining said equitable
relief, until such time as a final and binding
determination is made by the
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arbitrators. The foregoing equitable remedy shall be in
addition to, and not in lieu of, all other remedies and
rights which Licensor might otherwise have by virtue of
any breach of this Agreement by Licensee.
Breach of 10.1 Licensee shall be in default hereunder if Licensor
Contract determines that Licensee has made any false report to
Licensor, or has failed to pay when due any amounts
owed to Licensor, or has in Licensor's judgment in any
other way breached any of the terms of this Agreement,
Also See Addendum including but not limited to, failing to submit
to Paragraph 10.1 required reports, failing to meet any requirements or
specifications established with respect to product
quality, physical property, conditions or equipment or
materials used, products manufactured, menu or use of
approved products, packages or promotional materials.
Failure of Licensee to pay to Licensor any past due
amount owed within fourteen (14) days of Licensor's
written notice of default therein shall be construed
as Licensee's voluntary abandonment of this Agreement
and the franchised business hereunder operated.
10.2 Except as hereinafter provided, failure of Licensee to
cure a default by Licensee hereunder within fourteen
(14) days from the date of a written notice of default
Also See Addendum mailed or delivered to Licensee, which notice states
to Paragraph 10.2 such default, shall give Licensor good cause to
terminate this Agreement. Termination shall be
accomplished by mailing or delivering to Licensee
written notice of termination, which notice shall
state the grounds therefore and shall be effective (i)
immediately in any case of voluntary abandonment of
this Agreement by Licensee of conviction of Licensee
of an offense directly related to the business
conducted hereunder; or (ii) sixty (60) days after the
date of such notice of termination in all other cases;
provided, however, that notwithstanding any other
provision of this Paragraph 10, this Agreement may be
terminated immediately upon failure of Licensee to
cure within twenty-four (24) hours of notice thereof
any default under this Agreement which materially
impairs the good will associated with any of the
Trademarks. In addition to the foregoing, this
Agreement may be terminated by Licensor upon any
ground or by any period of notice as may be permitted
from time to time by applicable law or regulation. Any
notice of default of termination shall be personally
delivered or be mailed by certified or registered
mail, return receipt requested, postage prepaid.
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Land, Building 10.3 Subject to the provisions of Paragraph 5.4 hereof, any
Lease, or Failure failure to rebuild or repair and reopen for operation
to Reopen Licensee's destroyed or damaged store or store whose
lease has been terminated or not renewed within one
year of the date of occurence of such termination,
destruction or damage, shall automatically terminate
this Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this Operating Agreement:
Reversion of 11.1 All rights to the use of the Trademarks and the right
Trademark and license to conduct said business at the Authorized
Rights Location shall revert to Licensor and Licensee shall
immediately cease all use of the Trademarks and pay
all monies due at said date. Licensee shall promptly
and at his own expense remove or obliterate all store
signage and displays furnished to Licensee by Licensor
and shall remove or obliterate and thereafter
discontinue all use of any signage or displays at the
Authorized Location or in his possession bearing any
of the Trademarks or names or material confusingly
similar to any of the Trademarks.
11.2 All right, title and interest of Licensee in and to
this Operating Agreement shall become the property of
Licensor.
Purchase 11.3 Licensor shall have the first option to purchase any
or all equipment, fixtures, furnishings or supplies,
of whatever kind, owned by Licensee and used by him in
the production of the "Dairy Queen" product, or any of
the other approved products under any of the
Trademarks hereunder at a price determined by a
qualified appraiser selected with the consent of both
parties. if the parties cannot agree upon the
selection of such an appraiser he shall be appointed
by a Judge of the United States District Court of
Licensee's Authorized Location upon petition of either
party. Said option to purchase may be exercised by
Licensor at any time within thirty (30) days from the
date of such termination or within thirty (30) days
after the date of the receipt by Licensor of the
appraiser's determination, whichever shall be the
later date, and shall not be impaired or terminated by
the attempted sale or other transfer of any such
equipment or supplies by Licensee to a third party.
Upon the exercise of such option and tender of payment
for any such equipment or supplies, Licensee agrees to
sell and deliver the same to Licensor free and clear
of all encumbrances, and to execute and deliver to
Licensor a bill of sale therefore.
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<PAGE>
Non- 11.4 Licensee shall not directly or indirectly engage in
Compete any competitive business within 2,000 yards of the
Authorized Location for a period of one year after
said date of termination of this Agreement except
through a Bowlin' s or an af filiate in operation at
the time of signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that the store
facilities and operations of Licensee hereunder may
include in addition to "Dairy Queen" or "Dairy
Queen/Brazier" food and beverage service the sale of
various other products not identified or designated by
Company's Trademarks, including, but not limited to,
motor vehicle fuel, oil and related automotive
products, souvenir-type products, tobacco products,
sundries, and packaged food products not intended for
consumption on the premises where sold and which are
not competitive with food and beverage products
identified or designated by the Trademarks (all of said
products collectively referred to in this Agreement as
"Permitted Products"). In order to prevent public
confusion, preserve and protect the Trademarks and
establish the principles which shall govern Licensee's
sale of Permitted Products and usage of the Trademarks,
the parties agree that notwithstanding any provision of
this or any other Agreement to the contrary, the
following provisions shall control with regard to
Permitted Products:
12.1 Licensee may sell Permitted Products from its licensed
store. Licensee may use in the business operated
hereunder in the manner and to the extent permitted by
this Agreement marks and names identifying Permitted
Products.
12.2 The Trademarks shall not under any circumstances be
used to identify or designate Permitted Products or
any other productcs) for which use of the Trademarks
has not been specifically authorized by American.
Permitted Products shall be sold only from physical
facilities (such as a different area, room or
building) which are clearly distinct and apart from
the "Dairy Queen" retail store.
12.3 No product shall be sold from any part of any
sublicensed store's site which detracts or threatens
to detract from the reputation or goodwill of the
"Dairy Queen" trade name or any of the Trademarks.
Licensor shall have the right to direct Licensee to
remove from the store and discontinue the sale of any
product item or items which in American's good faith
judgment violates the quality standard of the
preceding sentence. No product shall under any
circumstances be sold from the "Dairy Queen" portion
of the licensed store which has not received
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the specific prior approval of Licensor.
12.4 A building design and related facility standards,
based upon American's existing design and
specifications for "Dairy Queen"/ "Brazier" stores,
shall be developed by mutual consultation and
agreement, which shall take into account the
particular requirements for a "Dairy Queen" or "Dairy
Queen"/"Brazier" facility to be situated along an
Interstate highway. Licensee shall comply strictly
with the design and facility standards developed
hereunder.
12.5 Notwithstanding Paragraph 8.2 hereof, Licensee may
employ off-site advertising media such as billboards
and radio commercials, provided such advertising is
approved by Licensor and American, and provided
further that no such advertising shall be used which
creates or fosters any confusion as to the identity,
source or quality of goods identified or designated by
the Trademarks. Licensor acknowledges that it may be
necessary to share extant billboard space with an
existing Stuckey's, Wayfara or other store, and
Licensor requires that advertising for the "Dairy
Queen" store be as visually and physically separate
from the other advertising as is feasible.
12.6 Because the "Dairy Queen" store hereunder may also
sell Permitted Products, the parties agree that
notwithstanding any other provision of this Agreement
or any other contract between the parties, Licensor
deems it to be necessary and desirable, to permit the
following:
a. To allow Licensee to sell Permitted Products in
conjunction with a "Dairy Queen" or "Dairy
Queen"/"Brazier" store;
b. To allow the principal shareholders of Licensee
and members of their immediate families to own
any amount or class of stock or debt in any
Bowlln's business;
c. To the extent and in the manner permitted
hereunder, to allow Licensee to sell and to
advertise Permitted Products in conjunction with
products identified or designated by the
Trademarks;
d. Subject to Paragraph 6.1 hereof, to relieve
Licensee from the obligation with respect to
Permitted Products, to purchase and use
equipment, supplies, ingredients and services
approved by American;
e. To allow Licensee to construct and equip its
retail store in accordance
-20-
<PAGE>
with building design and related facility
standards developed under Paragraph 12.4 hereof;
f. To relieve Licensee: (i) from the obligation of
using, in preparing or selecting Permitted
Products, ingredients, formulas and supplies
specified by American; (ii) from the obligation
to observe, with respect to Permitted Products,
the requirements relative to portions, sizes,
appearance and packaging set forth in American's
"Store Management Operations Manual" and "product
preparation charts"; and (iii) with respect to
Permitted Products, to allow the use of other
supplies and customer service materials without
regard to standards of uniformity and quality as
are now or hereafter set by American;
9. To allow Licensee its principal shareholders or
members of their immediate families to engage in
a competitive business within 2,000 yards of the
Authorized Location of the store licensed
hereunder, as defined in the Operating Agreement,
but only through a Bowlin's business; and
h. To relieve stockholders of this corporate
Licensee from the obligation of personally
guarantying the obligations of Licensee under the
Operating Agreement. Sale or transfer of this
License to another corporation shall include the
then customary guarantees required of
corporations.
