<PAGE>
UNITED STATES
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Securities and Exchange Commission
----------------------------------
Washington, D.C. 20549
-----------------------
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ______________.
Commission File Number: 1-8833
BIG O TIRES, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<C> <C>
Nevada 87-0392481
-------------------------------------------------- -------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
11755 East Peakview Avenue
Englewood, Colorado 80111
--------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 790-2800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
$0.10 Par Value Common Stock
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's voting stock held as of March 24,
1995, by nonaffiliates of the registrant was $35,473,244.50.
As of March 24, 1995, the registrant had 3,311,766 shares of its $0.10 par value
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
The definitive Proxy Statement for the 1995 Annual Meeting of Shareholders is
incorporated by reference in lieu of the information required by Part III
hereof.
Total Pages 718.
Exhibit Index Page 57
1
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PART I
------
Item 1. BUSINESS
-----------------
(a) General Development of Business
-------------------------------
(a) (1) General. The primary business of Big O Tires, Inc. (the "Company")
is to franchise Big O retail stores ("Retail Stores") and supply Retail Stores
with tires and related automotive products. On a limited basis, the Company
engages in site selection and real estate development for new, franchised
Retail Stores, and the Company also owns and operates Retail Stores. As used
herein, the term Retail Stores also includes the Company-owned Retail Stores
unless a distinction is warranted for clarification. Each independently owned
corporation, partnership and sole proprietorship that has entered into a
Franchise Agreement with the Company is hereinafter referred to as a
"Franchisee" or collectively as the "Franchisees."
As shown on the following page, at January 31, 1995, the Company had 378 Retail
Stores, 374 of which were franchised and 4 of which were Company-owned. The
Company also distributes its products at wholesale prices to 37 unaffiliated
retail tire stores in British Columbia, Canada, with which the Company has a
user agreement (the "Canadian Licensees").
The Company sells its Franchisees and Canadian Licensees an exclusive line of
premium private label Big O brand passenger, light truck, recreational and high
performance tires that are primarily manufactured by Kelly-Springfield Tire
Company (a division of The Goodyear Tire & Rubber Company) ("Kelly-
Springfield") and secondarily for a limited time by General Tire, Inc. (a
subsidiary of Continental AG) ("General"). The Company currently distributes
tires, its exclusive ProComp high performance wheels and other automotive
products through its Regional Sales and Service Centers ("RSC") located in the
states of California, Colorado, Idaho, Indiana and Nevada. In June 1993, the
Company adopted a plan to consolidate three (3) of its RSCs into a single
facility located near Las Vegas, Nevada (the "Las Vegas RSC"). The Las Vegas
RSC opened on March 6, 1995. One of the three RSCs that was consolidated into
the Las Vegas facility is the Denver, Colorado, RSC, which closed on March 24,
1995. In December 1994, the Company sold its Denver RSC to an unrelated third
party. The Denver RSC sale was consummated with a $242,000 down payment,
certain rent concessions, and the assignment of the Company's promissory note
and mortgage on the facility from the existing mortgage. The other two RSCs
that are to be or have been consolidated into the Las Vegas RSC are in the
cities of Ontario and Vacaville, California. The Ontario RSC is scheduled to
close on or around May 1, 1995. The Company is obligated under the lease on
the Ontario warehouse until June 24, 1998. In June 1994, the Company leased
the entire Vacaville, California, RSC under an agreement that will continue
through March 31, 2000.
2
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The following table sets forth the number of Retail Stores, by marketing
region, as of January 31, 1995:
<TABLE>
<CAPTION>
===========================================================================================================
REGION # of Franchisee # of Company # of Joint Total
Owned Stores Owned Stores Venture
Stores *
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTHWEST REGION
(includes Arizona, southern parts of 84 1 10 95
California, Nevada; and Utah)
-----------------------------------------------------------------------------------------------------------
WESTERN REGION
(northern part of California and 97 0 1 98
Western Nevada)
-----------------------------------------------------------------------------------------------------------
NORTHWEST REGION
(Idaho, Montana, Northern Nevada, 77 1 1 79
Oregon, Utah, Washington and
Wyoming)
-----------------------------------------------------------------------------------------------------------
CENTRAL REGION
(includes Colorado, Nebraska, New 68 0 1 69
Mexico, Oklahoma, South Dakota,
Texas and Wyoming)
-----------------------------------------------------------------------------------------------------------
SOUTHEAST REGION
(includes Indiana, Kentucky and 35 2 0 37
North Carolina)
-----------------------------------------------------------------------------------------------------------
TOTAL 361 4 13 378
===========================================================================================================
</TABLE>
* The Company, through its wholly-owned subsidiary, Big O Retail Enterprises,
Inc., a Colorado corporation, also enters into retail joint ventures with
existing Franchisees so that additional Retail Stores can be opened and, in
certain selected cases, may buy an interest in existing Retail Store(s) through
an existing joint venture. The Company looks to its joint venture partner to
manage the Retail Store and to purchase the Retail Store from the joint venture
after three (3) years of operation using a formula allowing for a determination
of the purchase price to be paid to the Company.
In 1994, twenty-six (26) Franchisee owned Retail Stores were opened and nine
(9) were closed. The Company sold five (5) of its Company-owned Retail Stores
located in the states of Colorado, Kentucky and Oklahoma to Franchisees, and
the Company acquired four (4) previously franchised Retail Stores in Kentucky,
two (2) of which continue to be operated as Company-owned Retail Stores. The
Company closed four (4) Company-owned Retail Stores located in the states of
Colorado, Oklahoma and Kentucky that the Company acquired in 1993 and 1994.
The Company continues to look to convert existing retail tire stores and retail
tire store chains to the Big O system as part of its growth strategy, but has
met with limited success using this growth strategy. The Company has not
emphasized the use of Company-owned Retail Stores as part of its business, but
in certain circumstances the Company may acquire tire stores and/or retail tire
store chains as a means to grow its business.
Investment Banker. At the Annual Meeting of Shareholders held in June 1994,
the shareholders adopted a resolution calling for the Company to engage an
investment banker to explore all alternatives for enhancing the value of the
Company. In implementing this resolution, the Company's Board of Directors
established the Investment Committee of the Board which retained PaineWebber
Incorporated to fulfill this shareholder proposal. In September 1994, the
proponent of the June 1994 shareholder proposal, upon invitation by the Board,
began assisting the Investment Committee in this process. On December 23,
1994, the Company announced that the Investment Committee had agreed to enter
into a period of exclusive negotiations with, and agreed to pay certain
expenses of, a group of Company officers, managers and Franchisees ("Dealer-
Management Group") that made an offer to acquire the outstanding shares of the
Company for $18.50 per share. The Dealer-Management Group originally made the
offer to acquire the Company on December 2, 1994, subject to certain conditions
including the Dealer-Management Group's ability to obtain the necessary
financing. The proposed transaction would have taken the Company private
3
<PAGE>
and was led by the Company's President, other officers and managers and
Franchisees acting on behalf of certain of the Company's Franchisees. On
February 7, 1995, the Company was notified that the Dealer-Management Group
elected not to continue negotiations to acquire the Company due to the
difficulties in obtaining commitments for the elements of financing necessary
to consummate the acquisition and the inability of the representatives of the
Franchisees and management to reach mutual understandings on certain
fundamental issues relating to the acquisition. The Dealer-Management Group
expenses the Investment Committee agreed to pay totalled $115,000.
At the time the Dealer-Management Group withdrew the offer to acquire the
Company, the Company was also informed by representatives of management that
they continue to be interested in completing a purchase of the Company on
mutually agreeable terms to shareholders, management, certain Franchisees and
the Board. The Company has advised the management representatives that it will
consider carefully credible proposals but the Board of Directors will continue
to review alternatives to enhance the value of the Company. In the meantime,
management of the Company has been restructured, creating the Office of the
Chief Executive. Members of the Office of the Chief Executive consist of the
Company's Chairman, Vice-Chairman and President. The Board of Directors is
permitting the Company's President to devote a portion of his time to efforts
to acquire the Company until such time as the Board of Directors advise
otherwise. In a Schedule 13D, as amended, the Company was notified that certain
members of management and certain members of Franchisees met on March 2 and 3,
1995, and evaluated the possibility of re-opening negotiations with the
Investment Committee regarding the acquisition of all of the outstanding shares
of the Company. Those persons stated that they determined to contact the
Investment Committee regarding such negotiations and that they believed that if
an agreement is to be reached regarding such a transaction, the price per share
of common stock of the Company must be below the price of $18.50 per share
previously discussed. As of March 24, 1995, the Investment Committee has not
been approached by these persons. The Company has also been notified in two
additional amended Schedule 13D filings, one of which was prepared by the
Balboa Investment Group, L.P., a California limited partnership and Mr. Kenneth
W. Pavia, Sr., the sole general partner of this partnership, collectively the
"Balboa Group", and the other amended filing was prepared by those persons
mentioned above, that the Balboa Group has entered into a confidentiality
agreement with certain Company Franchisees who have expressed an interest in
acquiring the Company. The amended filings indicate that the Company's
Franchisees intend to discuss with the Balboa Group the possibility of
acquiring the Company's common stock owned or controlled by the Balboa Group,
contingent upon, among other things, the completion of the acquisition of the
Company. Those talks would cover the possibility of selling the Balboa Group's
common stock in the Company to certain of the Company's Franchisees.
(a) (2) Information Required From Registrants on Form S-1
-------------------------------------------------
Not applicable.
(b) Financial Information About Industry Segments
---------------------------------------------
During the three years ended December 31, 1994, over ninety percent (90%) of
the Company's revenues, operating profit and identifiable assets have been
attributable to one industry segment, i.e., ownership, operation and
franchising of Retail Stores and the related wholesale and retail marketing of
tires and other automotive aftermarket products to or through such Retail
Stores. During this same three year period, less than ten percent (10%) of the
Company's revenues, operating profit and identifiable assets have been
attributable to the Company's development of real estate sites for Retail
Stores through its wholly-owned subsidiary, Big O Development, Inc.
("Development"), and one partnership.
(c) Narrative Description of Business
---------------------------------
The Company's principal business is franchising of Retail Stores and supplying
these stores with tires and related automotive aftermarket products through the
Company's RSCs. The Retail Stores are located primarily in the western United
States as indicated on the chart on page 3. The Company also distributes its
products to the 37 Canadian Licensees (see "Canadian Operations" on page 6).
In March 1994, the Company became a member of Summit Tire and Battery, Inc.
("Summit"), an independently owned buying group based in Brandon, Florida. In
certain parts of the country, Summit provides the Company
4
<PAGE>
exclusive access to the Heritage line of passenger and light truck tires. The
Heritage brand is manufactured by Kelly-Springfield.
In June 1994, subject to certain Company established limitations for
development activities, the Company formulated a real estate development
program involving the sale of Retail Store sites to prospective Franchisees
that qualify for Small Business Administration ("SBA") guaranteed loans. In
certain instances, the Company may provide subordinated loans (as to
collateral) not to exceed $50,000 for the prospective Franchisee to qualify for
this SBA guaranteed funding. The Company anticipates that this financing will
be repaid to the Company by the Franchisee, amortized monthly over five (5)
years. Another component of the Company's real estate development program is
site selection and development of the site. The Company anticipates that this
construction financing will be repaid if the financing through the SBA
guaranteed source is obtained by the prospective Franchisee.
The Company has also assisted in obtaining financing for new Retail Store
development with an unrelated third party financing company by providing debt
guarantees for joint ventures. The Company also has provided lease guarantees
to developers on behalf of Franchisees and straight debt financing for Retail
Stores developed internally.
In June 1994, the Company opened the RSC located in New Albany, Indiana, at a
total cost of approximately $1,985,000. Change orders associated with the
completion of this RSC totalled $73,000. In February 1995, the Company
acquired the Las Vegas RSC at a total cost of approximately $7.7 million. At
March 20, 1995, change orders associated with the completion of this RSC
totalled approximately $300,000. The Las Vegas RSC opened on March 6, 1995.
(i) Products, Services and Marketing.
---------------------------------
Franchise Operations:
---------------------
With respect to the Company's franchise operations, the primary products
provided and services related thereto are described in the franchise
agreement with each Franchisee (the "Franchise Agreement"). The Franchise
Agreement essentially grants to the Franchisee a ten (10) year license to
sell Big O brand tires and to use Company trademarks and trade secrets in
the operation of a Retail Store at a specific location within a trade area
defined in the Franchise Agreement.
Franchisees are generally required to capitalize their business with
$153,500 to $335,600 which covers the initial franchise fee, inventories,
equipment, working capital, certain deposits and initial advertising
costs. Initial franchise fees range between $7,000 to $21,000 depending
on the Company's classification of the prospective Franchisee, as defined
in the Franchise Agreement. In addition to the initial franchise fee, all
Franchisees are required to pay monthly royalty fees of 2% of each Retail
Store's prior month's gross sales, as defined in the Franchise Agreement.
The Company offers a unique franchise program characterized by high
standards, quality products and ongoing support designed to establish and
grow successful Retail Stores. Most Franchisees are owner/operators,
instead of passive investors. Management believes that a Franchisee's
active involvement in the day-to-day operation of a Retail Store enhances
its performance. The Company provides (i) training to the Franchisee and
its supervisory personnel, (ii) assistance in store design and site and
equipment selection, (iii) insurance programs, standardized manuals and
computerized accounting systems, (iv) Big O brand and other approved tires
and related automotive aftermarket products, and (v) continuing support
with respect to operations, marketing, merchandising and new product
introductions. The Company also promotes local advertising groups and
regional accounting centers, which may be nonprofit corporations,
cooperatives, mutual benefit corporations, or trusts designed to provide
assistance to the Franchisees. The Company also provides certain
materials, e.g., broadcast and print advertising materials, point of sale
materials, a point of sale cash register system, equipment, uniforms and
other wearables and services to each Franchisee at varying costs and
assistance in obtaining financing through unaffiliated financing
companies.
5
<PAGE>
The Company has established and requires Franchisees to meet certain
uniform guidelines for physical characteristics, inventories, efficiency,
speed and courteous service. Each new Franchisee or manager is required
to attend formal training covering sales, service, financial management,
personnel, business ethics, legal compliance, merchandising and other
management skills. In addition, Franchisees are to perform in accordance
with written standards outlined in manuals provided pursuant to the
Franchise Agreement. After the initial training requirements are met, the
Company offers regional training classes to maintain and improve this
expertise.
The Company's growth depends to a large measure on its ability to attract,
retain and maintain good relationships with suitable Franchisees. Any
change in that relationship could cause existing Franchisees to purchase
less merchandise from the Company and more from its competitors or to
decline to renew their franchises upon expiration. Factors beyond the
Company's control may adversely affect the Company's relationship with its
Franchisees. In addition, there is no assurance that the Company will be
able to continue to attract and retain suitable Franchisees. The Company
also loses franchises from time to time due to financial and other
problems of Franchisees. Accordingly, while a significant part of the
Company's strategy is to increase the number of its franchised Retail
Stores, there is no assurance that it will be able to do so. In 1994, one
(1) Franchise Agreement expired and the Franchisee has reapplied for a new
Franchise Agreement but has not yet been renewed. During 1995, six (6)
Franchise Agreements are due to expire, and in 1996 three (3) Franchise
Agreements are due to expire, with the remaining Franchise Agreements
expiring in the eight years thereafter, including 107 Franchise Agreements
which will expire in 1999.
In 1994, the Company continued its development of a master franchise
program whereby the Company intends to sell master franchises for specific
areas where the master franchisee will be authorized to offer franchises
for Retail Stores, be required to provide certain services in the specific
area, and have the opportunity to function as a distributor of the
Company's products. The Master Franchise Program will be used primarily
to expand Retail Stores in areas of the eastern United States where the
Company does not yet have established franchised stores and distribution,
and possibly to expand internationally. As of March 24, 1995, the Company
has not yet sold any master franchises.
Canadian Operations:
--------------------
Since 1962, certain Canadian retail tire stores within the Province of
British Columbia, Canada, have been using the Company's tradename and
previous versions of the Company's trademarks, logos and colors. As of
March 24, 1995, 37 Canadian Licensees have signed user agreements for the
Company's new trademark, logo and colors, and efforts continue to sign
additional Canadian tire stores. While the Company has invited the
Canadian Licensees to become Franchisees under the Company's franchise
system, the Canadian Licensees have chosen to look to the Company only as
a wholesale supplier.
During 1994, the Company sold $72,000 in goods to 37 Canadian Licensees.
The Company distributes to the Canadian Licensees through the Company's
Boise, Idaho, RSC and through The Goodyear Tire & Rubber Company's British
Columbia warehouse.
Distribution:
-------------
The Company distributes Big O branded passenger and light truck tires,
other approved brands of tires and automotive aftermarket products and
certain material and equipment used in the operation of Retail Stores.
Retail Stores may stock and sell other tires and automotive aftermarket
products which have been previously approved by the Company even though
such products are not distributed by the Company. The Company does not
manufacture any of the products it sells. During 1994, approximately 77%
of the Big O branded tires were manufactured by Kelly-Springfield, with
the remainder produced primarily by General. In July 1994, the Company
and General terminated the May 1993 Marketing Agreement wherein General
had agreed to supply Big O branded tires to the Company. The termination
agreement also provides that General will continue to discharge its
obligation to the Company and its Franchisees under a special warranty
program until July 26, 1995. Thereafter, all subsequent adjustments will
be subject to General's
6
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then current warranty adjustment policy. General is continuing to provide
and sell tires to Tire Marketers Association ("TMA"), a division of the
Company that supplies tires to distributors predominantly based in the
eastern United States. Prior to March 31, 1995, the Company anticipates
closing on a $65,000 cash sale of the assets, trademarks and copyrights of
TMA to an unrelated third party. TMA has been an operating division of
the Company that markets non-Big O branded products to retailers outside
the Big O system, and was acquired by the Company in June 1993. The
proceeds from this sale will be used by the Company for general corporate
purposes.
In March 1994, the Company became a member of Summit, an independently
owned buying group based in Brandon, Florida. This agreement provides
that Summit will provide the Company exclusive access to the Heritage line
of passenger and light truck tires. The Heritage brand is manufactured by
Kelly-Springfield.
In August 1991, the Company entered into a supply agreement with Kelly-
Springfield for the manufacture and sale to the Company of Big O branded
tires (the "Kelly Supply Agreement"). The term of the Kelly Supply
Agreement is a calendar year, which is automatically renewed for the next
calendar year unless either party elects to terminate upon three (3)
months prior written notice. The Kelly Supply Agreement was automatically
renewed for 1993, 1994 and 1995. Under the Kelly Supply Agreement, the
Company is required to provide Kelly-Springfield with monthly non-binding
estimates of the Company's tire requirements, by line and type, for the
succeeding three months, and on August 1 of each year, an itemized non-
binding forecast of the quantities of tires the Company will require
during the next calendar year.
As a result of entering into the Kelly Supply Agreement, the Company
believes that it has adequate supply arrangements to meet anticipated
demand, subject to industry wide shortages or disaster. However, the
Kelly Supply Agreement only commits Kelly-Springfield to fill those
portions of the Company's monthly orders that Kelly-Springfield agrees to
fill. The obligation of Kelly-Springfield is also subject to
circumstances causing delay that are outside of its reasonable control.
Big O Brand Marketing Program:
------------------------------
In July 1994, the Company implemented its "Cost-U-Less/TM/" marketing
program. This program provided, along with a marketing message of
competitive pricing on all products and services, a reduction in the cost
of Big O brand tires to the Company's Franchisees (without a similar
reduction in cost from the Company's suppliers). This allowed the
Franchisees to offer Big O brand products to retail customers at lower
retail pricing which generally allowed the Franchisees to be more
competitive in their markets.
In order to differentiate the Company's products in a commodity market,
all Big O brand tires are sold with a "Premium Tire Service Policy" and a
"Limited Warranty for Free Replacement" (certain exceptions apply to non-
recreational vehicle light truck tires).
The Premium Tire Service Policy provides certain services and products
free of charge, which are generally provided for as additional charges
from other tire stores. These include free mounting and balancing of the
new tires, free wheel weights and new rubber valve stems, free flat
repair, free rotations and any necessary rebalancing throughout the tire's
legal life.
The Limited Warranty for Free Replacement provides "no charge for
proration" (except for non-recreational light truck tires) and "no charge"
for mounting and balancing the replacements of such tires that fail during
the legal life of the tire tread due to workmanship, material defects or
road hazards, without any limitation as to time and mileage.
In July 1994, the Company authorized an 80,000 mile prorated warranty on
the Premium Legacy Plus 70 Series, which is a Kelly-Springfield
manufactured tire. It is anticipated that the financial impact to the
Company will be minimal because the majority of the Retail Stores do not
offer this particular mileage warranty.
7
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The Company's suppliers have financial responsibility for workmanship and
material defect claims during the first 2/32 of an inch of tread in the
case of Kelly-Springfield supplied tires, and the first 10% of the tread
life in the case of General supplied tires, with prorations to the Company
thereafter. General has also increased reimbursement to the Company for
certain workmanship and materials warranty adjustment returns. The Kelly
Supply Agreement provides maximum limits on workmanship and material
defects for which the Company will have any financial responsibility on
each line and size of Big O branded products. The Company or the Retail
Stores have financial responsibility for substantially all of the other
costs associated with the Premium Tire Service Policy and Limited Warranty
for Free Replacement programs beyond these prorations.
The Company's sales by product in 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
% of Total
Units Revenues Product Sales
----- -------- -------------
<S> <C> <C> <C>
Big O brand tires..................... 1,410 $80,424 68%
Other brand tires..................... 646 $26,472 22%
Wheels, shocks and other accessories.. 1,338 $12,051 10%
</TABLE>
The Company believes that a Franchisee's decision to purchase Big O brand
products is based on several factors, including product profitability,
knowledge of Big O products, services and programs, the level of product
support provided by the Company, and the availability of products that
meet the quality demands of the Retail Store's customers. The Company
plans to meet these requirements and thereby increase sales of Big O brand
products to Retail Stores by continuing to provide (i) a broad line of
quality products that command higher margins for Retail Stores and that
meet changing consumer demands, (ii) extensive training for store
personnel, (iii) support of Retail Store operations, marketing,
merchandising, and new product introductions, and (iv) upgraded product
quality, particularly as measured by the industry's Uniform Tire Quality
Grading Standards. Unit sales of Big O brand tires increased by 6.5% in
1994 as compared to 1993, following 1993's Big O brand unit sales decrease
of 3.9% as compared to 1992.
(ii) Status of Product or Segment.
-----------------------------
The Company has made no announcement of, nor has the Company otherwise
made public any information about any new product or industry segment
requiring investment of a material amount of the Company's total assets or
which is otherwise material to the Company's operations, other than its
ongoing investment in new product lines to meet Retail Store needs, the
Company's planned consolidation of some of its warehouse facilities, and a
retail site development program by Development.
(iii) Raw Materials.
--------------
The Company does not manufacture any products. The Company orders Big O
brand tires anywhere from 18 - 180 days before the beginning of the month
in which they are produced. Manufacturers normally produce these tires
and ship them directly to the appropriate RSCs thereby eliminating
manufacturers' inventories of Big O brand product. Because of the lack of
"safety stock," any unforecasted change in sales trends or interruptions
in production schedules may result in inventory shortages.
If the Company should lose Kelly-Springfield as a supplier at a time when
there is sufficient production capacity within the tire manufacturing
industry, management believes the Company could accomplish a rapid and
orderly transition to new supplier(s). If, however, production capacity
were limited, such as was experienced in 1988 and 1989, a change in
suppliers could be extremely difficult and could cause the Company to
again experience significant product shortages.
8
<PAGE>
While the Company cannot completely assess the impact on its financial
performance if an industry-wide shortage, labor strike or natural disaster
should occur, such circumstances might result in higher costs, higher
sales prices and possibly lower demand.
In 1994, the Company received price increases from its suppliers of
between 3% and 4% on tires and other products. In March 1995, the Company
received an approximate 3% price increase. This increase in cost, over a
sustained period, may be significant to the overall cost of sales and
working capital requirements of the Company, particularly if costs
increase and/or sales decrease. However, the tire industry in general,
and the Company specifically, generally raise prices in response to such
increases. As the cost of raw materials increases for all manufacturers,
the resulting costs are passed through, in the form of higher prices, to
the manufacturers' customers, i.e., distributors and retailers, such as
the Company. Such distributors and retailers, in turn, increase their
prices, and therefore the price increases are ultimately borne by the
consumer. Because demand in the replacement tire market is viewed to be
relatively inelastic, little disruption in demand has occurred due to
these increases.
Management believes that these increases will be borne proportionately
throughout the industry, as the pricing formula used usually results in
percentage margins which actually increase gross profit (dollars) for
distributors and retailers. Gross profit percentages should continue to
stay relatively constant as management does not expect such increases to
adversely affect the Company's performance.
Since price increases are initiated by manufacturers and are then subject
to competitive pressures, the original announced increases are sometimes
reduced.
(iv) Patents, Trademarks, Licenses, and Franchises.
----------------------------------------------
At January 31, 1995, the Company had 374 franchised Retail Stores
operating pursuant to Franchise Agreements. Please refer to "Products,
Services and Marketing" above, for a further explanation of the Company's
franchises and "Canadian Operations" above, for further explanation of the
Canadian Licensees. The existence of the Franchise Agreements is of
extreme importance to the Company since almost all of the Company's
revenue is generated from sales to these Franchisees and from monthly
royalty fees.
The Company is the owner of various United States, Canadian and state
trademark and service mark registrations and applications for marks used
in connection with the Company's tires and tire retailing concepts. These
trademarks and service marks include the Company's house mark, "Big O",
and numerous secondary marks for individual products and advertising
slogans.
The Company is aware that a retail tire company operating "Big 10" outlets
in Houston, Texas, and in areas of Alabama, Arkansas, Florida, Georgia,
and Mississippi has raised issues regarding the Company's use of "Big O"
in such areas. The Company does not currently have any Retail Stores
operating in territories served by the other company and the matter does
not affect the Company's ability to use the name "Big O" where currently
used. When the Company begins franchising locations that overlap or are
proximate to those served by the other company, it is possible that such
company may contest usage of the Company's tradename and trademarks in
such areas.
The Company does not own any United States or foreign issued patents or
pending patent applications.
(v) Seasonality.
------------
The Retail Stores experience some seasonal variation in product sales
because tire sales are generally greater during the summer than in the
winter months. The Company generally experiences some seasonality,
although not to the same extent that the Retail Stores do, as the Company
maintains sales to certain Retail Stores, e.g., snow tires, that offset
the trend on a national basis.
9
<PAGE>
(vi) Working Capital Items.
----------------------
Of the Company's $3,926,000 in notes receivable at December 31, 1994,
$1,432,000 relate to the sale of Company-owned Retail Stores to
Franchisees. Another portion of these notes receivable relates to trade
receivables that have been placed on notes as a financial strategy to
maintain sales to financially limited, franchised Retail Stores which, at
December 31, 1994, totaled $1,599,000. By placing these Retail Stores on
level monthly payments, and with the development of a business plan for
each such Retail Store, management is attempting to assist the Franchisees
in reaching financial success while improving repayment options and
timing. In 1994, the Company sold approximately $3 million of notes
receivable to an unrelated third party and plans to sell additional notes
in the future.
The Company targets a 60-day inventory of Big O brand tires, and lesser
inventory levels for other tires, wheels, and related automotive
aftermarket products. Big O brand inventory levels are greater than those
normally carried by tire distributors because of the limited availability
due to production scheduling and lack of supplier floor stocks. At
certain times, the Company has increased its Big O brand inventory due to
anticipated shortages, potential strikes and minimum production runs
required by suppliers. Subsequent to the Company's July 1994
implementation of the Company's Cost-U-Less/TM/ marketing program and the
addition of several lines of Big O and other private branded tires,
inventory needs increased by approximately $2.5 million. In lieu of
obtaining extended payment terms generally provided by manufacturers, the
Company has negotiated lower net pricing from suppliers. The Company
periodically obtains extended payment terms on purchases while maintaining
this lower net pricing. As a whole, the tire industry generally sells
product on varying extended payment terms, up to and including 180 days.
The standard credit terms extended by the Company to the Retail Stores are
3%/15, 2%/30, COD/31. Through arrangements with manufacturers regarding
shocks and struts, the Company has arranged terms to encourage Retail
Stores to stock sufficient quantities and varieties. These payment terms
are more limited than the industry "norms" and are structured to reduce
the Company's credit risk and working capital requirements. For certain
items, primarily snow tires, the Company provides extended payment terms
similar to those offered by wholesalers.
As part of the Company's warranty and marketing programs, Retail Stores
have the right to return certain merchandise to the RSCs for credit. The
Company believes that its warranty program provides certain significant
marketing advantages, but it also results in higher warranty expense to
the Company than is normal in the industry. Some of this expense has been
and will be offset by payments from manufacturers.
The decrease in net warranty cost for 1994 primarily resulted from the
establishment of certain programs negotiated with suppliers which
continued to limit the Company's financial exposure for warranty claims,
the elimination of the two product lines that created the greatest expense
under the Company's warranty program in previous years, and the
institution of a more stringent program for the review and verification of
warranty claims for compliance with the terms and conditions of its
warranty program.
During 1994, management of the Company formulated a developmental program
involving the sale of Retail Store sites to Franchisees that qualify for
Small Business Administration guaranteed loans. In certain instances, the
Company may provide subordinated loans (as to collateral) not to exceed
$50,000, in order for the prospective Franchisees to qualify for this SBA
guaranteed funding. The Company anticipates that this financing will be
repaid to the Company by the Franchisee, amortized monthly over five (5)
years. Another component of the Company's real estate development program
is site selection and development of the site by Development. This has
and will require significant financing by the Company, which is planned to
be repaid if the financing through the SBA guaranteed source is obtained
by the prospective Franchisee. At December 31, 1994, Development had
$2,000,000 invested in acquisition and construction in progress for nine
(9) sites, which was primarily financed by the sale of approximately $3
million of notes receivable, mentioned above. The Company anticipates
that this real estate developmental program will result in an increase in
the number of Retail Stores. As additional Retail Stores are added,
additional working capital for accounts receivable, inventories, and
certain real estate financing will be needed. Accounts receivable
financing is anticipated to be supplied through the Company's existing
credit facilities;
10
<PAGE>
inventory growth will be financed partially by the Company's suppliers and
partially through the Company's existing credit facilities; and real
estate financing will be provided by a combination of the Company's
revolving line of credit and limited permanent (term) financing.
(vii) Customer Dependence.
--------------------
Since the Company primarily sells its products to 374 Franchisees and 37
Canadian Licensees, its customer group is very limited. Of this customer
group, the Company does not depend upon a single customer, or a limited
number of customers, for its revenues, the loss of any one or more of
which would have a material adverse effect on the Company. However,
certain Franchisees (and Franchisee groups) continue their individual
growth and are becoming more significant customers.
Approximately 33% of the Company's sales were made to Retail Stores
located in the State of California (which includes sales made to the
Company's largest Franchisee who is affiliated with thirty-one (31) Retail
Stores) which constitutes about 38% of the Retail Stores. As a result, a
high portion of the Company's receivables and credit risks are
concentrated in California with the result that adverse conditions or
adverse publicity affecting retail operations in California could more
significantly affect the operating results of the Company than if the
stores were more geographically diversified. In addition, at December 31,
1994, receivables and financial guarantees totaling $4,179,000 were
associated with five (5) Franchisees who own and operate multiple Big O
Retail Stores. Adverse financial results with these Franchisees could
adversely affect the Company more significantly than if the credit risks
were less concentrated.
(viii) Backlog of Orders.
------------------
At March 24, 1995 and March 25, 1994, there were no material backlogs of
orders. Any sustained backlog the Company experiences with its suppliers
creates a backlog in fulfilling orders from the Retail Stores and Canadian
Licensees.
(ix) Government Contracts.
---------------------
The Company is not involved with any contracts or subcontracts with the
government which may allow for the renegotiation of profits or the
termination of such contracts at the election of the government.
(x) Competition.
------------
Since the Company is primarily a distributor to its Retail Stores and the
Canadian Licensees, its success depends on the retail success of its
Franchisees and Canadian Licensees. Both the tire aftermarket and under-
car service businesses are highly competitive. Through the Retail Stores
and Canadian Licensees, the Company competes with major tire manufacturers
who have retail tire stores, national and regional tire chains,
traditional department stores, independent merchants, and general, full
range, discount and warehouse club stores. Many of the Company's
competitors are larger in terms of sales volume, have access to greater
capital and management resources, and have been operating longer in
particular geographic areas. Management believes that price competition
in the geographical markets served by the Company continues to intensify.
Retail competition comes in the form of price, service, warranty, product
performance, product innovation, or differing variations of each of these
issues. Although competition varies by geographic area, the Company
believes that it generally has a favorable competitive position in terms
of price, product line, value, merchandising, warranty and customer
service. With the implementation of the Company's Cost-U-Less/TM/ program
on its Big O brand products, which include the Premium Tire Service Policy
and the Limited Warranty for Free Replacement, the Company believes that
these three marketing facets are equal to or exceed any such programs
offered by its competitors.
Franchise sales are also highly competitive as the Company competes with
other franchisors, some of which are larger, have better name recognition
and access to larger capital resources and have been operating
11
<PAGE>
longer than the Company. Management believes that the competition for the
sale of franchises has increased and will intensify due, in part, to the
entry of new franchisors and the growth of existing franchisors.
The competitive conditions for real estate development differ
substantially from those the Company faces in the retail tire and
franchise markets. The success of the Company's real estate development
lies in obtaining sites that can be developed into store facilities that
meet Franchisees' requirements at reasonable rental rates or sales prices.
Since the prime customers for the Company's real estate development are
its Franchisees, development of real estate can affect the growth of
Retail Stores. Competition for real estate development comes from many
sources, including other retail tire companies, other franchisors, e.g.,
fast food restaurants and gas stations, and other retailers.
(xi) Research and Development.
-------------------------
The Company does not engage in any significant research and development
activities, and no material amount was spent by the Company on research
and development activities.
(xii) Environmental Regulations.
--------------------------
The Company is subject to the ever expanding purview of federal, state and
local environmental laws relating to spillage, noise, air quality and
disposal of waste products. The Company believes it is in general
compliance with all applicable environmental laws and has adopted a policy
of requiring Phase I environmental studies associated with any new
projects or the acquisition of any existing locations before such
transactions are consummated. The Company is not aware of any
requirements to develop environmental control facilities and has not made
any material capital expenditures for such facilities and does not
anticipate doing so at this time. The Company has periodically been
involved with minor clean-ups associated with certain Retail Stores in
which the Company has been a tenant or subtenant. Generally, the costs of
these clean-ups have not been material. Many states have enacted specific
tire disposal laws that, among other requirements, assess fees for each
tire disposed and designate specific locations for tire disposal. This
impacts the Company, its Franchisees and the retail customers as such
costs are usually passed on to the customers.
(xiii) Employees.
----------
At March 24, 1995, the Company employed 211 persons on a full-time basis
and 39 persons on a part-time basis.
(d) Financial Information About Foreign and Domestic Operations and Export
----------------------------------------------------------------------
Sales
-----
Sales to Canadian Licensees totaled $72,000, $994,000 and $1,708,000,
which resulted in gross profits of $8,000, $97,000 and $169,000 in 1994,
1993 and 1992, respectively. In 1994, the Company negotiated sales of its
Big O branded product to be distributed through a subsidiary of The
Goodyear Tire & Rubber Company. As a result of this negotiation, the
Company no longer recognizes sales to its Canadian Licensees. The Company
has not maintained any identifiable assets in Canada.
12
<PAGE>
Item 2. PROPERTIES
------------------
<TABLE>
Mortgage
Amount # of Stores
Square Owned/ (if any) at Serves
Description/Location Footage Leased 3/17/95 at 3/17/95
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vacaville, California Warehouse(1)(8) 116,000 Owned $ - 0 -
Ontario, California RSC(7) 141,900 Leased $ - 0 - 194
Denver, Colorado RSC and Corporate
Offices(5)(6) 116,100 Leased $ - 0 -
Boise, Idaho RSC(2)(8) 100,000 Owned $ - 0 - 122(3)
New Albany, Indiana RSC(4) 80,000 Owned $1,450,000 42
Las Vegas, Nevada RSC(8) 294,000 Owned $ - 0 - 59
</TABLE>
(1) The Company also owns, in fee simple, approximately five acres of land
immediately adjacent to this property. In June 1994, the Company leased
the entire warehouse until the year 2000. When the Vacaville warehouse
space was fully leased to an unrelated third party, the Ontario,
California, RSC began servicing the Retail Stores in the Western region.
(2) The Company owns, in fee simple, approximately seven acres of land
immediately adjacent to this RSC, which can be used for expansion.
(3) Includes distribution to 37 Canadian Licensees.
(4) The New Albany, Indiana, RSC was completed in June 1994. This facility
is servicing the Retail Stores which were being serviced by the Kentucky
and Sellersburg, Indiana, warehouses. The cost of land acquisition and
construction of this facility was $1,985,000.
(5) This RSC will be replaced by the single warehouse facility located near
Las Vegas, Nevada, which opened on March 6, 1995. The Las Vegas RSC
contains approximately 294,000 square feet of warehouse space and 6,000
square feet of office space, and it will service the Retail Stores which
have been serviced by the Denver, Ontario and Vacaville RSCs.
(6) In anticipation of the opening of the Las Vegas RSC, the Company sold its
Denver RSC to an unrelated third party in December 1994. This sale was
consummated with a $242,000 down payment, certain rent concessions, and
the assumption of the Company's promissory note and mortgage on the
facility from the existing mortgage. The Company remains obligated on
this mortgage in the event that the purchaser defaults.
(7) The Company anticipates that the Ontario RSC operations will be fully
converted to the Las Vegas RSC by May 1995. The Company is obligated
under the lease for the Ontario warehouse until June 24, 1998. This
warehouse space is currently being marketed for lease.
(8) The Vacaville California, Boise, Idaho and Las Vegas, Nevada, properties
are all collateral for $8 million of senior, secured notes sold by the
Company in April 1994. The proceeds from these notes were used to pay the
previous mortgage on the Boise, Idaho RSC, a term loan with the previous
primary lender, and the balance (approximately $4.2 million) was placed in
a restricted cash account for the purpose of providing financing for the
acquisition of the Las Vegas RSC.
The Company also has a lease for a 35,000 square foot warehouse and general
office space in Santa Ana, California, which was assigned to a joint venture in
which a subsidiary of the Company was a 50% joint venture partner. The initial
term of this lease expires in October 1996. In 1993, the subsidiary of the
Company agreed to sell its 50% interest in the joint venture to the other joint
venturer which assumed all obligations under this lease through the 1996
termination of the initial term of the lease. Thus the Company will remain
contingently liable for this lease obligation through October 1996.
13
<PAGE>
As of March 14, 1995, the Company is also responsible for leases on
approximately sixty-one (61) Retail Store locations, of which thirty-four (34)
locations are subleased to Franchisees, six (6) locations are operated as
Company owned or joint venture Retail Stores and the leases for sixteen (16)
Retail Stores are guaranteed by the Company. The Company, in accordance with
lease guaranty provisions, is also responsible for the lease obligations on
five (5) closed Retail Store locations.
In addition, the Company owns five (5) Retail Store locations which are leased
directly to Franchisees.
Item 3. LEGAL PROCEEDINGS
--------------------------
As of March 24, 1995, the Company has been named as a defendant in
approximately twenty-seven (27) pending lawsuits which are incidental to its
business and which the Company believes will be subject to indemnification
and/or covered by insurance if the Company is held liable, and eight (8)
lawsuits which are incidental to its business and for which the Company does
not believe it is liable, but which are not covered by insurance. The Company
believes that the ultimate outcome of these matters will not have a material
adverse effect on its financial statements.
In December 1994, the Company and its nine directors were named in two proposed
stockholder class action lawsuits (Knopf vs. Big O Tires, Inc. and Zucker vs.
Big O Tires, Inc., Second Judicial District Court of the State of Nevada,
County of Washoe) each similarly requesting the court to enjoin the sale of the
Company to a Dealer-Management Group, enjoin the implementation of the recently
adopted shareholder rights plan, obtain specified damages, require the
disclosure of the Company's internal forecasts and award plaintiffs' their
attorneys' fees and costs, including experts fees. The lawsuits also request
that the court order the directors to carry out their fiduciary duties to the
plaintiffs and the other members of the class by announcing their intention to
cooperate and do all that is necessary to encourage the buyout or takeover of
the Company by enhancing the Company's attractiveness as a merger/acquisition
candidate, effectively exposing the Company to the marketplace in an effort to
create an active action of the Company, act independently and resolve all
conflicts of interest in the best interests of the class. If the contemplated
transaction with the Dealer-Management Group is consummated, the court is asked
to rescind the transaction and, among other actions, award rescissionary
damages. The Company moved to dismiss both lawsuits, which have been
consolidated, as being frivolous and not in the interests of the stockholders
as a class. Counsel for the plaintiffs have filed a motion to dismiss both
lawsuits without prejudice. As of March 24, 1995, the Company has not received
notice that these dismissals have occurred.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
During the fourth quarter of 1994, the Company did not submit any matters to a
vote of the security holders.
14
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------
(a) Market Information
The Company's Common Stock is reported on the NASDAQ National Market System.
The principal market for the stock is the over-the-counter market.
The quotations in the table below were obtained from NASDAQ and reflect high
and low bid prices of the Company's Common Stock. The prices reflect inter-
dealer prices without retail mark-up, mark-down or commission. The prices have
been rounded to the nearest eighth and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Period High Low
------ ------ ------
<S> <C> <C>
01/01/93--03/31/93 14 1/4 11 1/8
04/01/93--06/30/93 16 3/8 10 7/8
07/01/93--09/30/93 17 1/4 13 1/4
10/01/93--12/31/93 16 1/2 13 1/2
01/01/94--03/31/94 16 3/4 12 3/4
04/01/94--06/30/94 16 3/4 13 1/8
07/01/94--09/30/94 16 3/4 14 1/2
10/01/94--12/31/94 17 7/8 15 1/4
</TABLE>
________________
(b) Holders
As of March 24, 1995 the Company had 707 shareholders of record as indicated on
the Company's transfer records.
(c) Dividends
The Company has not declared cash dividends on its Common Stock during the last
two fiscal years and there is no present intent to pay a cash dividend.
Certain covenants contained in the credit agreements with the Company's primary
lender preclude the general declaration or payment of cash dividends and
preclude the general purchase, redemption, retirement or other acquisition of
the Company's capital stock, or the return of capital or distribution of assets
to its shareholders, without the prior written consent of the lender.