GENERAL PROVISIONS
13.1 In the event any one or more clauses of this Agreement
shall be held to be void or unenforceable for any
reason by any court of competent jurisdiction such
clause or clauses shall be deemed to be separable and
of no force or effect in such jurisdiction and the
remainder of this Agreement shall be deemed to be
valid and in full force and effect, and the terms of
this Operating Agreement shall be equitably adjusted
so as to compensate the appropriate party for any
consideration lost because of the elimination of such
clause or clauses.
13.2 Any waiver by Licensor of any breach or default by
Licensee shall not be deemed to be a waiver of any
other or subsequent breach or default nor an estoppel
to enforce its rights in the event of any other or
subsequent breach.
13.3 This Agreement, and the application form executed by
Licensee requesting Licensor
-21-
<PAGE>
to enter into this Agreement, constitute the sole
agreement between the parties with respect to the
entire subject matter of this Operating Agreement and
embodies all prior agreements and negotiations with
respect to the "Dairy Queen" business. There are no
representations of any kind except as contained herein
and in the aforesaid application.
13.4 Except as otherwise provided in this Agreement, any
notice, demand or communication provided for herein
shall be in writing, signed by the party giving the
same, deposited in the registered or certified United
States mail, return receipt requested, postage
prepaid, and;
a. If intended for American shall be addressed to
American Dairy Queen Corporation at 5701 Green
Valley Drive, Minneapolis, Minnesota, 5S437;
b. If intended for Licensor shall be addressed to
Licensor at the address hereinabove set forth;
c. If intended for Licensee, shall be addressed to
Licensee at the Authorized Location hereinabove
designated;
or to such other address as may have been given to the
other party by notification as herein provided.
Notices for purposes of this Agreement shall be deemed
**Refer to Addendum to to have been received **
Paragraph 13.4
13.5 If Licensee consists of two or more individuals, such
individuals shall be jointly and severally liable and
references to Licensee in this Agreement shall include
all such individuals. Reference to Licensee as male
shall also include a female licensee, partnership or
corporation or any other business entity. Headings and
captions contained herein are for convenience of
reference only and shall not be taken into account in
construing or interpreting this Agreement.
13.6 Subject to the terms of Paragraph 9.10 hereof, this
Agreement shall be binding upon and inure to the
benefit of the administrators, executors, heirs,
successors and assigns of the parties.
13.7 This Agreement shall be effective only when approved
by an officer of American and shall be governed by and
interpreted in accordance with the law of the state in
which the Authorized Location is Located.
-22-
<PAGE>
13.8 This Agreement shall be deemed to be amended from time
to time as may be necessary to bring any of its
provisions into conformity with valid applicable laws
or regulations.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing "Dairy Queen"
Operating Agreement the date first above written.
LICENSEE
Bowlin's Inc.
----------------------------------
ATTEST: By: M.L. Bowlin
----------------------------------
Signature Illegible Its: President
- ------------------------ ----------------------------------
LICENSOR
ATTEST: INTERSTATE DAIRY QUEEN CORPORATION
----------------------------------
Cathryn E. Campbell By Signature Illegible
- ------------------------ --------------------------------
Its President
-----------------------------
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
By Signature Illegible
--------------------------------
Its Vice President
-----------------------------
-23-
<PAGE>
I-10 & Exit 62 Approx. 20 Miles
West of Deming, NM
DATE: ________________________
INITITALS:_____________________
SALES PROMOTION PROGRAM FEE ADDENDUM TO PARAGRAPH 9.1
OF "DAIRY QUEEN" OPERATING AGREEMENT
Licensee is obligated to pay sales promotion fees as specified in Paragraph 9.1
of the Agreement.
However, in recognition that Licensor's Licensees in the past have expended more
than 3% of sales on sales promotion (primarily in an outdoor setting in order to
attract highway travellers), American and Licensor have temporarily without
prejudice allowed ADI #0069 Licensees to retain all or a portion of sales
promotion fees and to credit certain sales promotion expenditures against these
fees provided that:
(I.) Such expenditures are certified annually as specified in each
fiscal year's ADI #0069 Requirements Bulletin, and;
(2.) Unspent portions of the fiscal-year sales promotion fee are
remitted to Licensor by January 31 of the following year.
Events in American's and Licensor's exclusive discretion and judgement may, in
the future, require, and Licensee hereby agrees to make, full and regular
monthly payments of the sales promotion program fee to Licensor or American.
Licensee is obligated to participate annually in the Annual Marketing Program
(AMP) and the Interstate Marketing Program (IMP) each year that these programs
are in effect. In cases where Licensee pays all, or a portion, of the sales
promotion fee monthly to Licensor, the annual AMP and IMP fees will be paid from
amounts remitted to Licensor. The AMP fee will then be forwarded by Licensor to
American. In cases where Licensee does not pay sales promotion fees monthly to
Licensor, but instead retains them for local expenditure as specifed above,
Licensee shall remit the AMP and IMP annual fees to Licensor upon being invoiced
for these fees. Licensor will forward the AMP fee to American. Such AMP and IMP
fees are certifiable expenditures that can be credited against the total sales
promotion fee due for that fiscal year.
<PAGE>
I-10 & Exit 62 Approx. 20 Miles
West of Deming, NM
DATE: ________________________
INITITALS:_____________________
ADDITIONAL STORE DEVELOPMENT PROGRAM ADDENDUM TO PARAGRAPH 9.10
OF THE "DAIRY QUEEN" OPERATING AGREEMENT
In the event of any assignment of the franchise, transfer of assets or stock of
the franchisee, or change of management of franchisee which requires the prior
approval of Licensor, Licensor may at its election require Licensee to pay a
transfer fee in addition to that fee specified in Paragraph 9.10. This
supplemental fee is based on the following formula:
TRANSFER & ASSIGNMENT WITHIN SUPPLEMENTAL TRANSFER FEE
One Year of Opening $25,000
First Year to Second Year 18,000
Second Year to Third Year 13,000
Third Year to Fourth Year 9,000
The supplemental transfer fee reimburses Licensor for the loss of the service
and set-up fee of $25,000 in respect to a "Dairy Queenlt/"Brazier" operation,
which was waived in connection with Licensor's Additional Store Development
Program, inasmuch as said program is intended to promote development and
operation of additional stores by a seasoned Licensee.
<PAGE>
APPENDIX "A"
Licensee has the right to use the following trademarks and service marks In
accordance with the attached Operating Agreement.
This Appendix "A" may be amended by Company from time to time in order to make
available additional trademarks or service me unavailable. Licensee agrees to
use only those trademarks and service marks which are mark* or to delete those
which then currently authorized.
DAIRY QUEEN(R) DO(R)
BRAZIER(R) DAIRY QUEEN IN ELLIPSE LOGO(R)
MR. MISTY(R) BROWNIE DELIGHT(R)
MR. MISTY KISS(R) THE CONE WITH THE CURL ON TOP(R)
LET'S ALL GO TO THE DAIRY QUEEN(TM) DESIGN:THE CONE WITH THE CURL ON TOP(R)
FIESTA(TM) QUEEN'S CHOICE AND DESIGN(R)
FULL MEAL DEAL(TM) DOUBLE DELIGHT(R)
CHILI DOG SPLIT(R) STARKISS(R)
PEANUT BUSTER(R) PARFAIT BIG "Q"(R)
FUDGE NUT BAR(TM) IT'S A REAL TREAT(TM)
BANANA SUPREME(R) DO CHIPPER SANDWICH(R)
WE TREAT YOU RIGHT(R) BLIZZARD(R)
MORE BURGER THAN BUN(R) CHOCOLATE PEANUT BUTTER CRUNCH(TM)
SUPER DOG(TM) MR. MALTIE(R)
ROYAL BANANA SPLIT(TM) DO CHOCOLATE CHIP COOKIE SANDWICH(R)
SNAK DEAL(TM) CHOCOLATE MOUNTAIN SUNDAE(R)
BUSTER BAR(R) BIG CONE AND DESIGN(R)
DILLY(R) BAR DQWICH(R)
DILLYWICH(R)
Each of the above trademarks and/or service marks must be used only in the
manner specified by the Company and in connection with the goods and/or services
specified by the Company. No deviations will be permitted.
4/88
(R) Reg. U.S. Pat. Office Am. D.O. Corp. (TM)Trademark, Am. D.O. Corp.
<PAGE>
APPENDIX "B" Date:___________________ Initials:__________
Dairy Oueen'D /BrazierO
(Please attach to copy of current operating aiprooment)
Below is listed the approved menu of Company for Dairy Queens /BrazierO stores
which is in current use and effect. Licensee is authorized to use this menu in
accordance with the attached Operating Agreement.
This Appendix "B" may be amended by Company from time to time in order to make
available additional products or to delete those which become unavailable.
Licensee agrees to use only those products which are then currently authorized
for use in Dairy Queen/Brazier stores.
Licensee shall use in preparing products only such ingredients, formulas and
supplies as are specified by Company and in such portions, sizes. appearance and
package as set forth in Company's most current "Store Management Operations
Manual" and "Product Preparation Charts."
<TABLE>
<CAPTION>
Required Required Required
-------- -------- --------
Brazier(R) Food Items Dairy Queen* Soft Serve Items Beverage Items
--------------------- ----------------------------- --------------
<S> <C> <C>
Homestyle Hamburgers: Cones A minimum of three carbonated
Single Dipped Cones soft drinks"
Double Sundaes Mr. mistyo
Triple Shakes/Maits
w/Leftuce and Tomato Float
w/Cheese Mr. MisWO Float'
DQ Homestyle(TM) Ultimate Burger Freeze
HotDog Mr. Misty* Freeze' Optional
w/Chili Banana Split --------
w/Choess Peanut Buster* Parfait Boveragwitems
DO Hounder- Nuttty Double Fudges -------------
wichill Hot Fudge Brownie Delight*
W/Choose Blizzards Flavqr Treats Soft Drink 32 fl. oz.".
DO Hounder Basket DealTM Home Pak: Milk
Fish Fillet Sandwich Pint Coffee
w/Choose Novelties: Hot Chocolate
Chicken Breast Fillet Sandwich Dilly* Bar Iced Tea
w/Choose Buster BarO and/or Fudge Nut Bar- Lemonade
French Fries DO* Sandwich and/or DC)wichO Diet Soft Drinks"
Regular
Large
Onion Rings
Regular
Optional Optional
-------- --------
BrazierO Food Items Dairy Queenlb Soft Serve Items
------------------- ------------------------------
Super Dog- Cone 9 oz.
W/Chili Dipped Cone 10 oz.
w/Choose Strawberry Shortcake
Basket Deals: Banana SupromoO
Chicken Breast Fillet Shake'N Sundae
Fish Fillet Parfait
Pork Loin Fritter Soda
Polish Sausage Sundae 14 oz.
Barbecue Sandwich Float 21 R. oz.
Chill BovA Mr. MistyO Float 21 ff. oz.'
Nachos Freeze 21 ff. oz. -
Pork Loin Fritter Mr. MistyO Freeze 21 H. oz.'
Chicken Nuggets BlizzardO Flavor Treat 32 fl. oz.
Fried Mushrooms Mr. Misty Klass' and/or Starki"O
Turnover DO Chipper Sandwich* or
Prepackaged Lettuce & Tomato Salads DC) Chocolate Chip Cookie SandwichO
Biscuit Breakfast... DO Push
Traditional Breakfast... Low-Fat Soft Frozen Yogurt...
Salad Bar... Dairy Queen* Frozen Cakes and)
Onion Rings Blizzards Pies... )Mandatory for Franchise
Large Queen'& Cho@ Premium Hard )Agreement I after 2/86.
lee Cr@. )
</TABLE>
* Mr. Misty* contract stores only.
** All carbonated drinks must be of high quality in national distribution and
made by a primary manufacturer.
*** These items are Optional menu additions to be sold only by Dairy Queen or
Dairy Queen/Brazier store operators who have been certified to do so by
American Dairy Queen Corporation or a Territory Operator for store
franchise owners franchised directly by them In their respective are". The
product weightsiportions for these items are Filled In the r product
preparation procedure* from ADOC.
4/86 Note: The Dairy Queen soft serve and Braizer food and beverage items
listed on the National Optional Menu, shown above, may be sold by Licensee
if Licensee desires to do so, but are not required to be sold.
(R) Reg. U.S. Pat. Off., Am. D.Q. Corp.
<PAGE>
DATE:_________________
INITIALS:_______________
APPENDIX D: ADDITIONAL ADDENDA TO
"DAIRY QUEEN" OPERATING AGREEMENT DATED ___/___/___
1. PARAGRAPH 4.6 (page 6). Licensor advises that the purpose of this
paragraph is full disclosure.
2. PARAGRAPH 6.1 (page 7). Licensee sells packaged alcoholic beverages
intended for off-premise consumption in Licensee's store building
adjoining the "Dairy Queen"/"Brazier" store. Licensee will not dispense
alcohol intended for on-premise consumption from the adjoining non-"Dairy
Queen"/"Brazier" store and will not sell any alcoholic beverages from the
"Dairy Queen"/"Brazier" store.
3. PARAGRAPH 9.5 (pages 13 & 14). Licensor will allow Licensee to submit
monthly the profit and loss statement and consolidated balance sheet
generated by Licensees in-house computer in lieu of American's standard
profit and loss statement form, provided Licensee's form identifies a
separate "Dairy Queen"/"Brazier" profit center.
4. PARAGRAPHS 10.1, 10.2 AND 13.4 (pages 17 & 22). Licensor will mail any
notices specified in said paragraphs via certified mail, return receipt
requested. For purposes of this Agreement, notice will be deemed to have
been received by Licensee on the earlier of the date of delivery or the
date of the first attempted delivery as indicated on the return receipt.
In the absence of a noted delivery date or a noted attempted delivery
date, notice will be deemed to have been received 15 days from the noted
date of mailing.
<PAGE>
AGREEMENT
---------
THIS AGREEMENT made and entered into by and between American
Dairy Queen Corporation, hereinafter referred to as "ADQ," and Bowlin's, Inc.,
hereinafter referred to as "Bowlin's."
WHEREAS, a certain "Dairy Queen" Operating Agreement, hereinafter
referred to as "Operating Agreement," dated July 29, 1976, was entered into by
and between Richard G. Kassel and G. Leone Kassel as Licensor, hereinafter
referred to as "Kassels," and Garland Sarratt and Virginia Sarratt as Licensee,
hereinafter referred to as "Sarratts," covering the operation of a "Dairy
Queen"/"Brazier" store in Deming, New Mexico; and
WHEREASI ADQ has acquired Kassel's rights as Licensor and
Bowlin's have acquired Sarratts rights as Licensee under said Operating
Agreement; and WHEREAS, Paragraph 1.1 of said Operating Agreement precludes the
Licensor (ADQ) from establishing another "Dairy Queen" retail store in Luna
County, New Mexico, hereinafter referred to as "protected area"; and
WHEREAS, Bowlin's wish to develop a store under ADQ's territory
operator Interstate Dairy Queen Corporation at the southwest quadrant of I-10
and exit 62 in Luna County, New Mexico; and
WHEREAS, the parties hereto, in order to facilitate such
development, have mutually agreed to modify said protected area;
NOW, THEREFORE in return for the mutual conveyance herein
contained, the parties agree as follows:
1. Paragraph 1.1 of the Operating Agreement, referred to above,
is hereby deleted in its entirety and the following
substituted therefor:
1.1 Establish and operate a retail store under the name "Dairy
Queen" at 1414 E. Spruce, Deming, New Mexico 88030 and
Licensor agrees that it will not establish another "Dairy
Queen" retail store within the following defined territory:
County of Luna, New Mexico, except for a location to be
developed by Licensee as a sublicensee of Interstate Dairy
Queen Corporation at the southwest quadrant of I-10 and exit
62.
-1-
<PAGE>
2. All of the terms and conditions of the Operating Agreement
referred to above shall remain unchanged.
IN WITNESS WHEREOF the parties have executed this Agreement the
23 day of October, 1989.
LICENSOR:
AMERICAN DAIRY QUEEN CORPORATION
By: Signature Illegible
----------------------------
Its: Vice President
----------------------------
LICENSEE:
BOWLIN'S, INC
By: Signature Illegible
----------------------------
Its: E.V.P
----------------------------
-2-
<PAGE>
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT is made and entered into as of the 23rd day of October 1989
with respect to the "Dairy Queen" Operating
Agreement dated June 7, 1989 between BONLINIS, INCORPORATED, a New Mexico
Corporation whose head office is located in Albuquerque, NM (hereinafter
"Licensee") and INTERSTATE DAIRY QUEEN CORPORATION, a Georgia Corporation whose
head office is located in Washington, DC (hereinafter "IDOC").
WITNESSETH:
WHEREAS, The parties desire to amend the aforesaid Operating Agreement,
NOW, THEREFORE, In consideration of the premises and of the considerations set
forth herein, the parties hereby agree as follows:
1. It is understood that, in the event that by December 31, 1991, ID(2C shall
have executed six or more sublicense agreements with respect to locations
in the I-10 territory as defined in the Territory Agreement dated January
8, 1988 between American Dairy Queen Corporation (hereinafter "ADO") and
IDOC, IDQC may elect, under terms of the Developmental Rights Agreement
dated January 1, 1977 between ADO and IDQC, to enter Into a territory
agreement (hereinafter "the New I-10 Territory Agreement") with respect to
the entire corridor area lying within one-half mile of the center line of
I-10, excluding therefrom any portion of said corridor area within the
state of Texas and any portion for which ADQ has prior to that time
granted "Dairy Queen"/"Brazier" franchise or license rights to any third
party.
2. In the event that IDQC does so enter into the New I-10 Territory
Agreement, effective upon execution of said Agreement, IDQC will pay to
Licensee one-third (1/3) of the continuing license fee that IDQC receives
from its sublicensee for the "Dairy Queen"/"Brazier" store located at the
southwest quadrant of I-10 and Exit 62 (hereinafter "the Site"). The
continuing license fee payable to IDQC by its sublicensee will be no less
than 4% of gross retail "Dairy Queen"/"Brazier" restaurant sales,
exclusive of retail sales tax and exclusive of sales of permitted products
as these products are defined in the Operating Agreement.