15
<PAGE>
Item 6. SELECTED FINANCIAL DATA
-------------------------------
The following table presents selected financial data concerning the Company,
which should be read in conjunction with the financial statements appearing
elsewhere herein. Amounts are in thousands (000's) except per share data.
For the Years Ended December 31
-----------------------------------
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales $127,678 $122,960 $119,799 $113,836 $106,902
Net income 2,691 1,595 2,783 1,751 707
Earnings per share/(1)/ .80 .47 .80 .50 .20
Cash dividends per share .00 .00 .00 .00 .00
For the Years Ended December 31
----------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Working Capital $ 24,667 $ 11,885 $ 17,333 $ 20,661 $ 16,495
Total assets/(2)/ 61,968 56,607 57,679 57,111 63,176
Non-current portion
of long-term debt,
obligations under
capital leases and
guarantee of ESOP
obligation 16,355 12,012 10,636 16,305 11,883
</TABLE>
/(1)/ Adjusted to reflect the 1 for 5 reverse split of the Company's $0.10 par
value common stock that was effective June 15, 1992.
/(2)/ Total assets for years prior to 1992 have been restated to reflect the
reclassification of vendor receivables to accounts payable.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS:
1994 COMPARED TO 1993
Net Sales. Net sales consist principally of product, equipment and service
sales, initial franchise fees and royalty fees. Net sales in 1994 were
$127,678,000 which represented an increase of $4,718,000 (or 3.8%) over 1993.
This increase in sales was primarily due to higher sales of Big O brand tires
which resulted from the Company's "Cost-U-Less" marketing program that was
implemented on July 1, 1994. This program provided a significant reduction in
the cost of Big O brand tires to the Company's Franchisees (without a similar
reduction in cost from the Company's suppliers). This allowed the Franchisees
to offer Big O brand products to their customers at lower retail pricing which
generally allowed the Franchisees to be more price competitive in their
markets. The improvement in product mix is particularly significant since the
sale of Big O brand tires provides higher gross margins as compared to the
Company's other tire products and represented 69.8% of the Company's total
product sales for the last six months of 1994, an increase of 5.0% as compared
to the first six months of 1994.
16
<PAGE>
Wholesale sales of Big O brand tires increased by approximately 85,800 units
(6.5%) in 1994; based on this increase and an increase in the average selling
price of $.10 per unit or .2%, revenues increased by $5,027,000 in 1994. The
sale of other new tires increased by approximately 9,300 units or 1.5% as
compared to 1993. The sale of wheels, shocks, and other accessories also
increased by approximately 3,600 units or .3% which, along with an increase in
the average selling price of $1.06, increased revenues by $1,454,000 in 1994.
These wholesale sales increases were partially offset by a reduction of
$2,137,000 in retail sales at Company-owned Retail Stores.
During 1994, the Company continued its efforts to improve the operations of its
existing Retail Stores and add new stores to its distribution system. During
the year, 26 new Retail Stores were added, but 18 existing Retail Stores were
closed. Accordingly, sales to new franchised Retail Stores increased by
$5,342,000, sales to existing franchised retail stores increased by $4,129,000,
and higher retail sales generated a $658,000 increase in royalty fees.
Offsetting these sales increases were reductions in sales of $2,137,000 at
Company-owned Retail Stores, $1,225,000 from the closure of nine (9) franchised
Retail Stores, $922,000 from decreased sales to the Canadian licensees, and
$1,080,000 from a decrease in other wholesale sales.
The Company also receives royalties from the Extra Care service program at
Retail Stores which consists of alignment, brake work, front-end repair, shock
absorber and strut replacement, lubrication and oil changes. Extra Care
service program royalty fees in 1994 were $1,976,000, up $190,000 or 10.6% from
1993. While these fees continued to increase, they are growing at a slower
rate as the Company continues to focus its marketing efforts towards tire sales
and, specifically, Big O brand tire sales through its "Cost-U-Less" marketing
program.
The Company's revenues are primarily dependent on sales to its network of
Retail Stores. The continuation of these franchises during the ten year term
of each Franchise Agreement is extremely important to the Company as is the
renewal of these franchises upon their expiration period. In 1994, one (1)
Franchise Agreement expired and has reapplied for a new Franchise Agreement,
but has not yet been renewed. During 1995, six (6) Franchise Agreements will
expire. In 1996, three (3) Franchise Agreements are due to expire, with the
remaining Franchise Agreements expiring in the years thereafter.
The Company's Franchisees are independent business operators who are entitled
to establish their own policies within certain guidelines established by the
Company and who are directly responsible for supervision of their employees.
Of the 374 franchised Retail Stores at December 31, 1994, thirteen (13) are
owned by partnerships in which a subsidiary of the Company owns a 50% interest
but has no managerial control over day-to-day operations. The Company
prescribes certain operating procedures in business and ethical standards;
however, Franchisees are responsible for complying with these procedures and
standards as well as all applicable laws and regulations.
Gross Profit. Cost of goods sold consists primarily of the cost of products
and equipment sold and the cost of labor to deliver services at Company-owned
Retail Stores. Gross profit in 1994 was $30,131,000, an increase of $2,500,000
or 9.0% over 1993. Gross profit increased $1,113,000 due to increased sales
volumes, and increased $1,387,000 due to the 1.1% increase in gross margin.
Also contributing to this 1.1% increase in gross margin was an increase in
continuing royalties, additional cash discounts earned, and increased profits
associated with price changes. Partially offsetting these increases were
additional purchasing incentives provided to Franchisees and a decrease in
promotional funds provided by the Company's suppliers.
The gross margin was 23.6% in 1994 as compared to 22.5% in 1993. An increase
of .8% in the gross margin was attributable to the increase in sales of Big O
brand tires which carry higher gross margins than other tire products.
Warranty adjustment expense decreased by 3.2% in 1994 to $4,709,000. The
product quality produced by the Company's present supplier has continued to
reduce the Company's financial exposure for warranty claims. In addition,
products that have shown excessive adjustments have been discontinued and on-
hand inventories have been returned to suppliers for liquidation outside
existing market areas or distribution channels. The Company has also continued
its stringent program for the review and verification of warranty claims for
compliance with the terms and conditions of its warranty program.
17
<PAGE>
In 1994, the Company limited its exposure to foreign exchange gains and losses
by renegotiating the distribution channel of product sold to its Canadian
Licensees. Since this arrangement resulted in an override paid by the supplier
on such sales, sales for the Company were reduced, although gross profits on
such sales remained essentially the same and profitability increased as a
result of the reduced foreign exchange expenses.
Net Expenses. Net expenses increased by $1,139,000 or 4.7% to $25,490,000 in
1994. An increase in net expenses of $674,000 was associated with the
implementation of the shareholder proposal, and increased expenses of $677,000
resulted from losses on the sale or closure of Retail Stores.
Net expenses also increased by $614,000 in product delivery expense which
primarily resulted from the additional freight costs associated with the
Company's consolidation of its warehouse operations in California, $784,000
which resulted from increased promotional expense in connection with the
Company's new marketing program, and $824,000 which resulted from the operation
of Company-owned Retail Stores. However, these increases were partially offset
by a decrease of $1,927,000 in expenses related to Company-owned Retail Stores
which were sold, and a reduction of $149,000 in the provision for uncollectible
receivables.
Net expenses (excluding offering costs, warehouse consolidation costs,
shareholder proposal expense, and losses on sale or closure of Retail Stores)
("Operating Expense") in 1994 were 18.6% of net sales, down slightly from 18.7%
in 1993. The Company anticipates that Operating Expense in 1995 will decrease
as a result of a restructuring plan which was adopted in February 1995 and the
consolidation of the Colorado and California warehouse operations into a new
distribution facility near Las Vegas, Nevada, which began operations in
March 1995. This planned decrease in Operating Expense, when combined with
anticipated sales increases, is expected to result in a lower Operating Expense
as a percentage of sales for the last six months in 1995. However, increased
ownership of Retail Stores may add significantly to the growth of Operating
Expense as each store can add as much as $600,000 of Operating Expense
annually. While the Company's current strategic plan does not contemplate the
operation of additional Company-owned Retail Stores, beyond the four Retail
Stores presently in operation, the Company recognizes that it will generally
operate some Company-owned Retail Stores until such stores can be sold to
Franchisees. In most cases, it is beneficial for the Company to continue to
operate a store, even if reacquired from a Franchisee due to financial failure,
in an effort to maintain market presence and thereby allow the store to be
resold to a Franchisee as opportunities arise. In 1994, five (5) Company-owned
Retail Stores were sold to Franchisees which resulted in a pretax loss of
$117,000.
The Company's primary growth strategy is to accelerate growth in the number of
franchised Retail Stores. This will cause expenditures for advertising,
locating, and developing new franchised locations to increase at a rate faster
than overall sales increases. However, the Company believes that development
of these new stores, especially based on its relatively fixed overhead
structure, could increase profitability and margins as these fixed costs (which
are planned to be reduced by the Company's restructuring plan and the warehouse
consolidation project) are spread over more units sold due to increased
outlets. To the extent that new store openings do not materialize, these
additional expenses may reduce overall profitability and reduce the Company's
return on assets.
Interest expense increased by 20.2% in 1994 to $1,465,000. Although interest
expense decreased due to reduced borrowings resulting from lower working
capital requirements, this reduction was offset by an increase in interest
expense attributable to an increase in the "prime" rate and, therefore, in the
Company's borrowing rate, and the sale of 8.71% Senior Secured Notes in the
aggregate principal amount of $8,000,000 in April 1994.
1993 COMPARED TO 1992
Net Sales. Net sales in 1993 increased by $3,161,000 or 2.6% over 1992 to
$122,960,000 primarily due to higher sales from a line of private brand, price
point tire products which were introduced in late 1992. Big O brand unit sales
decreased by approximately 53,800 units or 3.9% while the average selling price
increased by $1.13 per unit or 2.0%. The sale of other new tires increased by
approximately 115,200 units or 22.1% which increased revenues by $4,026,000.
The increase in net sales included $5,854,000 attributable to increased sales
to new franchised Retail Stores, increased sales at Company-owned Retail Stores
of $2,482,000, and $258,000 from increased royalty fees. These sales increases
were partially offset by a reduction in sales of $871,000 due to the sale or
closure of
18
<PAGE>
Company-owned Retail Stores, $1,676,000 from the closure of franchised Retail
Stores, and $1,675,000 from a decrease in sales to existing Franchisees. Sales
of product to 37 unaffiliated retail stores in Canada (the "Canadian
Licensees") also decreased by $698,000 in 1993 as compared to 1992 due to
adverse changes in the foreign currency exchange rates which resulted in higher
pricing.
Royalties from the Extra Care service program in 1993 were $1,786,000, up
$24,000 or 1.4% from 1992. Sales of ProComp wheels totalled $2,533,000 in 1993
which represented an increase of $205,000 or 8.8% from 1992, which resulted
from the Company's success in reducing inventories of slow moving styles and
increasing sales by concentrating its efforts in building sales in the faster
moving lines.
Gross Profit. Gross profit in 1993 decreased by $18,000 or 0.1% from 1992 to
$27,631,000, primarily due to a reduction of 0.6% in gross margin which was
partially offset by increased sales volumes. Also contributing to the decrease
in gross profit were additional reserves for product obsolescence, decreased
profits associated with price changes, and an increase in freight costs.
Partially offsetting these decreases were improved profits associated with a
significant decrease in the Company's warranty adjustment expense, increased
royalty income, additional cash discounts earned, and increased promotional
funds provided by the Company's suppliers.
Gross Margin was 22.5% in 1993 as compared to 23.1% in 1992. A decrease of
0.3% in the gross margin was attributable to the decrease in sales of Big O
brand tires, and the gross margin was reduced by an additional 0.3% from
increased sales of a line of price-point tire products which carry
significantly lower margins as compared to the Big O brand products. However,
the decrease in gross margin was partially offset by a decrease of 7.8% in
warranty adjustment expense in 1993 to $4,565,000.
Net Expenses. Operating Expense increased by $151,000 or 0.7% to $23,034,000
in 1993, primarily due to an increase of $2,284,000 in Operating Expense
incurred by the operation of eleven (11) Company-owned Retail Stores in 1993 as
compared to seven (7) stores in 1992. Operating Expense also increased by
$193,000 as a result of losses incurred by the Company's joint venture
operations and the losses of subsidiaries, $635,000 as a result of increased
franchise development costs and $132,000 as a result of additional expense
associated with the operation of the Franchisee training center. Operating
Expense decreased by $887,000 due to reduced promotional expenses, $689,000
from a reduction in the provision for uncollectible receivables, $429,000 from
reduced compensation and $178,000 from reduced amortization of intangibles.
Operating Expense in 1993 was 18.7% of net sales as compared to 19.1% in 1992.
Interest expense increased by 4.2% in 1993 to $1,219,000. Although interest
expense decreased due to reduced borrowings resulting from lower working
capital requirements and a reduction in the Company's borrowing rate, this
reduction was offset by an increase in interest expense attributable to the $6
million supplier note used to finance most of the General stock and warrant
repurchase.
In 1993, the Company withdrew its registration statement for the sale of
1,300,000 shares of the Company's $.10 par value common stock which resulted in
an expense of $281,000 for the offering costs associated with the registration
statement. In addition, the Company adopted a plan in 1993 to consolidate
three of its RSCs into a single facility located in Nevada and recorded an
expense of $607,000 which represented the net amount of the estimated facility
relocation costs, employee compensation expenses, gain (or loss) on disposal of
assets, and other related expenses associated with the consolidation plan. The
Company also adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, as of January 1, 1993 which decreased net income
by $285,000 for the cumulative effect of this change in accounting principle.
LIQUIDITY AND CAPITAL RESOURCES
Shareholder Proposal. In June 1994, the shareholders adopted a proposal
requesting the Board of Directors to engage an investment banker to evaluate
all alternatives to enhance the value of the Company. In implementing this
shareholder proposal, the Board of Directors established the Investment
Committee of the Board who retained PaineWebber Incorporated (PaineWebber) to
fulfill this shareholder proposal.
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<PAGE>
The result of this process has led to two offers to acquire the Company,
neither of which has been successful as of March 15, 1995. However, an offer
for the Company may be received in the future and, if accepted by the
shareholders, could result in a significant change in the Company's liquidity
and need for capital resources. In the meantime, management of the Company has
been restructured, creating the Office of the Chief Executive. The purpose of
this restructuring is to achieve aggressive growth and to enhance the value of
the Company. As these strategies are currently being developed, their impact
on the liquidity and capital resources of the Company has not been determined.
However, management of the Company is aware of the limited capital resources
available and will act prudently and conservatively in establishing and
implementing growth plans and operating strategies.
Working Capital. The Company's working capital (defined as current assets less
current liabilities) more than doubled in 1994, increasing to $24.7 million at
December 31, 1994, versus $11.9 million in working capital at December 31,
1993. Sources of working capital included earnings, payments on and sales of
notes receivable, sales of property and equipment, and the issuance of long
term debt. Uses of working capital included purchases of property and
equipment and principal payments on long term debt.
Significant changes in the components of working capital consisted of the
following:
i. Trade accounts receivable increased by $1.15 million primarily due to
the addition of franchised Retail Stores, an increase in sales
resulting from the success of the Cost-U-Less marketing program and a
reduction in the allowance for doubtful accounts.
ii. Inventories increased by approximately $2.5 million as a result of
additional inventory needs resulting from increased sales associated
with the Cost-U-Less marketing program and the addition of several
lines of Big O and other private branded tire lines.
iii. Accounts payable decreased by approximately $3 million primarily
because of differences in credit terms and pricing from the current
principal supplier as compared to those offered by the previous
principal supplier. To take advantage of cash discounts offered by the
new supplier, the Company accelerated payments of invoices.
The Company anticipates that it will meet its working capital needs in 1995
through the internal generation of funds from operations and from financing
available from its new primary lender (See Existing Credit Facilities). The
Company has embarked on a significant real estate development program that is
planned to result in an increase in the number of Retail Stores (See Real
Estate Development). As additional Retail Stores are added, additional working
capital for accounts receivable, inventories, and certain real estate financing
will be needed. Accounts receivable financing is anticipated to be supplied
through the Company's existing credit facilities; inventory growth will be
financed partially by the Company's suppliers and partially through the
Company's existing credit facilities; and real estate financing will be
provided by a combination of the Company's revolving line of credit and limited
permanent (term) financing.
The Company significantly reduced the amount of accounts receivable transferred
to long term notes receivable during 1994. The Company has established a
successful program for the transfer of such receivables, although this transfer
limits the Company's access to cash that would have been generated from earlier
collection of these receivables. The Company was successful in selling
approximately $3 million of notes receivable in 1994 and plans to sell
additional notes in the future.
Real Estate Development. In the Company's ongoing effort to significantly
increase the number of Retail Stores, the Company has continually been called
upon to guarantee certain leases for prospective Franchisees at new locations.
Management has been adverse to providing these guarantees primarily due to the
significant financial impact on the Company when these guarantees are enforced.
(For example, of the $1,106,000 loss on sale or closure of Retail Stores
incurred in 1994, $881,000 related to the remaining lease obligations for
certain leases involving the Company.)
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The Company previously developed Retail Store sites by use of real estate joint
ventures, wherein the Company would provide the tenant (prospective Franchisee)
and the developer would provide the site locations and develop the real estate.
While this arrangement resulted in most of the debt not being included on the
Company's balance sheet, the Company was still contingently obligated on these
development loans.
In an effort to significantly reduce the lease guarantee requirements or
retention of these assets and liabilities, management formulated a
developmental program involving the sale of Retail Store sites to Franchisees
that qualify for Small Business Administration (SBA) guaranteed loans. In
certain instances, the Company may provide a small loan (not to exceed $50,000)
as subordinated debt in order for the Franchisee to qualify for this SBA
guaranteed funding.
The key component of this developmental program is site selection by the
Company and development of the site by one of the Company's subsidiaries. This
has and will require significant financing by the Company, which is planned to
be repaid if the financing through the SBA guaranteed source is obtained by the
prospective Franchisee. At December 31, 1994, the Company's subsidiary had $2
million invested in construction in progress for nine (9) sites, which was
primarily financed by the sale of approximately $3 million of notes receivable.
This program carries considerable developmental risk as the Company will be
required to hold these assets, and related liabilities, if the properties
cannot be sold. The Company has secured construction and permanent financing
commitments for this development as detailed under Existing Credit Facilities.
Existing Retail Store real estate and developmental sites may be sold to third
parties. Management will attempt to sell these without any lease guarantees.
In approving this developmental program, the Board of Directors established
certain financial limitations for development activities. Accordingly, future
development will only be allowed to the extent that funding can be obtained,
developed Retail Store sites have been sold, and the criteria established by
the Board of Directors is met.
Existing Credit Facilities. The Company's current operations are funded
through its revolving line of credit with a new primary lender - The First
National Bank of Chicago (First Chicago). First Chicago provided a $20 million
revolving credit line which was used to pay off the previous credit facility in
January 1995. The First Chicago credit line has a 1995 sub-limit of $6 million
which can be used for construction and permanent financing pursuant to the real
estate development program described above.
Limited financing for the Company's real estate and retail store joint venture
operations is provided by AT&T Capital Corporation (AT&T). Previously, two
credit facilities were offered by AT&T to meet each of these two developmental
needs. However, AT&T renewed this financing by providing one revolving credit
line totalling $11.75 million which can be used for both purposes. Prepayments
under this credit line associated with real estate development activities are
required during the first three years of such financing, unless an SBA
guaranteed loan is placed with AT&T's Small Business Lending unit. At December
31, 1994, $5.3 million was outstanding under this AT&T facility. $412,000 was
included as a liability on the Company's books, with the remainder being an off
balance sheet liability related to financing provided to joint ventures of the
Company which had been guaranteed by the Company and its joint venture
partners.
In April 1994, the Company successfully sold $8 million of senior, secured
notes providing for quarterly interest only payments through July 1998 and then
equal principal payments of $333,000, plus interest, per quarter with the
unpaid balance due May 2004. The proceeds from these notes were used to pay
the previous mortgage on the Boise, Idaho RSC, the term loan with the previous
primary lender, and the balance (approximately $4.2 million) was placed in a
restricted cash account for the purpose of providing financing for the
acquisition of the Las Vegas, Nevada RSC (Las Vegas RSC) in early 1995.
Financing for the Indiana RSC was converted from the construction loan into a
permanent loan in 1994. This loan amortizes over 7 years with such
amortization starting October 1994.
In 1993 the Company borrowed $6 million from Kelly-Springfield to finance the
acquisition and retirement of 400,000 shares of the Company's common stock and
certain warrants from General. The loan was renegotiated
21
<PAGE>
in September 1994, eliminating the balloon payment due in August 1995 and
extending the note through November 1997 based on scheduled principal payments.
Management's discretion with respect to certain business matters is limited by
financial and other covenants contained in loan agreements with First Chicago,
AT&T, the senior note holders, and Kelly-Springfield. These covenants, among
other things, limit or prohibit the Company from (i) paying dividends on its
capital stock, (ii) incurring additional indebtedness, (iii) creating liens on
or selling certain assets, (iv) making certain loans, investments, or
guarantees, (v) violating certain financial ratios (vi) repurchasing shares of
its common stock, and (vii) making certain capital expenditures. At December
31, 1994, the Company was either in compliance with all of these covenants or
had received waivers from the appropriate lender.
Advances from First Chicago are limited to a portion of eligible collateral as
defined in the Revolving Credit Agreement and are further reduced by the amount
of any outstanding letters of credit issued on behalf of the Company. This
credit facility extends through January 23, 1998. The Company anticipates that
short term cash needs can be met through this credit facility. As noted above,
limited Retail Store development costs can be met, on a short term basis, for
acquisition, construction, and renovation costs. However, financing through
this facility for both real estate development and operations will be subject
to the formula borrowing base and the above-mentioned covenant limitations.
Financing beyond these needs, principally for capital expenditures, will need
to be obtained through other credit facilities.
Proposed Financing. The Company is currently working on the following three
financing proposals:
i. Management is negotiating for the sale of additional promissory notes
receivable. It is presently anticipated that an additional $1 million of
these notes may be sold in 1995.
ii. In conjunction with the conversion to the Las Vegas RSC, management is
evaluating whether to acquire or lease certain equipment, computer
hardware, and computer software.
iii. Management is also seeking to secure additional permanent real estate
financing in the event that the SBA guaranteed financing, described in
Real Estate Development, is not obtained by the prospective Franchisee.
Currently, real estate development activities will be limited to the
extent that permanent financing can be provided by First Chicago or
AT&T.
Financial Commitments. The Company has provided financial guarantees to third
party lenders, equipment lessors, and other sources of financing provided to
certain franchised Retail Stores which, at December 31, 1994, approximated $4.7
million and at December 31, 1993 approximated $2.4 million. In conjunction
with the sale of the notes receivable in the amount of approximately $3
million, the Company guaranteed 50% of such notes based on the balance
outstanding for these notes at December 31 of the previous fiscal year. At
December 31, 1994, this amounted to an additional $1.5 million. Lease
guarantees provided to landlords by the Company amounted to approximately $4.8
million at December 31, 1994.
In November 1993, the Company guaranteed a promissory note on behalf of the Big
O Tires, Inc. Employee Stock Ownership Plan (ESOP) which refinanced three
previously existing promissory notes. The next annual payment is due in April
1995, in the amount of $240,000 plus accrued interest and the final installment
is due in April 1996. The Company is required to make contributions to the
ESOP in an amount equal to these principal and interest payments.
Contributions are anticipated to meet or exceed these debt service
requirements; however, contributions exceeding these payments are at the
discretion of the Board of Directors.
In December 1994, the Company sold its Denver RSC to an unrelated third party
in connection with the conversion to the Las Vegas RSC, as noted in the section
below. This sale was consummated with a down payment of $242,000, certain rent
concessions, and the assignment of the Company's promissory note and mortgage
on the facility from the existing mortgagee. The financial obligations under
this mortgage were not released by the mortgagee, so the Company remains
obligated on this mortgage in the event that the purchaser defaults. At
December 31, 1994, this financial commitment amounted to $2.8 million. The
Company is required to vacate the
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<PAGE>
warehouse portion of the premises by March 31, 1995. As part of the sale
agreement, the Company will maintain usage of the corporate office space for
three (3) years.
Las Vegas RSC Conversion. In June 1993, the Company announced a plan to
consolidate three of its RSCs (Vacaville, California, Ontario, California and
Denver, Colorado, as noted above) into a 300,000 square foot facility located
near Las Vegas, Nevada. The purpose of this consolidation was to continue the
Company's efforts to reduce selling, administrative, and product delivery
expense (S&A Expense). In May 1994, the Company closed its RSC in Vacaville,
California and consolidated its operations into the Ontario RSC. The Vacaville
warehouse was leased to an unrelated third party, which lease continues until
March 2000. The warehouse and lease are currently being marketed for sale.
Upon the sale, the cash proceeds will be used to reduce the outstanding loan
balance with First Chicago.
It is presently anticipated that the Ontario RSC operations will be fully
converted to the Las Vegas RSC by May 1995. The Company is obligated under the
lease for the Ontario warehouse until May 1998. This warehouse space is
currently being marketed for lease.
After all operations have been successfully consolidated at the Las Vegas RSC,
S&A Expense is anticipated to be reduced. However, during the first six months
of 1995, S&A Expenses are anticipated to remain approximately at current levels
until the Denver and Ontario RSC's are closed. The lease costs associated with
the Ontario warehouse have been accrued for the first twelve months of vacancy
after the facility is closed. Costs associated with the lease after that time
are currently expected to be absorbed by the subtenant, if one is secured; if
not, the Company will incur additional expense.
Capital Expenditures. In February 1995, the Company acquired the Las Vegas RSC
at a total cost of approximately $7.7 million. Change orders associated with
the completion of this facility currently amount to an additional $300,000.
New equipment including computer hardware and software to operate this facility
will add an additional estimated $650,000 to 1995 capital expenditures.
Additional capital expenditures are anticipated in connection with the real
estate development activities described above. While it has been anticipated
that the Boise RSC would be expanded in 1995, this expansion has been deferred.
Acquisition and implementation of a new computer hardware and software system
for the Company continues to be evaluated.
Additional Issues That Could Impact Liquidity. Expenses associated with the
warranty program offered by the Company have reduced profitability over the
past seven (7) years. While negotiated programs with suppliers have aided the
Company in reducing the financial impact of this warranty program during the
last four years, certain agreements with the Company's previous supplier have
been limited as to future application. The Company now has 77% of its private
brand product produced by Kelly-Springfield and it is anticipated that nearly
all of this product will be produced by Kelly-Springfield by the end of 1995.
The Company continues to have a significant portion of its Franchisees located
in California. The Company will continue to grow in this significant market,
but is also looking to expand Retail Store development in other states,
principally Washington, Oregon, and Arizona in 1995. In 1993 the Company and
its Franchisees experienced adverse publicity in the state of California, which
may have had an impact on retail sales during 1994. Retail sales and the
ability to franchise new locations within California may be impacted in the
future, although the exact extent, if any, cannot be forecast at this time.
A portion of the Company's growth strategy involves the addition of master
Franchisees (both domestically and internationally) and conversion of existing
tire chains to the Big O system. While the Company is prepared to offer
certain financial arrangements to assist in a conversion, the Company cannot
estimate the exact financial commitment that such a conversion will require
since it is based both on the number of stores converted as well as the
financing provided with each such conversion.
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In 1994, the Company assisted in one environmental issue located in California.
The Company settled this matter at a negligible cost. The Company has
periodically been involved with minor clean ups associated with certain Retail
Stores in which the Company has been a tenant or subtenant. Generally, the
costs of these clean ups have been less than $10,000; however, there is no
assurance that such environmental remediations in the future can be limited to
this amount. As a result of these environmental concerns and the Company's
real estate development strategy, the Company has adopted a policy requiring
that all new projects have Phase I environmental studies conducted before the
project is approved and the location is acquired.
Market risks associated with changes in interest rates could have an impact on
the Company's profitability due to the significant amounts of financing tied to
variable interest rates. Increases in consumer interest rates could have an
adverse effect on the sales of the Company's products to its Retail Stores,
since such Retail Stores sell a portion of their products and services to the
consumer on credit. Management established a credit card system and financing
program with American General Finance, Inc. to assist in the maintenance of
credit availability for the consumer. There is no assurance that this finance
company, or any other finance company, will continue to offer an acceptable
financing program in the event that interest rates increase.
As noted earlier, closures of Retail Stores can have significant financial
impact on the Company's operations and cash flows. While the cost of certain
lease guarantees were reserved and expensed in 1994, the cash flow requirements
from these leases will continue until the lease has expired. Further, the
failure of any Retail Stores for which the Company has guaranteed a lease will
result in reduced financial performance and a resulting impact on future cash
flows.
SEASONALITY
The Retail Stores experience some seasonal variation of product sales because
tire sales are generally greater during the summer than in the winter months.
The Company generally experiences some degree of seasonality, although not to
the same extent that Retail Stores do, as the Company maintains sales to
certain Retail Stores that offset this trend on a national basis through the
sale of such products as snow tires and chains. The Company has historically
generated operating losses or lower profits during the first quarter of each
fiscal year because of lower sales volumes and higher expenses as a percentage
of sales.
INFLATION AND PRICE CHANGES
As a matter of industry practice, most tire distributors adjust the selling
price of inventories when prices increase (decrease) which result in gross
profit increases (decreases) associated with the sale of existing inventories
at these higher (lower) prices. However, management has recently noted that
certain "discount" distributors may defer this price increase on their existing
inventory in an effort to increase market share.
Price increases contributed approximately $360,000, $90,000 and $712,000 to the
Company's gross profits for 1994, 1993 and 1992, respectively. The Company
received price increases from its suppliers of between 3 and 4% on tires and
other products in 1994. Manufacturers implemented a 3% price increase starting
March 1995. The Company is unsure as to whether this price increase will be
supported by the industry, although initial indications are that it will.
Since price increases are initiated by manufacturers and are then subject to
competitive pressures, management cannot predict any future increases for 1995
or thereafter.
ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standard (FAS) No. 107, Disclosures About Fair Value of
Financial Instruments, which is required to be implemented for the Company's
fiscal year ending December 31, 1995. Since this FAS only requires additional
disclosure of the fair value of certain financial instruments for which it is
practicable to estimate such value, the earlier adoption of this FAS would not
have materially affected the Company's financial position nor results of
operations for the year ended December 31, 1994.
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The FASB has issued two additional financial accounting standards, FAS No. 114,
Accounting by Creditors for Impairment of a Loan, and FAS No. 118, Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures,
which are required to be implemented for the Company's fiscal year ending
December 31, 1995. The earlier adoption of these FAS's would not have
materially affected the Company's financial position nor results of operations
for the year ended December 31, 1994.
The FASB has also issued FAS No. 119, Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments, which is required to be
implemented for the Company's fiscal year ending December 31, 1996. At
December 31, 1994, the Company did not hold any derivative financial
instruments for trading or other purposes, and the Company did not purchase any
such instruments during the year then ended. Accordingly, the earlier adoption
of this FAS would not have materially affected the Company's financial position
nor results of operations for the year ended December 31, 1994.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
All Financial Statements and Financial Statement Schedules required to be filed
hereunder are listed under Item 14 and are attached hereto following the
signature page.
(a) Selected Quarterly Financial Data (in thousands except per share data):
<TABLE>
<CAPTION>
1994
Quarter Ended
---------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $26,393 $31,087 $36,652 $33,546
Gross Profit 6,285 8,083 7,561 8,202
Income Tax 152 479 421 898
Net Income 205 650 599 1,237
Net Income Per Common
Share .06 .19 .18 .37
1993
Quarter Ended
---------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Net Sales $27,077 $31,810 $35,241 $28,832
Gross Profit 6,137 7,200 7,898 6,396
Income Tax 261 136 509 494
Cumulative Effect of Change
in Accounting Principle 285 --- --- ---
Net Income 81 191 715 608
Net Income Per Common
Share .02 .06 .22 .18
----------
</TABLE>
(b) Information about Oil and Gas Producing Activities
Not applicable.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
25
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PART III
Items 10 through 13 of this Form 10-K are omitted by the Company and are
incorporated by reference to the Company's definitive Proxy Statement for the
Company's 1995 Annual Meeting of Shareholders which will be filed with the
United States Securities and Exchange Commission not later than 120 days after
the close of the Company's fiscal year.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) List of Financial Statements
The following is a list of financial statements which, along with the auditors'
report, accompany this Form 10-K:
- Independent Auditors' Report - Deloitte & Touche LLP
- Consolidated Balance Sheets
December 31, 1994 and 1993
- Consolidated Statements of Income
Years Ended December 31, 1994, 1993, and 1992
- Consolidated Statements of Shareholders' Equity
Years ended December 31, 1994, 1993, and 1992
- Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993, and 1992
- Notes to Consolidated Financial Statements
(a) (2) List of Schedules Required by Item 8 and Item 14 (d)
None.
(a) (3) List of Exhibits Required by Item 601 of Regulation S-K
EXHIBIT
NUMBER
(3.1) Certificate of Amendment to Restated Articles of Incorporation of Big O
Tires, Inc. dated June 10, 1992 and Restated Articles of Incorporation
of Big O Tires, Inc. dated August 17, 1987 (incorporated by reference
to Exhibit 3 to Quarterly Report on Form 10-Q for quarter ended June
30, 1992).
(3.2) Amended and Restated Bylaws of Big O Tires, Inc., a Nevada corporation,
as amended, August 26, 1994 (incorporated by reference to Exhibit 2 to
Current Report on Form 8-K dated August 26, 1994).
(4.1) Rights Agreement dated as of August 26, 1994, between Big O Tires, Inc.
and Interwest Co., Inc., as Rights Agent (incorporated by reference to
Exhibit 1 to Current Report on Form 8-K dated August 26, 1994).
(10.1) 1994 Restatement of Employee Stock Ownership Plan and Trust Agreement
of Big O Tires, Inc. (incorporated by reference to Exhibit 10.3 to Big
O Tires, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).
(10.2) Big O Tires, Inc. Director and Employee Stock Option Plan
(incorporated by reference to Exhibit 10.11 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1988).
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(10.3) First Amendment to the Big O Tires, Inc. Director and Employee Stock
Option Plan (incorporated by reference to Exhibit 10.10 to Big O
Tires, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
(10.4) Amendment No. 2 to the Big O Tires, Inc. Director and Employee Stock
Option Plan (incorporated by reference to Exhibit 10.16 to Big O
Tires, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
(10.5) Ultimate Net Loss Agreement between Big O Tires, Inc. and FBS Business
Finance Corporation dated January 13, 1989 (incorporated by reference
to Exhibit 10.34 to Big O Tires, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1988).
(10.6) Purchase Agreement effective June 30, 1987, and related documents
including Promissory Notes, Modification Agreements, Security
Agreements, Guaranty Agreement, and Subleases in connection with a
purchase by C.S.B. Partnership and three individuals including Ronald
D. Asher, of three Big O Franchise Retail Tire Stores in California
from Security/Cal, Inc., a wholly-owned subsidiary of the Company, and
H.R.I., Inc., a wholly-owned subsidiary of Security/Cal, Inc.
(incorporated by reference to Exhibit 10.63 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1987).
(10.7) Purchase Agreement effective November 1, 1987, and related documents
including Promissory Notes, Security Agreements, Guaranty Agreements,
Subleases, and Franchise Agreements in connection with a purchase by
C.S.B. Partnership and its three general partners, including Ronald D.
Asher, of two Big O Franchise Retail Tire Stores in California from
Security/Cal, Inc. and H.R.I., Inc. (Seller) (incorporated by
reference to Exhibit 10.45 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1988).
(10.8) Purchase Agreements effective July 5, 1988, October 1, 1988, and
November 14, 1988, and related documents including Promissory Notes,
Security Agreements, Guaranty Agreements, and Subleases in connection
with a purchase by C.S.B. Partnership and three individuals including
Ronald D. Asher of three Big O Franchise Retail Tire Stores in
California from Big O Tires, Inc., Security/Cal, Inc., a wholly-owned
subsidiary of the Company, and H.R.I., Inc., a wholly-owned subsidiary
of Security/Cal, Inc. (incorporated by reference to Exhibit 10.46 to
Big O Tires, Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1988).
(10.9) Agreement and Release dated October 31, 1989, and related documents
including Promissory Note, related Subleases, Assignment of Lease
Rights, and Performance Guarantee in connection with the purchase by
C.S.B. Partnership and its general partners, including Ronald D.
Asher, of two (2) Big O franchise retail tire stores in California,
owned by GEM Tire, Inc. from the Company (incorporated by reference to
Exhibit 10.57 to Big O Tires, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1989).
(10.10) Ultimate Net Loss Agreement, dated as of December 1, 1990, by and
between Big O Tires, Inc. and Northcross Financial Services, Inc.,
ICON Capital Corp., in its individual capacity and on behalf of ICON
Cash Flow Partners, L.P., Series A, ICON Cash Flow Partners, L.P.,
Series B and any future partnerships on which it may be the general
partner and/or manager (incorporated by reference to Exhibit 10.70 to
Big O Tires, Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1990).
(10.11) Loan and Security Agreement dated October 15, 1991, with its former
lender together with exhibits and appendices (incorporated by
reference to Exhibit 10.57 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
(10.12) Assignment for Security (Trademarks and Trademark Licenses), dated
October 15, 1991, providing collateral assignment of Big O Tires,
Inc.'s and its subsidiaries' trademark and trademark licenses to its
27
<PAGE>
former lender (incorporated by reference to Exhibit 10.58 to Big O
Tires, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1991).
(10.13) Stock Pledge Agreement dated October 15, 1991, whereunder Big O Tires,
Inc. pledged stock holdings of its subsidiary companies to its former
lender (incorporated by reference to Exhibit 10.59 to Big O Tires,
Inc.'s Annual Report on Form 10-K for the fiscal year ended December
31, 1991).
(10.14) Continuing Guaranty Agreement dated October, 15, 1991, providing the
guarantee by certain of Big O Tires, Inc.'s subsidiary companies for
the obligations of Big O Tires, Inc. under the Loan and Security
Agreement with its former lender (incorporated by reference to Exhibit
10.60 to Big O Tires, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1991).
(10.15) First Amendment to Loan and Security Agreement, dated as of November
18, 1991, with its former lender (incorporated by reference to Exhibit
10.62 to Big O Tires, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1991).
(10.16) Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of November 19, 1991, for the benefit of its former
lender which now enjoys a first lien position on Big O Tires, Inc.'s
Vacaville, California Regional Sales and Service Center (incorporated
by reference to Exhibit 10.65 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
(10.17) Secured Promissory Note dated April 3, 1992, in the original principal
amount of $3,000,000, payable to the order of its former lender which
evidences Big O Tires, Inc.'s $3,000,000 term loan facility
(incorporated by reference to Exhibit 10.67 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1991).
(10.18) 1994 Incentive Bonus Plans (incorporated by reference to Exhibit 10.43
to Big O Tires, Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
(10.19) Agreement of Joint Venture of Big O/C.S.B. Joint Venture dated as of
June 1, 1992, by and between Big O Retail Enterprises, Inc., a wholly-
owned subsidiary of Big O Tires, Inc., and C.S.B. Partnership, a
California general partnership (incorporated by reference to Exhibit
10.70 to Big O Tires, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1991).
(10.20) Amendment No. 1 to Agreement of Joint Venture of Big O/C.S.B. Joint
Venture dated as of May 15, 1993 (incorporated by reference to Exhibit
10.27 to Big O Tires, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1993).
(10.21) Purchase Agreement for Private Brand Name Tires between Big O Tires,
Inc. and The Kelly-Springfield Tire Co., dated August 16, 1992
(incorporated by reference to Exhibit 10.71 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1991).
(10.22) Big O Tires, Inc. Long Term Incentive Plan (incorporated by reference
to Exhibit 55 to Big O Tires, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1992).
(10.23) Amendment No. 1 to Big O Tires, Inc. Long Term Incentive Plan
(incorporated by reference to Exhibit 56 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(10.24) Amendment No. 2 to Big O Tires, Inc. Long Term Incentive Plan
(incorporated by reference to Exhibit 57 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(10.25) Agreement of Joint Venture of Big O/S.A.N.D.S. Joint Venture
(incorporated by reference to Exhibit 58 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
28
<PAGE>
(10.26) Commitment Letters dated July 22, 1992, from AT&T Capital Corporation
(incorporated by reference to Exhibit 64 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(10.27) Agreement dated as of November 15, 1992, among Peerless Trading
Company, Limited, Delaware Liquidators, Inc. dba Trade Center Imports,
and Big O Tires, Inc.; Purchase Money Non-Negotiable Promissory Note
dated as of November 15, 1992, from Peerless Trading Company, Limited
to Big O Tires, Inc.; and amendment dated January 19, 1993 to the
Agreement dated November 15, 1992 (incorporated by reference to
Exhibit 66 to Big O Tires, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(10.28) Marketing Agreement for Private Brand Tires between Big O Tires, Inc.
and General Tire, Inc., dated May 14, 1993 (incorporated by reference
to Exhibit 10.1 to Big O Tires, Inc.'s Current Report on Form 8-K
dated April 30, 1993).
(10.29) Closing Agreement between General Tire, Inc. and Big O Tires, Inc.,
dated May 14, 1993 (incorporated by reference to Exhibit 10.2 to Big O
Tires, Inc.'s Current Report on Form 8-K dated April 30, 1993).
(10.30) Second Amendment to Loan and Security Agreement by and among its
former lender and Big O Tires, Inc., Big O Retail Enterprises, Inc.
and Big O Tire of Idaho, Inc., dated May 14, 1993 (incorporated by
reference to Exhibit 10.3 to Big O Tires, Inc.'s Current Report on
Form 8-K dated April 30, 1993).
(10.31) Inventory Financing Agreement between The Kelly-Springfield Tire
Company and Big O Tires, Inc. and/or Big O Tire of Idaho, Inc. and/or
Big O Retail Enterprises, Inc., dated May 14, 1993 (incorporated by
reference to Exhibit 10.4 to Big O Tires, Inc.'s Current Report on
Form 8-K dated April 30, 1993).
(10.32) Demand Note in the original principal amount of $6,000,338.67 with The
Kelly-Springfield Tire Co. as Holder and Big O Tires, Inc., Big O
Retail Enterprises, Inc. and Big O Tire of Idaho, Inc., as Maker
(incorporated by reference to Exhibit 10.50 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1993).
(10.33) Purchase Agreement by and among Tire Brands, Inc. and Big O Tires,
Inc., dated as of April 30, 1993 (incorporated by reference to Exhibit
10.5 to Big O Tires, Inc.'s Current Report on Form 8-K dated April 30,
1993).