3. The IDQC payment specified in Paragraph 2 of this Amendment Agreement will
be payable to Licensee but will not be assignable.
4. If the Operating Agreement is terminated pursuant to provisions of said
Operating Agreement, this Amendment Agreement will become null and void.
5. IDQC will require sublicensee for the "Dairy Queen"/"Brazier" store at the
Site to furnish a store monthly report accurately setting forth total
sales, by department, on which a continuing license fee is payable, as
well as such other information as IDQC requires in accordance with
Paragraph 9.4 of the Operating Agreement. Effective upon execution of the
New 1-10 Territory Agreement, IDOC will forward to Licensee a copy of each
report and payment of the one-third (1/3) portion of the continuing
license fee by the 25th of the month following the month in which said
report and continuing license fee is received by IDQC, unless Licensee is
also the sublicensee for the "Dairy Queen"/"Brazier" store at the Site. In
such event. IDQC will not forward a copy of each report back to Licensee
and Licensee will retain the one-third portion of the continuing license
fee each month. The parties to this Amendment Agreement acknowledge that
ADQ and IDOC have the right to audit the sublicensee and agree that
Licensee will receive its pro-rated share of any continuing license fee
assessment as a result of an audit.
IN WITNESS WHEREOF, The parties have executed this Amendment Agreement effective
as of the day and year first above written.
<PAGE>
BOWLIN'S INCORPORATED
Signature Illegible
- -------------------
Witness
By: Signature Illegible
-----------------------------
E.V.P
Its: -----------------------------
INTERSTATE DAIRY QUEEN CORPORATION
Signature Illegible
- -------------------
Witness By: Signature Illegible
-----------------------------
Its: President
-----------------------------
Stuckey's
STUCKEY'S CORPORATION
2121 NEWMARKET PARKWAY
SUITE 144
MARIETTA, GEORGIA 30067
March 1, 1987
Dear Mr. Bowlin:
STUCKEY'S CORPORATION purchased the franchise operations of Pet's subsidiary,
STUCKEY'S, INC., on April 30, 1985. This letter will memoralialize the terms of
the franchise agreements regarding any STUCKEY'S franchise for this store as
listed in SCHEDULE I enclosed and is effective March 1, 1987.
1. As the owner of one of the original locations for which a franchise was
granted by STUCKEY'S, INC and now granted by STUCKEY'S CORPORATION, you
are entitled to representation on the Franchise Council of STUCKEY'S
CORPORATION to help us improve the STUCKEY'S Method of Operation
throughout the country.
2. STUCKEY'S CORPORATION will perform quality, value, service and
cleanliness inspections at your franchised store and will furnish you
with a written report on these inspections.
3. STUCKEY'S is a registered trademark owned by STUCKEY'S CORPORATION. You
are hereby granted, by STUCKEY'S CORPORATION, for the term of this
agreement, a license, to use the mark STUCKEY'S at the location listed
in the attached SCHEDULE I in accordance with reasonable quality
standards and usage rules that STUCKEY'S CORPORATION adopts from time to
time.
STUCKEY'S CORPORATION
Corporate Office o 2121 Newmarket Parkway,
Suite 144, Marietta, GA 30067 a (404) 951-1997
2135 Wisconsin Avenue. N.W., Suite 403, Washington, D.C. 20007 o (202) 338-3041
<PAGE>
-2-
4. You will pay a franchise fee on a monthly basis to STUCKEY'S CORPORATION
equal to one (1%) percent of all gross sales from your STUCKEY'S store
listed on SCHEDULE I, but not more than $7,500 per store per calendar
year (adjusted each January 1, during the term hereof for any changes in
the appropriate Consumer Price Index from the then preceding January 1).
Payment shall be made and reports of sales indicated in such reasonable
form as STUCKEY'S CORPORATION shall request from time to time.
5. You may cancel this agreement at any time after February 29, 1988, upon
ninety (90) days prior written notice sent to the above address.
STUCKEY'S CORPORATION may only cancel this agreement for your
non-compliance with any of the terms of our agreement-
If this letter correctly sets forth our agreement, please sign and date the
duplicate of this letter and return it with SCHEDULE I to us by March 15, 1987,
so our files will be complete.
Sincerely,
STUCKEY'S CORPORATION
/s/ Michael L. Bowlin
Michael L. Bowlin
President
AGREED TO:
/s/ Michael L. Bowlin DATE 3/5/87
- --------------------------------------- --------------------------
(Signature)
Enc. - SCHEDULE I (Address of franchised premise listed on this schedule)
<PAGE>
SCHEDULE I
Address(es) of franchised STUCKEY' S store(s):
(1) Store Name: Stuckey's Pecan Shoppe
------------------------------------------------------------
Store Number: #154
----------------------------------------------------------
Store Location: I-10 & US 80, Benson, Arizona
--------------------------------------------------------
(2) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(3) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(4) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(5) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(6) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(7) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(8) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(9) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
(10) Store Name:____________________________________________________________
Store Number:__________________________________________________________
Store Location:________________________________________________________
FRANCHISE AGREEMENT
-------------------
THIS AGREEMENT, made this 22nd day of February 1982 by and between
STUCKEY'S, INC. (hereinafter called "Company"), and BOWLIN'S INC. a Corporation
whose address is 136 LOUISIANA NE, ALBUQUERQUE, NEW MEXICO, 87108 (hereinafter
called "Dealer"), who is, or is to be, the owner lessee, or tenant of the
premises described in Section 1 herein.
W I T N E S S E T H:
THIS AGREEMENT is executed with the franchisee as a result of his
purchase of the franchise from franchisees to whom the Company originally
granted the franchise covered by this agreement. There is, therefore, no
provision in this agreement for an initial franchise fee.
WHEREAS, Company warrants that it is the owner of the entire right,
title and interest, together with all the good will connected therewith, in
various registered and common law trademarks and service marks, including,
although not limited to, the following:
(1) Registered Trademarks:
a. STUCKEY'S
b. STUCKEY'S with Carriage and Lace Design
c. STUART'S
d. STUCKEY'S GASOLINE
(2) Registered Service Mark:
STUCKEY'S
(3) Unregistered Service Mark:
STUCKEY'S PECAN SHOPPE
all of which are used in the business of Stuckey's Inc.: and
WHEREAS, the Company manufactures, distributes and sells certain
products under the trademarks listed above; and
WHEREAS, the Company has created and developed a chain of distinctive
style and type of drive-in confection and gift stores operated under the name
STUCKEY'S PECAN SHOPPE, in which it distributes and sells pecans, pecan
products, jellies, jams, preserves, foods and confections, souvenirs, gifts and
novelties, petroleum products, and other approved commodities, and wherein it
also provides a fast food service with distinguishing characteristics, all of
which, in part or otherwise, may be changed, added to, improved and further
developed from time to time; and
<PAGE>
WHEREAS, by reason of maintaining high standards of quality for the
goods it manufactures and sells and for the goods of others offered for sale in
its STUCKEY'S PECAN SHOPPE stores, and by reason of maintaining high standards
of service specifications in connection with the sale of such products in, and
the operation of, such stores, both those of its ownership as well as those
stores owned by others and operated under licenses from the Company, the Company
has successfully developed and built a strong demand for the products sold and
the services provided in its stores, and has successfully established a
reputation and good will related to its stores operated under the name STUCKEY'S
PECAN SHOPPE: and
WHEREAS, the Dealer, being fully informed as to the good reputation,
required high standards and legal rights of the Company, desires to engage in
the business of conducting a STUCKEY'S PECAN SHOPPE at and from the premises
described in Section 1 on the terms and conditions herein set forth; and
WHEREAS, the Company is ready and willing to license the Dealer to
establish and operate a STUCKEY'S PECAN SHOPPE outlet at the location described
in Section 1 on the terms and conditions hereinafter set forth for the selling
of products manufactured or distributed by the Company and other merchandise
approved by the Company, and providing of services identified with the operation
of a STUCKEY'S PECAN SHOPPE, all in accordance with standards of service
specified by the Company;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and promises herein made by the parties to each other and for other
good consideration acknowledged by each to be satisfactory, the parties hereto
agree as follows:
1. GRANT OF FRANCHISE:
------------------
The Company hereby grants to Dealer, and Dealer hereby accepts, subject
to the terms and conditions hereof, a franchise and license to operate a
STUCKEY'S PECAN SHOPPE and to use in connection therewith the trade names,
trademarks and service marks set forth in the prefatory language to this
franchise agreement. The franchise and license herein established are granted in
respect to the specific location at and defined as:
STUCKEY'S PECAN SHOPPE Located in Section 5, Township 24,
SOUTHWEST QUADRANT Range 11 West
INTERSTATE 10 & STATE RT. 418
DEMING, NEW MEXICO 88036
While this agreement shall be and remain in effect,
(a) Dealer shall use the said premises exclusively for the
business of a STUCKEY'S PECAN SHOPPE, including the operation
of a fast food service, according to standards adopted by the
Company for its STUCKEY'S PECAN SHOPPE system, and such other
features and services as may be adopted from time to time by
Company in the operation of the system and Dealer shall not
use, allow or permit the said premises to be used for any
other purpose unless approved in writing by the Company;
(b) Dealer shall have the non-exclusive privilege of selling
Company's products and the non-exclusive privilege of using
the name "STUCKEY'S" as applied to STUCKEY'S pecans, pecan
meat, pecan candies and other pecan products, jellies, jams,
preserves, confections, souvenirs, gifts and novelties, and
the privilege of using other trademarks and service marks of
Company related to the operation of a STUCKEY'S PECAN SHOPPE,
including a fast food service and such other features and
services as may from time to time be made a part of and
identified with the STUCKEYS PECAN SHOPPE system;
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<PAGE>
(c) Dealer may advertise the business operated under this license
under the name "STUCKEY'S PECAN SHOPPE". and Dealer may use on
said premises the Company's trade names, trademarks, designs,
advertising and form of structure.
2. LOCATION CLAUSE:
---------------
The Dealer acknowledges that the franchise and license granted under
this Agreement are solely for the specific location set forth in Section 1.
Nothing in this Agreement shall be construed to authorize or permit Dealer to
use any right, privilege or license herein granted at or in any other location
or for any other purpose; and Dealer shall not, except pursuant to agreement in
writing with the Company, engage in the business of this franchise at Any place
other than the place described above, provided, however, that Dealer shall be
permitted to erect billboards at other locations consistent with Company's
policies regarding outdoor advertising, and Dealer shall be permitted to engage
in other advertising and promotions of its franchise and license granted by this
Agreement.
3. RESTRICTION ON GRANT OF FRANCHISES WITHIN SPECIFIC AREA:
-------------------------------------------------------
The Company agrees that it shall not, during the term of this
Agreement, grant a similar franchise or license to any other person,
partnership, corporation, or other entity to operate or own a STUCKEY'S PECAN
SHOPPE, or erect a Company owned STUCKEY'S PECAN SHOPPE within the below
described area:
Deming, New Mexico: Beginning at the present store location on
Interstate 10, 100 miles on the same side of the highway in both
directions and 50 miles on Interstate 10 in both directions on the
opposite side of the highway.
4. PURCHASE OF TRADEMARK PRODUCTS:
------------------------------
Company will sell to Dealer all products bearing any trademark
identified in the preamble to this Agreement, subject to the availability
thereof, that Dealer shall order for the business licensed hereunder; and
subject to the terms and conditions hereof, Dealer will purchase, stock, offer
and sell all products usually offered and sold in STUCKEY'S PECAN SHOPPESL it
being the purpose of this provision to assure that all STUCKEY'S PECAN SHOPPES
are (i) supplied with Stuckey's manufactured and trademarked products, and (ii)
are identified with the national image of the STUCKEY'S PECAN SHOPPES and the
products and services available therein. Dealer shall have the obligation to
develop and promote diligently the sale of Stuckey's products from the premises
above and otherwise to use his best efforts in developing and promoting the
business of the franchise herein granted.
Dealer will not sell from the above premises any products manufactured
or sold by others unless the same are approved by the Company, which approval
the Company shall not unreasonably withhold. A dealer desiring to sell products
and services or to use supplies other than those offered by the Company shall
submit samples thereof to the Company in accordance with reasonable procedures
established by the Company. If necessary, the Company shall have sufficient time
to test, make laboratory analysis, or other review of the samples before
approving or rejecting the submittal. Company shall advise Dealer of its
approval or rejection within forty-five (45) days of Dealer's submittal in
respect to a request for approval. Any rejection shall be given in writing. An
approval shall be deemed given after the expiration of the forty-five (45) days
referred to above.
5. COMPANY TRADEMARKS:
------------------
Dealer acknowledges the validity and the ownership in the
Company of the trade names, trademarks, service marks and designs employed by
the Company in the operation of
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STUCKEY'S PECAN SHOPPES. Dealer shall use his best efforts in developing and
promoting such trade names, trademarks, service marks and designs. Dealer agrees
to use such trade names, trademarks, service marks and designs only as permitted
by the Company, and all good will created from such usage and developed in
conducting the business of the STUCKEY'S PECAN SHOPPE covered by this Agreement
shall inure to the benefit of the Company.
Dealer shall not use the name STUCKEY'S, or any name visually or
phonetically similar thereto as part of any corporate name, or as any prefix,
suffix or other modifying word, phrase, term, sign or symbol not expressly
authorized by Company. Dealer shall not use the name STUCKEY'S or any name
visually or phonetically similar thereto, on any product other than those
manufactured and sold by Company, unless expressly approved by the Company in
writing.
6. STANDARDS:
---------
During the term of this Agreement, from time to time, the Company shall
determine and approve standards of quality for all commodities bought, used or
sold on the above described premises, standards of service in connection with
their sale, standards of quality for all furnishings and equipment required in
the conduct of the business, and generally all specifications, standards and
operating procedures for the STUCKEY'S PECAN SHOPPES, including, but not limited
to, specifications, standards and operating procedures relating to:
(a) The safety, maintenance, cleanliness, function and appearance of
the Dealer's premises and its fixtures, equipment and signs;
(b) Qualifications, dress, general appearance and demeanor of
employees;
(c) Quality, style, warranty, and other characteristics of all
clothing and other merchandise carried for sale and all bags,
boxes and other packaging used in the sale thereof;
(d) Hours during which the store will be opened for business;
(e) Merchandise inventory requirements;
(f) Advertising and promotion;
(g) Use of standard forms;
(h) Extension of credit and acceptance of credit cards;
(i) Use and illumination of exterior and interior signs, posters,
designs and similar items;
(j) Government regulations;
(k) Physical and other inventories;
(1) Bookkeeping and record keeping; and
(m) The handling of returns and customer complaints and adjustments.
Company agrees to use its best efforts to impose these standards on all
other STUCKEY'S PECAN SHOPPES, whether Company owned or franchised.
-4-
<PAGE>
To attain further uniformity in the operation of the STUCKEY'S PECAN
SHOPPES and in the use of the trademarks and service marks licensed hereunder,
Dealer shall display only such signs or advertising as permitted by the Company.
All accoutrements such as cups, napkins, matches, bags, paper goods and the like
shall be of a quality consistent with that prescribed by the Company and shall
bear only such designs, colors, names and symbols as specified and approved by
the Company.
The Company shall disclose to and keep Dealer informed of its standard
operating procedures, and shall make available and provide Dealer with the
latest editions of its Store Operations Manual, Food Service Manual, and any
other relevant manual in effect from time to time, or other rule, regulation or
standard involving any other relevant manual in effect from time to time, or
other rule, regulation or standard involving any other items set forth in this
section. The Dealer shall comply with the standards and procedures prescribed
and communicated to him by the Company in order to assure the uniform
maintenance of the distinguishing characteristics of the STUCKEY'S PECAN
SHOPPES. In the event that the Company makes any significant policy change in
the STUCKEY'S PECAN SHOPPES system, including but not limited to the following:
the marketing of new products, modification of products, discontinuance of
products, additions, changes or modifications in the design of the exterior or
the interior of the building structure, and the like, the Company shall discuss
such proposed change with the Franchise Advisory Board before notifying Dealer
thereof.
7. TRAINING:
--------
To assist the Dealer in meeting and complying with the Company's
standard operating procedures, Company shall train the person engaged by Dealer
from time to time to be manager of the STUCKEY'S PECAN SHOPPE licensed by this
Agreement, in all phases of the operation of the business of a STUCKEY'S PECAN
SHOPPE in a training course specifically designed for such purpose. Expenses
incurred by the Dealer, including transportation and living expenses, wages and
other employee costs during such period of training shall be borne by Dealer;
but no charge shall be made by Company to Dealer for the training so provided.
Company shall maintain supervisory personnel for the purpose of
monitoring the conduct of all STUCKEY'S PECAN SHOPPES and effecting compliance
with operating procedures established for them in a manner consistent with and
which will not adversely affect the image of the STUCKEY'S PECAN SHOPPES, and
for the further purpose of giving such assistance to the Dealer as may be needed
and agreed upon from time to time, all without any additional charge to the
Dealer.
8. RIGHT TO INSPECTION:
-------------------
Company shall have the right at alltimes during Dealer's normal
business hours to enter upon the premises set forth above and to inspect
Dealer's facilities and operations to determine and assure compliance by Dealer
with the standards of quality and service prescribed by Company. Company shall
make available to Dealer within a reasonable period of time any report of such
inspections.
9. LAWS AND ORDINANCES:
-------------------
Dealer shall have the obligation to ensure that its business and
premises are conducted and maintained in compliance with all applicable laws and
ordinances.
10. SALES STAFF:
-----------
Dealer shall maintain an adequate staff of sales people and clerks and
a manager of the store who shall meet the standards prescribed by Company for
managers.