(10.34) Consolidation and Modification Agreement among Big O Tires (successor
in interest to H.R.I., Inc. and Security/Cal, Inc.) and Big O Retail
Enterprises, Inc. and C.S.B. Partnership (incorporated by reference to
Exhibit 10.51 to Big O Tires, Inc.'s Registration Statement No. 33-
65852).
(10.35) Modification of Consolidation and Modification Agreement by and
between C.S.B. Partnership and Big O Tires, Inc. (incorporated by
reference to Big O Tires, Inc.'s Form 10-K for the year ended December
31, 1993).
(10.36) Registration Rights Agreement dated June 28, 1993, between the Selling
Shareholder and Big O Tires, Inc. (incorporated by reference to
Exhibit 10.52 to Big O Tires, Inc.'s Registration Statement No. 33-
65852).
(10.37) Loan Agreement and Promissory Note in the original principal amount of
$155,000.00 with C.S.B. Partnership as Maker (incorporated by
reference to Exhibit 10.44 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
(10.38) Loan Agreement and Promissory Note in the original principal amount of
$70,000.00 with Big O/C.S.B Joint Venture as Maker (incorporated by
reference to Exhibit 10.45 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
29
<PAGE>
(10.39) Loan Agreement and Promissory Note in the original principal amount of
$75,000.00 with Big O/S.A.N.D.S. Joint Venture as Maker (incorporated
by reference to Exhibit 10.46 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
(10.40) Commercial Note and Loan Agreement, Commercial Mortgage and
Environmental Certificate between Big O Development, Inc. and National
City Bank, Kentucky, and Guaranty Agreement of Big O Tires, Inc.
guaranteeing the obligations of Big O Development, Inc. to National
City Bank, Kentucky in connection with the borrowing of $1,500,000 for
construction of the Company's Regional Sales and Service Center in New
Albany, Indiana (incorporated by reference to Exhibit 10.47 to Big O
Tires, Inc.'s Form 10-K for the fiscal year ended December 31, 1993).
(10.41) Construction Agreement between Big O Development, Inc. and Koetter
Construction, Inc. to construct the Regional Sales and Service Center
in Floyd County, Indiana (incorporated by reference to Exhibit 10.48
to Big O Tires, Inc.'s Form 10-K for the fiscal year ended December
31, 1993).
(10.42) Purchase and Sale Agreement and Joint Escrow Instructions by and
between Western Realco and Big O Tires, Inc. for the purchase of the
Company's Regional Sales and Service Center in Clark County, Nevada
(incorporated by reference to Exhibit 10.49 to Big O Tires, Inc.'s
Form 10-K for the fiscal year ended December 31, 1993).
(10.43) Lease between Big O Tires, Inc. and Simpson Dura-Vent Company, Inc.,
dated January 24, 1994 for property located at 877 Cotting Court,
Vacaville, California and related election of option to accelerate
occupation (incorporated by reference to Exhibit 10.51 to Big O Tires,
Inc.'s Form 10-K for the fiscal year ended December 31, 1993).
(10.44) Letter dated January 26, 1994 from General Tire, Inc. to the Company
terminating the Marketing Agreement for Private Brand Name Tires
between Big O Tires, Inc. and General Tire, Inc. dated May 14, 1993
(incorporated by reference to Exhibit 10.52 to Big O Tires, Inc.'s
Form 10-K for the fiscal year ended December 31, 1993).
(10.45) Purchase Agreement by and between Caps Tire Limited Liability Company
and Intermountain Big O Realty for the Big O Tires Retail Store
located at 8151 East Arapahoe Road, Englewood, Colorado (incorporated
by reference to Exhibit 10.53 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
(10.46) Third and Fourth Amendments to Loan and Security Agreement by and
between Big O Tires, Inc. and its primary lender (incorporated by
reference to Exhibit 10.54 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
(10.47) Limited Partnership Agreement by and between Donald J. Horton, General
Partner, Thomas L. Staker, General Partner, and Big O Tires, Inc.,
Limited Partner, dated as of December 31, 1993 (incorporated by
reference to Exhibit 10.56 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
(10.48) Loan Agreement and Guaranty, Promissory Note and Security Agreement
with Big O Tires, Inc. Employee Stock Ownership Plan ("ESOP") as
Borrower, Big O Tires, Inc., as Guarantor, and Key Bank of Wyoming, as
Lender, in connection with the refinancing of the ESOP debt in the
amount of $960,000 (incorporated by reference to Exhibit 10.57 to Big
O Tires, Inc.'s Form 10-K for the fiscal year ended December 31,
1993).
(10.49) Amendment to Partnership Agreement dated August 25, 1994, by and
between Big O Development, Inc., a Colorado corporation, a wholly-
owned subsidiary of Big O Tires, Inc. and Mill Creek Associates, Ltd.,
a Colorado limited partnership (incorporated by reference to Exhibit
10.2 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994).
30
<PAGE>
(10.50) Agreement dated July 1, 1994, by and between General Tire, Inc., an
Ohio corporation and Big O Tires, Inc. (incorporated by reference to
Exhibit 10.4 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q
dated September 30, 1994).
(10.51) Consulting Agreement by and between Big O Tires, Inc., and Horst K.
Mehlfeldt (incorporated by reference to Exhibit 10.5 to Big O Tires,
Inc.'s Quarterly Report on Form 10-Q dated September 30, 1994).
(10.52) Letter Agreement dated January 10, 1995, amending the Consulting
Agreement by and between Big O Tires, Inc. and Horst K. Mehlfeldt
(incorporated by reference to Exhibit 10.3 to Big O Tires, Inc.'s
Current Report on Form 8-K dated January 10, 1995).
(10.53) Letter Agreement dated July 12, 1994, by and between Big O Tires, Inc.
and PaineWebber Incorporated (incorporated by reference to Exhibit
10.6 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q dated
September 30, 1994).
(10.54) Letter Agreement dated March 23, 1994, by and between Big O Tires,
Inc. and The CIT Group/Equipment Financing, Inc., a New York
corporation (incorporated by reference to Exhibit 10.7 to Big O Tires,
Inc.'s Quarterly Report on Form 10-Q dated September 30, 1994).
(10.55) Ultimate Net Loss Agreement dated October 21, 1994, by and between Big
O Tires, Inc. and The CIT Group/Equipment Financing, Inc., a New York
corporation (incorporated by reference to Exhibit 10.8 to Big O Tires,
Inc.'s Quarterly Report on Form 10-Q dated September 30, 1994).
(10.56) Fifth Amendment to Loan and Security Agreement by and between Big O
Tires, Inc. and its former lender dated April 29, 1994 (incorporated
by reference to Exhibit 10.1 to Big O Tires, Inc.'s Quarterly Report
on Form 10-Q dated September 30, 1994).
(10.57) Agreement by the Investment Committee of the Board of Directors and
the Management/Dealer participants dated September 22, 1994
(incorporated by reference to Exhibit 10.1 to Big O Tires, Inc.'s
Current Report on Form 8-K dated December 6, 1994).
(10.58) Letter dated September 13, 1994, to the Investment Committee of Big O
Tires, Inc. and the Management participants and Dealer representatives
(incorporated by reference to Exhibit 10.2 to Big O Tires, Inc.'s
Current Report on Form 8-K dated December 6, 1994).
(10.59) Letter dated February 7, 1995, from the Dealer-Management Group to the
Company's Board Chairman (incorporated by reference to Exhibit 10.1 to
Big O Tires, Inc.'s Current Report on Form 8-K dated January 10,
1995).
(10.60) Agreement between the Company and the Management/Dealer participants
dated January 20, 1995 (incorporated by reference to Exhibit 10.2 to
Big O Tires, Inc.'s Current Report on Form 8-K dated January 10,
1995).
(10.61) Form of Franchise Agreement currently in use.
(10.62) Multi-Tenant Lease NNN dated December 1, 1994 between Botac VI Leasing
L.L.C., a Utah Limited Liability Company and Big O Development, Inc .
(10.63) Assignment and Assumption Agreement dated December 2, 1994 by Big O
Development, Inc., Big O Tires, Inc. and Botac VI Leasing, L.L.C. and
Allstate Life Insurance Company.
(10.64) Guarantee Agreement dated December 2, 1994 by Big O Tires, Inc., Big O
Development, Inc. and Allstate Life Insurance Company.
31
<PAGE>
(10.65) Closing Agreement dated December 2, 1994 by Big O Development, Inc.,
Big O Tires, Inc., Botac VI Leasing, L.L.C., and Allstate Life
Insurance Company.
(10.66) Commercial contract to Buy and Sell Real Estate dated March 17, 1994
between Bailey's Moving and Storage and Big O Tires, Inc.
(10.67) Confidentiality Agreement dated September, 1994 between Big O Tires,
Inc. and Kenneth W. Pavia, Sr.
(10.68) Amendment No. 1 to the Big O Tires, Inc. Employee Stock Ownership
Plan and Trust Agreement dated September 12, 1994.
(10.69) Development Management Agreement dated September, 1994 between Ross
Development Management Group, Inc. and Big O Development, Inc. and
Big O Tires, Inc.
(10.70) Letter Agreement dated February 20, 1995 terminating the Consulting
Agreement between Big O Tires, Inc. and Horst K. Mehlfeldt.
(10.71) 1995 Incentive Bonus Plans
(10.72) Commitment Letter dated February 16, 1994 between Big O Tires, Inc.
and AT&T Commercial Finance Corporation for real estate financing.
(10.73) Commitment Letter dated February 16, 1994 between Big O Tires, Inc.
and AT&T Commercial Finance Corporation for equipment financing.
(10.74) Extension letter dated December 9, 1994 between Big O Tires, Inc. and
AT&T Commercial Finance Corporation to extend existing lines of
credit through December 31, 1995.
(10.75) Resignation letter dated February 27, 1995 from Robert L. Puckett.
(10.76) Resignation letter dated February 24, 1995 from David W. Dwyer.
(10.77) Revolving Credit Agreement dated January 23, 1995 between Big O
Tires, Inc. and The First National Bank of Chicago.
(10.78) Consent, Acknowledgement and Access Agreement dated January 23, 1995
between The Bank of Cherry Creek, N.A., Kenneth B. Buckius and The
First National Bank of Chicago.
(10.79) Note Purchase Agreement dated April 27, 1994 between Big O Tires,
Inc. and USG Annuity & Life Company and Republic Western Insurance
Company.
(10.80) Franchise Agreement dated October 7, 1994 between Big O Tires, Inc.
and OK Tires, Inc. for the Retail Store located at 2830 West 3500
South, West Valley City, Utah 84119.
(10.81) Franchise Agreement dated November 26, 1993 between Big O Tires, Inc.
and CAPS Tire Limited Liability Company for the Retail Store located
at 8151 East Arapahoe Road, Englewood, Colorado 80112.
(10.82) Form of Confidentiality Agreement signed by dealers dated October 19,
1994.
(10.83) Ultimate Net Loss Agreement dated November 30, 1994, by and between
Big O Tires, Inc. and The CIT Group/Equipment Financing, Inc., a New
York corporation.
32
<PAGE>
(10.84) Inventory Financing Agreement together with a Demand Note dated
September 30, 1994, by and between The Kelly-Springfield Tire Company
and Big O Tires, Inc., Big O Retail Enterprises, Inc. and Big O Tire
of Idaho, Inc.
(10.85) Supplemental Executive Retirement Plan dated December 7, 1994, by Big
O Tires, Inc., effective January 1, 1994.
(10.86) Forms of Stock Appreciation Rights Agreement dated February 15, 1995,
between Big O Tires, Inc. and the Members of the Chief Executive
Office.
(10.87) Letter Agreement dated March 24, 1995, regarding severance package,
between Big O Tires, Inc., and John E. Siipola.
(10.88) Letter Agreement dated March 24, 1995, regarding severance package,
between Big O Tires, Inc., and Horst K. Mehlfeldt.
(21.1) Big O Tires, Inc. Subsidiaries.
(25.1) Powers of Attorney executed by each of the Directors of Big O Tires,
Inc.
(27.1) Big O Tires, Inc.'s Financial Data Schedule.
(99.1) October 31, 1994 press release issued by AKH Company, Inc., a
California based retail tire chain, doing business as "Discount Tire
Centers" and "Evans Tire and Service Centers" (incorporated by
reference to Exhibit 99.1 to Big O Tires, Inc.'s Quarterly Report on
Form 10-Q dated September 30, 1994).
(99.2) November 1, 1994 press release issued by Big O Tires, Inc.
(incorporated by reference to Exhibit 99.2 to Big O Tires, Inc.'s
Quarterly Report on Form 10-Q dated September 30, 1994).
__________
* All executive compensation plans and arrangements required to be filed as
exhibits to the Form 10-K pursuant to Item 601.
(b) Reports on Form 8-K
1. In a Current Report on Form 8-K, dated December 2, 1994, the Company
reported on two proposals with contingencies to acquire the outstanding
shares of the Company. No assurances were given that either of the
proposals would be consummated.
2. In a Current Report on Form 8-K, dated December 6, 1994, the Company
reported that the Investment Committee of the Board of Directors agreed to
enter into a period of exclusive negotiations with a group of officers,
managers and franchised dealers ("Dealer-Management Group") that recently
made an offer to acquire the outstanding shares of the Company and that
AKH Company, Inc., who had made a previous offer to acquire the Company
had advised the Investment Committee it was contemplating deferring any
further proposal as long as the Dealer-Management Group's bid remains
under active consideration. The Company also reported that two separate
class action lawsuits had been filed against the Company and its nine
directors similarly requesting, among other things, the court to enjoin
the sale of the Company to the Dealer-Management Group.
(c) Exhibits
Exhibits required by Item 601 of Regulation S-K are listed above under (a) (3)
of this Item 14.
(d) Financial Statement Schedules
Financial Statement Schedules are listed above under (a) (2) of this Item 14.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: March 29, 1995
BIG O TIRES, INC., a Nevada corporation
By: /s/ JOHN E. SIIPOLA
----------------------------------
John E. Siipola
Member of the Office of the
Chief Executive and Chairman
By: /s/ HORST K. MEHLFELDT
----------------------------------
Horst K. Mehlfeldt
Member of the Office of the
Chief Executive and Vice-Chairman
By: /s/ STEVEN P. CLOWARD
----------------------------------
Steven P. Cloward
Member of the Office of the
Chief Executive and President
By: /s/ JOHN B. ADAMS
----------------------------------
John B. Adams
Principal Accounting Officer
By: /s/ JOHN B. ADAMS
----------------------------------
John B. Adams
Chief Financial Officer
34
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date Name and Title Signature
---- -------------- ---------
<S> <C> <C>
March 29, 1995 John E. Siipola JOHN E. SIIPOLA
Director, Member of the Office of the
Chief Executive and Chairman of the Board
Horst K. Mehlfeldt HORST K. MEHLFELDT
Director, Member of the Office of the
Chief Executive and Vice-Chairman of the Board
Steven P. Cloward STEVEN P. CLOWARD
Director, Member of the Office of the
Chief Executive and President
John B. Adams JOHN B. ADAMS
Director and Principal
Financial Officer
Ronald D. Asher RONALD D. ASHER
Director
Frank L. Carney FRANK L. CARNEY
Director
Everett H. Johnston EVERETT H. JOHNSTON
Director
Ralph J. Weiger RALPH J. WEIGER
Director
C. Thomas Wernholm C. THOMAS WERNHOLM
Director
</TABLE>
March 29, 1995
By: /s/ JOHN B. ADAMS
----------------------------------
John B. Adams
Attorney-in-Fact
35
<PAGE>
Independent Auditors' Report
----------------------------
To the Shareholders and Board of Directors of
Big O Tires, Inc.
Englewood, Colorado
We have audited the accompanying consolidated balance sheets of Big O Tires,
Inc. as of December 31, 1994 and 1993, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1994
and 1993 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 13, 1995
36
<PAGE>
BIG O TIRES, INC.
-----------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1994 AND 1993
--------------------------
(000s except for share amounts)
-------------------------------
<TABLE>
<CAPTION>
ASSETS 1994 1993
------------------------------------------------------------ ------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,882 $ 1,113
Trade accounts receivable, net of
allowance for doubtful accounts of
$835 in 1994 and $1,039 in 1993 8,165 7,016
Other receivables 2,905 706
Current portion of notes receivable:
Related parties 10 195
Other 723 798
Inventories 14,219 11,748
Deferred income taxes 2,126 1,802
Other current assets 688 758
------- -------
Total current assets 33,718 24,136
------- -------
NOTES RECEIVABLE,
net of current portion:
Related parties 20 955
Other 3,173 4,668
------- -------
3,193 5,623
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Furniture and equipment 6,021 5,939
Buildings and leasehold improvements 7,413 9,311
Land and land improvements 1,574 2,815
Construction in progress 2,169 -
------- -------
17,177 18,065
Less accumulated depreciation and amortization (5,146) (4,912)
------- -------
12,031 13,153
------- -------
INTANGIBLE AND OTHER ASSETS:
Distribution rights, net of accumulated amortiza-
tion of $1,816 in 1994 and $1,538 in 1993 9,077 9,355
Equity in joint ventures and unconsolidated subsidiaries 1,129 1,385
Other 2,820 2,955
------- -------
13,026 13,695
------- -------
TOTAL ASSETS $61,968 $56,607
======= =======
</TABLE>
See consolidated notes to financial statements.
<PAGE>
BIG O TIRES, INC.
-----------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1994 AND 1993
--------------------------
(000s except for share amounts)
-------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
--------------------------------------------------- ------- -------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 650 $ 3,613
Accrued payroll and benefits 1,130 1,257
Other accrued expenses 1,355 1,478
Warranty reserve 3,850 3,254
Current portion of long-term debt 2,033 2,448
Current portion of capital lease obligations 33 201
------- -------
Total current liabilities 9,051 12,251
------- -------
LONG-TERM DEBT,
net of current portion 15,739 10,783
------- -------
CAPITAL LEASE OBLIGATIONS,
net of current portion 167 254
------- -------
OTHER LONG-TERM LIABILITIES 1,433 856
------- -------
EMPLOYEE STOCK OWNERSHIP PLAN OBLIGATIONS 449 975
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock: $ .10 par value
100,000,000 shares authorized,
shares issued: 3,339,300 in 1994
and 3,274,900 in 1993 334 327
Capital contributed in excess of par 15,418 14,529
Retained earnings 20,419 17,728
------- -------
36,171 32,584
Less: Employee stock ownership plan obligations (449) (975)
Deferred stock grant compensation (472) -
Treasury stock, at cost, 31,300 shares (121) (121)
------- -------
35,129 31,488
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $61,968 $56,607
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BIG O TIRES, INC.
-----------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
----------------------------------------------------
(000s except for share and per share amounts)
---------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
SALES, net $ 127,678 $ 122,960 $ 119,799
COST OF SALES 97,547 95,329 92,150
--------- --------- ---------
GROSS PROFIT 30,131 27,631 27,649
--------- --------- ---------
EXPENSES, net:
Selling and administrative 19,132 19,316 19,372
Product delivery expense 3,113 2,499 2,341
Interest expense 1,465 1,219 1,170
Loss on sale or closure of retail stores 1,106 429 --
Shareholder proposal expense 674 -- --
Offering costs -- 281 --
Warehouse consolidation costs -- 607 --
--------- --------- ---------
25,490 24,351 22,883
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 4,641 3,280 4,766
--------- --------- ---------
PROVISION FOR INCOME TAXES:
Current 2,311 1,979 2,275
Deferred (361) (579) (292)
--------- --------- ---------
1,950 1,400 1,983
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 2,691 1,880 2,783
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- 285 --
--------- --------- ---------
NET INCOME $ 2,691 $ 1,595 $ 2,783
========= ========= =========
EARNINGS PER SHARE:
Income before cumulative effect of change in accounting principle $ .80 $ .55 $ .80
Cumulative effect of change in accounting principle -- (.08) --
--------- --------- ---------
Net income $ .80 $ .47 $ .80
========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING 3,347,892 3,409,962 3,497,044
========= ========= =========
</TABLE>
-See notes to consolidated financial statements.-
39
<PAGE>
BIG O TIRES, INC.
-----------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
----------------------------------------------------
($ only in 000s)
----------------
<TABLE>
<CAPTION>
Employee
COMMON STOCK Capital Stock TREASURY STOCK
------------------ Contributed Ownership Deferred ------------------
Number of In Excess Retained Plan Stock Grant Number of
Shares Amount of Par Earnings Obligations Compensation Shares Amount
--------- ------ ----------- -------- ----------- ------------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1992 3,525,300 $352 $19,012 $13,350 $(1,656) $ -- 32,800 $(126)
Net Income for 1992 2,783
Stock Options Exercised 17,400 2 11
Deferred Compensation under
Discounted Stock Option Plan 75
Treasury Stock Sold 1 (1,800) 7
Employee Stock Ownership Plan
Obligations 379
--------- ---- ------- ------- ------- ----- ------ -----
BALANCE DECEMBER 31, 1992 3,542,700 354 19,099 16,133 (1,277) -- 31,000 (119)
Net Income for 1993 1,595
Sale of Common Stock 93,300 9 1,097
Stock Issued as Compensation 1,500 19
Stock Options and Warrants
Exercised 37,400 4 284
Deferred Compensation under
Discounted Stock Option Plan 90
Purchase and Retirement of
Treasury Stock and Warrants (400,000) (40) (6,060)
Treasury Stock Purchased 300 (2)
Employee Stock Ownership Plan
Obligations 302
--------- ---- ------- ------- ------- ----- ------ -----
BALANCE DECEMBER 31, 1993 3,274,900 327 14,529 17,728 (975) -- 31,300 (121)
Net Income for 1994 2,691
Stock Issued as Compensation 33,700 4 516 (472)
Stock Options Exercised 30,700 3 229
Deferred Compensation under
Discounted Stock Option Plan 144
Employee Stock Ownership Plan
Obligations 526
--------- ---- ------- ------- ------- ----- ------ -----
BALANCE DECEMBER 31, 1994 3,339,300 $334 $15,418 $20,419 $ (449) $(472) 31,300 $(121)
========= ==== ======= ======= ======= ===== ====== =====
</TABLE>
-See notes to consolidated financial statements.-
40
<PAGE>
BIG O TIRES, INC.
-----------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
----------------------------------------------------
(000s)
------
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,691 $ 1,595 $ 2,783
------- ------- -------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 1,215 1,168 1,120
Amortization of intangibles 453 390 568
Provision for losses on accounts and notes receivable 356 556 1,245
Loss on sales and retirements of property and equipment 37 40 23
Loss on sales and closures of retail stores 1,106 150 --
Loss on investments in affiliates -- -- 306
Equity in losses of affiliates 250 350 157
Deferred compensation under stock option plan and
restricted stock grants 224 90 75
Deferred gain recognized (47) (35) (35)
Deferred income taxes (361) (579) (292)
Cumulative effect of change in accounting principle -- 285 --
Other -- 104 4
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (4,446) (1,206) (1,656)
(Increase) decrease in inventories (2,253) 3,356 (1,805)
(Increase) decrease in other current assets 161 (329) 58
(Increase) decrease in other assets 9 (40) 32
Increase (decrease) in accounts payable (2,987) 4,528 3,355
Increase (decrease) in accrued expenses 25 278 (376)
Increase (decrease) in warranty reserve 596 600 300
Increase (decrease) in other liabilities (258) -- --
------- ------- -------
Total adjustments (5,920) 9,706 3,079
------- ------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (3,229) 11,301 5,862
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (650) (400) (73)
Payments received on notes receivable 1,170 1,184 1,126
Proceeds from sales of notes receivable 2,962 -- --
Equity investment in affiliates (187) (673) (221)
Acquisition of interest in joint ventures -- (266) --
Acquisition of other assets -- (1,005) --
Contingent payments related to business combination -- (788) (501)
Net cash provided by sales of retail stores 204 77 --
Purchase of retail stores (410) (435) (182)
Purchases of property and equipment (1,896) (1,039) (753)
Proceeds from sales of property and equipment 1,183 42 38
------- ------- -------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 2,376 (3,303) (566)
------- ------- -------
</TABLE>
-See notes to consolidated financial statements.-
41
<PAGE>
BIG O TIRES, INC.
-----------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
----------------------------------------------------
(000s)
------
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt $10,735 $ 560 $ 1,140
Principal payments on long-term debt (6,106) (4,055) (6,539)
Principal payments on capital
lease obligations (239) (274) (201)
Proceeds from sale of common stock and
stock options and warrants exercised, net 232 1,394 13
Purchase and retirement of treasury stock
and warrants -- (6,100) --
Sale of treasury stock -- -- 8
------- ------- -------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 4,622 (8,475) (5,579)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 3,769 (477) (283)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 1,113 1,590 1,873
------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 4,882 $ 1,113 $ 1,590
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,446 $ 1,240 $ 1,219
Income taxes 2,373 2,116 2,583
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Accounts receivable transferred to long-
term notes receivable and other assets $ 478 $ 1,912 $ 1,871
Employee stock ownership plan obligations 526 302 379
Non-cash equity investments in affiliates -- 108 819
Notes receivable from sales of retail stores -- -- 83
Accounts payable transferred to long-term debt -- 6,000 --
Non-cash acquisition of company-owned
retail stores -- 187 --
Inventories received in satisfaction of
long-term notes receivables 454 -- --
Common stock issued as unearned compensation 520 -- --
Property and equipment purchased by issuance of
long-term debt 2,767 -- --
Sale of assets through assumption
of related debt 4,078 -- --
</TABLE>
-See notes to consolidated financial statements.-
42
<PAGE>
BIG O TIRES, INC.
-----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
----------------------------------------------------
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Operations
----------
The Company is the franchisor of Big O Tire stores and sells tires, wheels, and
related products directly to franchised Big O dealers ("Franchisees"), to
licensees in Canada and to retail customers at its Company owned retail tire
stores. The Company is active in promoting certain programs and sales
techniques to its Franchisees.
Under a Franchise Agreement, the Company grants the right to operate a retail
tire store using the Big O trademarks, service marks and associated logos and
symbols in exclusive marketing territories. Depending on certain
qualifications, the initial franchise fee ranges from $7,000 to a maximum of
$21,000. Assignment or transfer of a Franchise Agreement provides a transfer
fee of up to $21,000. Initial franchise fees are deferred and recognized when
all material services or conditions relating to the sale or transfer of the
franchise have been substantially completed. The Franchisees must also pay the
Company a continuing royalty fee of 2% based upon the Franchisees' monthly
gross sales as that term is defined in the Franchise Agreement. Continuing
royalty fees are recognized when the fees are earned and become receivable from
the Franchisee. The initial franchise and royalty fees included in sales were
$6,772,000, $6,116,000 and $5,856,000 for 1994, 1993 and 1992, respectively.
The Franchise Agreement also allows for the Company to collect a 1% fee to be
used for national advertising; however, this fee is currently limited to $.10
for each Big O brand tire purchased from the Company.
One member of the Company's Board of Directors had ownership of or interests in
thirty-one (31) Big O Retail Stores during 1994 and 1993, and two members of
the Company's Board of Directors had ownership of or interests in twenty-seven
(27) Big O Retail Stores in 1992. Three officers of the Company each had
ownership interests in a Big O Retail Store during 1994, two officers each had
an ownership interest in a Big O Retail Store in 1993, and one officer had an
ownership interest in a Big O Retail Store in 1992. Sales to these stores were
approximately $9,372,000, $8,122,000, and $9,176,000 during 1994, 1993 and
1992, respectively. These sales were made under the same terms and conditions
as those with unrelated parties. As of December 31, 1994 and 1993, outstanding
accounts and notes receivable from these stores totalled $803,000 and
$1,609,000, respectively. The Company has also provided equipment lease
guarantees to certain of these stores totalling $531,000 at December 31, 1994.
During 1993, an officer of the Company purchased real property from a joint
venture in which the Company holds a 50% interest. The sale resulted in a
pretax gain of $38,000 for the joint venture.
Significant Accounting Policies:
-------------------------------
Consolidation and Reclassifications -
All significant majority-owned subsidiaries are consolidated and all
significant intercompany transactions are eliminated. Certain
reclassifications have been made to 1993 and 1992 financial information to make
the presentation consistent with that of the current year. These
reclassifications had no impact on net income.
Cash -
Cash and cash equivalents include time deposits, certificates of deposit and
marketable securities with original maturities of three months or less.
At December 31, 1994 cash in the amount of $4,228,000 was restricted for use by
the Company for the acquisition of the Las Vegas distribution center which was
under construction.
43
<PAGE>
Inventories -
Inventories consist of finished goods only. New and recapped tire inventories
of Big O Tire of Idaho, Inc. ("Idaho"), a subsidiary of the Company, and the
inventories purchased pursuant to the November 1988 Kentucky and Indiana merger
(see Note 2), are valued at the lower of last-in, first-out (LIFO) cost or
market. All other inventories are valued at the lower of first-in, first-out
(FIFO) cost or market. Inventories of $4,657,000 and $3,864,000 at December
31, 1994 and 1993, respectively, are valued at LIFO. Under the FIFO method of
inventory valuation, these inventories would have been approximately $44,000
and $341,000 higher at December 31, 1994 and 1993, respectively.
Property, Plant and Equipment -
Property, plant and equipment are carried at cost. Depreciation is computed
using the straight-line and double declining balance methods over estimated
useful lives of the assets ranging from three to 40 years.
Ordinary maintenance and repairs are charged to operations, while expenditures
which extend the physical or economic life of property and equipment are
capitalized. Gains and losses on disposition of property and equipment are
recognized in operations in the year of disposition and the related asset and
accumulated depreciation accounts are adjusted accordingly.
Intangible Assets -
Distribution rights, which represent the excess purchase cost over the fair
market value of net assets acquired in certain mergers and acquisitions (see
Note 2) are capitalized and are being amortized by charges to operations on a
straight line basis over 40 years.
Warranty Reserve -
The Company maintains a reserve for future warranty claims on Big O brand tires
based on historical experience.
Earnings Per Share -
Earnings per share is computed using the weighted-average number of outstanding
shares during each period presented. Inclusion of common stock equivalents did
not have a material effect on the computation.
2. ACQUISITIONS AND MERGERS:
In November 1988 the Company acquired Big O Tire of Louisville, Inc.
("Louisville") at a cost of $3,031,000. Louisville had the distribution rights
to the Kentucky and Indiana market of 24 Big O Retail Stores. The Company
issued 204,200 shares of its common stock and paid $1,443,000 in cash for this
acquisition. The stock was valued at $7.70 per share which approximated
management's estimate of the market value of such unregistered shares as of the
date of the transaction. In accordance with the purchase method of accounting,
the purchase price was allocated to the net assets acquired based on fair
values at the date of acquisition with $1,114,000 being assigned to
distribution rights and $600,000 to a non-compete agreement. In connection
with this acquisition, the Company also had an obligation to provide additional
securities, or obtain the return of a portion of those securities, based upon
the trading price of the Company's common stock at specified dates through
November 1994.
In August 1990 the Company modified the agreement with the former shareholders
of Louisville whereby the Company guaranteed that the former shareholders would
receive, under certain circumstances, a value of $25.00 per share (subject to
adjustment depending on when payment is received) from the sale of the Big O
common stock issued to them in connection with the acquisition of Louisville,
and the former shareholders provided the Company with an option of paying cash
in lieu of issuing additional securities pursuant to this obligation. In 1993
and 1992, cash payments of $788,000 and $501,000, respectively, were made to
the former shareholders of Louisville under the terms of this obligation which
were capitalized as additional costs of distribution rights. In June 1993, the
Company completed an equity offering which included the sale of 81,667 shares
of Big O common stock held by
44
<PAGE>
the former shareholders of Louisville. With the sale of this stock and the
cash payment of $788,000, the Company's obligation to the former shareholders
was fully satisfied.
3. JOINT VENTURES:
In August 1992 the Company sold its interest in a joint venture involving a
wholly owned subsidiary, Big O Distributors, Inc. (Distributors) and received a
five-year promissory note for $231,000 in exchange for its interest. The
Company incurred a loss of approximately $73,000 on the sale. Although the
buyer, Aspen Enterprises, Inc., is now primarily responsible for obligations
under the building lease, Distributors remains liable through 1996 for up to
$287,000 in future rentals if the joint venture defaults. These future rents
are not included in the future minimum rental payments disclosed in Note 8.
Prior to 1992 the Company and one of its subsidiaries, Big O Development, Inc.
(Development), entered into three separate joint venture agreements with
independent parties for the purpose of developing real estate sites for Big O
Retail Stores. The Company accounts for its 50% investment in these joint
ventures using the equity method. During 1993, the Company acquired the
remaining 50% interest in one of the joint ventures at a cost of $266,000. The
joint venture was then liquidated and the net assets were transferred to
Development. At December 31, 1994 and 1993, $573,000 and $467,000,
respectively, were recorded as investments in these joint ventures including
$9,000 in pretax loss for 1994 and $10,000 and $23,000 in net pretax income for
1993, and 1992, respectively.
In 1993 and 1992, the Company and one of its subsidiaries, Big O Retail
Enterprises, Inc., entered into separate joint venture agreements with five of
its franchisees to operate retail stores in Arizona, California, Colorado, and
Wyoming. Generally, the Company contributed inventories in the amount of
$55,000 and guaranteed certain financing arrangements in exchange for a 50%
interest in each joint venture.
4. SALES AND CLOSURES OF RETAIL STORES:
In 1994, the Company sold five retail stores for cash and notes. Assets with a
net book value of $765,000 were sold for $648,000 resulting in a pretax loss of
$117,000. The Company also closed four retail stores. In connection with the
closure of these stores and the estimated future lease costs associated with
two additional closed locations, one time charges of $989,000 were accrued to
cover estimated closing and future lease costs.
In 1993, the Company sold five retail stores to franchisees for cash and notes.
Assets with a net book value of $798,000 were sold for $648,000, resulting in a
pretax loss of $150,000. The Company also closed one retail store. In
connection with this closure and the estimated future lease costs associated
with three other closed locations, one time charges of $279,000 were accrued to
cover estimated closing and future lease costs.
In 1992, the Company sold four retail stores to a franchisee for a promissory
note. Inventories, property, equipment and other assets with a net book value
of $481,000 were sold for $612,000. Because the transaction was considered a
highly leveraged transaction, it has not been recorded as a sale of assets, and
no gain has been recognized during 1994, 1993 or 1992. The note receivable
arising from the transfer of assets has been reflected in the financial
statements as other assets, net of the deferred gain of $131,000.
45
<PAGE>
5. NOTES RECEIVABLE:
Notes receivable at December 31, 1994 and 1993, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
6.0% to 12.0% notes receivable from
franchisees (including related parties
in 1993) from the sale of Company-owned
retail stores, substantially all of which
are collateralized by inventories,
equipment, receivables and franchise
rights, due in monthly installments
plus interest (see Note 4). $ 1,432 $ 2,053
8.0% to 11.25% notes receivable from
franchisees, for inventories and equipment,
substantially all of which are also collateral,
due in monthly installments plus
interest. 1,599 3,332
6% note receivable due from a vendor for
returned inventories, which are also
collateral, due in monthly installments
plus interest. 187 613
9.25% to 10% notes receivable from sale of real
properties, collateralized by said properties,
due in monthly installments plus interest. 494 213
8% note receivable from sale of joint venture
interest, collateralized by inventories and
equipment, due in monthly installments
plus interest. -- 184
Other - primarily 8% to 11% notes
receivable from various entities, majority
are without collateral, maturing at
various dates. 214 221
------- -------
3,926 6,616
Less current portion 733 993
------- -------
Long-term portion $ 3,193 $ 5,623
======= =======
</TABLE>
46
<PAGE>
6. LONG-TERM DEBT:
Long-term debt at December 31, 1994 and 1993, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Prime rate (8.5% at December 31, 1994) plus 1/2% revolving
credit loan, with an annual facility fee of $19,000,
collateralized by receivables and inventories, with a maximum
borrowing of up to $12,000,000 (limited to a portion of eligible
collateral and further reduced by the amount of any outstanding
letters of credit issued by the lender on behalf of the
Company). This loan was replaced by a new credit facility on
January 23, 1995. (a) $ 2,985 $ --
Prime rate plus 1% term loan paid in April 1994. -- 2,000
8.71% senior loan, collateralized by certain real estate,
interest only due in quarterly installments through July 1998,
then principal due in quarterly installments of $333,000 plus
interest through May 2004. 8,000 --
Prime rate credit loan, without collateral, due in monthly
principal installments of $115,000 plus interest through
September 1995, $125,000 plus interest through September 1996,
and $135,000 plus interest through October 1997, balance due
November 1997. (b) 4,355 5,600
Prime rate mortgage loan, collateralized by deed of trust, due
in monthly installments of $8,000 plus interest through
September 2001. 1,475 --
Prime plus 2.25% mortgage loan, collateralized by a deed of
trust, due in monthly installments of $4,000 through July 2004. 412 --
8.0% mortgage loan, collateralized by deed of trust, interest
and principal due January 1995. 312 --
8.0% mortgage loan, collateralized by deed of trust, interest
and principal due April 1995. 200 --
9.5% mortgage loan, collateralized by a deed of trust, due in
monthly installments of $25,000 through January 2000, balance
due February 2000. (c) -- 2,804
10.08% mortgage loan, collateralized by a deed of trust,
principal and interest due in monthly installments of $5,000
through April 1997, balance due April 1997. (c) -- 485
10.65% mortgage loan paid in April 1994. -- 1,740
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
8% mortgage loan paid in February 1994. -- 335
8% mortgage loan paid in April 1994. -- 225
Other 33 42
------- -------
17,772 13,231
Less current portion 2,033 2,448
------- -------
Long-term portion $15,739 $10,783
======= =======
</TABLE>
(a) The amount of borrowing availability for the line of credit is determined by
application of a predefined formula to the collateral base on a weekly basis.
The ranges of permitted borrowings for 1994, 1993 and 1992 were as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1994 $7,160 - $12,000
1993 $6,862 - $12,000
1992 $8,976 - $ 9,800
</TABLE>
In October 1991, the Company executed a Loan and Security Agreement with its
primary lender that provided a revolving line of credit of $12,000,000 (which
was limited to a portion of eligible collateral and was further reduced by the
amount of any outstanding letters of credit issued by the lender on behalf of
the Company) and a term loan of $3,000,000. Interest was computed on the
outstanding borrowings at the prime rate plus 1/2% on the line of credit and at
the prime rate plus 1% on the term loan. The credit facility was collateralized
by receivables, inventories, equipment and certain real estate. The agreement
contained various covenants and restrictions (including a restriction which
precludes the payment of cash dividends or the return of capital to
shareholders) with which the Company was in compliance at December 31, 1994.
In January 1995, the Company executed a Revolving Credit Agreement with another
primary lender which provides a revolving line of credit of $20,000,000 (which
is limited to a portion of eligible collateral and is further reduced by the
amount of any outstanding letters of credit issued on behalf of the Company).
This credit facility replaced the previous credit agreement and the borrowings
under the previous agreement were repaid.
(b) Interest rate reductions of up to 2.5% may be earned by meeting certain
purchase requirements defined in the lending agreement.
(c) In 1994 the Company sold the real property collateralizing these mortgage
loans. Under the terms of the transactions, the new owners assumed the mortgage
liability. The Company has guaranteed the loans.
The annual maturities of long-term debt for succeeding years are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 2,033
1996 (d) 4,630
1997 1,533
1998 786
1999 1,445
Due thereafter 7,345
-------
$17,772
=======
</TABLE>
(d) Includes $2,985,000 outstanding under a line of credit which was replaced in
January 1995 with a credit facility which matures January 1998.
48
<PAGE>
7. CAPITAL LEASES:
The Company leases certain equipment and a building under capital lease
arrangements. Leased assets under these arrangements at December 31, 1994 and
1993 were as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated
Cost Amortization Net
------ ------------ ----
1994:
-----
<S> <C> <C> <C>
Building and leasehold improvements $ 125 $ 70 $ 55
Equipment 144 89 55
------ ---- ----
$ 269 $159 $110
====== ==== ====
1993:
-----
Building and leasehold improvements $ 125 $ 64 $ 61
Equipment 875 584 291
------ ---- ----
$1,000 $648 $352
====== ==== ====
</TABLE>
At December 31, 1994, future minimum lease commitments under these leases for
succeeding years were as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 70
1996 70
1997 58
1998 34
1999 34
Due thereafter 126
----
Total minimum lease payments 392
Less amount representing interest 192
----
Present value of net minimum
lease payments 200
Less current portion 33
----
Long-term portion $167
====
</TABLE>
8. OPERATING LEASES:
The Company's operating leases are primarily for real property. Rental expense
for the years ended December 31, 1994, 1993 and 1992 was $1,218,000, $1,253,000
and $765,000 respectively after deducting sublease income of $1,571,000 for
1994, $1,448,000 for 1993 and $1,618,000 for 1992.
49
<PAGE>
Future minimum rental payments required under these leases for succeeding years
are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 2,845
1996 2,785
1997 2,514
1998 1,829
1999 1,522
Due thereafter 4,230
-------
15,725
Less sublease income 10,098
-------
$ 5,627
=======
</TABLE>
The Company is contingently liable for future rentals on a building lease
currently occupied by a former joint venture partner (See Note 3). In the event
of a default, the Company remains liable for up to $287,000 in future rentals.
These future rents are not included in the future minimum rental payments above.
Certain lease agreements provide the Company with the option to purchase the
leased property at its fair market value at the end of the lease term.
Additionally, certain lease agreements contain renewal options ranging from five
to fifteen years with terms similar to the original lease agreements.
In November 1988 the Company received a distribution of its interest in the
Ontario, California distribution center from the limited partnership and
subsequently sold its interest to an unrelated third party. As part of this
transaction, the distribution center's ten year lease was also transferred,
resulting in a sale-leaseback. The Company's share of the gain on the sale of
the property is being deferred and amortized over the remaining lease term.
9. INCOME TAXES:
The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (SFAS No. 109) as of January 1, 1993. SFAS No.
109 is an asset and liability approach that, among other provisions, requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, SFAS No. 109
generally considers all expected future events other than enactments or changes
in the law or rules.
The total cumulative effect of adopting SFAS No. 109 is an increase in deferred
tax liabilities of $285,000 at January 1, 1993 and has been reported as a charge
against income in the 1993 consolidated statement of income.