-5-
<PAGE>
11. BUILDING, CONSTRUCTION AND MAINTENANCE:
--------------------------------------
In the event a STUCKEY'S PECAN SHOPPE building is to be constructed on
the premises covered by this Agreement, Dealer shall not undertake construction,
and no reconstruction or alteration of an existing STUCKEY'S PECAN SHOPPE
structure, shall be undertaken without the written approval of the Company,
which approval shall not be unreasonably withheld and no substantial change or
modification shall be made in any building plan or specification without the
prior written consent of the Company, which approval shall not be unreasonably
withheld. The Company shall furnish plans and specifications for a STUCKEY'S
PECAN SHOPPE building to be constructed; and may supervise construction or
alteration so as to conform therewith. Dealer shall keep all structures in good
repair and well painted inside and outside. It shall at all times maintain the
premises, interior and exterior of buildings, salesroom, restrooms, storerooms,
and service station in a clean, orderly and sanitary condition satisfactory to
Company. Dealer shall do reasonable redecorating, restoration and repair as from
time to time may be reasonably required by the Company to meet the standards of
a STUCKEY'S PECAN SHOPPE operation.
12. SIGNS:
-----
Dealer shall prominently display on said premises advertising signs of
such nature, form, color, number, location, and size and composed of such
material as the Company shall direct or approve in writing.
In the event the Company disapproves of any Dealer's sign, the Company
shall give written notice to such Dealer and to the Franchise Advisory Board
explaining why such sign is not satisfactory to Company, and if such disapproved
sign is not corrected to Company satisfaction within a reasonable period of time
after written notice is received by the Dealer, provided that the Company
disapproval is not unreasonable, then Company shall have the right to enter upon
the premises for the purpose of removal thereof without paying therefor and
without being deemed guilty of trespass or any other tort.
In order properly to advertise the business, Dealer shall also erect
and maintain an adequate number of road signs upon a basis mutually satisfactory
to Dealer and the Company. Dealer shall incur all costs for such signs,
including, but not limited to, the construction, maintenance and insurance for
such signs.
13. ACCOUNTING AND FINANCIAL RECORDS:
--------------------------------
Dealer shall keep complete and up to date records regarding sales and
inventory, profit and loss from operations and financial standing of the Dealer,
and will permit the Company during normal business hours to inspect such records
and any tax returns of the Dealer. Dealer shall use cash registers having a
capacity to accumulate sales and otherwise of a number and type approved by the
Company.
In order to further the maintenance of a uniform accounting system and
practice, Company will advise and assist in setting up Dealer's books at no
extra charge to the Dealer and Dealer will permit an examination of his accounts
and records to be made by a person or persons, either in the employ of the
Company or acceptable to the Company, at such time or times as the Company may
designate in writing. A copy of a report of any such examination shall be
furnished both to Company and the Dealer. In the event that the books and
records of account of the Dealer are maintained by the Company on behalf of the
Dealer, the obligation of the Dealer under this paragraph shall be deemed to be
met. Company shall not be obligated to keep books of accounts for Dealer without
compensation.
-6-
<PAGE>
14. INSURANCE:
---------
Dealer shall purchase and keep in force during the term of this
Agreement public liability and other insurance in amounts and with carriers
meeting the minimum requirements as specified by the Company from time to time
in writing to the Dealer, which insurance shall cover public liability risk of
all kind including claims of product liability; and all such liability insurance
policies shall include Pet Incorporated and Stuckey's Inc. as named insureds.
Dealer shall file with the Company appropriate certificates of insurance and
provide for copies of all notices of renewal or cancellation to be sent to the
Company. The types of insurance required of the Dealer by the Company and the
limits therefor initially are as follows:
15. CUSTOMER COMPLAINTS:
-------------------
Dealer shall give Company immediate notice of any injury to person or
damage to property occurring on Dealer's premises or arising out of the
operation of its business as a STUCKEY'S PECAN SHOPPE. Dealer will receive,
investigate and adjust all complaints, whether received directly by Dealer or
forwarded to Dealer by the Company, arising out of the operation of its
business, all with a view to securing and maintaining the good will of the
public toward STUCKEY'S products and services. Dealer shall indemnify Company
and save Company harmless from and against all claims for damages to person or
property occurring on Dealer's premises or arising out of the operation of
Dealer's business, unless occurring as a result of a breach by the Company of
its obligations set forth in the next succeeding section of this Agreement.
16. PRODUCT WARRANTY:
----------------
Company warrants that all food products sold by it shall be as of the
date of delivery to Dealer neither adulterated nor misbranded within the meaning
of the Federal Food, Drug and Cosmetic Act, as amended, or pure food laws or
ordinances of the state or city in which Dealer is located, and will be products
which are not proscribed from introduction into interstate commerce under the
Federal Food, Drug and Cosmetic Act. Company shall indemnify Dealer and save
Dealer harmless and shall defend Dealer from and against any and all charges,
actions and proceedings, whether instituted by any government or any private
individual or entity, on account of any alleged adulteration or misbranding
which is in violation of the foregoing warranty.
17. ADVERTISING FEE:
---------------
Dealer shall pay to Company with each billing an amount equal to 4% of
the products sold through the warehouse with respect to which the company
customarily assesses an advertising fee on sales in transfers to franchisee and
company-owned pecan shoppes. These monies shall be placed in a special fund,
which shall consist of contributions of all STUCKEY'S PECAN SHOPPES (including
Company owned shoppes) and, shall be used in the advertising and promotion of
STUCKEY'S PECAN SHOPPES. Such advertising and promotion shall be created and
executed by the Company and the time for, methods of, and extent of all such
programs shall be determined solely by the Company.
Dealer may also establish advertising and promotional programs and
materials of its own, provided, however, that all advertising and promotional
material proposed by Dealer shall be approved by the Company prior to use.
18. PETROLEUM PRODUCTS:
------------------
It is an integral part of the style and pattern of business of
STUCKEY'S PECAN SHOPPES to provide for the sale of petroleum products. Company
shall, during the term
-7-
<PAGE>
hereof, provide specifications and standards to the Dealer for the operation of
such facilities and shall render such supervision as to assure compliance
therewith. It shall further establish procedures for the use of appropriate
credit cards in the purchase of petroleum products and shall advise and keep
Dealer informed thereof and furnish Dealer with supplies to be used in such
credit procedures.
The Dealer and Company both acknowledge and Dealer agrees, that Company
in negotiating contracts for the purchase of gasoline, may be paid a gasoline
commission or fee arising out of the sale of gasoline dispensed by Dealer at
Dealer's location.
19. APPLICATION OF AGREEMENT TO LOCATION FOLLOWING CONDEMNATION:
-----------------------------------------------------------
Should the specific location set forth in Section 1 be condemned by
governmental authority or any part thereof be condemned so that the location may
no longer be suitable for the operation of the STUCKEY'S PECAN SHOPPE franchise
granted by this Agreement, this Agreement shall be applicable to a new franchise
location that may be agreed upon between the Company and the Dealer provided,
however, that should a new location not be agreed upon between the Company and
the Dealer within two (2) years after the condemnation, then this Agreement
shall terminate. If for any other reason the Company and Dealer agree that it is
in the best interest of a franchise to discontinue the operation of the
STUCKEY'S PECAN SHOPPE at the specific location set forth in Section 1, the
parties may agree to move the franchise to another location and all the terms
and provisions of this Agreement shall continue in full force and effect
applicable to the franchise at such new location provided, however, that such
agreement shall be evidenced in writing and further provided that this section
shall not be construed to impose any costs of purchasing land, constructing
buildings, or otherwise related to said move, on the Company.
20. TERM OF AGREEMENT AND TERMINATION:
---------------------------------
Unless terminated as otherwise herein provided, the term of this
Agreement shall be for ten (10) years from the date hereof, and may be extended
thereafter at the option of the Franchisee for successive terms of five (5)
years upon Franchisee giving at least ninety (90) days' written notice of
extension prior to the end of the term of this Agreement or the end of any
extended term hereof, provided that Franchisee shall not be in default of any
provision of this Agreement, and provided, further, that Franchisee shall
execute Company is then current standard form franchise agreement, which may
include higher percentage royalty and advertising fees than provided for herein.
During the life of this agreement, it is anticipated that Stuckey's
will continue to provide additional services, management expertise and
profitable growth opportunities. Some of which may require increases in the
royalty and/or advertising fee rate, subject to mutual agreement.
Notwithstanding the provisions of the foregoing paragraph, Franchisee may
terminate this Agreement at any time by giving Company ninety (90) days' written
notice of termination, and the Company may terminate this Agreement at any time
by giving ninety (90) days' written notice of termination to the Franchisee or
by giving written notice of termination to the Franchisee upon any of the
following conditions:
(a) The filing of a petition in bankruptcy by or against the
Franchisee, or any partner if the Franchise is a partnership;
(b) The making of an assignment for the benefit of creditors or
the institution of any proceeding under any state insolvency
law by the Franchisee, or any partner if the Franchise is a
partnership;
-8-
<PAGE>
(c) The breach by Franchisee of any obligation of Franchisee under
this Agreement and the failure of the Franchisee to correct
such breach to the satisfaction of the Company upon demand and
within thirty (30) days thereafter.
Waiver, however occurring, by the Company of any specific default by
the Franchisee shall not affect or impair the Company's rights in respect to any
subsequent default whether of the same or a different kind. No delay or omission
of the Company to exercise any right arising from a default shall affect or
impair the Company's rights as to any such default or a future default. In the
event any bankruptcy or insolvency proceeding involves less than all parties
constituting the Franchisee, the Company shall not have the right to terminate
this Agreement as to the parties involved in such bankruptcy or insolvency
proceeding, provided said other parties elect in writing, within a reasonable
period of time after the filing of any such bankruptcy or insolvency proceeding,
to continue the STUCKEY'S PECAN SHOPPE established pursuant hereto and agree to
the terms and provisions of this Agreement for the unexpired term thereof.
21. ASSIGNMENT:
----------
Dealer shall not sell, transfer or assign this Agreement, or any
interest herein, and shall not sell, transfer, assign, lease or sublet or offer
to sell, transfer, assign or sublet (except as security for indebtedness
incurred in connection with the business being conducted hereunder) any interest
in the premises, or any part thereof, used in the operation of this franchise,
or in the business thereon conducted, or in any equipment or furnishings located
thereon which are standard to STUCKEY'S PECAN SHOPPES, without first offering
the same to the Company in writing at a stated price and upon stated terms which
offer the Company may accept within sixty (60) days, and if the Company does not
accept such offer with the sixty day period, then Dealer may within the sixty
days thereafter, sell, transfer, assign, lease or sublet such interest as the
case may be, but not at a lower price nor on more favorable terms than offered
to the Company, provided, however, that no sale, transfer, assignment, lease or
subletting to a third party shall be made without the prior written consent of
the Company, which consent the Company will not unreasonably withhold, and
provided further that it shall not be deemed unreasonable for the Company to
withhold its consent to a sale, transfer or assignment of this Agreement, or any
interest herein, if the transferee shall not agree in writing to take subject to
the terms and provisions of this Agreement for the unexpired term thereof.
Notwithstanding any of the foregoing,
(i) If Dealer hereunder constitutes more than one individual,
corporation, partnership or other entity, any one thereof
shall have the right to sell, transfer, assign, lease or
sublet any interest in the premises on which the franchise is
located, any interest in the franchise itself, or any interest
in the franchise itself, or any interest in the building
inventory, equipment, furniture or furnishings used for the
business of the franchise to any other individual,
corporation, partnership or other entity who, at the time of
such sale, transfer, assignment, lease or subletting is also
one of the individuals, corporations, partnerships, or other
entities constituting the Dealer under this Agreement;
(ii) Dealer, or any individual Dealer if Dealer is more than one
person, may during his lifetime, give to any trust, person,
corporation or other Donee whatsoever any interest in the
premises on which the franchise is located, any interest in
the franchise itself, or any interest in the building,
inventory, equipment, furniture, or furnishings used in the
business of the franchisee and said Donee shall be entitled to
all rights hereunder previously
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<PAGE>
held by the Dealer or such individual; provided, however, that
the Donee agrees in writing addressed to Company within a
reasonable period of time after such gift to be bound by the
terms and provisions of this Agreement;
(iii) Any legatee or heir of the Dealer or individual Dealer if
Dealer is more than one person, shall upon the death of the
Dealer be entitled to all the rights hereunder previously held
by the Dealer or such member; provided, however, that such
legatee or heir agrees in writing within a reasonable period
of time after receiving any such property to be bound by the
terms and provisions of this Agreement;
(iv) Dealer may incorporate its business and may assign its
interest in this Agreement to such corporation provided that
Dealer shall be the owner of at least fifty-one percent (51%)
of the stock of such corporation and that the activities of
the corporation are confined exclusively to the operation of
the STUCKEY'S PECAN SHOPPE hereby licensed. In the event
Dealer is a corporation, or becomes a corporation and assigns
this Agreement to said corporation, then at any time that
persons other than Dealer become directly or indirectly the
owners or controllers of more than forty-nine percent (49%) of
the stock of said corporation, this Agreement shall become
immediately terminable at the option of Company. Further, in
the event Dealer is a corporation, it shall not be deemed a
breach of this section for any shareholder in Dealer to sell,
assign, or transfer any shares to a member of his immediate
family.
22. OBLIGATIONS AFTER TERMINATION:
-----------------------------
Upon the sale by Dealer of the premises or property to the Company or
to a third party under the provisions of the preceding section, the obligations
and rights of this Agreement shall terminate, except in regard to the
obligations of Dealer to take action or to abstain from taking action after the
termination of this Agreement and the payment of all outstanding accounts.
In the event of termination of this Agreement without a concurrent
execution or assumption of Dealer's obligations hereunder by any assignee or
other successor in interest as herein permitted, the Company shall purchase from
the Dealer and the Dealer shall sell to the Company:
(a) All merchandise that is in a saleable condition manufactured,
distributed and/or packed under the STUCKEY'S label on hand in
Dealer's place of business or in Dealer's possession at
Dealer's net cost exclusive of transportation charges;
(b) Electrically lighted STUCKEY'S signs displayed on the building
or elsewhere on the premises that had been purchased from the
Company. The purchase price will be based upon 10%
depreciation per year, and with consideration given to the
condition of the sign with particular regard to unusual
deterioration, if any.
Upon the termination of this Agreement for whatever reason, Dealer
shall immediatel discontinue use of the name STUCKEY'S or any name visually or
phonetically similar, and shall discontinue at the above described premises the
use of all trade names, trademarks, service marks, signs, structures and form of
advertising indicative of a STUCKEY'S PECAN SHOPPE, or the business or products
thereof, and in the event said premises are not purchased by the Company, or are
not used with permission of Company by another in the business
-10-
<PAGE>
of a STUCKEY'S PECAN SHOPPE, Dealer shall make such changes in signs or
buildings so as effectively to distinguish it from its former use and from other
STUCKEY'S PECAN SHOPPES.
If Dealer, after termination of this Agreement, shall refuse or neglect
to keep or perform the provisions of this section, Dealer shall reimburse
Company for all costs, attorneys' fees, and other expenses incurred in
connection with legal actions to require Dealer to comply herewith and, in
addition, Dealer shall pay to Company the sum of $500 per day as damages for all
the time that Dealer displays the name STUCKEY'S on outdoor advertising or on a
sign at the front of or on the building after thirty (30) days after the
termination date.
23. COVENANT NOT TO COMPETE:
-----------------------
While this Agreement is in effect, Dealer shall not engage in any
business the same as or similar to the business covered by this Agreement
located within the area set forth in Section 3.
24. DEALER NOT AN AGENT OR LEGAL REPRESENTATIVE OF COMPANY:
------------------------------------------------------
This Agreement shall not constitute Dealer the agent or employee, or
legal representative of the Company for any purpose whatsoever. The Company and
the Dealer are not and shall not be considered as joint venturers or partners or
as agents of each other. No representations shall be made by either party that
would create apparent agency, and neither party shall have the power to bind or
obligate the other except as provided in this Agreement
25. NOTICES:
-------
Any notice required to be given by either party to the other under or
in connection with this Agreement shall be in writing and delivered personally
or by certified or registered mail, return receipt requested, with adequate
postage thereon. Notices to Dealer shall be directed to Dealer or his
representative at Dealer's place of business. Notices to Company shall be
directed to the President, Stuckey's, Inc., 4501 Circle 75 Parkway, Suite 6360,
Atlanta, Georgia, 30339.
26. SEVERABILITY:
------------
If any provision of this Agreement shall be construed to be illegal or
invalid, the validity of any of the remaining portions of this Agreement shall
not be affected thereby.
27. ARBITRATION:
-----------
Any controversy or claim arising out of or related to this Agreement,
or the breach thereof, shall be settled by arbitration. The party initiating the
arbitration proceedings shall give written notice to the other party indicating
such party's desire to arbitrate, the section of this Agreement in dispute, and
the reasons therefor, and the name of the arbitrator selected by such party. The
other party shall give written notice within thirty (30) days thereafter,
indicating the name of the arbitrator selected by such party. The two
arbitrators so selected shall within a reasonable period of time select a third
arbitrator. The arbitration proceedings shall be held within a reasonable period
of time as selected by the arbitrators at a site located in the area set forth
in Section 3 selected by the arbitrators. Each party shall bear the expenses and
fee of the arbitrator selected by him but all other expenses and fees shall be
borne equally by the two parties. Judgment upon an award of a majority of the
arbitrators shall be binding and may be entered in any court having jurisdiction
thereof. Except as otherwise expressly provided, the proceedings shall be
conducted in accordance with the rules then prevailing of the American
Arbitration Association.
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28. GENERAL:
-------
This Agreement cancels and supersedes any and all other agreements,
oral or written, among the parties with respect to the subject matter hereof and
contains all covenants and agreements between the parties with respect thereto.
No change in, addition to or erasure of any printed portion of this
Agreement (except filling in blank lines) shall be valid or binding upon the
Company unless the same is approved in writing by the President of the Company.