The tax effects of temporary differences which give rise to the deferred tax
assets and liabilities as of December 31, 1994 and 1993 are as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts not currently
deductible $ 325 $ 405
Inventory reserves not currently deductible 198 104
Inventory basis differences 44 --
Accruals not currently deductible 208 102
Warranty reserves not currently deductible 1,499 1,267
Other reserves not currently deductible 474 453
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Compensation under stock option plan not currently
deductible 207 155
Differences between book and tax recognition of gain
on sales of property 93 58
Property and equipment basis differences -- 26
Investment basis differences 106 93
------ ------
$3,154 $2,663
====== ======
Deferred Tax Liabilities:
Prepaid expenses deductible for tax purposes $ 216 $ 49
Accelerated tax depreciation and amortization 604 648
Property and equipment basis differences 43 --
Intangible assets not currently deductible 165 175
Inventory basis differences -- 27
------ ------
$1,028 $ 899
====== ======
Net deferred tax asset $2,126 $1,764
Non-current deferred tax liability -- 38
------ ------
Current deferred tax asset $2,126 $1,802
====== ======
</TABLE>
The following is a summary of the income tax provision for the years ended
December 31, 1994 and 1993 under SFAS No. 109 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Currently payable $2,197 $1,921
Deferred expense (361) (579)
Tax benefit of exercise of stock options 114 58
------ ------
Total income tax provision $1,950 $1,400
====== ======
</TABLE>
51
<PAGE>
The following is a summary of the income tax provision for the year ended
December 31, 1992, under the Company's former method of accounting for income
taxes (in thousands):
<TABLE>
<CAPTION>
1992
------
<S> <C>
Current
Federal $1,837
State 438
Deferred
Federal (236)
State (56)
------
Total $1,983
======
</TABLE>
The net deferred income taxes charged to operations at December 31, 1992
consist of the following (in thousands):
<TABLE>
<CAPTION>
1992
------
<S> <C>
Installment sales $(163)
Depreciation 17
Reserve for warranty claims (117)
Reserve for bad debts (19)
Stock compensation 15
Inventory costs (28)
Deferred gain on property purchased from affiliate 3
-----
$(292)
=====
</TABLE>
A reconciliation of the provision for income taxes to the statutory Federal tax
rate of 34% on income before income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Tax at statutory rate $1,578 $1,115 $1,620
State taxes, net of Federal
tax benefit 248 177 252
Depreciation and amortization not
deductible for tax purposes 91 87 104
Other 33 21 7
------ ------ ------
$1,950 $1,400 $1,983
====== ====== ======
</TABLE>
10. EMPLOYEE STOCK OWNERSHIP PLAN:
The Company has an employee stock ownership plan ("ESOP") in which all non-
retail employees, 18 years of age or older and having 1,000 hours of service in
a fiscal year, are eligible to participate. The ESOP generally provides for
20% vesting after three years of service with an additional 20% each year of
service thereafter, until a participant is 100% vested. Annual contributions
are at the discretion of the Board of Directors, subject to the ESOP provision
that the Company is required to make contributions equal to principal and
interest payments on debt issued by the ESOP to acquire securities.
Contributions recorded in 1994, 1993 and 1992 were $357,000, $697,000 and
$664,000, respectively.
52
<PAGE>
In 1991, the ESOP purchased 461,008 shares of the Company's $.10 par value
common stock from four of the Company's shareholders at market value in exchange
for cash and notes. In 1993, the ESOP refinanced the remaining three notes with
a new note payable in five annual installments of principal and interest fixed
at 9.0%. The Company's financial statements at December 31, 1994 and 1993
reflect the ESOP's obligations as a liability and a corresponding reduction of
shareholders' equity.
11. SHAREHOLDERS' EQUITY:
Shareholder Rights Plan -
In August 1994, the Board of Directors adopted a shareholder rights plan and
declared a dividend of one right for each outstanding share of the Company's
common stock. Each right entitles the shareholder to purchase from the Company
one share of the Company's common stock at a discounted price (which varies
depending upon the circumstances, determined according to the plan). The rights
are not and will not become exercisable unless certain change of control events
occur. None of the rights are exercisable as of December 31, 1994.
Stock Compensation Plans -
In August 1988 the Company adopted the Big O Tires, Inc. Director and Employee
Stock Option Plan ("the Option Plan") which allows the Company's directors and
employees to forego a portion of their compensation in order to acquire options
for the purchase of the Company's common stock in accordance with the provisions
of the Option Plan. Options are granted to the participants on January 1 of each
year, in an amount equal to the foregone compensation divided by 90% of the fair
market value of the Company's $0.10 par value common stock. The remaining 10% of
the fair market value then becomes the exercise price of the options. The
options are exercisable one year after the grant date and expire ten years after
grant.
In June 1991 the Company adopted the Big O Tires, Inc. Long Term Incentive Plan
("the Incentive Plan") which allows the Company to make long-term awards of
stock options and restricted stock grants to selected officers and employees of
the Company and to make long-term awards of stock options to selected directors
of the Company. The stock options are generally not exercisable for at least
three years following their award date and awards of restricted common stock are
subject to vesting requirements.
Stock option transactions for the years ended December 31, 1994, 1993 and 1992
are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------------------- ---------------------- -----------------------
Exercise Exercise Exercise
Price Options Price Options Price Options
------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year $ .32 - 12.25 203,974 $ .32 - 5.16 150,223 $ .32 - 5.00 109,427
Granted 1.48 - 15.44 53,213 1.35 - 12.25 71,336 .48 - 5.16 58,149
Exercised .32 - 12.25 (30,735) .32 - 5.16 (17,348) .32 - 1.06 (17,353)
Expired 1.06 (105) .84 - 1.06 (237) -- --
------- ------- -------
Options outstanding at end of year .32 - 15.44 226,347 .32 - 12.25 203,974 .32 - 5.16 150,223
======= ======= =======
Options exercisable at end of year .32 - 12.25 77,025 .32 - 1.06 65,848 .32 - 1.06 60,974
======= ======= =======
</TABLE>
53
<PAGE>
12. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN:
Effective January 1, 1994, the Company adopted a supplemental executive
retirement plan ("SERP") which is maintained for the purpose of providing
deferred compensation for a select group of highly compensated employees. The
1994 contribution to the SERP was $11,000 and was determined by multiplying the
Board approved ESOP contribution rate by the ESOP qualified compensation
exceeding $150,000. This plan is unfunded and the contribution was made only for
1994.
13. COMMITMENTS AND CONTINGENCIES:
During 1992, the Company entered into an agreement with a lender to provide
equipment, inventory and real estate financing to various joint ventures in
which the Company was a 50% joint venture partner. The agreement requires the
Company and the other joint venture partners to guarantee repayment of the
loans. In February 1994, this agreement was amended to provide a total of up to
$9,750,000 of real estate financing and up to $2,000,000 for inventory and
equipment financing.
The Company previously entered into two separate equipment leasing programs for
its franchisees with two equipment leasing companies. The Company entered into
agreements with these leasing companies which require the Company to pay up to
$1,000,000 and $500,000 respectively, under certain franchisee contract
defaults. These commitments are collateralized by the leased equipment. In
addition, the Company entered into a similar leasing program with another
equipment leasing company which does not require a financial guarantee, but does
require the Company to assist in the re-marketing of the leased equipment, if
necessary.
In December 1989 the Company also entered into an agreement with an independent
franchise finance company to provide financing to its franchisees for
inventories and equipment. This agreement requires the Company to guarantee
payment of up to $750,000 under certain franchisee contract defaults. This
commitment is collateralized by the inventories and equipment which have been
financed and franchise rights.
In 1994, the company sold certain notes receivable which had a remaining
principal balance of $2,962,000, plus accrued interest, to an investor. In
connection with the sale of these notes, the Company executed an Ultimate Net
Loss Agreement which limits the Company's guarantee for payment of these notes
to fifty percent of the aggregate unpaid balance of the purchased notes at the
end of each prior year. No gain or loss was recorded in connection with the sale
of these notes, but the Company incurred transaction costs of $55,000.
At December 31, 1994 and 1993, the Company had no post-retirement or post-
employment benefits which would require the recording of an accrued or
contingent liability under the provisions of SFAS No. 106 and No. 112,
respectively.
14. FINANCIAL GUARANTEES AND CREDIT RISK:
The Company has provided financial guarantees associated with franchisee
financing and real estate leases for its franchisees. The guarantees were issued
in the normal course of business to meet the financing needs of the Company and
its franchisees. However, these financial guarantees represent additional credit
risk in excess of the amounts which are already reflected in the balance sheet
as of December 31, 1994.
54
<PAGE>
The Company's maximum exposure to credit loss in the event of nonperformance by
the beneficiaries of the financial guarantees at December 31, 1994 is
represented by the contractual amount of the guarantees as indicated below (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Mortgage loan guarantees $ 2,769
Franchisee financing guarantees 6,222
Franchisee real estate lease guarantees 4,821
-------
Total $13,812
=======
</TABLE>
The financing and lease guarantees are conditional commitments issued by the
Company to guarantee the repayment of amounts which are owed to third parties by
certain of its franchisees and joint ventures. Most of the financing and lease
guarantees extend for more than five years and expire in decreasing amounts
through 2002.
The credit risk associated with these guarantees is essentially the same as that
involved in extending loans to the Company's franchisees or partners. The
Company evaluates each franchisee's creditworthiness on an individual basis, and
it is the Company's policy to require that sufficient collateral (primarily
inventories and equipment) and security interests be obtained by the third
parties in connection with the financing and lease obligations (except for real
estate obligations) for which the guarantees are issued. There are no cash
requirements associated with these guarantees except in the event that an actual
financial loss is subsequently incurred by the Company in connection with these
guarantees.
15. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK:
Although the Company has franchised and Company-owned retail stores located in
18 states, approximately 38% of these stores are located in the State of
California, and nearly 33% of the Company's sales were made to the California
retail stores. In addition, all of the Company's operations and identifiable
assets are attributable to the wholesale and retail marketing of tires and other
automotive aftermarket products primarily to franchised, Company-owned (and
Canadian licensed) retail stores. Accordingly, the Company's receivables and its
guarantees of obligations are concentrated within a single industry segment and
a significant portion of its credit risk is also concentrated within a single
state.
In addition, the Company had receivables and financial guarantees totalling
$4,179,000 at December 31, 1994 which were associated with five of its
franchisees.
16. AGREEMENTS WITH GENERAL TIRE, INC.:
In September 1989, the Company entered into a Master Loan Agreement and a Stock
and Warrants Purchase Agreement with General Tire, Inc. ("General"), a related
party through May 1993. Under the Master Loan Agreement, General provided the
Company with a revolving line of credit of up to $7,500,000 which was
collateralized by receivables, inventories and equipment. Under the Stock and
Warrants Purchase Agreement, General acquired 400,000 shares of the Company's
common stock (approximately 11.4% of the then outstanding shares), and acquired
warrants to purchase an additional 1,000,000 shares.
In May 1993, the Company and General entered into an agreement which terminated
the 1989 agreements, and which resulted in the Company's repurchase of the
400,000 shares of the Company's common stock which had been owned by General,
the repurchase and cancellation of the warrants held by General for the purchase
of an additional 1,000,000 shares, and the repayment of the outstanding balance
of the revolving line of credit in the amount of $1,764,000.
55
<PAGE>
17. SHAREHOLDER LITIGATION:
In December 1994, the Company and its nine directors were named in two proposed
stockholder class action lawsuits each similarly requesting the court to enjoin
the sale of the Company to a Dealer-Management Group, enjoin the implementation
of the recently adopted shareholder rights plan, obtain specified damages,
require the disclosure of the Company's internal forecasts and award plaintiffs'
their attorneys' fees and costs, including experts fees. The lawsuits also
request that the court order the directors to carry out their fiduciary duties
to the plaintiffs and the other members of the class by announcing their
intention to cooperate and do all that is necessary to encourage the buyout or
takeover of the Company by enhancing the Company's attractiveness as a
merger/acquisition candidate, effectively exposing the Company to the
marketplace in an effort to create an active action of the Company, act
independently and resolve all conflicts of interest in the best interests of the
class. If the contemplated transaction with the Dealer-Management Group is
consummated, the court is asked to rescind the transaction and, among other
actions, award rescissionary damages. The Company moved to dismiss both
lawsuits, which have been consolidated, as being frivolous and not in the
interests of the stockholders as a class. Counsel for the plaintiffs have filed
a motion to dismiss both lawsuits without prejudice. The Company has not
received notice that these dismissals have occurred. The Company cannot predict
the outcome or the effect, if any, on the Company's financial statements if such
litigation continues.
56
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
------- ------------------------------------------------------------------------- --------
<C> <S> <C>
(3.1) Certificate of Amendment to Restated Articles of Incorporation of Big N/A
O Tires, Inc. dated June 10, 1992 and Restated Articles of Incorpora-
tion of Big O Tires, Inc. dated August 17, 1987 (incorporated by
reference to Exhibit 3 to Quarterly Report on Form 10-Q for quarter
ended June 30, 1992).
(3.2) Amended and Restated Bylaws of Big O Tires, Inc., a Nevada corpo- N/A
ration, as amended, August 26, 1994 (incorporated by reference to
Exhibit 2 to Current Report on Form 8-K dated August 26, 1994).
(4.1) Rights Agreement dated as of August 26, 1994, between Big O Tires, N/A
Inc. and Interwest Co., Inc., as Rights Agent (incorporated by
reference to Exhibit 1 to Current Report on Form 8-K dated August
26, 1994).
(10.1) 1994 Restatement of Employee Stock Ownership Plan and Trust N/A
Agreement of Big O Tires, Inc. (incorporated by reference to Exhibit
10.3 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994).
(10.2) Big O Tires, Inc. Director and Employee Stock Option Plan N/A
(incorporated by reference to Exhibit 10.11 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1988).
(10.3) First Amendment to the Big O Tires, Inc. Director and Employee N/A
Stock Option Plan (incorporated by reference to Exhibit 10.10 to Big
O Tires, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
(10.4) Amendment No. 2 to the Big O Tires, Inc. Director and Employee N/A
Stock Option Plan (incorporated by reference to Exhibit 10.16 to Big
O Tires, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
(10.5) Ultimate Net Loss Agreement between Big O Tires, Inc. and FBS N/A
Business Finance Corporation dated January 13, 1989 (incorporated by
reference to Exhibit 10.34 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1988).
(10.6) Purchase Agreement effective June 30, 1987, and related documents N/A
including Promissory Notes, Modification Agreements, Security
Agreements, Guaranty Agreement, and Subleases in connection with a
purchase by C.S.B. Partnership and three individuals including Ronald
D. Asher, of three Big O Franchise Retail Stores in California from
Security/Cal, Inc., a wholly-owned subsidiary of the Company, and
H.R.I., Inc., a wholly-owned subsidiary of Security/Cal, Inc. (incor-
porated by reference to Exhibit 10.63 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1987).
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(10.7) Purchase Agreement effective November 1, 1987, and related N/A
documents including Promissory Notes, Security Agreements,
Guaranty Agreements, Subleases, and Franchise Agreements in
connection with a purchase by C.S.B. Partnership and its three
general partners, including Ronald D. Asher, of two Big O Franchise
Retail Stores in California from Security/Cal, Inc. and H.R.I., Inc.
(Seller) (incorporated by reference to Exhibit 10.45 to Big O Tires,
Inc.'s Annual Report on Form 10-K for the fiscal year ended Decem-
ber 31, 1988).
(10.8) Purchase Agreements effective July 5, 1988, October 1, 1988, and N/A
November 14, 1988, and related documents including Promissory
Notes, Security Agreements, Guaranty Agreements, and Subleases in
connection with a purchase by C.S.B. Partnership and three
individuals including Ronald D. Asher of three Big O Franchise Retail
Stores in California from Big O Tires, Inc., Security/Cal, Inc., a
wholly-owned subsidiary of the Company, and H.R.I., Inc., a wholly-
owned subsidiary of Security/Cal, Inc. (incorporated by reference to
Exhibit 10.46 to Big O Tires, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1988).
(10.9) Agreement and Release dated October 31, 1989, and related N/A
documents including Promissory Note, related Subleases, Assignment
of Lease Rights, and Performance Guarantee in connection with the
purchase by C.S.B. Partnership and its general partners, including
Ronald D. Asher, of two (2) Big O franchise Retail Stores in
California, owned by GEM Tire, Inc. from the Company
(incorporated by reference to Exhibit 10.57 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1989).
(10.10) Ultimate Net Loss Agreement, dated as of December 1, 1990, by and N/A
between Big O Tires, Inc. and Northcross Financial Services, Inc.,
ICON Capital Corp., in its individual capacity and on behalf of ICON
Cash Flow Partners, L.P., Series A, ICON Cash Flow Partners,
L.P., Series B and any future partnerships on which it may be the
general partner and/or manager (incorporated by reference to Exhibit
10.70 to Big O Tires, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1990).
(10.11) Loan and Security Agreement dated October 15, 1991, with its N/A
primary lender together with exhibits and appendices (incorporated by
reference to Exhibit 10.57 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
(10.12) Assignment for Security (Trademarks and Trademark Licenses), dated N/A
October 15, 1991, providing collateral assignment of Big O Tires,
Inc.'s and its subsidiaries' trademark and trademark licenses to its
primary lender (incorporated by reference to Exhibit 10.58 to Big O
Tires, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1991).
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(10.13) Stock Pledge Agreement dated October 15, 1991, whereunder Big O N/A
Tires, Inc. pledged stock holdings of its subsidiary companies to its
primary lender (incorporated by reference to Exhibit 10.59 to Big O
Tires, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1991).
(10.14) Continuing Guaranty Agreement dated October, 15, 1991, providing N/A
the guarantee by certain of Big O Tires, Inc.'s subsidiary companies
for the obligations of Big O Tires, Inc. under the Loan and Security
Agreement with its primary lender (incorporated by reference to
Exhibit 10.60 to Big O Tires, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1991).
(10.15) First Amendment to Loan and Security Agreement, dated as of N/A
November 18, 1991, with its primary lender (incorporated by
reference to Exhibit 10.62 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
(10.16) Deed of Trust, Assignment of Rents, Security Agreement and Fixture N/A
Filing dated as of November 19, 1991, for the benefit of its primary
lender, which now enjoys a first lien position on Big O Tires, Inc.'s
Vacaville, California Regional Sales and Service Center (incorporated
by reference to Exhibit 10.65 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
(10.17) Secured Promissory Note dated April 3, 1992, in the original principal N/A
amount of $3,000,000, payable to the order of its primary lender,
which evidences Big O Tires, Inc.'s $3,000,000 term loan facility
(incorporated by reference to Exhibit 10.67 to Big O Tires, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1991).
(10.18) 1994 Incentive Bonus Plans (incorporated by reference to Exhibit N/A
10.43 to Big O Tires, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
(10.19) Agreement of Joint Venture of Big O/C.S.B. Joint Venture dated as of N/A
June 1, 1992, by and between Big O Retail Enterprises, Inc., a
wholly-owned subsidiary of Big O Tires, Inc., and C.S.B.
Partnership, a California general partnership (incorporated by
reference to Exhibit 10.70 to Big O Tires, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
(10.20) Amendment No. 1 to Agreement of Joint Venture of Big O/C.S.B. N/A
Joint Venture dated as of May 15, 1993 (incorporated by reference to
Exhibit 10.27 to Big O Tires, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1993).
(10.21) Purchase Agreement for Private Brand Name Tires between Big O N/A
Tires, Inc. and The Kelly-Springfield Tire Co., dated August 16,
1992 (incorporated by reference to Exhibit 10.71 to Big O Tires,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1991).
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(10.22) Big O Tires, Inc. Long Term Incentive Plan (incorporated by N/A
reference to Exhibit 55 to Big O Tires, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1992).
(10.23) Amendment No. 1 to Big O Tires, Inc. Long Term Incentive Plan N/A
(incorporated by reference to Exhibit 56 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(10.24) Amendment No. 2 to Big O Tires, Inc. Long Term Incentive Plan N/A
(incorporated by reference to Exhibit 57 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(10.25) Agreement of Joint Venture of Big O/S.A.N.D.S. Joint Venture N/A
(incorporated by reference to Exhibit 58 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(10.26) Commitment Letters dated July 22, 1992, from AT&T Capital N/A
Corporation (incorporated by reference to Exhibit 64 to Big O Tires,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
(10.27) Agreement dated as of November 15, 1992, among Peerless Trading N/A
Company, Limited, Delaware Liquidators, Inc. dba Trade Center
Imports, and Big O Tires, Inc.; Purchase Money Non-Negotiable
Promissory Note dated as of November 15, 1992, from Peerless
Trading Company, Limited to Big O Tires, Inc.; and amendment
dated January 19, 1993 to the Agreement dated November 15, 1992
(incorporated by reference to Exhibit 66 to Big O Tires, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(10.28) Marketing Agreement for Private Brand Tires between Big O Tires, N/A
Inc. and General Tire, Inc., dated May 14, 1993 (incorporated by
reference to Exhibit 10.1 to Big O Tires, Inc.'s Current Report on
Form 8-K dated April 30, 1993).
(10.29) Closing Agreement between General Tire, Inc. and Big O Tires, Inc., N/A
dated May 14, 1993 (incorporated by reference to Exhibit 10.2 to Big
O Tires, Inc.'s Current Report on Form 8-K dated April 30, 1993).
(10.30) Second Amendment to Loan and Security Agreement by and among N/A
its primary lender and Big O Tires, Inc., Big O Retail Enterprises,
Inc. and Big O Tire of Idaho, Inc., dated May 14, 1993 (incorporated
by reference to Exhibit 10.3 to Big O Tires, Inc.'s Current Report on
Form 8-K dated April 30, 1993).
(10.31) Inventory Financing Agreement between The Kelly-Springfield Tire N/A
Company and Big O Tires, Inc. and/or Big O Tire of Idaho, Inc.
and/or Big O Retail Enterprises, Inc., dated May 14, 1993
(incorporated by reference to Exhibit 10.4 to Big O Tires, Inc.'s
Current Report on Form 8-K dated April 30, 1993).
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(10.32) Demand Note in the original principal amount of $6,000,338.67 with N/A
The Kelly-Springfield Tire Col. as Holder and Big O Tires, Inc., Big
O Retail Enterprises, Inc. and Big O Tire of Idaho, Inc. as Maker
(incorporated by reference to Exhibit 10.50 to Big O Tires, Inc.'s
Annual Report on Form 10-K dated April 30, 1993).
(10.33) Purchase Agreement by and among Tire Brands, Inc. and Big O N/A
Tires, Inc., dated as of April 30, 1993 (incorporated by reference to
Exhibit 10.5 to Big O Tires, Inc.'s Current Report on Form 8-K dated
April 30, 1993).
(10.34) Consolidation and Modification Agreement among Big O Tires N/A
(successor in interest to H.R.I., Inc. and Security/Cal, Inc.) and Big
O Retail Enterprises, Inc. and C.S.B. Partnership (incorporated by
reference to Exhibit 10.51 to Big O Tires, Inc.'s Registration
Statement No. 33-65852).
(10.35) Modification of Consolidation and Modification Agreement by and N/A
between C.S.B. Partnership and Big O Tires, Inc. (incorporated by
reference to Big O Tires, Inc.'s Form 10-K for the year ended
December 31, 1993).
(10.36) Registration Rights Agreement dated June 28, 1993, between the N/A
Selling Shareholder and Big O Tires, Inc. (incorporated by reference
to Exhibit 10.52 to Big O Tires, Inc.'s Registration Statement No. 33-
65852).
(10.37) Loan Agreement and Promissory Note in the original principal amount N/A
of $155,000.00 with C.S.B. Partnership as Maker (incorporated by
reference to Exhibit 10.44 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
(10.38) Loan Agreement and Promissory Note in the original principal amount N/A
of $70,000.00 with Big O/C.S.B Joint Venture as Maker
(incorporated by reference to Exhibit 10.45 to Big O Tires, Inc.'s
Form 10-K for the fiscal year ended December 31, 1993).
(10.39) Loan Agreement and Promissory Note in the original principal amount N/A
of $75,000.00 with Big O/S.A.N.D.S. Joint Venture as Maker
(incorporated by reference to Exhibit 10.46 to Big O Tires, Inc.'s
Form 10-K for the fiscal year ended December 31, 1993).
(10.40) Commercial Note and Loan Agreement, Commercial Mortgage and N/A
Environmental Certificate between Big O Development, Inc. and
National City Bank, Kentucky, and Guaranty Agreement of Big O
Tires, Inc. guaranteeing the obligations of Big O Development, Inc. to
National City Bank, Kentucky in connection with the borrowing of
$1,500,000 for construction of the Company's Regional Sales and
Service Center in New Albany, Indiana (incorporated by reference to
Exhibit 10.47 to Big O Tires, Inc.s Form 10-K for the fiscal year
ended December 31, 1993).
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(10.41) Construction Agreement between Big O Development, Inc. and N/A
Koetter Construction, Inc. to construct the Regional Sales and Service
Center in Floyd, County, Indiana (incorporated by reference to
Exhibit 10.48 to Big O Tires, Inc.'s Form 10-K for the fiscal year
ended December 31, 1993).
(10.42) Purchase and Sale Agreement and Joint Escrow Instructions by and N/A
between Western Realco and Big O Tires, Inc. for the purchase of the
Company's Regional Sales and Service Center in Clark County,
Nevada (incorporated by reference to Exhibit 10.49 to Big O Tires,
Inc.'s Form 10-K for the fiscal year ended December 31, 1993).
(10.43) Lease between Big O Tires, Inc. and Simpson Dura-Vent Company, N/A
Inc. dated January 24, 1994, for property located at 877 Cotting
Court, Vacaville, California and related election of option to
accelerate occupation (incorporated by reference to Exhibit 10.51 to
Big O Tires, Inc.'s Form 10-K for the fiscal year ended December
31, 1993).
(10.44) Letter dated January 26, 1994 from General Tire, Inc. to the N/A
Company terminating the Marketing Agreement for Private Brand
Name Tires between Big O Tires, Inc. and General Tire, Inc. dated
May 14, 1993 (incorporated by reference to Exhibit 10.52 to Big O
Tires, Inc.'s Form 10-K for the fiscal year ended December 31,
1993).
(10.45) Purchase Agreement by and between Caps Tire Limited Liability N/A
Company and Intermountain Big O Realty for the Big O Tires Retail
Store located at 8151 East Arapahoe Road, Englewood, Colorado
incorporated by reference to Exhibit 10.53 to Big O Tires, Inc.'s
Form 10-K for the fiscal year ended December 31, 1993).
(10.46) Third and Fourth Amendments to Loan and Security Agreement by N/A
and between Big O Tires, Inc. and its primary lender (incorporated by
reference to Exhibit 10.54 to Big O Tires, Inc.'s Form 10-K for the
fiscal year ended December 31, 1993).
(10.47) Limited Partnership Agreement by and between Donald J. Horton, N/A
General Partner, Thomas L. Staker, General Partner, and Big O
Tires, Inc., Limited Partner, dated as of December 31, 1993
(incorporated by reference to Exhibit 10.56 to Big O Tires, Inc.'s
Form 10-K for the fiscal year ended December 31, 1993).
(10.48) Loan Agreement and Guaranty, Promissory Note and Security N/A
Agreement with Big O Tires, Inc. Employee Stock Ownership Plan
("ESOP") as Borrower, Big O Tires, Inc., as Guarantor, and Key
Bank of Wyoming, as Lender, in connection with the refinancing of
the ESOP debt in the amount of $960,000 (incorporated by reference
to Exhibit 10.57 to Big O Tires, Inc.'s Form 10-K for the fiscal year
ended December 31, 1993).
</TABLE>
62
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<CAPTION>
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(10.49) Amendment to Partnership Agreement dated August 25, 1994, by and N/A
between Big O Development, Inc., a Colorado corporation, a wholly-
owned subsidiary of Big O Tires, Inc. and Mill Creek Associates,
Ltd., a Colorado limited partnership (incorporated by reference to
Exhibit 10.2 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994).
(10.50) Agreement dated July 1, 1994, by and between General Tire, Inc., an N/A
Ohio corporation and Big O Tires, Inc. (incorporated by reference to
Exhibit 10.4 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q
dated September 30, 1994).
(10.51) Consulting Agreement by and between Big O Tires, Inc., and Horst N/A
K. Mehlfeldt (incorporated by reference to Exhibit 10.5 to Big O
Tires, Inc.'s Quarterly on Form 10-Q dated September 30, 1994).
(10.52) Letter Agreement dated January 10, 1995, amending the Consulting N/A
Agreement by and between Big O Tires, Inc. and Horst K. Mehlfeldt
(incorporated by reference to Exhibit 10.3 to Big O Tires, Inc.'s
Current Report on Form 8-K dated January 10, 1995).
(10.53) Letter Agreement dated July 12, 1994, by and between Big O Tires, N/A
Inc. and PaineWebber Incorporated (incorporated by reference to
Exhibit 10.6 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q
dated September 30, 1994).
(10.54) Letter Agreement dated March 23, 1994, by and between Big O N/A
Tires, Inc. and The CIT Group/Equipment Financing, Inc., a New
York corporation (incorporated by reference to Exhibit 10.7 to Big O
Tires, Inc.'s Quarterly Report on Form 10-Q dated September 30,
1994).
(10.55) Ultimate Net Loss Agreement dated October 21, 1994, by and N/A
between Big O Tires, Inc. and The CIT Group/Equipment Financing,
Inc., a New York corporation (incorporated by reference to Exhibit
10.8 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q dated
September 30, 1994).
(10.56) Fifth Amendment to Loan and Security Agreement by and between N/A
Big O Tires, Inc. and its former lender dated April 29, 1994
(incorporated by reference to Exhibit 10.1 to Big O Tires, Inc.'s
Quarterly Report on Form 10-Q dated September 30, 1994).
(10.57) Agreement by the Investment Committee of the Board of Directors N/A
and the Management/Dealer participants dated September 22, 1994
(incorporated by reference to Exhibit 10.1 to Big O Tires, Inc.'s
Current Report on Form 8-K dated December 6, 1994).
(10.58) Letter dated September 13, 1994, to the Investment Committee of Big N/A
O Tires, Inc. and the Management participants and Dealer
representatives (incorporated by reference to Exhibit 10.2 to Big O
Tires, Inc.'s Current Report on Form 8-K dated December 6, 1994).
</TABLE>
63
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<CAPTION>
<S> <C> <C>
(10.59) Letter dated February 7, 1995, from the Dealer/Management Group to N/A
the Company's Board Chairman (incorporated by reference to Exhibit
10.1 to Big O Tires, Inc.'s Current Report on Form 8-K dated
January 10, 1995).
(10.60) Agreement between the Company and the Management/Dealer N/A
participants dated January 20, 1995 (incorporated by reference to
Exhibit 10.2 to Big O Tires, Inc.'s Current Report on Form 8-K
(10.61) Form of Franchise Agreement currently in use. 67
(10.62) Multi-Tenant Lease NNN dated December 1, 1994 between Botac VI 122
Leasing L.L.C., a Utah Limited Liability Company and Big O
Development, Inc.
(10.63) Assignment and Assumption Agreement dated December 2, 1994 by 135
Big O Development, Inc., Big O Tires, Inc. and Botac VI Leasing,
L.L.C. and Allstate Life Insurance Company.
(10.64) Guarantee Agreement dated December 2, 1994 by Big O Tires, Inc., 145
Big O Development, Inc. and Allstate Life Insurance Company.
(10.65) Closing Agreement dated December 2, 1994 by Big O Development, 152
Inc., Big O Tires, Inc., Botac VI Leasing, L.L.C., and Allstate Life
Insurance Company.
(10.66) Commercial Contract to Buy and Sell Real Estate dated March 17, 159
1994 between Bailey's Moving and Storage and Big O Tires, Inc.
(10.67) Confidentiality Agreement dated September, 1994 between Big O 168
Tires, Inc. and Kenneth W. Pavia, Sr.
(10.68) Amendment No. 1 to the Big O Tires, Inc. Employee Stock 171
Ownership Plan and Trust Agreement dated September 12, 1994.
(10.69) Development Management Agreement dated September, 1994 between 172
Ross Development Management Group, Inc. and Big O Development,
Inc. and Big O Tires, Inc.
(10.70) Letter Agreement dated February 20, 1995 terminating the Consulting 204
Agreement between Big O Tires, Inc. and Horst K. Mehlfeldt.
(10.71) 1995 Incentive Bonus Plans. 205
(10.72) Commitment Letter dated February 16, 1994 between Big O Tires, 234
Inc. and AT&T Commercial Finance Corporation for real estate
financing.
(10.73) Commitment Letter dated February 16, 1994 between Big O Tires, 251
Inc. and AT&T Commercial Finance Corporation for equipment
financing.
(10.74) Extension letter dated December 9, 1994 between Big O Tires, Inc. 258
and AT&T Commercial Finance Corporation to extend existing lines
of credit through December 31, 1995.
(10.75) Resignation letter dated February 27, 1995 from Robert L. Puckett. 259
</TABLE>
64
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<CAPTION>
<S> <C> <C>
(10.76) Resignation letter dated February 24, 1995 from David W. Dwyer. 265
(10.77) Revolving Credit Agreement dated January 23, 1995 between Big O 269
Tires, Inc. and The First National Bank of Chicago.
(10.78) Consent, Acknowledgement and Access Agreement dated January 23, 381
1995 between The Bank of Cherry Creek, N.A., Kenneth B. Buckius
and The First National Bank of Chicago.
(10.79) Note Purchase Agreement dated April 27, 1994 between Big O Tires, 391
Inc. and USG Annuity & Life Company and Republic Western
Insurance Company.
(10.80) Franchise Agreement dated October 7, 1994 between Big O Tires, 543
Inc. and OK Tires, Inc. for the Retail Store located at 2830 West
3500 South, West Valley City, Utah 84119.
(10.81) Franchise Agreement dated November 26, 1993 between Big O Tires, 610
Inc and CAPS Tire Limited Liability Company for the Retail Store
located at 8151 East Arapahoe Road, Englewood, Colorado 80112.
(10.82) Form of Confidentiality Agreement signed by dealers dated October 670
19, 1994.
(10.83) Ultimate Net Loss Agreement dated November 30, 1994, by and 673
between Big O Tires, Inc. and The CIT Group/Equipment Financing,
Inc., a New York corporation.
(10.84) Inventory Financing Agreement together with a Demand Note dated 681
September 30, 1994, by and between The Kelly-Springfield Tire
Company and Big O Tires, Inc., Big O Retail Enterprises, Inc. and
Big O Tire of Idaho, Inc.
(10.85) Supplemental Executive Retirement Plan dated December 7, 1994, by 688
Big O Tires, Inc., effective January 1, 1994.
(10.86) Forms of Stock Appreciation Rights Agreement dated February 15, 696
1995, between Big O Tires, Inc. and the Members of the Chief
Executive Office.
(10.87) Letter Agreement dated March 24, 1995, regarding severance 714
package, between Big O Tires, Inc. and John E. Siipola.
(10.88) Letter Agreement dated March 24, 1995, regarding severance 715
package, between Big O Tires, Inc. and Horst K. Mehlfeldt.
(21.1) Big O Tires, Inc. Subsidiaries 716
(25.1) Powers of Attorney executed by each of the Directors of Big O Tires, 717
Inc.
(27.1) Big O Tires, Inc.'s Financial Data Schedule. 722
</TABLE>
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<CAPTION>
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(99.1) October 31, 1994 press release issued by AKH Company, Inc., a N/A
California based retail tire chain, doing business as "Discount Tire
Centers" and "Evans Tire Service Centers" (incorporated by reference
to Exhibit 99.1 to Big O Tires, Inc.'s Quarterly Report on Form 10-Q
dated September 30, 1994).
(99.2) November 1, 1994 press release issued by Big O Tires, Inc. N/A
(incorporated by reference to Exhibit 99.2 to Big O Tires, Inc.'s
Quarterly Report on Form 10-Q dated September 30, 1994).
</TABLE>
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<PAGE>
EXHIBIT 10.61
BIG O TIRES, INC.
FRANCHISE AGREEMENT
<PAGE>
BIG O TIRES, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY PAGES i
GLOSSARY............................................... iii
1. PARTIES AND RECITALS............................... 1
2. GRANT OF FRANCHISE................................. 1
2.01 Grant of Franchise.......................... 1
2.02 Trade Area.................................. 1
3. FIRST OPTION RIGHTS................................ 1
3.01 First Option Rights......................... 1
3.02 Notification by Big O....................... 2
3.03 Multiple First Option Rights................ 2
3.04 Notification of Qualification............... 2
3.05 Exercise of Option by Franchisee............ 2
3.06 Transfer of First Option Rights............. 2
3.07 Limitation on First Option Rights........... 2
3.08 Expiration of First Option Rights........... 2
4. TERM............................................... 2
4.01 Term........................................ 2
5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS............. 3
5.01 Grant of Successor Franchise Rights......... 3
5.02 Conditions to Grant of Successor Franchise.. 3
5.03 Notification of Non-Renewal................. 3
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS............... 3
6.01 Financing Approval.......................... 3
6.02 Site Selection.............................. 3
6.03 Equipment and Signage....................... 4
6.04 Conditions to Opening....................... 4
6.05 Commencement of Business.................... 4
7. PRE-OPENING AND ONGOING ASSISTANCE................. 4
7.01 Pre-Opening Assistance...................... 4
7.02 On-Going Assistance......................... 5
8. FEES............................................... 6
8.01 Initial Franchise Fee....................... 6
8.02 Royalty Fee................................. 6
8.03 Late Fees................................... 6
8.04 Taxes....................................... 6
8.05 Allocation of Payments...................... 6
9. LICENSED MARKS..................................... 6
9.01 Licensed Marks.............................. 6
9.02 Limitation on Use........................... 7
9.03 Infringement................................ 7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9.04 Franchisee's Business Name...................... 7
9.05 Change of Licensed Marks........................ 7
10. STANDARDS OF OPERATION................................. 7
10.01 Standards of Operations........................ 7
11. STORE MANAGEMENT....................................... 8
11.01 Store Management............................... 8
11.02 Completion of Training by Operator or Manager.. 8
11.03 Operation of Store by Big O.................... 9
12. QUALITY CONTROL........................................ 9
12.01 Inspections.................................... 9
13. MANUAL: NEW PROCESSES................................. 9
13.01 Manual......................................... 9
13.02 Confidentiality of Information................. 9
13.03 Revisions to Manual............................ 10
13.04 Improvements to System......................... 10
14. PRODUCTS AND SERVICES.................................. 10
14.01 Products and Services.......................... 10
14.02 Approval of Products and Services.............. 10
14.03 Inventory 11
14.04 Warranties and Guaranties...................... 11
14.05 Open Account Financing......................... 11
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS........... 11
15.01 Initial Advertising............................ 11
15.02 National Advertising Fund...................... 12
15.03 Local Fund..................................... 13
15.04 Approval of Advertising........................ 13
16. STATEMENTS AND RECORDS................................. 13
16.01 Invoices....................................... 13
16.02 Audit.......................................... 13
16.03 Monthly Reports................................ 13
16.04 Financial Statements........................... 13
16.05 Management System.............................. 14
16.06 Regional Accounting Center..................... 14
17. COVENANTS.............................................. 14
17.01 Noncompetition During Term..................... 14
17.02 Confidentiality................................ 14
17.03 No Interference with Business.................. 14
17.04 Post Termination Covenant Not to Compete....... 14
17.05 Survivability of Covenants..................... 15
17.06 Modification of Covenants...................... 15
18. TRANSFER AND ASSIGNMENT................................ 15
18.01 Assignment by Big O............................ 15
18.02 Right of First Refusal......................... 15
18.03 Transfer Legend................................ 15
18.04 Pre-Conditions to Franchisee's Assignment...... 16
18.05 Death of Franchisee............................ 18
</TABLE>
<PAGE>
<TABLE>
<S> <C>
18.06 No Waiver.................................. 18
18.07 Excepted Transfers......................... 18
19. DEFAULT AND TERMINATION............................ 18
19.01 Termination by Big O....................... 18
19.02 Governing State Law........................ 20
19.03 Termination by Franchisee.................. 20
19.04 Force Majeure.............................. 20
20. POST TERMINATION OBLIGATIONS....................... 20
20.01 Post-Termination Obligations............... 20
20.02 Right to Repurchase........................ 22
20.03 Right of First Refusal..................... 22
20.04 De-Identification of Assets Upon Sale...... 22
21. INSURANCE.......................................... 22
21.01 Insurance Coverage......................... 22
21.02 Proof of Insurance......................... 23
21.03 Survival of Indemnification................ 24
22. TAXES, PERMITS AND INDEBTEDNESS.................... 24
22.01 Payment of Taxes........................... 24
22.02 Compliance with Laws....................... 24
22.03 Payment of Debts........................... 24
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS.. 24
23.01 Indemnification............................ 24
23.02 Independent Contractor..................... 24
24. WRITTEN APPROVALS, WAIVERS AND AMENDMENT........... 25
24.01 Written Approval........................... 25
24.02 Waiver..................................... 25
24.03 Modification............................... 25
25. DEALER PLANNING BOARD.............................. 25
25.01 Dealer Planning Board...................... 25
25.02 Special Interest Issues.................... 25
25.03 Disapproval of Management Proposal......... 25
25.04 Compliance with Modification............... 26
26. RIGHT OF OFFSET.................................... 26
26.01 Right of Offset............................ 26
27. ENFORCEMENT........................................ 26
27.01 Declaratory and Injunctive Relief.......... 26
27.02 Costs of Enforcement....................... 26
28. NOTICES............................................ 26
28.01 Notices.................................... 26
29. GOVERNING LAW...................................... 26
29.01 Governing Law.............................. 26
29.02 Jurisdiction............................... 27
</TABLE>
<PAGE>
<TABLE>
<S> <C>
30. SEVERABILITY AND CONSTRUCTION.. 27
30.01 Severability........... 27
30.02 Counterparts........... 27
30.03 Construction........... 27
31. ACKNOWLEDGEMENTS............... 27
</TABLE>
Schedule 1 - Premises and Trade Area
Schedule 2 - Corporate Verification
Schedule 3 - Guaranty
Schedule 4 - Lease Rider and Modification
Schedule 5 - Farm Class Rider
Schedule 6 - Renewal Rider
Schedule 7 - Trademarks
Schedule 8 - Convertor Rider
<PAGE>
BIG O TIRES, INC. FRANCHISE AGREEMENT
SUMMARY PAGES
-------------
These pages summarize the attached Franchise Agreement, the details of which
shall control in the event of any conflict.
1. FRANCHISEE:
----------- -------------------------------------------
2. INITIAL FRANCHISE FEE: Amount Due:
---------------------
-with Application:
-------------------------
-upon signing Agreement:
-------------------
Total:
----------------------------------
3. ROYALTY FEE Two percent (2%) of Gross Sales
-----------
4. LOCAL ADVERTISING Minimum of four percent (4%) of Gross Sales
-----------------
CONTRIBUTION:
------------
5. NATIONAL ADVERTISING See sections 15 and 25
--------------------
CONTRIBUTION:
------------
6. INITIAL ADVERTISING REQUIREMENT:
------------------------------- ----------------------------------
7. STORE LOCATION:
--------------
--------------------------------------------------------------------
Street and Number
--------------------------------------------------------------------
City, State and Zip Code
--------------------------------------------------------------------
Phone Number
8. Franchisee's Operator:
----------------------------------------------
9. Franchisee's Manager:
-----------------------------------------------
10. Franchisee's Agent For Service of Process:
Name:
---------------------------------------------------------------
Address:
------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
11. Big O's Agent for Service of Process:
Name: CT Corporation
---------------------------------------------------------------
Address: 1675 Broadway, Suite 1200
------------------------------------------------------------
Denver, Colorado 80290
--------------------------------------------------------------------
-i-
<PAGE>
12. Effective Date:
------------------------------------------------------
13. Commencement Date:
---------------------------------------------------
14. Expiration Date:
-----------------------------------------------------
15. Franchisee's Advisor:
------------------------------------------------
16. Send Notices to Big O to:
Name: Philip J. Teigen (Legal Department)
----------------------------------------------------------------
Address: Big O Tires, Inc.
-------------------------------------------------------------
11755 E. Peakview Avenue
-------------------------------------------------------------
Englewood, Colorado 80111
-------------------------------------------------------------
17. Send Notices to Franchisee to:
Name:
----------------------------------------------------------------
Address:
-------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
18. Business not subject to Section 17 (a)
Name:
----------------------------------------------------------------
Address:
-------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
19. Farm Class Franchise:
Yes
--------------------
No X
---------------------
20. First Option Holder:
Name: N/A
--------------------------
Address:
-----------------------
-----------------------
-----------------------
-ii-
<PAGE>
GLOSSARY (in alphabetical order)
--------
Advertising - The advertising, promotional programs, public relations programs
-----------
and marketing programs approved or administered by Big O utilizing the resources
of the National Advertising Fund or local franchisee cooperatives or franchisee
associations.
Agreement - This contract, the Summary Pages and all Riders and Schedules
---------
hereto, as interpreted through the Manual.
Big O - Big O Tires, Inc.
-----
Big O Store or Store - A retail tire store operated pursuant to the Big O
--------------------
System.
Big O System or System - The plan and system developed by Big O relating to the
----------------------
complete operation of Stores which are authorized to sell Products and Services
and offer other authorized tire and automotive services at retail, which include
some or all of the following: site selection as required, site approval, Store
layout and design, product selection and display, purchasing and inventory
control methods, accounting methods, merchandising, advertising, sales and
promotional ideas, franchisee training, personnel training, and other matters
relating to the efficient operation and supervision of Stores and the
maintenance of uniform standards of retail merchandising.
Blue II - See the definition of "Manual".
-------
Commencement Date - The date upon which the Store opens for business or, in the
-----------------
event of transfer, or conversion, the date designated by Big O Tires, Inc.
Convertor - A person who converts a retail tire store it owns to a Big O Store
---------
pursuant to this Agreement.
Dealer Planning Board - The group of franchisee representatives elected from
---------------------
each Local Group which meets periodically with Big O's management to develop Big
O's strategic plans and to discuss issues of concern to franchisees. The
functions of the Dealer Planning Board are described in Section 25 of this
Agreement.
Development Agreement - An agreement between Big O and a person to which the
---------------------
person ("Developer") agrees that within a defined territory to open and commence
operating an agreed number of Big O Stores pursuant to a development schedule.
Developers must execute Franchise Agreements prior to commencing business at any
Store developed pursuant to a Development Agreement.
Due Date - The fifteenth day of each month: the date by which all royalty fees
--------
and advertising contributions must be postmarked and mailed to Big O.
Effective Date - The date upon which the Franchise Agreement has been executed
--------------
in full by both the Franchisee and Big O.
Expiration Date - The date on which the initial term of the Agreement expires.
---------------
Farm Class Store - A Store with twenty-five percent (25%) or more of its average
----------------
Gross Sales during any twelve (12) month period arising directly from the sale
of Farm Class Tires.
Farm Class Tires - Farm tires, off road tires, large double bead truck tires and
----------------
similar select tires, as may be more specifically defined from time to time by
Big O.
-iii-
<PAGE>
First Option - Franchisee's right to acquire a franchise for a new Store planned
------------
for development within a five (5) mile radius of Franchisee's Premises. The
First Option and method of exercising it are described in Section 3 of this
Agreement.
Franchise - The rights granted by the Franchise Agreement.
---------
Franchised Business - The business operated pursuant to a license granted by
-------------------
Big O which utilizes the Licensed Marks and the Big O System.
Franchisee - The individual(s), corporation or other entity to which the
----------
Franchise is granted. Depending on the context of this Agreement, the term
Franchisee may include the shareholders or guarantors of a corporate Franchisee.
Gross Sales - The aggregate gross amount of all revenues from whatever source
-----------
derived whether in form of cash, credit, agreements to pay or other
consideration including the actual retail value of any goods or services traded,
bartered, or otherwise received by Franchisee in exchange for any form of non-
monetary consideration, (whether or not payment is received at the time of sale
or any such amount is proved uncollectible) from or derived by Franchisee or any
other person from business conducted or which originated in, on, from or through
the Premises, whether such business is conducted in compliance with or in
violation of the terms of the Franchise Agreement. Gross Sales includes sums
paid for claims made on business interruption insurance policies, Federal Excise
Taxes collected, as well as payments received from employees of Franchisee for
products purchased at a discounted price. However, Gross Sales does not
include: (i) sales or use taxes collected by Franchisee; (ii) the amount of any
refunds or allowances made on Products and Services returned by customers;
(iii) returns to shippers, vendors and manufacturers; (iv) proceeds derived
from the sale of equipment or supplies used by Franchisee in the operation of
the Store and not acquired for resale; (v) sales of Products and Services to
other Big O Stores; (vi) tire disposal fees so long as the fees charged do not
exceed the highest fee recommended by any applicable governmental agency; and
(vii) sums received in settlement of claims for loss or damage to fixtures,
equipment or leasehold improvements, other than sums received from business
interruption insurance.
Information - The contents of the Manual or any other manual, computer software,
-----------
materials, goods, training module and any other proprietary information and
information created or used by Big O designated for confidential use within the
Big O System, and the information contained therein.
Initial Advertising - Advertising conducted within sixty (60) days of the
-------------------
Commencement Date to promote the opening of the Store.
Licensed Marks - Trademarks and trade names, service marks and associated logos
--------------
and symbols owned or sublicensed by Big O, including those enumerated on
Schedule 7 and such other marks, logos and names as Big O may designate.
Local Fund - The fund, which may be a trust fund, corporation or other entity,
----------
derived from contributions by Big O franchisees who are members of a Local Group
which shall be maintained by the Local Group for Advertising pursuant to such
guidelines as Big O may approve or prescribe.
Local Group - A cooperative or association of Big O franchisees formed and
-----------
operating in their marketing area pursuant to a structure approved or prescribed
by Big O for the purpose of promoting Big O Stores and their Products and
Services, and providing Management Systems and related services to its members
to the extent approved by Big O. Big O will assign a Franchisee to a Local
Group and Franchisee must become a member of that Local Group and be bound by
any decisions it makes to the extent they are approved by Big O.
-iv-
<PAGE>
Management Systems - Computer hardware, software, cash registers, bookkeeping
------------------
and accounting services or systems and other systems designed to provide
information for the management of Big O Stores, including but not limited
Boss/2/.
Manager - An individual other than the Operator who is responsible for the day-
-------
to-day operation of a Store.
Manager Incentive Contract - An agreement pursuant to which certain Managers may
--------------------------
earn purchase credits based upon their performance so that they can acquire
Big O franchises from their employer, whether the employer is Big O or a Big O
franchisee.
Manual - The various written, audio and video instructions and manuals,
------
including amendments thereto relating to the operation of the Franchised
Business which are provided to Franchisee by Big O and identified as such,
including but not limited to A Blueprint For Success, also known as "Blue II",
-----------------------
Big O's Confidential Operating Manual, any training module or any other
proprietary information.
National Advertising Fund - The fund derived from contributions by Big O
-------------------------
franchisees which shall be exclusively maintained and administered by Big O for
national Advertising in cooperation with the Dealer Planning Board.
National Fund - Big O Tires, Inc. National Advertising Fund.
-------------
Operator - The individual approved by Big O who shall be responsible for the
--------
operation of the Franchised Business. The Operator may be the Franchisee if the
Franchisee is an individual.
Option - Big O's right to purchase the interest being offered by the Franchisee
------
or any Shareholder by matching the bona fide monetary purchase price and payment
schedule terms of the proposed Transfer, less any brokerage commission (without
having to match any other non-monetary terms).
Pioneer - A person who owned at least twenty-five percent (25%) equity interest
-------
in a Big O franchisee on March 1, 1987, provided such ownership interest
appeared on Big O's records as of July 1, 1987. A Pioneer is entitled to
acquire Big O franchises for one-third of the applicable initial franchise fee,
provided the Pioneer satisfies Big O's other requirements.
Premises - The site from which a Franchised Business will be operated at the
--------
Store Location described on the Summary Pages, or where applicable, on Schedule
1 to the Franchise Agreement.
Products and Services - All tires (including but not limited to Big O's private
---------------------
brand lines of tires), products and services produced, organized or distributed
under a license granted by Big O, which are designated by Big O for sale or
lease in Stores.
Regional Accounting Center - A cooperative or association which provides
--------------------------
accounting, payroll, tax and related services for the purpose of providing such
services at a lower cost and providing the financial reporting Big O requires.
Shareholder - Any person possessing a legal or beneficial interest or holding a
-----------
share of stock of any kind or nature in the Franchisee, including partners in a
Franchisee which is a partnership.
Survivor - A surviving spouse or heir of estate of any deceased person owning
--------
stock or any other interest in the Franchisee.
Termination Date - The date upon which the Franchise Agreement is cancelled or
----------------
ended by Big O or the Franchisee.
-v-
<PAGE>
Trade Area - The area described on Schedule 1 to the Agreement within which,
----------
subject to certain conditions, Big O agrees to limit the number of Stores to one
(1) for every fifty thousand (50,000) persons residing therein. Big O may, from
time to time, redefine Franchisee's Trade Area.
Trade Dress - Any shop or architectural designs, fixtures, improvements, signs,
-----------
color schemes or other elements of the appearance of the Store which in any
manner suggest affiliation of the Store or Premises with Big O, or the System.
Transfer - To give away, sell, assign, pledge, lease, sublease, devise, or
--------
otherwise transfer, either directly or by operation of law or in any other
manner, the Agreement, any of Franchisee's rights or obligations hereunder, or
any interest or shares of stock or partnership interest of any kind or nature in
Franchisee or the Premises. The merger or consolidation or issuance of
additional securities representing an ownership interest in Franchisee shall
also be deemed to be a "Transfer" for purposes of this Agreement.
-vi-
<PAGE>
BIG O TIRES, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") is made by and between Big O Tires,
Inc. ("Big O"), a Nevada corporation, with its principal place of business at
11755 East Peakview Avenue, Englewood, Colorado 80111, and
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("Franchisee"), a(n) corporation with a place
---------------------------------
of business at
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.
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1. PARTIES AND RECITALS
1.01 Big O was established to provide franchisees with access to Products
and Services and a System for marketing and servicing such Products and
Services. Since its inception, Big O has added to the Product and Services and
System to enhance the competitive posture of its franchisees. Big O has
developed and owns certain Licensed Marks which are licensed to franchisees for
use in the Big O Stores. In connection therewith, Big O has developed the Big O
System relating to the operation of Stores which are authorized to offer and
sell Big O tires as part of the Products and Services offered to retail
customers.
1.02 Franchisee desires, upon the terms and conditions set forth herein, to
obtain a license to operate a Franchised Business and to offer and sell Big O
Products and Services. Franchisee acknowledges that it is essential to the
preservation of the integrity of the Licensed Marks, and the goodwill of Big O
and the Big O System, that each franchisee in the System maintain and adhere to
certain standards, procedures and policies described hereinafter and in the
Manual.
1.03 Big O is willing, upon the terms and conditions set forth herein, to
license Franchisee to operate a Franchised Business which will utilize the
Licensed Marks and the Big O System.
2. GRANT OF FRANCHISE
2.01 Grant of Franchise. Subject to all of the terms and conditions
------------------
herein, including but not limited to, the condition that Franchisee or its
Shareholders or some of them, personally guarantee the obligations of Franchisee
to Big O under this Agreement as set forth in Schedule 3 to this Agreement, Big
O grants to Franchisee the non-exclusive license to use the Licensed Marks and
the exclusive right to operate a Franchised Business solely at the Premises set
forth in Schedule 1 to this Agreement. If, at the time of execution of this
Agreement, the Premises cannot be designated as a specific address because a
location has not been selected by Franchisee and approved by Big O, then
Franchisee shall promptly take steps to choose and acquire a location for its
Big O Store within the following city, county or other geographical
area:
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("Designated Area"). In such circumstances,
------------------------------
Franchisee shall select and submit to Big O for approval a specific location for
the Premises, which shall hereinafter be set forth in Schedule 1.
2.02 Trade Area. During the term of this Agreement, Big O agrees not to
----------
operate itself or grant to any other person the right to operate any more than
one (1) Store for every fifty thousand (50,000) persons residing in the Trade
Area described on Schedule 1. Big O may, from time to time, redefine the Trade
Area. Absent Franchisee's prior approval, Big O shall not permit the
establishment or operation of another Store within a two (2) mile radius of
Franchisee's Store. Big O shall offer Products and Services bearing the
Licensed Marks at retail only through Big O Stores.
3. FIRST OPTION RIGHTS
3.01 First Option Rights. Subject to the conditions described below, if
-------------------
Big O or any prospective Big O franchisee should propose to open a Store within
a five (5) mile radius of Franchisee's Store, Franchisee shall be notified of
its First Option to acquire a Franchise for an additional Store within the five
(5) mile radius of its Store. Franchisee may only exercise the First Option if:
<PAGE>
(a) at the time Big O notifies Franchisee of the proposal for the new
Store, Franchisee is in full compliance with all the terms of this
Agreement and any other agreements it has with Big O;
(b) Franchisee meets Big O's then current criteria for new
franchisees; and
(c) There are not two (2) or more Big O franchises with Stores
within a five (5) mile radius of the site of a proposed new Store.
3.02 Notification by Big O. When notifying Franchisee of a proposal to
---------------------
establish a new Store in accordance with Franchisee's First Option, Big O may
notify Franchisee of the proposal to establish the new Store within the general
vicinity of Franchisee's Store without identifying a specific site or sites.
3.03 Multiple First Option Rights. If two (2) or more Big O franchisees
----------------------------
have Stores within a five (5) mile radius of the site of a proposed new Store,
the Franchisee and all such franchisees will be invited simultaneously by
written notice from Big O to exercise their First Option rights; but if two (2)
or more such franchisees apply for the same franchise, it shall be awarded to
the qualified franchisee which has a Store that is closest to the site of the
proposed new Store or, if two qualified franchisees have Stores that are
equidistant from such site, it shall be awarded to the qualified franchisee
which owns the franchised Big O Store which was first licensed as a Big O Store
by the current or a previous owner.
3.04 Notification of Qualification. If Franchisee qualifies for the First
-----------------------------
Option pursuant to this Section 3, Big O will provide Franchisee with written
notice that it has thirty (30) days within which to submit an application for
the franchise in the manner prescribed by Big O in the notice. Franchisee must
submit the application within the prescribed time along with the standard
franchise deposit then required by Big O. Upon approval of the application by
Big O, Franchisee must execute Big O's then current standard Franchise Agreement
and pay the remainder of any initial fee due.
3.05 Exercise of Option by Franchisee. If Franchisee is a corporation or
--------------------------------
partnership, the First Option may be exercised only by the corporation or
partnership itself, or by the individual designated as First Option holder on
the Summary Pages.
3.06 Transfer of First Option Rights. The First Option is not transferable
-------------------------------
without Big O's prior written approval, which may be withheld for any reason, in
----------------------------------------
Big O's sole discretion.
-----------------------
3.07 Limitation on First Option Rights. The First Option rights described
---------------------------------
above are void and unenforceable with respect to a site proposed for development
in an area which is at the time of the proposal subject to a Development
Agreement between Big O and Developer.
3.08 Expiration of First Option Rights. If a Franchisee has failed to
---------------------------------
qualify for or otherwise submit an application for a Franchise pursuant to this
Section 3 for a proposed franchise to be granted within the area in which
Franchisee holds First Option rights, Franchisee's First Option rights for that
proposed franchise shall lapse regardless of whether the site actually selected
for development by Big O is different from the site which was initially proposed
for development.
4. TERM
4.01 Term. This Agreement shall take effect upon the earlier of the
----
Effective Date or of the Commencement Date and, unless previously terminated
pursuant to Section 19 hereof, its term shall extend until the earlier of the
tenth anniversary of the Commencement Date or such other Expiration Date as is
stated on the Summary Pages.
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<PAGE>
5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS
5.01 Grant of Successor Franchise Rights. If Franchisee is not in default
-----------------------------------
under this Agreement and has complied with all of its provisions during the
initial term, and has cooperated with Big O, its Local Group and other Big O
franchisees in programs and suggestions developed by Big O, upon its expiration
Big O will offer a successor franchise agreement with Franchisee, provided the
parties mutually agree to the terms of a successor franchise at least one
hundred eighty (180) days before the Expiration Date.
5.02 Conditions to Grant of Successor Franchise. Big O will only offer to
------------------------------------------
execute a new franchise agreement in accordance with its then current terms and
conditions for granting successor franchises, which may include any or all of
the following:
(a) Execution of a new and modified franchise agreement which may
include, among other matters, a different fee structure, increased fees,
a modified Trade Area and different purchase requirements;
(b) A requirement that Franchisee refurbish the Premises or relocate
the Premises to conform to Big O's then current standards for similar
Stores;
(c) Payment of Big O's renewal administration fee of One Thousand Five
Hundred Dollars ($1,500); and
(d) Execution of a general release in favor of Big O and its
representatives.
5.03 Notification of Non-Renewal. If Big O is willing to execute a new
---------------------------
franchise agreement with Franchisee, at least one (1) year before the Expiration
Date, Big O shall notify Franchisee of the Expiration Date and the terms and
conditions upon which Big O is willing to execute a new franchise agreement with
Franchisee. Franchisee must execute a successor franchise agreement within
sixty (60) days of its receipt. The Franchise Agreement will expire on the
Expiration Date and the franchise relationship will terminate unless Franchisee
and Big O have executed a successor franchise agreement at least one hundred
eighty (180) days prior to the Expiration Date, and Franchisee has satisfied all
other terms and conditions agreed upon as a prerequisite to renewal. If Big O
intends not to offer Franchisee a successor franchise agreement, Big O shall
give Franchisee at least one hundred eighty (180) days notice of nonrenewal
prior to the Expiration Date. If Big O has not given Franchisee at least one
hundred eighty (180) days notice of nonrenewal prior to the Expiration Date, the
term of this Agreement will automatically be extended by the amount of time
necessary to give Franchisee one hundred eighty (180) days notice of nonrenewal.
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS
6.01 Financing Approval. Unless otherwise agreed to by Big O, Franchisee
------------------
shall obtain a letter of commitment for the provision of financing through a
lender approved by Big O and with minimum credit terms, also approved by Big O,
no later than one hundred twenty (120) days from the Effective Date of this
Agreement.
6.02 Site Selection. Franchisee shall obtain the written approval of Big O
--------------
of the site for the Store within one hundred twenty (120) days from the
Effective Date of this Agreement. Franchisee shall propose sites for approval
by Big O on forms and in the manner designated from time to time by Big O. A
proposed site shall only be submitted to Big O for approval after Franchisee has
evaluated the site and determined that it meets Big O's then current criteria
for sites which Big O has communicated to Franchisee. Franchisee shall be
responsible for obtaining Big O's then current site criteria prior to submitting
a site approval application. Big O shall review the site approval application
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<PAGE>
and within thirty (30) days of Big O's receipt thereof, Big O shall approve or
reject the proposed site. Unless otherwise agreed to in writing by Big O, final
site approval will be conditioned upon Big O's receipt of evidence of
Franchisee's ownership, lease or control of the property in such form as Big O,
in its sole discretion shall deem to be acceptable, including, without
limitation, a deed to the property, an executed contract to purchase the
property, a lease with a duration of not less than ten (10) years, or an option
to purchase the property. Franchisee acknowledges and agrees that Big O's
approval of a site or provision of criteria regarding the site do not constitute
a representation or warranty of any kind, express or implied, as to the
suitability of the site for a Big O Store or for any other purpose. Big O's
approval of the site indicates only that Big O believes that a site falls within
the acceptable criteria established by Big O as of that time. In the case of a
Convertor, execution of this Agreement shall be deemed approval of the Store
Location by Big O, unless additional obligations to convert or upgrade the
premises are described in Schedule 8 to this Agreement.
6.03 Equipment and Signage. Franchisee agrees to purchase, lease or
---------------------
otherwise use in the establishment and operation of the Big O Store only those
fixtures, equipment, signs and hardware and/or software that Big O has approved
as meeting its specifications and standards for quality, design, appearance,
function and performance. Franchisee shall purchase or lease approved brands,
types or models of fixtures, equipment, and signs only from suppliers designated
or approved by Big O. Franchisee agrees to place or display at the Premises
only such signs, logos and display materials that Big O approves from time to
time.
6.04 Conditions to Opening. Franchisee agrees, at its sole expense, to do
---------------------
or cause to be done the following prior to opening the Big O Store for business:
(i) secure all required financing; (ii) obtain all required permits and
licenses; (iii) construct all required improvements and decorate the Store in
compliance with approved plans and specifications; (iv) purchase and install all
required fixtures,equipment and signs required for the Big O Store; (v) purchase
an opening inventory of tires and supplies; (vi) provide Big O with copies of
all required insurance policies, or such other evidence of coverage and payment
as Big O requests; and (vii) provide Big O with any other documents as may be
required by Big O, including but not limited to financing statements.
6.05 Commencement of Business. Franchisee agrees to open the Big O Store
------------------------
for business within fourteen (14) days after Big O notifies Franchisee that the
conditions set forth in this Section 6 have been satisfied. Unless otherwise
agreed in writing by Big O and Franchisee, Franchisee has sixteen (16) months
from the Effective Date of this Agreement within which to have its Big O Store
opened and operating ("Development Period"). Big O will extend the Development
Period for a reasonable period of time in the event that factors beyond
Franchisee's reasonable control prevent Franchisee from meeting this Development
Period, so long as Franchisee has made reasonable and continuing effort to
comply with such development obligations and Franchisee requests, in writing, an
extension of time in which to have its Big O Store open and operating before the
Development Period lapses.
7. PRE-OPENING AND ONGOING ASSISTANCE
7.01 Pre-Opening Assistance. Prior to Franchisee's Commencement Date,
----------------------
Big O shall provide Franchisee with such of the following and on the same
basis as it will from time to time provide to similarly situated franchisees
of Big O:
(a) Assistance to Franchisee related to approval of a site for the
Store, although Franchisee acknowledges that Big O shall have no obligation
to select or acquire a site on behalf of Franchisee. Big O's assistance will
consist of the provision of criteria for a satisfactory site, an on-site
inspection and determination of whether a proposed site fulfills the
requisite criteria, prior to formal approval of a site selected by
Franchisee. At Big O's option, Big O may ,
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<PAGE>
without fee or expense to Franchisee and review the proposed Store lease.
The final decision about whether to acquire a given approved site or whether
to execute any particular lease shall be the sole decision of Franchisee.
Big O disclaims all liability for the consequences of approving a given
site. Big O's participation in site selection in no way is meant to
constitute a warranty or guaranty that the Franchised Business will be
profitable or otherwise successful. Big O's written approval of the Premises
and Store must be obtained by Franchisee before the Store may be opened or
relocated. Big O may condition its approval of a Store lease upon
Franchisee's execution of a conditional lease assignment in a form which is
the same as or similar to the one found on Schedule 4.
(b) A prototype floor plan, elevation and equipment layout for the
Store, if requested by Franchisee. The plans must be modified by
Franchisee's architect or contractor to adapt them to conditions at the
Premises and to satisfy all local code requirements. Revisions or
modifications to the plans must be approved by Big O.
(c) Five consecutive (5) weeks of training for one person in the
operation of the Franchised Business at Big O's training facility located in
Mesa, Arizona, or another location designated by Big O. Unless Big O waives
the training requirement, the Manager of the Franchisee's Store, provided he
or she has been approved by Big O, and Franchisee's Operator must attend and
successfully complete such training. Franchisee shall pay for its own
transportation, lodging, and living expenses which are incurred while
attending the initial training program, except that Big O will pay lodging
and transportation for the first person to attend the training program. In
the event that, in Big O's sole discretion, Franchisee's Operator fails to
successfully complete the initial training program, Big O may, in its sole
discretion, require Franchisee's Operator to attend and successfully
complete another training program or terminate this Agreement and, upon
receipt from Franchisee of a general release in a form approved by Big O,
refund the initial franchise fee paid by Franchisee, less any amounts
necessary to reimburse Big O for the costs it incurred in approving
Franchisee and in training Franchisee's Operator and Manager.
(d) One (1) copy of Big O's Confidential Operating Manual and Operations
Manual, known as "Blue II"or other such proprietary information.
(e) Assistance in selecting Franchisee's initial inventory.
7.02 On-Going Assistance. Big O agrees to make available to Franchisee the
-------------------
following ongoing assistance for which Big O may charge the Franchisee a fee:
(a) To the extent available to Big O, a source of Big O private brand
tires;
(b) Ongoing research and development into new tires and other lines of
Products and Services and ways to enhance the competitive posture of Big O
Stores;
(c) Additional training for the Operator or other personnel of
Franchisee, for which Big O may charge the Franchisee a fee;
(d) Suggested prices for Big O brands sold at the Franchisee's Store,
provided that Franchisee will not be required to sell at any particular
price if such a requirement would be unlawful;
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<PAGE>
(e) A warranty or replacement program for Big O private brand tires and
related automotive Products and Services;
(f) Regional training provided by Big O personnel and field assistance,
inspections and advice pertaining to the Franchisee's Store provided by
Big O area managers;
(g) Point of sale advertising materials and wearables utilizing Big O
marks will be purchased through Big O's subsidiary, O Advertising, Inc., or
such other licensee as designated by Big O; and from time to time, local
advertising plans and materials, special promotions and similar advertising,
for which Big O may charge the Franchisee a fee;
(h) At the request of Franchisee's Local Group, Big O will supply
Franchisee with newspaper mats and radio and television commercial tapes,
for which Big O may charge Franchisee or the Local Group a fee.
8. FEES
8.01 Initial Franchise Fee. In consideration of the execution of this
---------------------
Agreement, Franchisee agrees to pay Big O an initial franchise fee in the amount
and at the times specified on the Summary Pages. Except as described in Section
7.01(c) above, the initial franchise fee is not refundable.
8.02 Royalty Fee. After the Commencement Date, Franchisee shall pay to
-----------
Big O a monthly royalty fee equal to two percent (2%) of the prior month's Gross
Sales. The royalty fee must be postmarked and mailed to Big O by no later than
the Due Date.
8.03 Late Fees. If any fee or any other amount due under this Agreement,
---------
including payments for Products and Services, is not received within ten (10)
days after such payment is due, Franchisee shall pay Big O interest equal to the
lesser of the daily equivalent of eighteen percent (18%) per annum of such
overdue amount per year, or the highest rate then permitted by applicable law,
for each day such amount is past due.
8.04 Taxes. If any federal, state, or local tax other than an income tax
-----
is imposed upon royalty fees paid by Franchisee to Big O which Big O cannot
offset against taxes it is required to pay under the laws of the United States
or the state of its domicile, Franchisee agrees to compensate Big O in the
manner prescribed by Big O so that the net amount or net rate received by Big O
is no less than that which has been established by this Agreement and which was
due Big O on the Effective Date of this Agreement.
8.05 Allocation of Payments. Unless other written instructions accompany a
----------------------
specific payment, all payments made by Franchisee pursuant to this Agreement
shall be applied in such order as Big O may designate from time to time. Big O
shall comply with any written instructions for allocation specified by
Franchisee to the extent, in Big O's opinion, it is reasonable to do so.
9. LICENSED MARKS
9.01 Licensed Marks. Franchisee expressly acknowledges that Big O is the
--------------
sole and exclusive licensor of the Licensed Marks. Franchisee agrees not to
represent in any manner that Franchisee has acquired any ownership rights in the
Licensed Marks. Franchisee agrees not to use any of the Licensed Marks or any
marks, names, or indicia which are or may be confusingly similar in its own
corporate or business name except as authorized in this Agreement. Franchisee
further acknowledges and agrees that any and all goodwill associated with the
Big O System and identified by the Licensed Marks shall inure directly and
exclusively to the benefit of Big O and that, upon the expiration or
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<PAGE>
termination of this Agreement for any reason, no monetary amount shall be
assigned as attributable to any goodwill associated with Franchisee's use of
Licensed Marks.
9.02 Limitations on Use. Franchisee understands and agrees that any use of
------------------
the Licensed Marks other than as expressly authorized by this Agreement, without
Big O's prior written consent, is an infringement of Big O's rights therein and
that the right to use the Licensed Marks granted herein does not extend beyond
the termination or expiration of this Agreement. Franchisee expressly covenants
that, during the term of this Agreement and thereafter, Franchisee shall not,
directly or indirectly, commit any act of infringement or contest or aid others
in contesting the validity of Big O's right to use the Licensed Marks or take
any other action in derogation thereof.
9.03 Infringement. Franchisee acknowledges Big O's right to regulate the
------------
use of the Licensed Marks and Trade Dress of the Big O System. Franchisee shall
promptly notify Big O if it becomes aware of any use or any attempt by any
person or legal entity to use the Licensed Marks or Trade Dress of the Big O
System, any colorable variation thereof, or any other mark, name, or indicia in
which Big O has or claims a proprietary interest. Franchisee shall assist Big
O, upon request and at Big O's expense, in taking such action, if any, as Big O
may deem appropriate to halt such activities, but shall take no action nor incur
any expenses on Big O's behalf without Big O's prior written approval.
9.04 Franchisee's Business Name. Franchisee further agrees and covenants
--------------------------
to operate and advertise only under the name or names from time to time
designated by Big O for use by similar Big O System franchisees; to refrain
from using the Licensed Marks to perform any activity or to incur any obligation
or indebtedness in such a manner as may, in a way, subject to Big O to liability
therefor; to observe all laws with respect to the registration of trade names
and assumed or fictitious names; to include in any application for the above a
statement that Franchisee's use of the Licensed Marks is limited by the terms of
this Agreement, and to provide Big O with a copy of any such application and
other registration document(s); and to observe such requirements with respect to
trademark and service mark registrations, copyright notices, and other notices
as Big O may, from time to time, require.
9.05 Change of Licensed Marks. Subject to the requirements of Section 25
------------------------
of this Agreement, Big O reserves the right, in its sole discretion, to
designate one or more new, modified, or replacement Licensed Marks or trade
names for use by franchisees and to require the use by Franchisee of any such
new, modified, or replacement Licensed Marks or trade names in addition to or in
lieu of any previously designated Licensed Marks. Any expenses or costs
associated with the use by Franchisee of any such new, modified, or replacement
Licensed Marks shall be the sole responsibility of Franchisee.
10. STANDARDS OF OPERATION
10.01 Standards of Operations. Big O shall establish and Franchisee shall
-----------------------
maintain high standards of quality, appearance and operation for the Franchised
Business. For the purpose of enhancing the public image and reputation of the
businesses operating under the System and for the purpose of increasing the
demand for Products and Services provided by Franchisee and Big O, the parties
agree as follows:
(a) Franchisee shall not open the Store for business until Big O has
provided Franchisee with written authorization to do so;
(b) Franchisee shall comply in good faith with all published Big O
System rules, regulations, policies, and standards, including, without
limitation, those contained in the Manual. Franchisee shall
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<PAGE>
operate and maintain the Franchised Business solely in the manner and
pursuant to the standards prescribed herein, in the Manual and in other
materials provided by Big O to Franchisee, and shall make such modifications
thereto as Big O may require;
(c) Franchisee shall at all times operate the Store diligently and in a
manner which is consistent with sound business practices so as to maximize
the revenues therefrom;
(d) Franchisee shall at all times maintain working capital and a net
worth which is sufficient, in Big O's opinion, to enable Franchisee to
fulfill properly all of Franchisee's responsibilities under this Agreement;
(e) Franchisee shall at all times maintain its Store in the image of and
according to the standards of Big O as prescribed in the Manual. Moreover,
Franchisee agrees to cooperate with Big O at its expense, to the extent
building and site limitations permit, in the implementation of new programs,
including those which may require the addition of new equipment or fixtures
for the Store. In its sole discretion, Big O may waive some or all of any of
its franchisees' obligations to comply with such programs.
(f) Prior to opening, Franchisee shall provide Big O with written
certificates or documentary evidence from an insurance company or companies
that Franchisee has obtained the insurance coverage prescribed by
Section 21;
(g) If Franchisee maintains a customer list, such lists or parts thereof
shall be disclosed to no one other than Franchisee's employees or Big O
without Big O's prior written consent; and
(h) Franchisee shall participate in and be bound by the decisions of any
Local Group established and operated pursuant to standards and within the
guidelines prescribed or approved by Big O. Franchisee shall not be subject
to any agreement to fix prices, or allocate customers or territories which
would violate any applicable laws. Nor will Franchisee be subject to any
capital investment requirements or other standards which are inconsistent
with this Agreement or which have not been approved or prescribed by Big O.
11. STORE MANAGEMENT
11.01 Store Management. Franchisee's Store shall only be operated by the
----------------
Operator or a Manager employed by the Franchisee who has previously been
approved by Big O. All initial and subsequent Operators or Managers must be
approved by Big O. Big O's approval will be conditioned upon the Operator's or
Manager's successful completion of any training required by Big O. Big O may
waive some or all of its initial training requirements for Operators or Managers
who have already received such training as a result of their affiliation with
another Store or Big O franchisee. If Franchisee or Franchisee's Operator has
not already successfully completed such training, he shall be required to
successfully complete the training described in Section 7.01 (c) above.
11.02 Completion of Training by Operator or Manager. Franchisee's Operator
---------------------------------------------
or Manager and such of its managerial personnel or Shareholders as are
designated by Big O, shall complete, to Big O's reasonable satisfaction, any and
all training programs Big O may reasonably require or provide at such time as
Big O may reasonably prescribe. All expenses incurred by persons receiving such
training, including, without limitation, costs of travel, room and board, as
well as wages of the person(s) receiving such training shall be borne by the
Franchisee except that the transportation and lodging costs for the first person
receiving such training shall be paid by Big O.
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<PAGE>
11.03 Operation of Store by Big O. Under the circumstances described
---------------------------
below, upon Franchisee's request, Big O has the option, but not the duty, to
replace or substitute for Franchisee's Operator, Manager, or both, its own
employees or agents, to operate the Franchisee's Store for the benefit of
Franchisee with complete discretion over all matters relating to its operation.
Franchisee shall pay Big O's then current Store management fee as well as the
out-of-pocket expenses Big O incurs for travel, food and lodging in the course
of providing such services. Big O may operate Franchisee's Store if:
(a) Franchisee's Operator or Manager has failed to satisfactorily
complete any training required by this Section 11; or
(b) Franchisee's Operator or Manager becomes physically or mentally
incapable of operating the Franchised Business; or
(c) Franchisee's Operator or Manager dies and a new Operator or Manager
has not completed initial training.
12. QUALITY CONTROL
12.01 Inspections. Franchisee hereby grants to Big O and its authorized
-----------
agents the right to enter the Premises during regular business hours:
(a) To conduct inspections and, upon Big O's request, Franchisee agrees
to render such assistance as may reasonably be requested and to take such
steps as may be necessary immediately to correct any deficiencies in the
operation of its Franchised Business pursuant to this Agreement which are
detected during such an inspection; and
(b) To remove from the Premises, certain samples of any Products and
Services, supplies or goods, in amounts reasonably necessary for testing or
examination by Big O or an independent laboratory, to determine whether such
samples meet Big O's then current standards and specifications. Big O will
grant Franchisee a credit equivalent to the cost of any approved Products
and Services or supplies damaged or removed by it.
13. MANUAL; NEW PROCESSES
13.01 Manual. To protect the reputation and goodwill of the businesses
------
operating under the System and to maintain high standards of operation under the
Licensed Marks, Franchisee shall conduct the Franchised Business strictly in
accordance with the Manual, which Franchisee acknowledges belongs solely to Big
O and shall be on loan from Big O during the term of this Agreement. Franchisee
agrees to pay Big O up to Five Thousand Dollars ($5,000) for the failure to
return the Confidential Operating Manual, Big O's Blueprint for Success,
otherwise known as Blue II, any training module or any other proprietary
information to Big O within five (5) days of the Expiration Date or Termination
Date of this Agreement, or the date upon which controlling interest in the
Franchisee, the Franchised Business or its assets is transferred. However, Big
O will waive the payment if Franchisee notifies Big O that it has lost or
mislaid all or part of the Manual at any time prior to six (6) months before the
date upon which the Franchise is transferred, terminates, or expires.
13.02 Confidentiality of Information. Franchisee shall at all times use
------------------------------
its best efforts to keep Big O's Information confidential and shall limit access
to the Information to employees and independent contractors of Franchisee on a
need-to-know basis. Franchisee acknowledges that the unauthorized use or
disclosure of Big O's Information will cause irreparable injury to Big O and
that damages are not adequate remedy. Franchisee accordingly covenants that it
shall not at any time,
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without Big O's prior written consent, disclose, use, permit the use thereof
(except as may be required by applicable law or authorized by this Agreement),
copy, duplicate, record, transfer, transmit, or otherwise reproduce such
Information, in any form or by any means, in whole or in part, or otherwise make
the same available to any unauthorized person or source. Any and all
Information, knowledge, and know-how not generally known about the System and
Big O's Products and Services, standards, procedures, techniques, and such other
Information or material as Big O may designate as confidential shall be deemed
confidential for purposes of this Agreement, except Information which Franchisee
can demonstrate lawfully came to its attention prior to disclosure by Big O, or
which legally is or has become a part of the public domain by publication or
communication by others.
13.03 Revisions to Manual. Franchisee understands and acknowledges that
-------------------
subject to the requirements of Section 25, Big O may, from time to time, revise
the contents of the Manual to implement new or different requirements for the
operation of the Franchised Business, and Franchisee expressly agrees to comply
with all such changed requirements which are by their terms mandatory, provided,
that such requirements apply in a reasonably nondiscriminatory manner to
comparable Big O franchisees. The implementation of such requirements may
require the expenditure of reasonable sums of money by Franchisee. Big O will
not alter the basic rights and obligations of the parties arising under this
Agreement through changes to the Manual.
13.04 Improvements to System. If Franchisee develops any concept, process,
----------------------
service, or improvement in the operation or promotion of the Store, Big O may
itself use or disclose it to other Big O franchisees without any obligation to
compensate Franchisee therefor. If the concept, process, service, or
improvement is adopted for use by the majority of Big O Stores, such concept,
process, service, or improvement shall become the property of Big O and Big O
may itself use or disclose it to other Big O franchisees without any obligation
to compensate Franchisee therefor.
14. PRODUCTS AND SERVICES
14.01 Products and Services. Franchisee acknowledges that its principal
---------------------
interest in acquiring a Big O Franchise is to sell Big O private brand tires and
related merchandise and benefit from Big O's Products and Services selection,
purchasing programs including programs for the purchase of major brand tires,
and marketing expertise. The consuming public expects Big O Stores to offer the
full line of Big O Products and Services and advertised warranty services.
Accordingly, Franchisee shall at all times have in stock on the Premises a
complete representative line of Big O private brand tires, shock absorbers,
related merchandise, and other Products and Services in such quantities as Big O
may prescribe from time to time.
14.02 Approval of Products and Services. Prior to commencing business at
---------------------------------
the Premises, Franchisee shall stock the Store with Products and Services and
supplies of such variety and in such amounts as Big O may select. Franchisee
may not sell any product or service which has not been selected, manufactured,
or approved by Big O. Big O is not obliged to approve any product, service, or
merchandise selected by the Franchisee. Big O will exercise its right of
approval of suppliers selected by the Franchisee which are not at the time
approved by Big O for use by the Franchisee in accordance with the following
procedure:
(a) The Franchisee must submit a written request to Big O for approval
of the supplier;
(b) The Franchisee must demonstrate to Big O the existence of a need for
the product;
(c) The supplier must demonstrate to Big O's reasonable satisfaction,
that it is able to supply a commodity to the Franchisee meeting Big O's
specifications for such commodity and that it is able to do so on a timely
basis;
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(d) The supplier must demonstrate to Big O's reasonable satisfaction
that the supplier is of good standing in the business community with respect
to its financial soundness and reliability of its product and service;
(e) The supplier must agree to indemnify and hold Big O and the
Franchisee harmless from and against any claim or liability by reason of the
supplier's products, including without limitation, defects in materials and
workmanship and supplier must provide to Big O certificates or other
evidences of insurance coverage with coverage limits sufficient to cover the
risks and an endorsement reflecting that Big O and Franchisee are named as
additional insureds under the supplier's insurance policies; and
(f) Big O must be reasonably satisfied that the commodity is priced
competitively.
Big O's current practice is to notify the Franchisee of its approval or
disapproval in writing as soon as practicable.
14.03 Inventory. Franchisee shall at all times maintain an inventory of
---------
Products and Services in such amounts and of such variety as Big O may
reasonably require, and shall offer all services which Big O may require.
14.04 Warranties and Guaranties. Franchisee agrees to issue and honor
-------------------------
warranties and guarantees written on certain Products and Services sold to
consumers in accordance with the terms and procedures prescribed in the Manual.
Any such warranty or guaranty will be offered through all Big O Tire Stores on a
nondiscriminatory basis. Only warranties or guarantees sponsored or approved by
Big O may be offered or honored by Franchisee (other than those required by
law). Franchisee and Big O shall only honor warranties and guaranties on
Products and Services which have been sold to and returned by consumers in
accordance with the terms and procedures prescribed in the Manual. Franchisee
acknowledges that it will honor any and all warranties and guarantees sponsored
or approved by Big O, regardless of where or by whom they were issued.
Franchisee shall make no charge to a customer for honoring such a warranty or
guaranty unless the charge is permitted by the express terms of the warranty or
guaranty or the then current Manual. Big O agrees not to change or revoke any
warranty or guaranty without giving Franchisee at least thirty (30) days prior
written notice. Warranties or guarantees issued prior to any such revocation or
modification shall be honored according to their terms as interpreted in the
Manual.
14.05 Open Account Financing. In its sole discretion, Big O may provide
----------------------
Franchisee with open account financing for some or all of the Products and
Services it sells Franchisee. Whether or not such credit is offered, Franchisee
will be required to execute a security agreement and comply with all other
requirements of Big O to secure Franchisee's obligations to Big O under the
Franchise Agreement and perfect its security interest therein. If such credit
is offered, Franchisee will be required to execute a credit agreement and
security agreement and comply with all other requirements of Big O to secure
such payments and perfect its security interest therein. Franchisee's failure
to comply with any credit terms set forth above shall constitute an event of
default of this Agreement.
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS
15.01 Initial Advertising. Recognizing the value of standardized
-------------------
Advertising programs to the furtherance of the goodwill and public image of the
Big O System, the parties agree that within the first year of business,
Franchisee is required to spend on Initial Advertising, in addition to the
required four percent (4%), the amount specified on the Summary Pages. The
exact amount to be spent on Initial Advertising shall be determined by the
Franchisee's Local Group and will depend, in part, on Big O's then current
presence in the market place, reputation and name recognition. The amount and
manner of the Initial Advertising must be approved in advance by Big O. If no
Local Group exists for
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the region where Franchisee's Store is located, then the amount of the Initial
Advertising shall be agreed upon by Big O and Franchisee.
15.02 National Advertising Fund. Big O has established a National
-------------------------
Advertising Fund which Big O, in its sole discretion, may decide to terminate at
any time. If Big O does terminate the National Advertising Fund, Big O, in its
sole discretion, may re-establish it at any time. Big O shall notify Franchisee
as to the manner in which it shall function and the amount of contribution
required of Franchisee.
(a) Not later than the Due Date, Big O or its designee must have
received from Franchisee such amount as Big O shall designate, but not more
than one percent (1%) of its previous month's Gross Sales, as a contribution
to the National Advertising Fund which shall be maintained or approved by
Big O for Big O National Advertising. Big O shall limit any increase in
Franchisee's contribution to the National Advertising Fund from any amount
then currently being charged to one-tenth of one percent (.001%) in any
twelve (12) consecutive month period and an additional one-tenth of one
percent (.001%) for each twelve (12) consecutive months thereafter until the
one percent (1%) limitation is reached. Such incremental increases shall not
be cumulative so that if Big O fails to adopt an additional incremental
increase after any twelve (12) consecutive month period, the next one-tenth
of one percent (.001%) incremental increase will not accrue until actually
adopted by Big O and shall constitute the maximum for the next consecutive
twelve (12) months; provided, however, in the event Big O shall determine,
in its sole judgment and discretion, that a special advertising circumstance
or opportunity is available to Big O and/or its franchisees, Big O may
propose to the Dealer Planning Board a greater increase during any
consecutive twelve (12) month period (up to one percent (1%) limit), and if
a majority of the members of the Dealer Planning Board agree to such
increase, it shall be implemented by Big O, not withstanding Big O's
limitation as to the phasing in of any increases.
(b) Big O shall, following consultation with the Dealer Planning Board,
direct all National Advertising which is provided through the National
Advertising Fund with sole discretion over the concepts, materials, and
media used therein. All National Advertising Fund contributions paid by
Franchisee and other similarly situated Big O System franchisees to Big O
shall be part of the National Advertising Fund.
(c) Franchisee understands and acknowledges that the National
Advertising Fund is intended to maximize general public recognition and
acceptance of the Licensed Marks for the benefit of the System as a whole
and that Big O undertakes no obligation in administering the National
Advertising Fund to insure that any particular franchisee benefits directly
or pro rata from the national Advertising. Franchisee agrees that the
National Advertising Fund may otherwise be used to meet any and all costs
incident to such Advertising; provided that no part thereof shall be used by
Big O to defray its general operating expenses other than (i) those
reasonably allocable to such Advertising, or (ii) other activities
reasonably related to the administration or direction of the National
Advertising Fund and its related programs. No refund of contributions to the
National Fund shall be due Franchisee upon termination or nonrenewal of this
Agreement.
(d) Any part of the National Advertising Fund contributions paid to Big
O, but not spent by Big O during Big O's fiscal year, which Big O may change
in its sole discretion, shall remain in the National Advertising Fund. Any
taxes imposed on the National Advertising Fund shall be paid from the
National Advertising Fund.
(e) The Dealer Planning Board shall have the right to review all
expenditures of the National Advertising Fund on a regular basis.
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15.03 Local Fund. Franchisee shall also contribute by the Due Date a
----------
minimum of four percent (4%) of its Store's Gross Sales for the previous month
either to Big O or, if a Local Fund has been established in Franchisee's
marketing area, to the Local Fund formed for the purpose of local advertising
and operated pursuant to such structure and guidelines as Big O may prescribe or
approve. Franchisee agrees to be bound by the decisions of either Big O or its
Local Group, if one has been established in Franchisee's marketing area,
pertaining to Local Advertising, provided such decisions have been approved by
Big O and do not violate any applicable laws. From time to time, the Local
Group may agree to increase the amount Franchisee is required to spend for
Advertising, but subject to the terms of certain documents already effective on
this Agreement's Effective Date, not by more than one percent (1%) of
Franchisee's Gross Sales on an annual basis.
15.04 Approval of Advertising. Franchisee or the Local Group shall submit
-----------------------
(through the mail, return receipt requested) to Big O for its prior written
approval (except with respect to prices to be charged), samples of all marketing
materials and advertising to be used by Franchisee that have not been prepared
or previously approved in all respects by Big O or its designated agents.
Franchisee shall submit tear sheets, receipts, and other evidence of such
Advertising in the manner prescribed by Big O. Franchisee will not be required
to submit to Big O copies of any proposed Advertising which has been adopted for
use by the Local Group and which was previously approved by Big O for use by the
Local Group.
16. STATEMENTS AND RECORDS
16.01 Invoices. Every sale of Products and Services from the Franchisee's
--------
Store shall be accurately recorded on a consecutively numbered invoice or in
such other format as Big O may approve. All invoices, whether voided or used,
shall be accounted for by Franchisee.
16.02 Audit. Throughout the term of this Agreement and for two (2) years
-----
thereafter, Franchisee shall maintain for not less than three (3) years
original, full, and complete records, accounts, books, data, licenses, and
contracts which shall accurately reflect all particulars relating to the
Franchised Business and such other statistical and other information or records
as Big O may require. Big O or its designated agent shall have the right to
examine and audit such records, accounts, books, and data during regular
business hours or at reasonable times. If any such examination or audit
discloses that Franchisee has understated its Store's Gross Sales by more than
two percent (2%), Franchisee shall be obliged to reimburse Big O for the cost
and expense of such examination or audit. If Franchisee has understated any
amount due Big O or any Local Group or Local Fund, it shall tender payment of
the amount due not later than ten (10) days following receipt of the auditor's
report, plus interest calculated at a rate which is the lower of eighteen
percent (18%) per annum or the highest rate permitted by law. If Franchisee has
overpaid Big O or such Local Group or Local Fund, such amount will be credited
to Franchisee against monthly royalty fees or advertising contributions due to
Big O, the Local Group or the Local Fund beginning with the month following
receipt of the auditor's report and continuing until the credit is exhausted.
16.03 Monthly Reports. No later than the Due Date, Franchisee shall mail
---------------
to Big O all payments of royalty fees and advertising contributions and monthly
reports due Big O on forms prescribed by Big O, stating the fees or
contributions due to Big O which were incurred during the preceding month as
specified from time to time by Big O, the Gross Sales at the Premises for the
prior month, copies of all sales tax receipts or returns and such other
information as Big O may require, all signed and certified as true and correct
by Franchisee or Franchisee's Operator. Big O reserves the right to require
such reporting to be performed and submitted to Big O electronically.
16.04 Financial Statements. Franchisee shall deliver to Big O, no later
--------------------
than sixty (60) days from the end of each of Franchisee's fiscal quarters, an
unaudited profit and loss statement covering
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the Franchised Business for such quarter and a balance sheet of the Franchised
Business as of the end of such quarter, all of which shall be certified by
Franchisee as true and correct. All such statements shall be prepared in a
format which has been prescribed or approved by Big O. In addition, Franchisee,
as well as any guarantor(s) of this Agreement, shall, within thirty (30) days
after request from Big O, deliver to Big O a financial statement, certified as
correct and current, in a form which is satisfactory to Big O and which fairly
represents the total assets and liabilities of Franchisee and any such
guarantor(s).
16.05 Management System. Big O has authorized Local Groups to recommend to
-----------------
Big O that certain Management Systems be obtained and used by all their member
franchisees. If Franchisee's Local Group persuades Big O that the acquisition
of a Management System by all its member Franchisees is necessary to the
efficient functioning of a program which is consistent with the Big O System,
Franchisee shall, at its sole expense acquire such Management System and place
it in service within such time periods as are recommended by the Local Group and
approved by Big O. Once a particular Management System or accounting software
has been adopted by a Local Group pursuant to the criteria described herein,
Franchisee may utilize a different Management System at Franchisee's Store only
with Big O's prior written approval.
16.06 Regional Accounting Center. The Franchisee is required to use some
--------------------------
or all of the services provided by a Regional Accounting Center operating within
the Franchisee's marketing area.
17. COVENANTS
17.01 Noncompetition During Term. Except for any businesses already
--------------------------
operating and identified on the Summary Pages, during the term of this
Agreement, Franchisee and any guarantor(s) hereof covenant, individually, not to
engage in or open any business, other than as a Franchisee of the Big O System,
which offers or sells tires, wheels, shock absorbers, automotive services, or
other products or services which compete with Big O Products and Services. The
purpose of this covenant is to encourage Franchisee and any guarantor(s) hereof
to use their best efforts to promote the Big O System, its Products and
Services, to protect its Information and trade secrets, and to generate a
successful business at the Store.
17.02 Confidentiality. During the term of this Agreement and thereafter,
---------------
Franchisee covenants not to communicate directly or indirectly, divulge to or
use for its benefit or the benefit of any other person or legal entity, any
trade secrets which are proprietary to Big O or any Information, knowledge, or
know-how deemed confidential under Section 13 hereof, except as permitted by Big
O. The protection granted hereunder shall be in addition to and not in lieu of
all other protections for such trade secrets and confidential Information as may
otherwise be afforded in law or in equity.
17.03 No Interference with Business. Franchisee agrees that during the
-----------------------------
term of this Agreement that it shall not divert or attempt to divert any
business of or any actual customers of the Big O System to any competitive
business, by direct or indirect inducement or otherwise.
17.04 Post Termination Covenant Not to Compete. If Franchisee terminates
----------------------------------------
this Agreement other than in a manner prescribed by Section 19.03 or if this
Agreement is terminated for "good cause" as defined in Section 19.01, Franchisee
and its guarantors covenant that they shall not directly or indirectly, for a
period of two (2) years after the Termination Date of this Agreement, engage in
any business, other than as a Franchisee of the Big O System, which offers or
sells tires, wheels, shock absorbers, automotive services, or other products or
services which compete with Big O Products and Services within a ten (10) mile
radius of the Premises or within a ten (10) mile radius of any other Big O Store
which was operational or under construction on the Termination Date.
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If a former Franchisee or guarantor commits a breach of this Section 17.04, the
two year period shall start on the date that the former Franchisee or guarantor
is enjoined from competing or stops competing, whichever is later.
17.05 Survivability of Covenants. The parties agree that each of the
--------------------------
foregoing covenants shall be construed as independent of any other covenant or
provision of this Agreement. If all or any portion of a covenant in this
Section 17 is held unenforceable by a court or agency having valid jurisdiction
in an unappealed final decision to which Big O is a party, Franchisee expressly
agrees to be bound by any lesser covenant imposing the maximum duty permitted by
law that is subsumed within the terms of the covenant, as if the resulting
covenant were separately stated in and made a part of this Section 17.
Franchisee further expressly agrees that the existence of any claim it may have
against Big O, whether or not arising from this Agreement, shall not constitute
a defense to the enforcement by Big O of the covenants in this Section 17. The
covenants in this Section 17 shall survive the Termination Date or Expiration
Date of this Agreement.
17.06 Modification of Covenants. Franchisee understands and acknowledges
-------------------------
that Big O shall have the right, in its sole discretion, to reduce the scope of
any covenant set forth in this Section 17 or any portion hereof, without
Franchisee's consent, effective immediately upon receipt by Franchisee of
written notice thereof; and Franchisee agrees that it shall comply immediately
with any covenant as so modified.
18. TRANSFER AND ASSIGNMENT
18.01 Assignment by Big O. This Agreement and all rights and duties
-------------------
hereunder may be freely assigned or transferred by Big O and shall be binding
upon and inure to the benefit of Big O's successors and assigns.
18.02 Right of First Refusal. Because Big O or someone known to Big O may
----------------------
be interested in purchasing Franchisee's Franchised Business, the Premises, or
an interest in either, if Franchisee decides to make a Transfer, Franchisee
agrees to offer in writing to make the Transfer to Big O, and describe the terms
under which Franchisee offers to make such a Transfer. If Big O has not offered
to purchase what the Franchisee has offered to Transfer to Big O within thirty
(30) days after Big O receives the notice from Franchisee, Franchisee may then
offer to make the Transfer to third parties on the same or not more favorable
terms and conditions as were offered to Big O. If Franchisee does not
consummate the Transfer within six months after Franchisee gives notice of the
Transfer to Big O, Franchisee shall not make the Transfer without again first
offering to make the Transfer to Big O.
18.03 Transfer Legend. Franchisee understands and acknowledges that the
---------------
rights and duties set forth in this Agreement are personal to Franchisee and
that Big O has granted the Franchise in reliance on Franchisee's personal
background, business skills, experience, and financial capacity. It is
important to Big O that Franchisee be known to Big O and always meet Big O's
standards and requirements. Accordingly, neither Franchisee nor any Shareholder
shall be permitted or have the power, without the prior written consent of Big
O, to make a Transfer. To assure compliance by Franchisee with the transfer
restrictions contained in this Section 18, all share or stock certificates of
Franchisee shall at all times contain a legend sufficient under applicable law
to constitute notice of the restrictions on such stock contained in this
Agreement and to allow such restrictions to be enforceable. Such legend shall
appear in substantially the following form:
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"The sale, transfer, pledge, or hypothecation of this stock is
restricted pursuant to the terms of Section 18 of a Franchise Agreement
dated between Big O Tires, Inc, and the issuer of
---------------------
these shares."
Any Transfer which does not comply with the terms of this Section 18 shall be
null and void.
18.04 Pre-Conditions to Franchisee's Assignment. If Franchisee or any
-----------------------------------------
Shareholder desires to make a Transfer, such person or entity must comply with
the following terms, conditions, and procedures to effectuate a valid Transfer:
(a) If any proposed assignment of any rights under this Agreement, or if
any other Transfer which, when aggregated with all previous Transfers, would
in the reasonable opinion of Big O, result in the transfer of effective
control over the ownership and/or operation of the Premises or Franchisee or
the Franchised Business:
(i) The transferee must apply for a Big O franchise and must meet
all of Big O's then current standards and requirements for becoming a
Big O franchisee (which standards and requirements need not be written);
and
(ii) The transferee shall execute the then current form of Franchise
Agreement generally issued by Big O with respect to comparable Big O
franchisees. Such agreement shall generally provide for a new term equal
to the term of the standard Big O franchise agreement then being
offered, and may include, without limitation, different fee structures,
modified Trade Areas and/or increased fees;
(b) Regardless of the degree of control which would be affected by a
proposed Transfer:
(i) Franchisee shall first notify Big O in writing of any bona fide
proposed Transfer and set forth a complete description of all terms and
fees of the proposed Transfer in the manner prescribed by Big O,
including the prospective transferee's name, address, financial
qualifications, and previous five (5) years business experience;
(ii) Big O or its assignee may, within thirty (30) days after
receipt of such notice, exercise the Option to purchase the interest
being offered by Franchisee or any Shareholder;
(iii) If Big O or its assignee fails to exercise the Option to
purchase the interest, Big O shall, within thirty (30) days after
receipt of the notice of the Option, notify Franchisee in writing of its
approval or disapproval of the prospective transferee. Big O's approval
will be granted only if the prospective transferee, its Shareholders,
partners, and/or Operator: meets Big O's then current standards for new
franchisees, which standards need not be in writing; demonstrates to Big
O's satisfaction that it or its Operator meets Big O's managerial,
business, and technical standards; possesses a good moral character,
business reputation, and satisfactory credit rating; and has the
aptitude, ability, and financial capacity to operate the Franchised
Business (as may be evidenced by prior related business experience or
otherwise). Big O reserves the right to disallow a transfer of the
Premises (without a transfer of the Franchised Business) to a person
which would operate a business from the Premises which sells or offers
for sale products or services which are the same as or similar to those
offered for sale through the Franchised Business;
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(iv) If Big O approves the proposed transferee, Franchisee or the
Shareholder may transfer the interest to the proposed transferee at a
price and under terms and conditions which are not more favorable than
the terms offered to Big O. Big O's approval is conditioned upon the
proposed transferee or its Operator having completed (to the
satisfaction of Big O) the training program then currently required of
Big O franchisees or Operators;
(v) Prior to the consummation of any such Transfer, Franchisee
shall pay all amounts due to Big O and cure all other breaches of this
Agreement and any other agreement or loan document it may have with
Big O;
(vi) Big O will, as a condition of any Transfer involving a change
in control of Franchisee, the Store or its Assets, require Franchisee or
Transferee to pay a transfer fee (but no initial franchise fee) to
reimburse Big O for any expenses which may be incurred in its review,
analysis, and preparation of any documentation relating to the Transfer,
including legal and accounting fees, any required training and
additional assistance as may be requested by the Franchisee related to
the Franchisee's resale of the Store. The transfer fee will range
between $4,500 and the amount of the then current initial franchise fee,
the exact amount within that range to be based on Big O's actual costs
incurred. Big O shall be the sole arbiter of whether a change of control
occurred as a result of a single Transfer or a group of Transfers;
For any transfer of less than fifty percent (50%) of Franchisee's
ownership, Big O will, as a condition of any Transfer involving less
than fifty percent (50%) of Franchisee's ownership in the Franchise, the
store or its assets, require the Franchisee or the transferee to pay a
transfer fee (but no initial franchise fee) to reimburse Big O for any
expenses which may be incurred in its review, analysis and preparation
of any documentation relating to the Transfer, including legal and
accounting fees and additional assistance as may be requested by the
Franchisee related to the resale of the Store. The transfer fee will be
$500. However, if such Transfer consumes an inordinate amount of time
(in excess of ten (10) hours of cumulative Big O personnel time) the
Franchisee or the Transferee may be billed the then current billable
hour rate, which is currently in addition to the $500 fee. The
transferee will be charged no other initial franchise fee. Big O shall
be the sole arbiter of whether a change of control will occur as a
result of a single Transfer or a group of Transfers.
(vii) Big O may require any transferor of any partnership interest,
shares of stock, or any other interest of any kind or nature in
Franchisee to guarantee the obligations of Transferee under this
Agreement or under any new Franchise Agreement entered into between
transferee and Big O;
(viii) Prior to approving a Transfer of the controlling interest in
Franchisee, the Franchised Business, or the Premises, Big O may inspect
Franchisee's Store and as a result of such inspection, Big O may prepare
a "Punch List" setting forth the necessary repairs, maintenance, or
other upgrading of the Store which will become a condition of Big O's
approval of the Transfer; and
(ix) If the Franchisee acquired its interest in the Franchise as a
Pioneer, Converter, or pursuant to a Development Agreement or Manager
Incentive Contract, and the Franchisee makes a Transfer of its interest
within two (2) years of the Effective Date of this Agreement, the
Franchisee must pay Big O as a condition of such Transfer
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the difference between the initial franchise fee paid by Franchisee and
twenty-one thousand dollars ($21,000.00), the standard initial
franchisee fee charged by Big O for new franchises when Franchisee
executed this Agreement.
(x) Franchisee shall comply with all other applicable transfer
requirements as designated in the Confidential Operating Manual or
otherwise in writing.
18.05 Death of Franchisee. Notwithstanding any other provision in this
-------------------
Section 18, if a Survivor desires to acquire or retain the interest of a
decedent of a Franchisee or in a Franchisee and continues to operate the
Franchised Business pursuant to the System, the Survivor may do so under the
terms of this Agreement subject only to:
(a) The Survivor's execution and delivery to Big O of a written
agreement to be bound:
(i) By the terms of this Agreement; and
(ii) By the terms of any guaranty of this Agreement;
(b) Satisfactory completion of initial training by the Survivor,
Survivor's Operator, or Manager and such other managerial personnel as Big O
may designate within the time periods prescribed by Big O; and
(c) The Survivor's payment of all travel, lodging, food, and similar
expenses incurred by it or its Operator or managerial personnel in attending
the training prescribed by Section 11.02. If the Survivor does not desire to
acquire or retain such interest, then the Survivor shall have a reasonable
period of time, but no more than six (6) months, to make a Transfer to a
transferee acceptable to Big O subject to compliance with the procedures set
forth in this Section 18, provided, the Survivor throughout such period
fulfills all duties of Franchisee under this Agreement.
18.06 No Waiver. Big O's consent to a Transfer hereunder shall not
---------
constitute a waiver of any claims Big O may have against Franchisee or the
transferring party or Big O's right to demand exact compliance with any
provision of this Agreement.
18.07 Excepted Transfers. The provisions of Section 18.02 and 18.04(b)(ii)
------------------
shall not apply to: (a) any Transfer to a spouse, parent, child, or sibling of
Franchisee or any Shareholder; (b) a Transfer to Franchisee's Operator or
Manager pursuant to the terms of a Manager Incentive Contract which complies in
all respects with the standards approved or prescribed by Big O; or (c) a
Transfer to a spouse, parent, child, or sibling of Franchisee or any Shareholder
which, in the aggregate, amounts to a Transfer of less than a controlling
interest in Franchisee, the Franchised Business, or the Premises.
19. DEFAULT AND TERMINATION
19.01 Termination by Big O. Big O may terminate this Agreement for good
--------------------
cause, without prejudice to the enforcement of any legal or equitable right or
remedy, immediately upon giving written notice of such termination and the
reason or cause for the termination, and, except as hereinafter provided,
without providing Franchisee an opportunity to cure the default. Without in any
way limiting the generality of the meaning of the term "good cause", the
following occurrences shall constitute sufficient basis for Big O to terminate
the Agreement:
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(a) If Franchisee fails to pay any financial obligation pursuant to
this Agreement including, but not limited to, payments to Big O or any
other supplier for Products and Services, and fails to cure such failure to
pay within five (5) days after Big O gives Franchisee a written notice of
default;
(b) If Franchisee fails to perform or breaches any covenant,
obligation, term, condition, warranty, or certification herein and fails to
cure such non-compliance within thirty (30) days after Big O gives
Franchisee written notice of default;
(c) If Franchisee fails to open the Store and commence business within
eighteen (18) months of the Effective Date of this Agreement, or if
Franchisee fails to commence business on such other Commencement Date as the
parties hereto may have agreed;
(d) If Franchisee makes, or has made, any materially false statement or
report to Big O in connection with this Agreement or the application
therefor;
(e) If Franchisee operates the Franchised Business in a manner contrary
to or inconsistent with the Licensed Marks or as specified by Big O in the
Manual, and Franchisee fails to cure such deficiency within thirty (30) days
after Big O gives a written notice of default;
(f) If Franchisee, a Shareholder, guarantor, or transferee violates any
transfer and assignment provision contained in Section 18 of this Agreement;
(g) If Franchisee receives from Big O more than three (3) valid notices
of default of this Agreement in the same twelve (12) month period,
regardless of whether previous defaults have been cured;
(h) If Franchisee fails to operate or keep the Franchised Business open
for more than five (5) consecutive business days without Big O's express
written approval, or if Franchisee ceases to operate all or any part of the
Franchised Business conducted under this Agreement or defaults under any
loan, lending agreement, mortgage, deed of trust or lease with any party
covering the Premises, and such party treats such act or omission as a
default, and Franchisee fails to cure such default to the satisfaction of
such party within any applicable cure period granted Franchisee by such
party;
(i) If Franchisee or any person owning an interest in Franchisee is
convicted of any felony or crime of moral turpitude regardless of the nature
thereof, or any other crime or offense relating to the operation of the
Franchised Business, or if Franchisee engages in any conduct which reflects
materially and unfavorably upon the operation of the Franchised Business;
(j) If Franchisee becomes insolvent or makes a general assignment for
the benefit of creditors, or if a petition in bankruptcy is filed by
Franchisee, or such a petition is filed against and consented to by
Franchisee, or if a bill in equity or other proceeding for the appointment
of a receiver of Franchisee or other custodian for Franchisee's business or
assets is filed and consented to by Franchisee, or if a receiver or other
custodian (permanent or temporary) of Franchisee's assets or property, or
any part thereof, other than as described in Section 18.05, is appointed;
(k) If Franchisee or any guarantor(s) hereof defaults in any other
agreement or loan document with Big O or if Franchisee defaults under the
terms of any lease of the Premises or if Franchisee fails to comply with the
requirements of any Local Group operating pursuant to standards prescribed
or approved by Big O including, but not limited to, any requirement to pay
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<PAGE>
dues or make advertising contributions, and such default is not cured in
accordance with the terms of such other agreement, loan document, or lease, or
the by-laws of the Local Group;
(l) If Franchisee fails, for a period of ten (10) days after
notification of non-compliance, to comply with any law or regulation
applicable to the operation of the Franchised Business;
(m) If Franchisee sells, offers for sale, or gives away at the Premises
any products or services which have not been previously approved by Big O in
writing, or which have been subsequently disapproved;
(n) If Franchisee shall have understated its Gross Sales to Big O by
more than two percent (2%) on two (2) or more occasions; or
(o) If a court of competent jurisdiction or an arbitration tribunal in a
final and unappealed judgment determines that any significant amount of the
payments or compensation which Franchisee has agreed to pay Big O pursuant
to the terms hereof is unlawful, or that all or a significant part of
Franchisee's payment obligations hereunder are void or voidable by
Franchisee.
If a different notice or cure period or good cause standard is prescribed by
applicable law, it shall apply to a termination of the Franchise Agreement.
Remedies to Big O. If the Franchisee is in default and has failed to cure
-----------------
such default in a manner prescribed by the Franchise Agreement, in addition
to the rights Big O has to terminate the agreement, the Franchisee agrees to
pay to Big O, among the many remedies available to Big O, royalties and any
lost gross profits.
19.02 Governing State Law. If a different notice or cure period or good
-------------------
cause standard is prescribed by applicable law, it shall apply to a termination
of this Agreement.
19.03 Termination by Franchisee. Franchisee may only terminate this
-------------------------
Agreement if Big O has committed a material breach of any of Big O's obligations
under this Agreement and has failed to cure such breach within thirty (30) days
after Franchisee has given written notice to Big O of such breach.
19.04 Force Majeure. Notwithstanding anything contained in this Agreement
-------------
to the contrary, neither party shall be in default hereunder by reason of its
delay in performance of, or failure to perform, any of its obligations
hereunder, if such delay or failure is caused by:
(a) strikes or other labor disturbance;
(b) acts of God, or the public enemy, riots or other civil disturbances,
fire, or flood;
(c) interference by civil or military authorities;
(d) compliance with governmental laws, rules, or regulations which were
not in effect and could not be reasonably anticipated as of the date of this
Agreement;
(e) delays in transportation, failure of delivery by suppliers, or
inability to secure necessary governmental priorities for materials; or
(f) any other fault beyond its control or without its fault or
negligence. In any such event, the time required for performance of such
obligation shall be the duration of the unavoidable delay.
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<PAGE>
20. POST TERMINATION OBLIGATIONS
20.01 Post-Termination Obligations. Upon the expiration or termination of
----------------------------
this Agreement by any means or for any reason, Franchisee shall immediately:
(a) Cease to be a Franchisee of Big O and cease to operate the former
Franchised Business under the Big O System. Franchisee shall not thereafter,
directly or indirectly, represent to the public that the former Franchised
Business is or was operated or in any way connected with the Big O System or
hold itself out as a present or former Franchisee of Big O;
(b) Pay all sums owing to Big O. Upon termination for any default by
Franchisee, such sums shall include actual and consequential damages, costs,
and expenses incurred by Big O as a result of the default;
(c) Return to Big O the (i) Confidential Operating Manual, Blue II, any
training modules or other proprietary information and supplements thereto
and all trade secrets and confidential materials owned or licensed by Big O
and all copies thereof other than Franchisee's copy of the Franchise
Agreement, copies of any correspondence between the parties, and any other
document which Franchisee reasonably needs for compliance with any
applicable law; (ii) return or discontinue use of all forms, advertising
matter, marks, devises, insignias, slogans, designs, signs, any computer
systems including BOSS/2/ software and/or hardware; and (iii) discontinue
the use of all copyrights, Licensed Marks, tradenames and patents now or
hereafter applied for or granted in connection with the operation of the
Franchise.
(d) Provide Big O, upon its request, with a complete list of any
outstanding obligations Franchisee may have to any third parties including
outstanding customer orders. Big O shall have the right, but not the
obligation, to fill any such outstanding customer orders generated by
Franchisee and in such event, Franchisee shall immediately reimburse Big O
for any costs or expenses incurred by Big O in doing so. In addition, Big O
shall have the right to cancel any orders placed by Franchisee for which
delivery has not been made;
(e) Take such action as may be required by Big O to transfer and assign
to Big O or its designee all telephone numbers, white and yellow page
telephone references and advertisements, and all trade and similar name
registrations and business licenses, and to cancel any interest which
Franchisee may have in the same. The Franchisor is hereby appointed as the
Franchisee's attorney-in-fact for such purpose and such power, being coupled
with an interest, shall be irrevocable;
(f) Cease to use in Advertising, or in any manner whatsoever, any
methods, procedures, or techniques associated with the Big O System in which
Big O has a proprietary right, title, or interest; cease to use the Licensed
Marks, and any other marks and indicia of operation associated with the Big
O System and remove or change all Trade Dress, Products and Services, and
other indicia of operation under the Big O System from the Premises, at
Franchisee's expense and in a manner satisfactory to Big O. Unless otherwise
approved in writing by Big O, Franchisee shall return to Big O all copies of
materials bearing the Licensed Marks; and
(g) If during the term of Franchisee's Franchise Agreement, the
Franchisee has made available to its customers, the ability to purchase
Products and Services from Franchisee's Store by the use of the Big O credit
card with American General Finance, upon termination the Franchisee shall
cease accepting such card from any future customers.
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<PAGE>
(h) Franchisee shall immediately make available to Big O all customer
lists as such was developed while a Franchisee.
(i) Strictly comply with all other provisions of this Agreement
pertaining to post-termination obligations, including, without limitation,
those contained in Sections 13 and 17.
(j) Any tire adjustments existing as of the Termination Date shall be
referred to other existing LSCs, RSCs or other Stores for processing.
Franchisee shall receive no allowance for tire adjustments upon termination.
20.02 Right to Repurchase. Big O shall have the right, but not the
-------------------
obligation, to purchase:
(a) Some or all of the Products and Services and supplies at the Store
and the equipment, furnishings, fixtures, or signs at the Premises which
bear the Licensed Marks for a mutually agreed upon price within thirty (30)
days of the Termination Date or the Expiration Date.
(b) If Big O elects to exercise such a right, it may offset the purchase
price against any other amounts owed by Franchisee to Big O pursuant to this
or any agreement or loan document. Before exercising any such rights, Big O
shall have the right to enter upon the Premises during reasonable hours to
take an inventory of the Franchised Business.
20.03 Right of First Refusal. Upon receipt by Franchisee of an offer to
----------------------
purchase Franchisee's Products and Services, equipment, supplies, fixtures or
signs at the Premises, Franchisee hereby grants Big O a right of first refusal
to purchase any of such items by matching the bona fide monetary purchase price
and payment schedule terms, less any brokerage commission without having to
match any other non-monetary terms of the proposed purchase by Franchisee's
buyer(s). Franchisee must give Big O written notice of any such bona fide
offer. If within thirty (30) days after receipt of such notice, Big O has
neither exercised its right of first refusal nor notified Franchisee of its
rejection thereof, Franchisee may sell such items as were covered by the offer
at the expiration of the thirty (30) day period.
20.04 De-Identification of Assets Upon Sale. If Big O determines not to
-------------------------------------
exercise its option to repurchase any such items, Franchisee may continue to
sell its remaining Products and Services, equipment, supplies, and fixtures, but
may not identify itself as a Big O Franchisee. Franchisee shall otherwise abide
by the terms of this Section 20.
21. INSURANCE
21.01 Insurance Coverage. Franchisee shall, at its expense and no later
------------------
than upon the Commencement Date, procure and maintain in full force and effect
throughout the term of this Agreement either the approved Big O Dealers National
Insurance Program ("Program") then in effect or the types of insurance
enumerated in this Agreement, which shall be in such coverages, limits and
amounts as may from time to time be required by Big O, and which shall designate
Big O, its directors, officers, employees, agents and other Big O designees as
additional named insured(s). Unless otherwise agreed to by Big O, Franchisee
shall procure and maintain whichever limits and coverages are greater in a
comparison of the insurance enumerated in the Manual and the insurance
enumerated in the Program. If the Franchisee chooses not to procure insurance
pursuant to the Program, Franchisee shall procure the following insurance
coverages, limits and amounts:
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<PAGE>
(a) Workers' Compensation insurance with statutory limits for Coverage A
as prescribed by the statutes of the state of the Franchised Business;
including Coverage B, Employers Liability, with limits not less than or
equivalent to $500,000 each person, $500,000 each occurrence, and $500,000
annual aggregate;
(b) Comprehensive or Commercial General Liability insurance covering all
operations and premises of the Franchised Business, including but not
limited to Product Liability, Completed Operations Liability, Personal
Injury Protection, Advertisers Liability, Fire Legal Liability, Medical
Payments, and Contractual Liability, with limits not less than the
equivalent of $2,000,000 per occurrence combined single limit for bodily
injury and property damage;
(c) Vehicular/Automobile Liability insurance, including Uninsured
Motorist and Medical Payments, covering owned, non-owned, hired, leased or
other vehicles associated, directly or indirectly, with the Franchised
Business, with limits of not less than the equivalent of $1,000,000 per
occurrence combined single limit for bodily injury and property damage;
(d) "All Risk" Property insurance covering risk of loss to real and
personal property; including but not limited to, Accounts Receivable,
Valuable Papers, Glass, Signs, Employees' Tools, Loss of Rents, and other
building contents -including flood and earthquake coverage if appropriate
for the location of the specific Franchised Business-for repair/replacement
coverage and valuation of all assets. This coverage will include Business
Income/Extra Expense insurance for extra expenses incurred and/or profits
lost due to a covered, "All Risk" peril (Business Interruption Valuation
Worksheets will be submitted by Franchisee to Big O annually for evaluation
and approval). Any coinsurance provisions should apply only to values
reported and should have no adverse impact on claim settlement (an Agreed
Amount Endorsement should be obtained, if possible);
(e) Inland Marine insurance covering all signs, tools and equipment, and
cargo being transported by rail, motortruck, or other common carrier
conveyances where the Franchised Business has title or responsibility for
transported goods, with limits of no less than $10,000 per any one
conveyance;
(f) Garage Liability and Garagekeepers Legal Liability insurance
covering all vehicle storage, garage premises and other operations arising
out of the Franchised Business and non-owned use and/or operation of
vehicles, with Garage Liability limits of not less than the equivalent of
$2,000,000 per occurrence combined single limit for bodily injury and
property damage and Garagekeepers Legal Liability of not less than the
equivalent of $100,000 per location;
(g) Boiler and Machinery insurance covering all real and personal
property; including, but not limited to, pressure vessels, machinery,
piping, tubing and other high and low pressurized items at the Franchised
Business for the repair/replacement valuation of all assets. This coverage
shall include Business Income/Extra Expenses insurance for additional
expenses incurred and/or profits lost;
(h) Comprehensive Fidelity/Crime insurance covering Employee Dishonesty
with limits no less than $25,000; Forgery with limits no less than $10,000;
Money and Securities Inside Premises with limits no less than $10,000; and
Money and Securities Outside Premises with limits no less than $10,000; and
(i) Commercial Umbrella Liability insurance covering all underlying
liability insurance coverages enumerated in this section, with no gaps
between underlying and umbrella limits or coverage with excess and primary
limits of no less than the equivalent of $3,000,000 per occurrence combined
single limit for bodily injury and property damage.
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<PAGE>
21.02 Proof of Insurance. Prior to the Commencement Date, Franchisee shall
------------------
make timely delivery of a signed original certificate or certificates of all
required insurance coverages to Big O, which shall contain the authorized
agent's business name, address and phone number, together with a statement by
the insurer that the policy will not be cancelled or materially changed without
at least thirty (30) days prior written notice to Big O that the alteration or
cancellation is being made. All insurance coverages will be underwritten by a
company acceptable to Big O, with a Best's Rating of no less than "A-" or a
financial statement of the insurer approved by Big O. If Franchisee fails to
purchase required insurance conforming to the standards prescribed by Big O,
Big O may obtain such insurance for Franchisee, and Franchisee shall pay Big O
the cost of such insurance plus a ten percent (10%) administrative surcharge.
21.03 Survival of Indemnification. The procurement and maintenance of the
---------------------------
greater of the prescribed insurance coverages set forth in the Manual or those
set forth in the Program shall not relieve Franchisee of any liability to Big O
assumed under any indemnification requirement of this Agreement.
If Big O deems it appropriate, the Franchisee shall, upon Big O's request,
provide to Big O a true, complete certified copy of all, or a part of the
Franchisee's insurance policies within 10 days of receiving such request. In
addition, upon Big O's request, the Franchisee shall provide to Big O renewal
certificates of insurance, or certified insurance binders, for all required
coverages no fewer than 10 days before the indicated anniversary date(s) of such
insurance coverages.
22. TAXES, PERMITS, AND INDEBTEDNESS
22.01 Payment of Taxes. Franchisee shall promptly pay when due any and all
----------------
federal, state, and local taxes including without limitation, unemployment and
sales taxes, levied or assessed with respect to any Products and Services
distributed or sold pursuant to this Agreement and all accounts or other
indebtedness of every kind incurred by Franchisee in the operation of the
Franchised Business.
22.02 Compliance with Laws. Franchisee shall comply with all applicable
--------------------
federal, state, and local laws, rules and regulations, including, without
limitation, environmental laws related to tire disposal. Franchisee shall
obtain any and all permits, certificates, and licenses required for the full and
proper conduct of the Franchised Business.
22.03 Payment of Debts. Franchisee hereby expressly covenants and agrees
----------------
to accept full and sole responsibility for any and all debts and obligations
incurred in the operation of the Franchised Business.
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS
23.01 Indemnification. Franchisee agrees to protect, defend, indemnify,
---------------
and hold Big O and its affiliates, their directors, officers, shareholders,
employees and agents jointly and severally, harmless from and against all
claims, actions, proceedings, damages, costs, expenses and other losses
(including death) and liabilities, consequently, directly or indirectly incurred
(including, without limitation, attorneys', accountants' and other related fees)
as a result of, arising out of, or connected with the operation of the
Franchised Business, including, without limitation, the failure of Franchisee to
comply with any relevant environmental and tire disposal laws. Franchisee shall
not, however, be liable for claims arising exclusively as a result of Big O's
intentional or fraudulent acts or omissions or sole negligence.
23.02 Independent Contractor. In all dealings with third parties,
----------------------
including, without limitation, customers, employees, and suppliers, Franchisee
shall disclose in an appropriate manner acceptable
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<PAGE>
to Big O that it is an independent entity operating under a franchise granted by
Big O. Franchisee shall submit all applications and enter into all contracts in
its designated corporate name or such other fictitious names which have been
approved by Big O, but not in the name "Big O Tires" or in any other name which
includes the name "Big O". Nothing in this Agreement is intended by the parties
hereto to create a fiduciary relationship between them nor to constitute
Franchisee or Franchisee's employees or contractors as an agent, legal
representative, subsidiary, joint venturer, partner, employee, or servant of Big
O for any purpose whatsoever. It is understood and agreed that Franchisee is an
independent contractor and is in no way authorized to make any contract,
warranty, or representation or to create or imply any obligation on behalf of
Big O.
24. WRITTEN APPROVALS, WAIVERS, AND AMENDMENT
24.01 Written Approval. Whenever this Agreement requires Big O's prior
----------------
approval, Franchisee shall make a timely written request. Unless a different
time period is specified in this Agreement, Big O shall respond with its
approval or disapproval within fifteen (15) business days.
24.02 Waiver. No failure of Big O to exercise any power reserved to it by
------
this Agreement and no custom or practice of the parties at variance with the
terms hereof shall constitute a waiver of Big O's right to demand exact
compliance with any of the terms herein. A waiver or approval by Big O of any
particular default by Franchisee or any other Big O franchisee or acceptance by
Big O of any payments due hereunder shall not be considered a waiver or approval
by Big O of any preceding or subsequent breach by Franchisee of any term,
covenant, or condition of this Agreement. Big O shall not be deemed to have
waived any of its rights under this Agreement, including any right to receive
payment in full for any Product or Service provided, nor shall Franchisee be
deemed to have been excused from performance of any of its obligations pursuant
to this Agreement, unless such waiver or excuse is written and executed by an
authorized representative of Big O and Franchisee.
24.03 Modification. No amendment, change, or variance from this Agreement
------------
shall be binding upon either Big O or Franchisee except by mutual written
agreement. If an amendment of this Agreement is executed at Franchisee's
request, any legal fees or costs of preparation of such amendment and any
amendment of a franchise registration arising in connection therewith shall be
paid by Franchisee.
25. DEALER PLANNING BOARD
25.01 Dealer Planning Board. Big O has established a Dealer Planning Board
---------------------
("DPB"), consisting of franchisee representatives, which is designed to assist
Big O's management in the development of its strategic business plan and to
advise Big O's management on issues of concern to Big O franchisees. Through a
representative elected from Franchisee's Local Group, Franchisee shall be
represented on the DPB.
25.02 Special Interest Issues. Big O has granted the DPB the authority to
-----------------------
participate with Big O's management in making policy decisions relating to
issues in which the DPB is deemed to have a special interest. The issues of
"Special Interest" include:
(a) advertising policies and the creation of a National Advertising
Fund;
(b) standards of operation; and the implementation of new programs which
may require the addition of new equipment and fixtures for the store;
(c) selection of Products and Services offered at Big O Stores; and
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<PAGE>
(d) changes in the Licensed Marks anticipated to require the majority
of franchisees to expend more than five thousand dollars ($5,000.00) per
Store.
25.03 Disapproval of Management Proposal. With respect to those issues in
----------------------------------
which the DPB has a Special Interest, the DPB may, after consulting with the
members of the Local Groups, vote to disapprove a proposal of Big O's
management. If, pursuant to established procedures which have been approved by
Big O, the DPB shall disapprove a proposal of Big O's management, the proposal
may only become effective if, following a presentation to the Big O board of
directors by a representative of the DPB, Big O's board of directors votes to
adopt management's proposal.
25.04 Compliance with Modification. Franchisee agrees to comply with any
----------------------------
and all modifications to Big O's standards of operation, procedures, or other
requirements adopted pursuant to the procedures described in this Section 25.
26. RIGHT OF OFFSET
26.01 Right of Offset. Big O shall have the right at any time before or
---------------
after termination of this Agreement, without notice to Franchisee, to offset any
amounts or liabilities that may be owed by the Franchisee to Big O against any
amounts or liabilities that may be owed by Big O to Franchisee under this
Agreement or any other agreement, loan, transaction or relationship between the
parties.
27. ENFORCEMENT
27.01 Declaratory and Injunctive Relief. Big O or its designee shall be
---------------------------------
entitled to obtain without bond, declarations, temporary and permanent
injunctions, and orders of specific performance:
(a) To enforce the provisions of this Agreement relating to:
(i) Franchisee's use of the Licensed Marks; (ii) the obligations of
Franchisee upon termination or expiration of this Agreement; or (iii) the
Transfer and Assignment requirements of Section 18; or
(b) to prohibit any act or omission by Franchisee or its employees that:
(i) constitutes a violation of any applicable law or regulation; (ii) is
dishonest or misleading to prospective or current customers or clients of
businesses operated under the System; (iii) constitutes a danger to other
Big O franchisees, their employees, customers, clients or the public; or
(iv) may impair the goodwill associated with the Licensed Marks.
27.02 Costs of Enforcement. If Big O secures any declaration, injunction
--------------------
or order of specific performance pursuant to Section 27.01 hereof, if any
provision of this Agreement is enforced at any time by Big O or if any amounts
due from Franchisee to Big O are, at any time, collected by or through an
attorney at law or collection agency, Franchisee shall be liable to Big O for
all costs and expenses of enforcement and collection including, but not limited
to, court costs and reasonable attorneys' fees, including the fair market value
of any time expended by legal counsel employed by Big O.
28. NOTICES
28.01 Notices. Any notice required to be given hereunder shall be in
-------
writing and shall be mailed by registered or certified mail. Notices to
Franchisee and Big O shall be addressed to them at their addresses as listed on
the Summary Pages or to such other addresses as the parties may hereafter
prescribe. A copy of each notice to Big O shall be addressed to Franchisee's
designated regional representative. Any notice complying with the provisions
hereof shall be deemed to be given on the date of mailing.
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<PAGE>
29. GOVERNING LAW
29.01 Governing Law. This Agreement is accepted by Big O in the State of
-------------
Colorado and shall be governed by and interpreted in accordance with Colorado
law, which law shall prevail in the event of any conflict of law. Big O and
Franchisee consent to personal and subject matter jurisdiction and venue in
Denver, Colorado.
29.02 Jurisdiction. The parties hereto agree that it is in their best
------------
interest to resolve disputes between them in an orderly fashion and in a
consistent manner. Therefore, the parties consent to the exclusive jurisdiction
of either Colorado state courts or the United States Federal District Court for
the District of Colorado for any litigation relating to this Agreement or the
operation of the Franchised Business thereunder. Franchisor and Franchisee
irrevocably constitute and appoint the persons designated on paragraphs 10 and
11 of the Summary Pages to be their true and lawful agents, to receive service
of any lawful process in any civil litigation or proceeding arising under this
Agreement, and service upon such agent shall have the same force and validity as
if personal service had been obtained on the other party; provided that notice
of service and a copy of any process served shall be sent by registered or
certified mail, addressed to the other party at the address specified herein.
30. SEVERABILITY AND CONSTRUCTION
30.01 Severability. Subject to Section 19.01(o), should any part of this
------------
Agreement, for any reason, be declared invalid by a court of competent
jurisdiction, such decision or determination shall not affect the validity of
any remaining portion and such remaining portion shall remain in force and
effect as if this Agreement had been executed with the invalid portion
eliminated; provided, however, that in the event of a declaration of
invalidity, the provision declared invalid shall not be invalidated in its
entirety, but shall be observed and performed by the parties to the extent such
provision is valid and enforceable. The parties hereby agree that any such
provision shall be deemed to be altered and amended to the extent necessary to
effect such validity and enforceability.
30.02 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute one and the same
instrument.
30.03 Construction. The headings and captions contained herein are for the
------------
purpose of convenience and reference only and are not to be construed as part of
this Agreement. All terms and words used herein shall be construed to include
the number and gender as the context of this Agreement may require. The parties
agree that each section of this Agreement shall be construed independently of
any other section or provision of this Agreement.
31. ACKNOWLEDGEMENTS
(a) Big O acknowledges that Franchisee's principal interest in obtaining
the Franchise granted herein is to obtain Big O private brand tires and a
competitive source of supply for Products and Services. Big O acknowledges
its obligation to seek to attempt, with no obligation, to maintain a
competitive source of supply for the benefit of its franchisees and to aid
in the promotion of Big O Products and Services.
(b) Franchisee understands and acknowledges that the business licensed
under this Agreement involves business risks and that Franchisee's volume,
profit, income and success is dependent primarily upon Franchisee's ability
as an independent business operator.
- 27 -
<PAGE>
(c) Big O expressly disclaims the making of, and Franchisee acknowledges
that it has not received from any representative of Big O, any warranty or
guaranty, express or implied, as to the obligation of Big O to provide
Franchisee with any specific or sufficient amount of Products and Services
or as to the potential volume, profit, income or success of the Franchised
Business.
(d) Franchisee acknowledges that Big O or its agent has provided
Franchisee with a Franchise Offering Circular not later than the earlier of
the first personal meeting held to discuss the sale of the Franchise, ten
(10) business days before the execution of this Agreement, or ten (10)
business days before any payment of any consideration connected to the
purchase of this Franchise. Franchisee further acknowledges that Franchisee
has read such Franchise Offering Circular and understands its contents.
(e) Franchisee acknowledges that Big O has provided Franchisee with a
copy of this Agreement and all related documents, fully completed, for at
least five (5) business days prior to Franchisee's execution hereof.
(f) Franchisee acknowledges that Big O has advised it to consult with
its own attorneys, accountants, or other advisers, that Franchisee has had
ample opportunity to do so, and that the attorneys for Big O have not
advised or represented Franchisee with respect to this Agreement or the
relationship hereby created. The name and address of Franchisee's adviser,
if any, is set forth on the Summary Pages.
(g) Franchisee acknowledges that this Agreement, the documents referred
to herein, the attachments hereto, and other agreements signed concurrently
with this Agreement, if any, constitute the entire, full and complete
Agreement between Big O and Franchisee concerning the subject matter hereof.
This Agreement terminates and supersedes any prior agreement between the
parties concerning the same subject matter, and any oral or written
representations which are inconsistent with the terms of this instrument and
its accompanying Franchise Offering Circular.
(h) Franchisee acknowledges and recognizes that different terms and
conditions, including different fee structure and investment requirements
may pertain to different Big O franchises offered in the past,
contemporaneously herewith, or in the future, and that Big O does not
represent that all franchise agreements are or will be identical.
(i) Franchisee acknowledges that except as is specifically set forth in
this Agreement, it is not nor is it intended to be a third party beneficiary
of this Agreement or any other agreement or contractual relationship to
which Big O is a party.
- 28 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to
become effective on the date it is executed by the last of Franchisee or Big O.
FRANCHISEE:
By:
------------------------------------------------------
Date:
----------------------------------------------------
Home Address:
--------------------------------------------
---------------------------------------------------------
Home Phone Number:
---------------------------------------------------------
Office Address:
------------------------------------------
---------------------------------------------------------
Office Phone Number:
-------------------------------------
Title:
---------------------------------------------------
Attest:
--------------------------------------------------
Title:
---------------------------------------------------
(Affix Corporate Seal)
FRANCHISEE:
By:
------------------------------------------------------
Date:
----------------------------------------------------
Home Address:
--------------------------------------------
---------------------------------------------------------
Home Phone Number:
---------------------------------------
Office Address:
------------------------------------------
---------------------------------------------------------
Office Phone Number:
-------------------------------------
Title:
---------------------------------------------------
Attest:
--------------------------------------------------
Title:
---------------------------------------------------
(Affix Corporate Seal)
FRANCHISE:
- 29 -
<PAGE>
BIG O TIRES, INC.
By:
------------------------------------------------------
Date:
----------------------------------------------------
Title:
---------------------------------------------------
Attest:
--------------------------------------------------
Title:
---------------------------------------------------
(Affix Corporate Seal)
(4/1/94)
- 30 -
<PAGE>
SCHEDULE 1
----------
TO
--
FRANCHISE AGREEMENT
-------------------
BETWEEN BIG O TIRES, INC. AND
-----------------------------
-------------------------------------------
1. The Premises of referred to in Section 2.01 of the Franchise Agreement shall
be:
----------------------------------------------------------------------------
.
----------------------------------------------------------------------------
2. Legal Description of Premises:
---------------------------------------------
.
-------------------------------------------------------------------------------
3. Names(s) and address(es) of holder(s) of record fee title to Premises (the
landlord):
Name:
----------------------------------------------------------------
Address:
-------------------------------------------------------------
-------------------------------------------------------------
Name:
----------------------------------------------------------------
Address:
-------------------------------------------------------------
-------------------------------------------------------------
Name:
----------------------------------------------------------------
Address:
-------------------------------------------------------------
-------------------------------------------------------------
4. Description of Trade Area:
Schedule 1 Franchise Agreement
Page 1
<PAGE>
SCHEDULE 2
----------
OWNERSHIP VERIFICATION
----------------------
1. Name(s) and address(es) of person(s) owning interest in Franchisee and
percentage of said person(s) interest:
Name:
---------------------------------------------------------
Address:
------------------------------------------------------
--------------------------------------------------------------
Name:
---------------------------------------------------------
Address:
------------------------------------------------------
--------------------------------------------------------------
Name:
---------------------------------------------------------
Address:
------------------------------------------------------
--------------------------------------------------------------
STATE OF )
---------------- )
COUNTY OF )
----------------
, being first duly sworn, says that they are
-----------------------------
respectively, the and of
-------------- --------------- -----------------------,
the above-named and execute this instrument for and in its
---------------,
behalf, by authority of its and that they have read the
-----------------------
foregoing Agreement and all Exhibits attached thereto.
------------------------------
----------------
------------------------------
----------------
Subscribed and sworn to before
me this day of
-----------------
, 19 .
-------------------- --
------------------------------
Notary Public
My Commission Expires:
--------
Schedule 2 Franchise Agreement
Page 1
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that
--------------------------------------------
("Franchisee") will perform during the term of the Franchise Agreement each
and every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without
notice to the undersigned (a) resort to the undersigned for payment of any of
the liabilities of the Franchisee to Big O, whether or not Big O or its
successors have resorted to any property securing any of the liabilities or
proceeded against any of the undersigned or any party primarily or secondarily
liable on any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
Schedule 3 Franchise Agreement
Page 1
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
-------------------------------------------
Signature
-------------------------------------------
Date
-------------------------------------------
Printed Name
-------------------------------------------
-------------------------------------------
Home Address
-------------------------------------------
Home Telephone
-------------------------------------------
-------------------------------------------
Business Address
-------------------------------------------
Business Telephone
Schedule 3 Franchise Agreement
Page 2
<PAGE>
SCHEDULE 4
----------
LEASE RIDER AND MODIFICATION
----------------------------
THIS AGREEMENT is made effective by and between
-----------------------
("Landlord"), ("Tenant"), and Big O Tires,
------------------ -------------------
Inc., its affiliates, successors and assigns ("Big O").
WHEREAS, Landlord leases or will lease certain premises to Tenant at
("Premises") under that certain lease
------------------------------------
agreement dated between Landlord and Tenant ("Lease"); and
-------------------
WHEREAS, Tenant will operate a Big O Tire Store at such Premises under a
Franchise Agreement ("Franchise Agreement") between Tenant and Big O; and
WHEREAS, the parties hereto desire to provide Big O with certain rights in
the event of default under the Lease, Franchise Agreement, or other franchise
agreements between Tenant and Big O, if any;
NOW, THEREFORE, in consideration of the sum of One ($1.00) Dollar, in hand
paid by Big O to Landlord and to Tenant, and other good and sufficient
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. No act, failure to act, event, condition, non-payment or other
occurrence ("Event") shall constitute a breach or default under the Lease so as
to allow to Landlord any right of acceleration of obligations thereunder,
termination, cancellation or rescission:
(a) if the Event is the non-payment of rent, unless such Event is not
cured within ten (10) days after Notice of Default (as hereinafter defined)
has been received by Big O;
(b) if the Event is anything other than the non-payment of rent, unless
such Event is not cured within twenty-five (25) days after Notice of
Default (as hereinafter defined) has been received by Big O, provided,
however, if the Event is of such nature that it cannot reasonably be cured
within such twenty-five (25) day period, then, in that case such twenty-five
(25) day period shall be extended to a period of such length as is
reasonably necessary to cure such Event, provided, however, such period
shall be extended only so long as Tenant and/or Big O diligently pursues the
cure of such Event.
2. Landlord agrees to accept from Big O any payment or performance required
under the Lease. Nothing herein shall be construed as requiring Big O to make
any payments or perform any obligation under the Lease.
3. As used herein, Notice of Default means written notice specifying the
Event claimed and specifically describing, in each instance of a claimed Event,
the particular Event and the cure Landlord requires, such Notice of Default to
be mailed to Big O at:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attention: Vice President of Business Development
4. In the event Landlord claims that an Event has occurred, or in the event
Big O notifies Landlord in writing that Big O is exercising a right to take over
possession of the Premises, then, at Big O's option, Landlord shall accept Big O
as substitute tenant under the Lease and will cooperate with Big O in turning
actual, immediate possession of the Premises over to Big O. In such case, the
Lease shall remain in full force and effect, but with Big O as the tenant
thereunder. Big O's option, hereinabove granted, may be exercised only if Big O
agrees to assume the obligations of the Tenant
Schedule 4 to Franchise Agreement
Page 1
<PAGE>
to Landlord under the Lease as of the date Franchisor or its affiliate or
successor is given actual possession of the Premises.
5. Landlord agrees that Big O, or its affiliate or successor may sublet or
assign the Premises to a new Big O Franchisee on the same terms and conditions
as are contained in the Lease.
6. Tenant agrees that if Landlord claims that an Event has occurred, or if
any material breach occurs under any Franchise Agreement between Tenant and Big
O (whether for the Premises or not), then, Big O shall have the right to:
(a) immediate and actual possession of the Premises, and all equipment
and inventory therein, which such possession Tenant agrees to give
peaceably, and which may be otherwise obtained by Big O by warrant,
injunction, temporary restraining order, summary process or such other
immediate legal, summary or equitable proceeding or action as Big O may
choose. Tenant hereby waives any right to a jury in any such proceeding or
action.
(b) become the Tenant under the Lease to the exclusion of the Tenant.
7. Tenant agrees that any default under the Lease shall constitute a
material breach under all Franchise Agreements between Tenant and Big O, or its
affiliates or successors.
8. Tenant and Landlord understand that Big O is entering into or has
entered into a Franchise Agreement with Tenant for a Big O Tire Store at the
Premises in reliance on the agreements of Tenant and Landlord as herein
contained and that Big O, in this instance, would not have otherwise entered
into such Franchise Agreement.
IN WITNESS WHEREOF, the parties hereto have duly execute and delivered this
agreement as of the date first above-listed.
LANDLORD
By:
---------------------------- --------------------------------
Witness
Attest:
---------------------------- ----------------------------
(CORPORATE SEAL)
TENANT
By:
---------------------------- --------------------------------
Unofficial Witness
Attest:
---------------------------- ----------------------------
Notary Public
(CORPORATE SEAL)
BIG O TIRES, INC.
By:
---------------------------- --------------------------------
Unofficial Witness (CORPORATE SEAL)
----------------------------
Notary Public
Schedule 4 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 5
FARM CLASS RIDER
----------------
Franchisee represents that it reasonably anticipates that at least twenty-
five percent (25%) of its Store's Gross Sales on an annual basis will be derived
directly from the sale of Farm Class Tires. In reliance on Franchisee's
representations, and its consideration for Franchisee to become or remain a Big
O franchisee, Big O has offered Franchisee the opportunity to execute this Farm
Class Rider.
1. So long as at least twenty-five percent (25%) of Franchisee's Gross
Sales on an annual basis are derived directly from Farm Class Tires, Big O
agrees to exercise its best efforts to provide Franchisee with access to a
supply of Farm Class Tires. Franchisee acknowledges that production and
distribution problems occasionally cause supplies to be limited, and that so
long as Big O acts in good faith and in a commercially reasonably and lawful
manner to obtain access to Farm Class Tires that it shall be deemed in
compliance with its obligations hereunder.
2. If Big O fails to comply with its obligations pursuant to Section 1 of
this Farm Class Rider and cannot or will not provide Franchisee with access to
Farm Class Tires for sixty (60) days following written notice of such failure
from Franchisee, as its sole and exclusive remedy, Franchisee shall be relieved
of its obligation to pay Big O monthly royalty fees on that portion of its Gross
Sales derived directly from the sale of Farm Class Tires. Any services provided
by Franchisee in connection with the sale of Farm Class Tires, and any other
Products and Services sold by Franchisee in a transaction involving the sale of
Farm Class Tires shall be included in the portion of Franchisee's Gross Sales
upon which monthly royalty fees are payable. Big O may require Franchisee to
provide it with documentation to support any exclusion claimed by Franchisee.
3. Big O may terminate Franchisee's rights under this Farm Class Rider
without in any way affecting Franchisee's obligations under the Franchise
Agreement if the Store's sales of Farm Class Tires during any twelve (12) month
period have been less than twenty-five percent (25%) of its Gross Sales.
IN WITNESS WHEREOF, the parties have set forth their signatures below.
FRANCHISEE:
By:
-----------------------------------
Date:
---------------------------------
Home Address:
-------------------------
--------------------------------------
Home Phone Number:
--------------------
Office Address:
-----------------------
--------------------------------------
Office Phone Number:
------------------
Title:
--------------------------------
Attest:
-------------------------------
Title:
--------------------------------
(Affix Corporate Seal)
Schedule 5 to Franchise Agreement
Page 1
<PAGE>
FRANCHISEE:
By:
-----------------------------------
Date:
---------------------------------
Home Address:
-------------------------
--------------------------------------
Home Phone Number:
--------------------
Office Address:
-----------------------
--------------------------------------
Office Phone Number:
------------------
Title:
--------------------------------
Attest:
-------------------------------
Title:
--------------------------------
(Affix Corporate Seal)
Schedule 5 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 6
RIDER FOR EXISTING FRANCHISEES EXECUTING THE
--------------------------------------------
FRANCHISE AGREEMENT PRIOR TO THE EXPIRATION
-------------------------------------------
OF THEIR PRE-EXISTING FRANCHISE AGREEMENT
-----------------------------------------
Franchisee is the owner of a Store which is the subject of a franchise
agreement which has not yet expired.
Franchisee's execution of the attached Franchise Agreement is subject to the
following:
1. Unless otherwise provided herein, the attached Franchise Agreement shall
expire on the tenth anniversary of the Effective Date of Franchisee's attached
Franchise Agreement, to wit:
-----------------------------------.
2. Prior to the expiration of the Franchisee's present franchise agreement,
to wit , the monthly continuing services fees (or their functional
--------------
equivalent) provided in the present franchise agreement shall continue to be the
only such fees due to Big O. In all other respects the terms of the attached
Franchise Agreement shall be applicable as of the Effective Date of this
Franchise Agreement.
In Witness Whereof, the parties have set forth their signature below.
BIG O TIRES, INC.
By:
---------------------------------
Date:
-------------------------------
Title:
------------------------------
Attest:
-----------------------------
Title:
------------------------------
(Affix Corporate Seal)
FRANCHISEE:
By:
---------------------------------
Date:
-------------------------------
Home Address:
-----------------------
------------------------------------
Home Phone Number:
------------------
Office Address:
---------------------
Office Phone Number:
----------------
Schedule 6 to Franchise Agreement
Page 1
<PAGE>
Title:
------------------------------------
Attest:
-----------------------------------
Title:
------------------------------------
(Affix Corporate Seal)
FRANCHISEE:
By:
---------------------------------------
Date:
-------------------------------------
Home Address:
-----------------------------
------------------------------------------
Home Phone Number:
------------------------
Office Address:
---------------------------
------------------------------------------
Office Phone Number:
----------------------
Title:
------------------------------------
Attest:
-----------------------------------
Title:
------------------------------------
(Affix Corporate Seal)
Schedule 6 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 7
TRADEMARKS
----------
Big O is the sole and exclusive owner of the following trademarks and
service marks:
<TABLE>
<CAPTION>
Trademark, Service Mark, Trade Where Registration
Name or Logotype Registered Number Registration Date
<S> <C> <C> <C>
Sonic Principal 805,575 03/15/66
Sonic Commercial Principal 805,578 03/15/66
Super Sonic Principal 805,574 03/15/66
Ultra Sonic Principal 805,577 03/15/66
Winter Sonic Principal 805,581 03/15/66
Sun Valley Principal 871,318 06/17/69
Sonic & Design Principal 890,380 05/05/70
Sonic Principal 891,936 06/02/70
Maxima Principal 926,329 12/28/71
Golden Sonic Power Principal 962,580 07/03/73
Super S Principal 981,992 04/09/74
Saxon Principal 982,828 04/30/74
Big O Principal 993,415 09/24/74
Big O Principal 994,466 10/01/74
Sonic Vagabond Principal 996,459 10/22/74
Big Ride Principal 1,009,148 04/22/75
Big Steel Principal 1,012,897 06/10/75
Sonic Sahara Principal 1,013,509 06/17/75
Big Trak Principal 1,016,826 07/29/75
Big Haul Principal 1,018,800 08/26/75
Protectors of Safety Saxon and
Design Principal 1,024,138 11/04/75
Design of Human Likeness
"Sebastian Treadmore" Principal 1,044,068 07/20/76
Big Foot 70 Principal 1,102,059 09/12/78
Big Foot 60 Principal 1,102,058 09/12/78
Big Sur Principal 1,219,035 12/07/82
Extra Care and Design Principal 1,417,730 11/18/86
Legacy Principal 1,393,967 05/20/86
Aspen Principal 1,508,041 10/11/88
Exotic Principal 1,511,711 11/08/88
</TABLE>
Schedule 7 to Franchise Agreement
Page 1
<PAGE>
<TABLE>
<S> <C> <C> <C>
Big O Tires and Design Principal 1,559,725 10/10/89
Sun Valley III Principal 1,588,734 03/27/90
Big O Tires and Design Principal 1,611,160 08/28/90
Optima Principal 74/198,278 Pending
Procomp & Design Principal 74/298,320 Pending
Vail Principal 74/310,463 Pending
Arapahoe Principal 74/271,501 Pending
Alpine Principal 74/310,467 Pending
Aztec Principal 74/310,465 Pending
Hydro-Trac Principal 74/357,214 Pending
A Reputation You Can Ride On Principal 74/360,838 Pending
Big Foot Principal 74/389,931 Pending
STATE REGISTRATIONS
Big O Texas 40,967 11/01/82
Big O Texas 40,704 09/02/82
Boss Colorado T28335 04/23/85
Legacy Colorado T29645 10/28/85
Extra Care Colorado T30670 04/22/86
</TABLE>
Schedule 7 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 8
CONVERTOR RIDER
---------------
AMENDMENT TO BIG O
FRANCHISE AGREEMENT
(CONVERSION)
Big O TIRES, INC. ("Big O") and
------------------------------------------
("Franchisee") entered into a certain Big O Franchise Agreement ("Agreement")
on , 19 and desire to supplement and amend certain terms and
---------------- --
conditions of such Agreement in consideration of Franchisee's conversion of a
currently operating tire store to a Big O Store. The parties therefore agree as
follows:
1. The following paragraph is hereby added to 6.03:
Notwithstanding any provision herein to the contrary,
Franchisee's obligation to comply with Big O's standards
and specifications as are set forth in the Manual shall be
phased in for a period of six months from the Commencement
Date of the Agreement in accordance with Schedule A,
----------
attached hereto and by this reference incorporated herein.
Franchisee will be permitted to use Big O's trademarks,
service marks, logos and other identifying symbols or
names, in its signage, advertising and otherwise, in
conjunction with any other previous signage or identifying
symbols or names for sixty (60) days from the Commencement
Date of this Agreement, in a manner which shall be approved
by Big O, which approval shall not be unreasonably
withheld. Upon expiration of such sixty day period,
Franchisee must use Big O's signage exclusively and remove
all other previous signage.
2. Section 6.05 is deleted in its entirety and the following is inserted in
its place:
6.05 Commencement of Business. The Big O Store shall be
------------------------
considered to have commenced operation as of the
Commencement Date of this Agreement. All modifications
required to bring the premises into compliance with the
standards and specifications of Big O must be completed
within six (6) months of the Commencement Date.
3. Section 7.01(a) is hereby deleted in its entirety and the following is
inserted in its place:
(a) Franchisee acknowledges that Big O is under no
obligation to provide site selection assistance and Big O
does not guarantee the success or profitability of the
Franchisee's current site in any manner whatsoever. If
Franchisee leases the Premises upon which the Store is to
be operated, Franchisee agrees to use its best efforts to
negotiate with its landlord for execution of a conditional
lease assignment in a form which is the same as or similar
to the one found on Schedule 4.
4. The following language shall be added to Section 7.01(b):
Big O will provide Franchisee with sample blueprints for
modification of the interior and exterior of Franchisee's
premises, if applicable, but makes no representations or
guarantees regarding the suitability of such blueprints for
required modification of Franchisee's premises.
Schedule 8 to Franchise Agreement
Page 1
<PAGE>
5. Franchisee agrees to convert all other tire stores owned or controlled
by it into Big O Stores, in the manner prescribed in Schedule B, attached hereto
----------
and by this reference incorporated herein.
6. The terms and conditions of this Conversion Amendment are in addition to
or in explanation of the existing terms and conditions of the Agreement and
shall prevail over and supersede any inconsistent terms and conditions thereof.
Effective this day of , 199 .
------- ----------------- --
BIG O TIRES, INC. FRANCHISEE:
------------------------------------
(Print Name)
By: By:
------------------------------ ------------------------------------
Title: Title:
--------------------------- ---------------------------------
Schedule 8 to Franchise Agreement
Page 2
<PAGE>
EXHIBIT 10.62
MULTI-TENANT LEASE--NNN
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This lease ("LEASE"), dated for reference purposes only,
December 1, 1994, is made by and between BOTAC VI LEASING L.L.C., A UTAH LIMITED
LIABILITY COMPANY ("LESSOR") and BIG O DEVELOPMENT, INC., A COLORADO CORPORATION
("LESSEE"), (collectively the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain portion of the Building, consisting of
approximately 18,000 square feet of office space ("Office Space") and
approximately 5,000 square feet of warehouse space ("Warehouse Space") including
all improvements therein, situate on the real property described as: Lot 5,
Lincoln Executive Center, an administrative replat of Lot 5, Filing no. 1,
commonly known by the street address of 11755 East Peakview Avenue, located in
the City of Englewood, County of Arapahoe, State of Colorado, with zip code
80111, as outlined on Exhibit "A" attached hereto ("PREMISES"). The "BUILDING"
is that certain building containing the Premises and generally described as
office/warehouse. In addition to Lessee's rights to use and occupy the Premises
as hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.3 below) "COMMON AREAS" as hereinafter
specified, but shall not have any rights to the roof or exterior walls of the
Building. The Premises, the Building, the Common Areas, the land upon which
they are located, along with all other buildings and improvements thereon, are
herein collectively referred to as the "LEASED PREMISES." (Also see Paragraph
2.)
1.3 PARKING: 51 unreserved parking spaces (UNRESERVED PARKING SPACES");
and 9 reserved vehicle parking spaces ("RESERVED PARKING SPACES"). (Also see
Paragraph 2.2)
1.4 TERM: Three (3) years and Zero (0) months ("ORIGINAL TERM")
commencing APRIL 1, 1995 ("COMMENCEMENT DATE") and ending MARCH 31, 1998
("EXPIRATION DATE").
1.5 BASE RENT: Zero Dollars ($0) per month for the OFFICE SPACE AND $3.00
PER SQUARE FOOT PER YEAR FOR THE WAREHOUSE SPACE ("BASE RENT"), payable on the
first day of each month commencing commencement of extended term. (Also see
Paragraph 4.)
1.6 BASE RENT PAID UPON EXECUTION: Zero Dollars ($0) for the Office Space
and the first month's Base Rent of One Thousand Two Hundred Fifty and NO/100
Dollars ($1,250.00) for the Warehouse Space as Base Rent for the Original Term.
1.7 LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: ("Lessee's Share").
1.8 SECURITY DEPOSIT: $0 ("SECURITY DEPOSIT").
1.9 PERMITTED USE: general office purposes for the OFFICE SPACE AND
WAREHOUSE USES FOR THE WAREHOUSE SPACE ("PERMITTED USE") (Also see Paragraph 5.)
1.10 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see
Paragraph 6.)
1.11 REAL ESTATE BROKERS. Not applicable.
1.12 GUARANTOR. Not applicable.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby Leases to Lessee, and Lessee hereby leases
from Lessor, the Leased Premises, for the term, at the rental, and upon all of
the terms, covenants and condition set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.7).
2.2 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.3
on those portions of the Common Areas designated from time to time by Lessor for
parking.
2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is designed as all
areas and facilities outside the Premises and within the exterior boundary line
of the Leased Premises that are provided and designated by the Lessor from time
to time for the general non-exclusive use of Lessor, Lessee and other lessees of
the Leased Premises and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, access to the
Premises, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways and landscaped areas.
2.4 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for
the benefit of the Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, privileges reserved by
Lessor under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Leased Premises.
2.5 COMMON AREAS - RULES AND REGULATIONS. Subject to the provisions of
this Lease, Lessor or such other person(s) as Lessor may appoint and shall have
the exclusive control and management of the Common Areas and shall have the
right, from time to time, to establish, modify, amend and enforce reasonable
Rules and Regulations with respect thereto in accordance with Paragraph 29.
Lessee agrees to abide by and conform to all such Rules and Regulations, and to
cause its employees, suppliers, shippers, customers, contractors
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and invitees to so abide and conform. Lessor shall not be responsible to Lessee
for the non-compliance with said rules and regulations by other lessees of the
Leased Premises.
3. TERM. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.4.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to the Lessor at its address stated
herein or to such other persons or at such other addresses as Lessor may from
time to time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.7) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of this
Lease, are all costs incurred by Lessor relating to the ownership and operation
of the Leased Premises, including, but not limited to, the following:
i. The operation, repair and maintenance, in neat, clean, good
order and condition, of the following:
1. The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
2. Fire detection and sprinkler systems.
ii. Trash disposal and property management.
iii. Maintenance of Common Areas.
iv. Base Real Property Taxes and any increases in such taxes (as
defined in Paragraph 8.2(b) for the Building and the Common Areas.
v. Insurance Costs (as defined in Paragraph 6.1).
vi. The cost of insurance carried by Lessor with respect to the
Common Areas.
vii. Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area Operating Expense.
(b) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by lessor from time to time of Lessee's Share of Annual
Common Area Operating Expenses and the same shall be payable quarterly, during
each 12-month period of the Lease term, on the same day as the Base Rent is due
hereunder. Lessor shall deliver to Lessee within sixty (60) days after the
expiration of each calendar year a reasonably detailed statement showing
Lessee's Share of the Actual Common Area Operating Expenses incurred during the
preceding year. If Lessee's payments under this Paragraph 4.2(b) during said
preceding year exceed Lessee's Share as indicated on said statement, Lessor
shall credit the amount of such overpayment against Lessee's Share of Common
Area Operating Expenses next becoming due. If Lessee's payments under this
Paragraph 4.2(b) during said preceding year were less than Lessee's Share as
indicated on said statement, Lessee shall pay to Lessor the amount of the
deficiency within ten (10) days after delivery by Lessor to Lessee of said
statement.
(c) Since Lessee is leasing most of the Office Space and a small
portion of the Warehouse Space in the Leased Premises and most of the remaining
space in the Leased Premises is for warehouse use, Lessor and Lessee will have
to allocate the Common Area Operating Expenses, by mutual agreement between them
and the other lessee(s), so as to fairly allocate such expenses, based on the
unique uses of each lessee. In the event the parties fail to reach a mutual
agreement as to the allocation of the Common Area Operating Expenses, or to re-
allocate them due to changes in circumstances in any Lessee's use of the Leased
Premises, the parties will resolve such disputes under the procedures of the
American Arbitration Association.
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5. USE.
5.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.9, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the permissible pursuant to this Paragraph 5. If
Lessor elects to withhold such consent, Lessor shall within five (5) business
days after such request give a written notification of same, which notice shall
include an explanation of Lessor's reasonable objections to the change in use.
5.2 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 5.3 (Lessor's
Obligations), 7 (Damage or Destruction), and 12 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair, including, without limiting
the generality of the foregoing, all equipment or facilities specifically
serving the Premises, such as plumbing, heating, air conditioning, ventilating,
electrical, lighting facilities, boilers, fired or unfired pressure vessels,
fire hose connections if within the Premises, fixtures, interior walls, interior
surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and
skylights, but excluding any items which are the responsibility of Lessor
pursuant to Paragraph 5.3 below. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform good maintenance practices.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 5.2, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair.
5.3 LESSOR'S OBLIGATIONS. Subject to the provisions of 4.2 (Common Area
Operating Expenses), 5 (Use), 5.2 (Lessee's Obligations), 7 (Damage or
Destruction) and 12 (Condemnation), Lessor shall keep in good order, condition
and repair the foundations, exterior walls, structural condition of interior
bearing walls, exterior roof, fire sprinkler and/or standpipe and hose (if
located in the Common Areas) or other automatic fire extinguishing system
including fire alarm and/or smoke detection systems and equipment, fire
hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parte thereof, as
well as providing the services for which there is a Common Area Operating
Expense pursuant to Paragraph 4.2.
5.4 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility Installations" is
used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's furniture and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not owned by
Lessor. Lessee shall not make nor cause to be made any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior written
consent. Lessee may, however, make non-structural Utility Installations to the
interior of the Premises (including the roof) without Lessor's consent but upon
notice to Lessor, so long as they are not visible from the outside of the
Premises, do not involve puncturing, relocating or removing the roof or any
existing walls, or changing or interfering with the fire sprinkler or fire
detection systems.
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(b) CONSENT. Any alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities; (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon; and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and be in compliance with all
Applicable Requirements. Lessee shall promptly upon completion thereof furnish
Lessor with as-built plans and specifications therefor.
(c) LIEN PROTECTION. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises.
5.5 OWNERSHIP, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. All Alterations and Utility Installations made to the
Premises by Lessee shall be the property of and owned by Lessee, but considered
a part of the Premises.
(b) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation to
repair and restore the Premises per this Lease.
6. INSURANCE; INDEMNITY.
6.1 PAYMENT OF PREMIUMS.
(a) As used herein, the "Insurance Costs" is defined as the actual
cost of the insurance applicable to the Building and required to be carried by
Lessor pursuant to Paragraphs 6.2(b), 6.3(a) and 6.3(b), ("Required
Insurance"), as hereinafter defined, calculated on an annual basis. "Insurance
Costs" shall include, but not be limited to, requirements of the holder of a
mortgage or deed of trust covering the Premises, increased valuation of the
Premises, and/or a general premium rate increase. The "Base Premium" shall be
the lowest annual premium reasonably obtainable for the Required Insurance as of
the Commencement Date. In no event, however, shall Lessee be responsible for
any portion of the premium cost attributable to liability insurance coverage in
excess of $2,000,000 procured under Paragraph 6.2(b).
(b) Lessee shall pay any Insurance Costs to Lessor pursuant to
Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement Date or Expiration Date.
6.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence. The
policy shall not contain any intra-insured exclusions as between insured persons
or organizations, but shall include coverage for liability assumed under this
Lease as an "insured contract" for the performance of Lessee's indemnify
obligations under this Lease.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability insurance
described in Paragraph 6.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee.
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6.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof of, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 6.4. Lessor's policy or policies
shall insure against all risks of direct physical loss or damage (except the
perils of flood and/or earthquake unless required by a Lender or included in the
Base Premium), including coverage for any additional costs resulting from debris
removal and reasonable amounts of coverage for the enforcement of any ordinance
or law regulating the reconstruction or replacement of any undamaged sections of
the Building required to be demolished or removed by reason of the enforcement
of any building, zoning, safety or land use laws as the result of a covered
loss, but not including plate glass insurance. Said policy or policies shall
also contain an agreed valuation provision in lieu of any co-insurance clause,
waiver of subrogation, and inflation guard protection causing an increase in the
annual property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers
for the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force during the
term of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor and any Lender(s), insuring the loss of the full rental and other
charges payable by all lessees of the Building to Lessor for one year (including
all Real Property Taxes, insurance costs, all Common Area Operating Expenses and
any scheduled rental increases). Said insurance may provide that in the vent
the Lease is terminated by reason of an insured loss, the period of indemnify
for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income, Real
Property Taxes, insurance premium costs and other expenses, if any, otherwise
payable, for the next 12-month period.
(c) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
6.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of Paragraph
6.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 6.3(a). The proceeds
from any such insurance shall be used by Lessee for the replacement of personal
property and the restoration of Trade Fixtures and Lessee-Owned Alterations and
Utility Installations. Upon request from Lessor, Lessee shall provide Lessor
with written evidence that such insurance is in force.
6.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall cause
to be delivered to Lessor, within seven (7) days after the earlier of the Early
Possession Date or the Commencement Date, certified copies of, or certificates
evidencing the existence and amounts of, the insurance required under Paragrah
6.2(a) and 6.4. No such policy shall be cancelable or subject to modification
except after thirty (30) days' prior written notice to Lessor. Lessee shall at
least thirty (30) days prior to the expiration of such policies, furnish Lessor
with evidence of renewals or "insurance binders" evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee to Lessor upon demand.
6.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 6. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
6.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect ,of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under the
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims
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made against Lessor) litigated and/or reduced to judgment. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing matters,
Lessee upon notice from Lessor shall defend the same at Lessee's expense by
counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee
in such defense. Lessor need not have first paid any such claim in order to be
so indemnified.
7. DAMAGE OR DESTRUCTION.
7.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage, or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent(50%) or of
the then Replacement Cost (as defined in Paragraph 7.1(d) of the Premises
(excluding Lessee-owned alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50 %) or more of
the then Replacement Cost of the Premises (excluding Lessee-Owned Alterations
and Utility Installations and Trade Fixtures) immediately prior to such damage
or destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee owned
alterations and utility installments and trade fixtures of any Lessees of the
building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 6.3 (a)irrespective of any deductible amounts or coverage
limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
7.2 PARTIAL DAMAGE-INSURED LOSS. If Premises Partial Damage that is an Insured
Loss occurs, then Lessor shall,at Lessor's expense, repair such damage (but not
Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility Installations)
as soon as reasonably possible and this shall continue in full force and effect.
If Lessor receives said funds or adequate assurance thereof within said ten
(10) day period, Lessor shall complete them as soon as reasonably possible and
this Lease shall remain in full force and effect. If Lessor does not receive
such funds or assurance within said period, Lessor may nevertheless elect by
written notice to lessee within ten (10) days thereafter to make such
restoration and repaid as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect. If Lessor does not receive such funds or assurance within such ten (10)
day period, and if Lessor does not so elect to restore and repair, then this
Lease shall terminate sixty (60) days following the occurrence of the damage or
destruction.
7.3 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if Premises
Total Destruction occurs (including any destruction required by any authorized
public authority), this Lease shall terminate sixty (60) days following the date
of such Premises Total Destruction, whether or not the damage or destruction is
an Insured Loss or was caused by a negligent or willful act of Lessee.
7.4 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Destruction, the base Rent
and the Common Area Operating Expenses and other charges, if any, payable by
Lessee hereunder for the period during which such damage or condition, its
repair, remediation or restoration continues, shall be abated in proportion to
the degree to which Lessee's use of the Premises is impaired.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 7 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the of
such notice. If Lessee gives such notice to Lessor and such Lenders and such
repair or restoration is not commenced within thirty (30) days after receipt of
such notice, this Lease shall terminate as of the date specified in said notice.
If Lessor or a Lender commences the repair or restoration of the Premises within
thirty (30) days after the receipt of such notice, this Lease shall continue in
full force and effect. "Commence" as used in this Paragraph 7.4 shall mean
either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the premises , whichever occurs
first.
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7.5 TERMINATION. Upon termination of this Lease pursuant to this
Paragraph 7, Lessor shall return to Lessee any advance payment made by Lessee to
Lessor and so much of Lessee's Security Deposit as has not been, or is not then
required to be, used by Lessor under the terms of this Lease.
8. REAL PROPERTY TAXES.
8.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 8.2(a), applicable to the Leased Premises, and except as
otherwise provided in Paragraph 8.3, the Base Real property Taxes and any
increases in such taxes shall be included in the calculation of Common Area
Operating Expenses in accordance with the provisions of Paragraph 4.2.
8.2 REAL PROPERTY TAX DEFINITIONS.
(a) As used herein, the term Real Property Taxes, shall include
any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement bond or
bonds, levy or tax (other than inheritance, personal income or estate taxes)
imposed upon the Leased Premises by any authority having the direct or indirect
power to tax, including any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage, or other improvement district
thereof, levied against any legal or equitable interest of Lessor in the Leased
Premises or any portion thereof, Lessor's right to rent or other income
therefrom, and/or Lessor's business of leasing the premises. The term 'Real
Property Taxes' shall also include any tax, fee, levy, assessment or charge, or
any increase therein, imposed by reason of events occurring, or changes in
Applicable law taking effect, during the term of this Lease, including but not
limited to a change in the ownership of the Leased Premises or in the
improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.
(b) As used herein, the term 'Base Real Property Taxes" shall be
the amount of Real Property Taxes, which are assessed against the Premises,
Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
8.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Leased
Premises by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 8.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
8.4 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Leased Premises. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
9. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by mutual agreement of Lessor and Lessee of all such
charges jointly metered or billed with other premises in the Building, in the
manner and within the time periods set forth in Paragraph 4.2(b).
10. ASSIGNMENT AND SUBLETTING.
10.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent, which consent shall not be unreasonably
withheld.
(b) and assignment or subletting of Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 11.1.
(c) Regardless of Lessor's consent, any assignment or
subletting shall not (i) be effective without the express written assumption by
assignee or sublessee of the obligations of the Lessee under this Lease, (ii)
release the Lessee of any obligations hereunder
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nor (iii) alter the primary liability of Lessee for the payment of Base Rent and
other sums due Lessor hereunder or for the performance of any other obligations
to be performed by Lessee under this Lease.
(d) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee.
11. DEFAULT; BREACH.
11.1 A "DEFAULT" by Lessee is defined as a failure by Lessee to observe,
comply with or perform any of the terms, covenants, conditions or rules
applicable to Lessee under this Lease. A "BREACH" by Lessee is defined as the
occurrence of any one or more of the following Defaults, and, where a grace
period for cure after notice is specified herein, the failure by Lessee to cure
such Default prior to the expiration of the applicable grace period, and shall
entitle Lessor to pursue the remedies set forth in Paragraphs 11.2 and/or 11.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Lessee's Base Rent and/or Lessee's
Share of Common Area Operating Expenses, or any other monetary payment required
to be made by Lessee hereunder, within ten (10) days after the due date.
(c) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 29 hereof that
are to be observed, complied with or performed by Lessee, where such Default
continues for a period of thirty (30) days after written notice hereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty(30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(d) The occurrence of any of the following events: (i) the making
by Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute (unless, in the case of a petition filed against Lessee, the
same is dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days; provided, however, in the event that any
provision of this Subparagraph 11.1(d) is contrary to any applicable law, such
provision shall be of no force or effect, and shall not affect the validity of
the remaining provisions.
11.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. In the event of a Breach of this Lease
by Lessee (as defined in Paragraph 11.1), with or without further notice or
demand, and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment approximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises,reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive, Lessor's right to recover damages under the
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraph
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13.l(b), (c) or (d) was not previously given, a notice to pay rent or quit, or
to perform or quit, as the case may be, given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shar also constitute
the applicable notice for grace period purposes required by Subparagraph
13.l(b), (c) or (d). In such case, the applicable grace period under the
unlawful detainer statue shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two (2) such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect
after Lessee's Breach and recover the rent as it becomes due, provided Lessee
has the right to sublet or assign, subject only to reasonable prorations.
Lessor and Lessee agree that the prorations on assignment and subletting in the
Lease are reasonable. Acts of maintenance or preservation, efforts to relet the
Premises, or the appo of a receiver to protect the Lessor's interest under this
Leme, shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafer available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or on of this Lease and/or the termination of
Lessee's right to possession shallnot relieve Lessee from liabilty under any
indemnity provisions of this Lease as to matters occurring or accruing during
the temm hereof or by reason of Lessee's occupancy of the Premises.
11.3 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 11.3, a
reasonable time shall in no event be less than thirty(30) days after receipt by
Lessor, and by any Lender(s) whose name and address shau have been fitmished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if
thenature of Lessor's obligation is such that more than thirty (30) days after
such notice, are reasonably required for its performance, then Lessor shall not
be in breach of this Lease if performance is commenced within such thirty (30)
day period and thereafter diligently pursued to completion.
12. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation'), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25 %) of the portion of
the Commmon Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten(10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority shau
have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in fuU force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in same proportion as therentable floor area of the Premises taken bears
to,the total rentable floor area of the Premises. No reduction of Base Rent
shall if the condemnation does not apply to any portion of thePremises. Any
award or taking of all or any part of the Premises under the power of eminent
domin or any payment made under threat of the exercise of such power shall be
the property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
compensation, separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent of its net
severance damages received over and above Lessee's Share of the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to
Premises caused by such condemnation authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
13. SEVERABILITY. The invalidity of any provision o this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision herof.
14. INTEREST ON PAST DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus two percent (2%) per annum, but not exceeding the
maximum rate allowed by law.
15. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
16. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
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17. NO PRIOR OR OTHER AGREEMENTS. This Lease contains all agreements between
the Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.
18. NOTICES.
18.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by and or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 18. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Lessee's
possession of the Premises, the Premises shall constitute Lessee's address for
the purpose of Mailing or delivering notices to Lessee. A copy of all notices
required or to be given to Lessor hereunder shall be concurrently transmitted to
such party or parties at such addresses as Lessor may from time to time
hereafter designate by written notice to Lessee.
18.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail, the notice shall be deemed given three (3) days after the
same is addressed as required herein and mailed with postage prepaid. Notices
delivered by United States Express Mail or overnight courier that guarantees
next day delivery shall be deemed given twenty-four (24) hours after delivery of
the same to the United States Postal Service or Courier. If any notice is
transmitted by facsimile transmission or similar means, the same shall be deemed
served or delivered upon telephone or facsimile confirmation of receipt of the
transmission thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Saturday or a Sunday or a legal holiday, it shall be
deemed received on the next business day.
19. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term,covenantor condition hereof. Lessor's consent to,
or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of estoppel to enforce the provision of
this Lease such consent. Regardless of Lessor's knowledge of a Default or Breach
at the time of accepting rent, the acceptance of rent by Lessor shall not be a
waiver of any Default or Breach by Lessee of any provision hereof. Any payment
given Lessor may be accepted by Lessor on account of moneys or damages due
Lessor, notwithstanding anything statements or conditions made by Lessee in
connection therewith, such statements and/or conditions shall be of no force or
effect whatsoever unless specifically agreed to in writing by Lessor at or
before the time of deposit of such payment.
20. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
21. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
22. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
23. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representative, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
24. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
24.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to paragraph 11.3. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and/or any such Options shall be
deemed prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
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24.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
24.3. Lessee agrees to attorn to a Lender or any other party who acquires
ownership to the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
24.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
24.4 SELF-EXECUTING. The agreements contained in this Paragraph 24 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attormment and/or non-disturbance agreement
as is provided for herein.
25. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder,the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 25.
26. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and such alterations, repairs,
improvements or additions to the Premises or to the Building, as Lessor may
reasonably deem necessary. Lessor may at any time place on, about the Premises
or Building any ordinary "For Sale" signs and Lessor may at any time during the
last one hundred eighty (180) days of the term hereof place on or about the
Premises any ordinary "For Lease" signs. All such activities of Lessor shall be
without abatement of rent or liability to Lessee.
27. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
28. OPTIONS.
28.1 OPTIONS. Lessee shall have the Options to extend the term of this
lease for two (2) additional three (3) year terms, at a Base Rent determined by
the Parties to be at market at the time of each extension.
28.2 DEFINITION. As used in this Lease, the word "Option" are the rights
to extend the term of this Lease or to renew this Lease for additional terms
beyond the Original Term.
28.3 MULTIPLE OPTIONS. In the event Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be, exercised unless the prior
Options to extend or renew this Lease have been validly exercised.
28.4 EFFECT OF DEFAULT ON OPTIONS. Lessee shall have no right to exercise
an Option, notwithstanding any provision in the grant of Option to the contrary:
(i) during the period commencing with the giving of any notice of Default under
Paragraph 11.1 and continuing until the notice of default is cured, or (ii)
during the period of time any monetary obligation due Lessor from Lessee is
unpaid (without regard to whether notice thereof is given Lessee).
29. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Leased Premises and their invitees.
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30. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
31. CONFLICT. Any conflict between the printed Provisions of this Lease and the
typewritten or handwritten'provisions shall be controlled by the typewritten or
handwritten provisions.
32. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. Parties shall amend this
Lease from time to time to reflect any adjustments that are made to the Base
Rent or other rent payable under this Lease. As long as they do not materially
change Lessee's obligations hereunder, Lessee agrees to make such reasonable
non-monetary modifications to this Lease as may be reasonably required by an
institutional Insurance company or pension plan Lender in connection with the
obtaining of normal financing or refinancing of the property of which the
Premises are a part.
33. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
34. ADDITIONAL OFFICE IMPROVEMENTS. As an inducement to Lessor to lease to
Lessee the Office Space for three (3) years for no Base,Rent,Lessee is
depositing in escrow, concurrently with the execution of the Lease, Eighty
Thousand and N0/100 Dollars ($80,000.00),to be expended by Lessee for the
construction of additional office space in a portion of the remaining warehouse,
space of the Leased Premises for another lessee. Lessee will issue for the
construction the additional office space pursuant to plans and specifications
approved by the other lessee and Lessor and will pay up to $80,000 in costs for
such construction. In the event Lessee does not incur the total $80,000
construction of this additional office space, the balance will be paid over to
Lessor and shall be deemed payment of Base Rent on the Office Space for the
Original Term. In the event Lessee is required to expend more than $80,000 for
the additional office space, such additional expenditures will be deemed Base
Rent on the office Space and the Original Term will be extended for the period
of terms permitted by additional Base Rent at $6.00 per square foot per year.
35. DIESEL GENERATOR. Big O Development, Inc. shall have the right to continue
to operate the diesel generator located on the east side of the building at Big
O Development Inc.'s sole cost and expense for the term of this lease and any
options that are exercised.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH AND EVERY
TERM AND PROVISION CONTAINED HEREIN,AND BY THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT
THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCLALLY
RFASONABLY AND EFFECTUATE, THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
The parties hereto have executed this Lease at the place and on the dates
specified above thier respective signatures.
Executed at: 400 North 700 West
North Salt Lake City, Utah 84054
on: December 7, 1994
By: LESSOR:
BOTAC VI LEASING, L.L.C.
/s/ R. JOHN WALKER
By: ________________________________
Print Name: R. John Walker,
Title: Member of L.L.C.
/s/ BRENT C. BEUTLER
By: ________________________________
Print Name: BRENT C. BEUTLER
Title: Member of L.L.C.
Address: 400 North 700 West
North Salt Lake City, Utah 84054
Telephone: 801 292-1466
Facsimile: 801 298-4967
Executed at: 11755 East Peakview Avenue
Englewood, Colorado 80111
on: December 6, 1994
By: LESSOR:
BIG O DEVELOPMENT, INC.
/s/ JOHN B. ADAMS
By: __________________________
John B. Adams
Vice President
Address: 11755 East Peakview Avenue
Englewood, Colorado 80111
Telephone: (303) 790-2800
Facsimile: (303) 790-0225
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EXHIBIT A
[Rendition of Corporate offices
space appears here]
[Site Plan Sketch.]
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EXHIBIT 10.63
Recording Requested By
and When Recorded Mail to:
GORSUCH KIRGIS, L.L.C.
1401 Seventeenth Street, #1100
P.O. Box 17180
Denver, Co 80217
Attn: Connie B. Hyde
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is entered into as of
this 2nd day of December, 1994 by BIG 0 DEVELOPMENT, INC., a Colorado
corporation ("Development"), BIG 0 TIRES, INC., a Nevada corporation ("CoMaker")
(Development and CoMaker collectively called "Assignor") and BOTAC VI LEASING,
L.L.C., a Utah limited liability company ("Assignee"), and ALLSTATE LIFE
INSURANCE COMPANY, an Illinois insurance corporation ("Lender"), with reference
to the following facts.
RECITALS
Whereas, Assignor and Lender entered into a loan in the original principal
amount of $2,860,000.00 ("Loan") evidenced by that certain Deed of Trust Note
dated January 18, 1990, made by Assignor in favor of Lender, in the amount of
the Loan ("Note"); and
Whereas, the Note is secured by: (I) Deed of Trust, Assignment of Leases,
Rents and Contracts, Security Agreement and Fixture Filing, dated January 18,
1990, from Development to the Public Trustee of the County of Arapahoe, as
trustee, for the benefit of Lender, recorded in the records of the Clerk and
Recorder of Arapahoe County, Colorado ("Official Records") on January 18, 1990,
in Book 5855, at Page 76, as Reception No. 9000005741 ("Deed of Trust',); (ii)
Assignment of Leases, Rents, Profits and Contracts, dated January 18, 1990 from
Development to Lender, recorded in the Official Records on January 18, 1990, in
Book 5855, at Page 123, as Reception No. 9000005742 ("Assignment,,); (iii) UCC-1
Financing Statements recorded in the UCC Records of the Official Records on
January 18, 1990, as file number C320563 and with the Colorado Secretary of
State on January 24, 1990 as file number 902006607 (collectively, "Financing
Statements,,); and (iv) any other assignments, agreements and documents executed
by Assignor in connection with the Loan defined in the Deed of Trust as
("Related Agreements"); the foregoing security instruments shall be collectively
referred to as the "Loan Documents"; and
<PAGE>
Whereas, the Deed of Trust encumbers certain real property lying and
situated in Arapahoe County, Colorado, and more particularly described in
Exhibit A attached hereto and incorporated herein by reference ("Property") ;
and
Whereas, Assignor and Assignee have entered into an agreement whereby
Development shall transfer to Assignee all of Development's right, title and
interest in and to the Property, the improvements and fixtures located thereon,
the leases relating to the Property and all personal property encumbered by the
Financing Statements; and
Whereas, Assignor and Assignee have requested Lender's consent to the sale
and transfer of the Property, the improvements and fixtures located thereon, the
leases and the personal property and to the assumption by Assignee of Assignor's
obligations under the Note and Loan Documents and Lender is willing to consent
to said transfer of title and assumption of said indebtedness in accordance with
the terms and conditions of this Agreement; and
Whereas, Assignor and Assignee acknowledge that the execution of this
Agreement shall confer a real and substantial benefit upon each of them.
NOW, THEREFORE, in consideration of the foregoing facts and the covenants
contained herein and other consideration, the receipt and sufficiency of which
is hereby acknowledged, Assignor and Assignee hereby agree as follows:
1.Recitals. The foregoing recitals are true and correct and incorporated by
reference herein. Unless otherwise defined herein, capitalized terms shall have
the meaning and definition set forth in the Note and the Loan Documents.
2 . Assumption of the Loan. Assignee unconditionally assumes all the duties,
obligations and liabilities of Assignor under the Note and the Loan Documents.
In connection therewith, without limiting the generality of the foregoing,
Assignee agrees to pay the Note at the time, in the manner and in all other
respects as therein provided, to perform all of the duties, covenants and
obligations provided in the Note and the Loan Documents to be performed by
Assignor thereunder at the time, in the manner, and in all other respects as
therein provided, and to be bound by all the terms and to the same extent as
originally made, executed and delivered to Lender by Assignee. Accordingly, the
Note and Loan Documents shall include Assignee as an obligee thereunder,
including without limitation, the inclusion of Assignee (i) as "Maker" under the
Note, and (ii) as "Grantor" under the Deed of Trust, and (iii) "Assignor" under
the Assignment.
2
<PAGE>
3.Release of Assignor. Lender hereby releases Assignor from liability under the
Note, the Loan Documents and the Related Agreements (as defined in the Deed of
Trust) for matters occurring after the effective date of this Agreement.
Notwithstanding the foregoing, (a) neither Assignor, nor the other indemnitors
under the Environmental Indemnity Agreement shall be released of their
liabilities under the Environmental Indemnity Agreement by this agreement; (b)
Assignor agrees that its liability to Lender for acts or omissions arising out
of its duties and obligations under the Note, the Loan Documents and the Related
Agreements shall not be impaired, prejudiced or affected in any way whatsoever
for matters arising or occurring prior to the effective date of this Agreement,
whether known or unknown at this time; and (C) Assignor's liability under the
Guarantee Agreement (hereinafter defined) shall be a continuing obligation of
Assignor and shall not be impaired by foregoing release.
4.Acknowledgment of Debt. Assignor and Assignee acknowledge by their
execution hereof that the indebtedness evidenced by the Note is unconditionally
due and owing to Lender as provided in the Note and that as of the date hereof
Assignor and Assignee have no actions, defenses, demands and/or claims of set-
off or deduction whatsoever, against: (i) Lender; (ii) the indebtedness
evidenced by the Note; or (iii) the Loan Documents. Furthermore, Assignor and
Assignee acknowledge that, as of the date hereof, Lender has in no way defaulted
or performed any act or omission under the Note or the Loan Documents or any
other agreements between or among Assignor, Assignee and Lender, which would or
could give rise to any action(s), cause(s) of action, suits, debts, sums of
money damages, claims, costs, expenses and/or demands whatsoever, in law or in
equity or otherwise, by Assignor or Assignee against Lender.
5. Ratification of Prior Acts. Except as herein specifically modified hereby,
the terms, covenants and conditions of the Note and the Loan Documents shall
remain in full force and effect without any further modifications.
6.Termination of Side Letter Agreement. Lender, Assignor and Assignee agree
that all provisions set forth in that certain Agreement Regarding Rights to
Transfer Property dated January 18, 1990, between Development and Lender
granting Assignor a one-time right to transfer the Property and additional
rights personal to Development set forth in that certain Agreement Regarding
Waiver of Escrows dated January 18, 1990, between Development and Lender waiving
tax and insurance deposits (collectively called-the "Side Letter Agreement") are
hereby terminated and of no further force or effect as of the date hereof.
7. No Waiver of Future Consent. This consent to transfer shall not be a
waiver of the right of Lender to require
3
<PAGE>
such consent to future or successive transfers, Lender reserving all such rights
in the Note and the Loan Documents.
8.Further Documentation. Assignee agrees to execute, contemporaneously
herewith, in favor of Lender, an Environmental Indemnity Agreement in form and
content acceptable to Lender ("Assignee's Environmental Indemnity"), as well as
any and all other documents reasonably required by Lender to retain its
perfected security interest in the Property. Assignee hereby covenants that it
will, at any time, upon written request therefore, execute and deliver to Lender
any new or confirmatory instruments which Lender may request in order to
evidence Assignee's assumption of the Note and the Loan Documents. Assignor
agrees to execute, contemporaneously herewith, and deliver to Lender, a
Guarantee Agreement, guaranteeing payment of the Note, in form and content
acceptable to Lender (the "Guarantee Agreement").
9.Costs. Assignor and Assignee shall pay all costs of the assignment and
assumption made pursuant hereto, including without limitation, attorneys, fees
and costs, recording fees, Lender's administrative fees and the cost of an
endorsement to Lender's mortgagee's title policy. In the event it is determined
that additional costs relating to this transaction are due, Assignor and
Assignee agree to pay such costs immediately upon demand. Furthermore, in the
event that Lender resorts to litigation to enforce this Agreement, all costs of
such trials, appeals and proceedings, including, without limitation any
proceedings pursuant to the bankruptcy laws of the United States, shall be paid
by Assignor and Assignee. The liability of Assignor and Assignee shall be joint
and several with respect to this provision.
10.Consent of Any Subordinate Lienholder. Assignor and Assignee hereby
represent to Lender: (I) that the lien of the Deed of Trust held by Lender is a
valid, first and subsisting lien on the Property; (ii) that as of the date
hereof there is no subordinate lien or encumbrance now outstanding against the
Property which has not been approved by Lender in writing.
11.Notices. Section 4.16 of the Deed of Trust is hereby deleted in its entirety
and the following IS substituted therefor:
A. All notices expressly provided hereunder to be given by Beneficiary to
Grantor and all notices, demands and other communications of any kind or nature
whatever which Grantor may be required or may desire to give to or serve on
Beneficiary shall be in writing and shall be (1) hand-delivered, effective upon
receipt, (2) sent by United States Express Mail or by private
4
<PAGE>
overnight courier, effective upon receipt, or (3) served by certified mail, to
the appropriate address set forth below, or at such other place as the Grantor,
Beneficiary or Trustee, as the case may be, may from time to time designate in
writing by ten (10) days prior written notice thereof. Any such notice or
demand served by certified mail, return receipt requested, shall be deposited in
the United States mail, with postage thereon fully prepaid and addressed to the
party so to be served at its address above stated or at such other address of
which said party shall have theretofore notified in writing, as provided above,
the party giving such notice. Service of any such notice or demand so made
shall be deemed effective on the day of actual delivery as shown by the
addressee's return receipt or the expiration of three (3) business days after
the date of mailing, whichever is the earlier in time. Any notice required to
be given by Beneficiary shall be equally effective if given by Beneficiary's
agent, if any.
B. Grantor hereby requests that any notice, demand, request or other
communication (including any notice of an Event of Default and notice of sale as
may be required by law) desired to be given or required pursuant to the terms
hereof be addressed to Grantor as follows:
Botac VI Leasing, L.L.C.
400 North 700 West
Post Office Box S40230
North Salt Lake, UT 84054
All notices and other communications to Beneficiary shall be addressed as
follows:
Allstate Life Insurance Company
Allstate Plaza West M2C
3100 Sanders Road
Northbrook, IL 60062
Attention: Commercial Mortgage Loan
Servicing Manager
5
<PAGE>
With a copy to:
Allstate Insurance Company
Financial Law Division
Allstate Plaza West M2A
3100 Sanders Road
Northbrook, IL 60062
The Note and the Loan Documents are hereby modified such that the foregoing
address shall be deemed to be the address for all notices required to be given
to Borrower pursuant to the Note and the Loan Documents.
12.Severability. If any one or more of the provisions of this Agreement
shall be held invalid or unenforceable, the validity and enforceability of all
other provisions of this Agreement shall not be affected.
13. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their heirs, personal representatives,
successors and assigns.
14.Captions. The captions and headings in this Agreement are for
convenience only and are not to be used to interpret, define or limit the
provisions hereof.
15.Multiple Counterparts. This agreement may be executed in multiple
counterparts each of which shall be an original part, but all of which shall
constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
hereinabove set forth.
"Assignor"
BIG O DEVELOPMENT, INC., a
Colorado corporation
ATTEST:
By: /s/ Susan D. Hendee By: /s/ John B. Adams
----------------------- -----------------------
Its: Asst. Secretary Its: V. P.
---------------------- ----------------------
6
<PAGE>
BIG O TIRES, INC.,
a Nevada corporation
ATTEST:
By: /s/ Susan D. Hendee By: /s/ John B. Adams
---------------------------- ----------------------------
Its: Asst. Secretary Its: Ex. V.P.
--------------------------- ---------------------------
"Assignee"
BOTAC VI LEASING, L.L.C.,
a Utah limited liability company
By: /s/ Hal Morrell
----------------------------
Its: Manager
---------------------------
"Lender"
ALLSTATE LIFE INSURANCE COMPANY,
an Illinois Insurance Corporation
By: /s/ Richard Student
----------------------------
By: /s/ William F. Wein, Jr.
----------------------------
Its Authorized Signatories
7
<PAGE>
STATE OF COLORADO)
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this., 6th day of
December, 1994, by John B. Adams and Susan D. Hendee, Vice President and
Assistant Secretary of Big 0 Development, Inc., a Colorado corporation.
Witness my hand and seal.
My commission expires: 1/26/98
-------------------------------------.
[SEAL APPEARS HERE] /s/ Cindy L. Schutz
-------------------------------------
Notary Public
STATE OF COLORADO)
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this, 6th day of
December, 1994, by John B. Adams and Susan D. Hendee, Vice President and
Assistant Secretary of Big 0 Tires, Inc., a Nevada corporation.
Witness my hand and seal.
My commission expires: 1/26/98
-------------------------------------.
[SEAL APPEARS HERE] /s/ Cindy L. Schutz
-------------------------------------
Notary Public
STATE OF COLORADO)
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this, 6th day of
December, 1994, by John B. Adams and Susan D. Hendee, Vice President and
Assistant Secretary of Big 0 Tires, Inc., a Nevada corporation.
Witness my hand and seal.
My commission expires: 1/26/98
-------------------------------------.
[SEAL APPEARS HERE] /s/ Cindy L. Schutz
-------------------------------------
Notary Public
8
<PAGE>
STATE OF COLORADO)
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this, 5th day of
December, 1994, by Hal Morrell, as Manager/Member of Botac VI Leasing, L.L.C., a
Utah limited liability company.
Witness my hand and seal.
My commission expires: 3/17/98
-----------------------------------.
[SEAL APPEARS HERE] /s/ Miriam E. Ellsworth
-----------------------------------
Notary Public
STATE OF ILLINOIS)
) ss.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this, 12th day of
December, 1994, by Richard Student and William F. Wein, Jr., as authorized
signatories of Allstate Life Insurance Company, an Illinois corporation.
Witness my hand and seal.
My commission expires: 1/5/97
-----------------------------------.
[SEAL APPEARS HERE] /s/ Janice Gregory
-----------------------------------
Notary Public
9
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Lot 5, Lincoln Executive Center, an Administrative Replat of Lot 5 of Filing
No. 1, County of Arapahoe, State of Colorado.
Together with the Ingress and Egress Rights as contained in Declaration of
Easement recorded October 21, 1987 in Book 5292 at Page 75, Arapahoe County
Records.
Street Address: 11755 East Peakview Avenue
Englewood, Colorado 80111
10
<PAGE>
EXHIBIT 10.64
GUARANTEE AGREEMENT
-------------------
THIS GUARANTEE AGREEMENT ("Guarantee") is given as of the 2nd day of
December, 1994, by BIG O TIRES, INC., a Nevada corporation ("Big O"), whose
address is 11755 East Peakview Avenue, Englewood, Colorado 80111, and BIG O
DEVELOPMENT, INC., a Colorado corporation ("Development") whose address is 11755
East Peakview Avenue, Englewood, Colorado 80111 (collectively called
"Guarantors"), to ALLSTATE LIFE INSURANCE COMPANY, whose address is Allstate
Plaza West M2C, 3100 Sanders Road, Northbrook, Illinois 60062 ("Lender") based
on the following facts:
A. Guarantors and Lender entered into a loan in the original principal
amount of $2,860,000.00 ("Loan") to the Guarantors as evidenced by a Deed of
Trust Note dated January 18, 1990, payable to Lender in the principal amount of
$2,860,000.00 ("Note").
B. The Note is secured by: (i) Deed of Trust, Assignment of Leases, Rents
and Contracts, Security Agreement and Fixture Filing, dated January 18, 1990,
from Development to the Public Trustee of the County of Arapahoe, as trustee,
for the benefit of Lender, recorded in the records of the Clerk and Recorder of
Arapahoe County, Colorado ("Official Records") on January 18, 1990, in Book
5855, at Page 76, as Reception No. 9000005741 ("Deed of Trust"); (ii) Assignment
of Leases, Rents, Profits and Contracts, dated January 18, 1990 from Development
to Lender, recorded in the Official Records on January 18, 1990, in Book 5855,
at Page 123, as Reception No. 9000005742 ("Assignment"); (iii) UCC-1 Financing
Statements recorded in the UCC Records of the Official Records on January 18,
1990, as file number C320563 and with the Colorado Secretary of State on
January 24, 1990 as file number 902006607 (collectively, "Financing
Statements"); and (iv) any other assignments, agreements and documents executed
by Assignor in connection with the Loan defined in the Deed of Trust as
("Related Agreements"); the foregoing security instruments shall be collectively
referred to as the "Loan Documents".
C. The Deed of Trust encumbers certain real property lying and situated in
Arapahoe County, Colorado, and more particularly described in Exhibit A attached
hereto and incorporated herein by reference ("Property").
D. Guarantors have entered into an agreement whereby Development shall sell
and transfer the Property to BOTAC VI LEASING, L.L.C., a Utah limited liability
company ("Botac").
E. Guarantors and Botac have requested Lender' s consent to the sale and
transfer of the Property, to the assumption by Botac of Guarantors, obligations
under the Note and Loan Documents, and to the release of Guarantors' obligations
for payment of the Note as co-makers thereof. Lender is unwilling to consent to
the
<PAGE>
transfer of the Property, the assumption of the Note and Loan Documents, and the
release of Guarantors' obligations under the Note, unless the obligations are
unconditionally, independently, and directly guaranteed by Guarantors. Botac,
Guarantors and Lender are concurrently herewith executing an Assignment and
Assumption Agreement (the "Assumption Agreement") which sets forth more fully
the terms and conditions of Lender's consent. The contemporaneous execution and
delivery of this Guarantee is required by the Assumption Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the matters recited above, and to induce
Lender to accept the assumption of the Note and Loan Documents by Botac,
Guarantors hereby jointly and severally undertake and agree as follows:
1. This is a guarantee of payment and not of collection. Guarantors hereby
guarantee unconditionally the prompt, punctual, and timely payment of any and
all obligations, as hereinafter defined, of Botac to Lender. Botac IS obligated
to Lender for the payment and performance of all duties and obligations of Botac
under the terms of the Note and Loan Documents. The amounts payable and
obligations to be performed pursuant to the terms of the Note, the Loan
Documents, or any other instrument now in existence or hereafter executed, the
purpose of which is to secure the obligations of the Note, are hereinafter
called the "Obligations." Notwithstanding any provision hereof to the contrary,
Lender shall not bring any action against Guarantors in federal or state court
seeking to collect the obligations from Guarantors until such time as Lender has
provided notice to Guarantors of the existence of a default of the Obligations,
and (if the stated default can be cured by the payment of a sum of money) a
period of ten (10) days has elapsed subsequent to the giving of notice but the
default remains uncured, or (if the stated default cannot be cured by the
payment of a sum of money) a period of thirty (30) days has elapsed subsequent
to the giving of notice but the default remains uncured. Any notice provided to
Guarantors shall be delivered to the addresses and otherwise in accordance with
the notice provisions contained in the Assumption Agreement.
2. The Guarantors hereby waive and agree not to assert or take advantage of
(a) any right to require Lender to proceed against Botac or any other person or
to proceed against or exhaust any security held by it at any time or to pursue
any other remedy in its power before proceeding against the Guarantors; (b) the
defense of the statute of limitations in any action hereunder or for the
collection of the Obligations; (c) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of, or revocation hereof, by
the Guarantors or others, or the failure of Lender to file or enforce a claim
against the estate (either in administration, bankruptcy, or any other
proceeding) of the Guarantors or others; (d) demand, protest and
-2-
<PAGE>
notice of any other kind, including, without limiting the generality of the
foregoing, notice of the existence, creation or incurring of any new or
additional indebtedness or obligation or of any action or non-action on the part
of Botac, Lender, the Guarantors under this or any other instrument, or creditor
of Botac, or any other person whomsoever, in connection with any obligations
hereby guaranteed; (e) any defense based upon an election of remedies by Lender,
including, without limitation, an election to proceed by non-judicial rather
than judicial foreclosure, which destroys or otherwise impairs the subrogation
rights of the Guarantors or the right of the Guarantors to proceed against Botac
for reimbursement, or both; and (f) any duty on the part of Lender to disclose
to the Guarantors any facts it may now or hereafter know about Botac, regardless
of whether Lender has reason to believe that any such facts materially increase
the risk beyond which the Guarantors are obligated or whether Lender has a
reasonable opportunity to communicate such facts to the Guarantors, it being
understood and agreed that the Guarantors are fully responsible for being and
keeping informed of the financial condition of Botac and of all circumstances
bearing on the risk of non-payment of any obligations hereby guaranteed.
3. The obligations of Guarantors hereunder are independent of the
obligations of Botac and each of the Guarantor's obligations are independent of
the obligations each of the other Guarantors who have executed and delivered
this or similar guarantees. Release of one or more Guarantors shall not impair
or diminish the liability of any remaining Guarantors, except to the extent of
monies actually received by Lender from the released Guarantor as a consequence
of such release. In the event of any default hereunder, a separate action or
actions may be brought and prosecuted against the Guarantor, or any Guarantors,
whether or not Botac is joined therein or a separate action or actions are
brought against Botac. Lender may maintain successive actions for other
defaults. The Lender's rights hereunder shall not be exhausted by its exercise
of any of its rights or remedies or by any such action or by any number of
successive actions until and unless the Obligations have been paid and fully
performed.
4. The Guarantors authorize Lender, without notice to Guarantors and without
impairing the liability of the Guarantors hereunder, from time to time to renew,
extend, accelerate, modify, or otherwise change the times for or terms of
payment for the obligations or any portion thereof, including but not limited to
any increase or decrease in the rates of interest provided in the Note, to make
other amendments, changes or modifications to the Loan Documents, to waive any
other terms, covenants, or conditions thereof, to compromise or settle any
amount or claim due or owing or claimed to be due or owing under the Loan
Documents, or to surrender, release, or subordinate all or any portion of the
Property defined in the Deed of Trust or other security under the Deed of Trust
or accept additional or substitute security therefor.
-3-
<PAGE>
The provisions of this Guaranty shall extend and be applicable to all such
renewals, extensions and modifications.
5. The Guarantors agree to pay to Lender, without demand, reasonable
attorneys' fees and all costs and other expenses which it expends or incurs in
collecting or compromising the obligations or in enforcing this Guarantee
against the Guarantors whether or not suit is filed.
6. Should any one or more provisions of this Guarantee be determined to be
illegal or unenforceable, all other provisions nevertheless shall be effective.
7. This Guarantee shall inure to the benefit of Lender, its successors and
assigns, including the assignees of any indebtedness hereby guaranteed, and bind
the heirs, executors, administrators, successors and assigns of the Guarantors.
This Guarantee is assignable by Lender with respect to all or any portion of the
Obligations, and when so assigned, the Guarantors shall be liable to the
assignees under this Guarantee without in any manner affecting the liability of
the Guarantors hereunder with respect to any Obligations retained by Lender.
8. The Guarantors hereby postpone and subordinate to the claims of Lender
against Botac and the other Guarantors any indebtedness or other claim which the
subject Guarantor may have against Botac and the other Guarantors. The
Guarantors shall have no right of subrogation and waives any right to enforce
any remedy which Lender now has or may hereafter have against Botac and the
other Guarantors, and waives any benefit of, and any right to participate in,
any security now or hereafter held by Lender.
9. If more than one Guarantor signs this Guarantee, the obligation of all
Guarantors shall be joint and several. When the context and construction so
requires, all words used in the singular herein shall be deemed to have been
used in the plural and the masculine shall include the feminine and neuter. The
word "person" as used herein shall include any individual, company, firm,
association, partnership, corporation trust or other legal entity of any kind
whatsoever.
10. No provision of this Guarantee or right of Lender hereunder can be
waived nor can the Guarantors be released from the obligations hereunder except
in writing, duly executed and authorized by an officer of Lender.
11. This Guarantee shall be governed by and construed in accordance with the
laws of Colorado. This Guarantee shall constitute the entire agreement of the
Guarantors with Lender with respect to the subject matter hereof and no
representation, understanding, promise or condition concerning the subject
matter hereof shall be binding upon Lender unless expressed herein.
-4-
<PAGE>
Executed as of December 2, 1994.
BIG O TIRES, INC.,
a Nevada Corporation
By: /s/John B. Adams
------------------------------
Its: Ex. V.P.
--------------------------
BIG O DEVELOPMENT, INC.,
a Colorado Corporation
By: /s/ John B. Adams
------------------------------
Its: V.P.
--------------------------
-5-
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 6th day of
December, 1994 by John B. Adams, as Vice President of Big 0 Tires, Inc., a
Nevada corporation.
Witness my hand and official seal.
My commission expires: 1/26/98
--------------------------.
[SEAL APPEARS HERE]
/s/ Cindy L. Schultz
--------------------------
Notary Public
STATE OF COLORADO)
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 6th day of
December, 1994 by John B. Adams, as Vice President of Big 0 Development, Inc., a
Colorado corporation
Witness my hand and official seal.
My commission expires: 1/26/98
--------------------------.
[SEAL APPEARS HERE]
/s/ Cindy L. Schultz
--------------------------
Notary Public
-6-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Lot 5, Lincoln Executive Center, an Administrative Replat of Lot 5
of Filing No. 1, County of Arapahoe, State of Colorado.
Together with the Ingress and Egress Rights as contained in Declaration of
Easement recorded October 21, 1987 in Book 5292 at Page 75, Arapahoe County
Records.
Street Address: 11755 East Peakview Avenue
Englewood, Colorado 80111
-7-
<PAGE>
EXHIBIT 10.65
CLOSING AGREEMENT
-----------------
This Closing Agreement is made as of the 2nd of December, 1994, by BIG 0
DEVELOPMENT, INC., a Colorado corporation ("Development"), BIG 0 TIRES, INC., a
Nevada corporation ("CoMaker") (Development and CoMaker collectively called
"Assignor") and BOTAC VI LEASING, L.L.C., a Utah limited liability company
("Assignee"), and ALLSTATE LIFE INSURANCE COMPANY, an Illinois insurance
corporation ("Lender"), with reference to the following facts.
RECITALS
A. Assignor and Lender entered into a loan in the original principal
amount of $2,860,000.00 ("Loan") evidenced by that certain Deed of Trust Note
dated January 18, 1990, made by Assignor in favor of Lender, in the amount of
the Loan ("Note") , which Note is secured by, among other things, a Deed of
Trust, Assignment of Leases, Rents and Contracts Security Agreement and Fixture
Filing dated January 18, 1990 from Development to the Public Trustee of Arapahoe
County, Colorado ("Deed of Trust") encumbering certain real property situated in
said county ("Property") and more particularly described therein.
B. Assignor and Assignee have entered into an agreement WHEREBY
Development shall transfer to Assignee all of Development's right, title and
interest in and to the Property, the improvements and fixtures located thereon,
as well as other items relating to the Property.
C. Assignor and Assignee have requested Lender's consent to the sale and
transfer of the Property, the improvements and fixtures located thereon, and
other items relating to the Property, and to the assumption by Assignee of
Assignor's obligations under the Loan.
D. Lender has agreed to consent to the said transfer of title and
assumption of obligations in accordance with the terms of an Assignment and
Assumption Agreement ("Assumption Agreement") among the parties, of even date
herewith.
E. Assignor and Assignee have not fully complied with the requirements of
the Assumption Agreement and have requested Lender to grant its conditional
consent to the proposed transfer and assumption subject to the terms of this
Agreement.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
<PAGE>
1. Lender conditionally consents to the transfer of the Property and the
assumption of the Loan notwithstanding the failure of Assignee and Assignor to
comply fully with the terms of the Assumption Agreement, subject to the terms of
this Closing Agreement.
2. No unfulfilled term or condition of the Assumption Agreement shall be
waived by reason of the foregoing Lender's conditional consent, and Assignor and
Assignee covenant and agree to complete the unfulfilled requirements shown on
the closing checklist attached hereto ("Requirements") to the Lender's
satisfaction, within ten (10) days following the date hereof.
3. To secure the performance of the foregoing covenant to complete
performance of the Requirements, Assignor and Assignee shall deposit with Lender
the sum of Ten Thousand and No One-Hundredths Dollars ($10,000.00) (the
"Deposit") at the time of execution of this Closing Agreement by Assignor and
Assignee. Lender is authorized to hold and disburse the Deposit for payment of
costs and expenses incurred subsequent to the date hereof in connection with the
completion of the Requirements. Such costs and expenses may include, without
limitation, additional attorneys' fees and costs.
4. If the Requirements have not been fully completed to Lender's
satisfaction within said ten (10) day period, Lender may, at its election, (a)
withdraw its conditional consent to the transfer of the Property and the
assumption of the Loan, in which event the transfer and assumption shall be
deemed to have occurred without Lender's consent in violation of the terms of
the Deed of Trust, or (b) disburse the Deposit (or so much thereof as may be
required) to complete the Requirements to Lender's satisfaction, or (c) any
combination of parts (a) and (b) above which Lender in its discretion deems
appropriate.
5. If the Requirements are completed within said ten (10) day period,
Lender shall return the Deposit (or so much thereof as has not then been
disbursed in accordance with this Closing Agreement) to Assignor and Assignee,
together with an accounting of the amounts which have been so disbursed. If the
Requirements are not completed within said ten (10) day period, but are
thereafter completed to Lender's satisfaction prior to the occurrence of any
declaration of default under the Loan, Lender shall likewise return the balance
of the Deposit to Assignor and Assignee with an accounting of amounts which have
been disbursed. In all other events, Lender shall be entitled to retain the
Deposit as additional security for the payment and performance of the Loan;
however, the Deposit shall not be deemed to be liquidated damages for the
failure to perform the Requirements and Assignor and Assignee shall remain
liable for all costs of completing the Requirements in excess of the Deposit.
-2-
<PAGE>
6. This Closing Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.
7. This Closing Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date above set forth.
ASSIGNOR
BIG O DEVELOPMENT, INC., a
Colorado corporation
ATTEST:
By: /s/ Susan D. Hendee By: /s/ John B. Adams
------------------------- ------------------------------
Its: Assistant Secretary Its: Vice President
------------------------ -----------------------------
BIG O TIRES, INC., a Nevada
corporation
ATTEST:
By: /s/ Susan D. Hendee By: /s/ John B. Adams
------------------------- ------------------------------
Its: Assistant Secretary Its: Executive Vice President
------------------------ -----------------------------
ASSIGNEE
BOTAC VI LEASING, L.L.C.,
a Utah limited liability company
By: /s/ Hal Morrell
------------------------------
Its: Member L.L.C.
-----------------------------
-3-
<PAGE>
LENDER
ALLSTATE LIFE INSURANCE
COMPANY, an Illinois insurance
corporation
By: /s/ Richard Student
------------------------------
By: /s/
------------------------------
Its Authorized Signatories
-4-
<PAGE>
CLOSING DAY CHECKLIST
EFFECTIVE AS OF DECEMBER 2, 1994
LENDER: Allstate Life Insurance Company
ORIGINAL
BORROWER: Big 0 Development, Inc. ("Development")
Big 0 Tires, Inc. ("Big O")
NEW
BORROWER: Botac VI Leasing, L.L.C., a Utah limited liability company
LOAN NO. 103006
LOAN DOCUMENTS
1. Assignment and Assumption Agreement executed by:
Big 0, Development, Botac and Allstate
2. UCC Financing Statement - executed by Botac
3. Restated Closing Certificate of Big 0
4. Restated Closing Certificate of Development
5. Certificate of Representations and Warranties of Botac
6. Environmental Indemnity executed by Botac and Bailey's Moving and Storage
7. Side letter agreement waiving tax and insurance escrows (Botac and
Allstate)
8. Guarantee Agreement executed by Big 0 and Development
9. Letter Agreement regarding closing and escrow of funds in the amount of
$10,000.00 for any costs and fees incurred by Allstate - to be refunded
after balance of checklist items are submitted within 10 days after
closing.
CHECKLIST ITEMS
10. Leases:
A. Lease as of closing date between Botac and Development
B. Lease between Botac and Development commencing April 1, 1994
C. Lease to be entered into with Bailey's Moving and Storage for a
minimum of 10 years
-5-
<PAGE>
11. Certified Rent Roll - indicate the lease term, monthly payment and
commencement date for the following leases:
A. Existing lease as of closing date between