No agreement between the parties which is at variance with any of the
provisions of this Agreement or which imposes definite obligations upon either
party not specifically imposed by this Agreement or which is intended to be
effective or performed following the expiration or the termination of this
Agreement and imposes obligations or extends the time for performance thereof
other than as provided in this Agreement shall be binding upon either party
unless executed by Dealer and the President or Executive Vice President of
Company.
STUCKEY'S INC. BOWLIN'S, INC.
--------------------------
BY Don Barnes Michael L. Bowlin
- ----------------------------------- --------------------------
DON BARNES, PRESIDENT MICHAEL L. BOWLIN
Subject to Mutual
Acceptance of Attached
"Addendum"
NOTARY PUBLIC: Janice Wingham
-----------------
Notary Public, Georgia, State at Large
My Commission expires: My Commission Expires October 25, 1985
-------------------------------------------
<PAGE>
ADDENDUM TO FRANCHISE AGREEMENT
INTERPRETATION AND COMMENT OF CERTAIN PROVISIONS IN STUCKEY'S, INC.,
FRANCHISE AGREEMENT AS AGREED UPON IN A TELEPHONE CONVERSATION BETWEEN
DEALER AND COMPANY HELD ON MARCH 24, 1982.
1. Page 3, Article 4, Paragraph 2, states that a dealer desiring to sell
products other than those offered by the Company must submit samples and
allow forty-five (45) days for Company approval. After discussion and
interpretation of this provision by M. L. Bowlin, Executive Vice President,
Bowlin's Incorporated, (hereinafter called "Dealer"), and Don Barnes,
President, Stuckey's Incorporated, (hereinafter called "Company"), it was
mutually agreed that this requirement be waived. Both Dealer and Company
acknowledge that the intent of this section is to prevent the introduction
of directly competing products that are otherwise identical to the
trademarked products supplied by Company. Further, Dealer hereby agrees not
to introduce such identical products or business format not consistent with
a Stuckey's Pecan Shoppe without approval of Company.
2. Pages 4 and 5, Article 6, states that Company shall keep Dealer informed of
the standard operating procedures by providing Dealer with the current
editions of its store Operations Manual, Food Service Manual, and any other
relevant manuals, regulations, or standards that may be in effect. During
the discussion of this provision, Dealer was assured by Company that all
manuals would be provided, and that the policies contained therein are
prudent and reasonable.
3. Page 6, Article 11, states that no alteration of an existing Stuckey's
Pecan Shoppe structure shall be undertaken without written approval of the
Company. As a result of the disucssion of this provision by Dealer and
Company, it was mutually agreed that written approval is not needed for the
changing or altering of the display sales areas of the store as long as
such alterations do not involve the relocating of fixed partitions or
walls, or other substantial structural changes.
4. Page 7, Article 14, states the necessity of Dealer provided insurance that
protects the interests of both Dealer and Company, but the paragraph does
not detail the exact amount and types of insurance required. Company
informed Dealer that the Dealer's customary and usual insurance coverage is
acceptable. Further, Dealer will instruct its insurance agent to provide
whatever documentation Company desires upon receiving a written request for
same.
5. Page 11, Article 23, states that during the term of this Agreement that
Dealer shall not compete by engaging in any similar business for a distance
of 100 miles in both directions on the same side of the highway and 50
miles in both directions on the opposite side of the highway. Dealer
informed Company that Dealer presently operates the following stores within
a 50 and 100 mile radius in both directions:
<PAGE>
Page 2 / ADDENDUM TO FRANCHISE AGREEMENT
(1) Approximately 25 miles West on the same side of the highway known as
Bowlin's Continental Divide Trading Post; (2) Approximately 5 miles West on
the same side of the highway known as Bowlin's Tepee Store; (3)
Approximately 35 miles East on the opposite side of the highway known as
Bowlin's Akela Flats Trading Post; (4) Approximately 55 miles East on the
opposite side of the highway known as Bowlin's Old West Trading Post.
Company acknowledges that the existence of these similar and competing
businesses shall not violate Article 23, or any other provisions of the
Franchise Agreement, and further, that any "covenants not to compete"
contained in the Franchise Agreement are hereby waived with respect to the
businesses mentioned herein.
6. Page 11, Article 25, states that notices shall be directed to Dealer at his
place of business. Dealer requests that all notices by directed to the
following address:
Bowlin's Incorporated
136 Louisiana N.E.
Albuquerque, NM 87108
7. Page 12, Article 28, states that no changes in, or additions to, the
.Franchise Agreement shall be binding upon either party unless executed in
writing by both Dealer and the President or Vice President of Company.
Dealer therefore requests that Company sign this Addendum to Franchise
Agreement and that this Addendum shall be attached to, and become a part
of, that Agreement. Further, that no other changes in this agreement shall
be binding unless acknowledged in writing and signed by both parties.
STUCKEY'S INC. BOWLIN'S INC.
BY /s/ Don Barnes BY /s/ M.L. Bowlin
-------------------------- ------------------------------------
DON BARNES, PRESIDENT M. L. BOWLIN, EXECUTIVE VICE PRESIDENT
STATE OF Georgia )
---------- ) ss
COUNTY OF Cobb )
-----------
Before me on this 31th day of March, 1986, personally appeared Don Barnes
to me know to be the persons who executed the foregoing instrument and
acknowledged same to be their free act and deed.
/s/ Janice Wingham
------------------------
Notary Public
My Commission Expires: Notary Public, Georgia,
My Commission Expires October 25, 1985
<PAGE>
Page 3 / ADDENDUM TO FRANCHISE AGREEMENT
STATE OF New Mexico )
------------ ) ss
COUNTY OF Bernalillo )
------------
Before me on this 26th day of March, 1982, personally appeared M.L. Bowlin
to me know to be the persons who executed the foregoing instrument and
acknowledged same to be their free act and deed.
/s/ Signature Illegible
----------------------------
Notary Public
My Commission Expires: 6/30/83
<PAGE>
PERSONAL GUARANTY AND INDEMNITY
-------------------------------
THIS GUARANTY AND INDEMNITY is made by MICHAEL L. BOWLIN and MONICA A.
BOWLIN, of 136 LOUISIANA NE, ALBUQUERQUE, NEW MEXICO, 87108, hereinafter
referred to individually and collectively as "Guarantors";
As an inducement for Stuckey's Inc., a Delaware corporation herein
referred to as "Stuckey's", to extend credit to BOWLIN'S INC. a CORPORATION,
herein referred to as "Franchisee". in the course of selling supplies and making
purchases of petroleum products and other materials for the Franchisee's
account, Guarantors represent, warrant, and agree as follows:
1. Guarantors do hereby absolutely and unconditionally guarantee the
full and complete performance by Franchisee of all the terms, covenants and
conditions of the Franchise Agreement between Stuckey's and Franchisee, whether
entered into contemporaneously with this Guaranty or not, and do further
guarantee the payment of all amounts due Stuckey's from Franchisee.
2. Guarantors do agree to indemnify and hold Stuckey's harmless from
and against all liability, losses, damages, costs and expenses (including
reasonable attorneys fees) suffered or incurred by Stuckey's arising out of the
Franchisee's failure to pay any and all amounts due third parties.
3. Guarantors within ten days of receipt of written demand from
Stuckey's, shall pay to Stuckey's any and all losses, damages, costs and
expenses (including reasonable attorneys! fees) suffered or incurred by
Stuckey's as a result of any default by Franchisee or the breach of any
agreement by Franchisee. Stuckey's shall not be required to exhaust its legal
remedies against Franchisee before making written demand of Guarantors. If there
is more than one Guarantor, each makes this Guaranty both jointly and severally.
4. Execution of this Guaranty and performance of its terms shall not
result in the breach of any term or provision, or constitute a default under,-
any indenture, mortgage, deed of trust, security agreement, financial agreement
or contract to which Guarantors are a party or are otherwise bound.
5. In the event the Guarantors shall pay to Stuckey's any obligation of
Franchisee as provided herein, Guarantors shall be subrogated to Stuckey's right
of recovery against Franchisee to the extent of any such payment made by
Guarantors.
6. This Guaranty shall inure to the benefit of Stuckey's, its parent
company, Pet Incorporated, their successors and assigns, and shall be binding
upon Guarantors, their successors, assigns, heirs and legal representatives.
7. Guarantors expressly agree that this Guaranty and its provisions
shall not be modified, amended or waived in any manner except by written
instrument signed by Stuckey's.
<PAGE>
IN WITNESS WHEREOF, Guarantors have executed and delivered this
Guaranty this 24th day of March, 1982.
GUARANTORS:
MICHAEL L. BOWLIN /s/ MICHAEL L. BOWLIN
- --------------------- ---------------------------------
(Signature of Guarantor)
MONICA A. BOWLIN /s/ MONICA A. BOWLIN
- --------------------- ---------------------------------
(Signature of Guarantor's Spouse)
STATE OF New Mexico )
------------)ss
COUNTY OF Bernalillo)
----------
Before me on this 24th day of March , 1982, personally appeared Michael
L. & Monica A. Bowlin to me know to be the persons who executed the foregoing
instrument and acknowledged same to be their free act and deed.
Signature Illegible
----------------------------
Notary Public
My Commission Expires: 6/30/83
-2-
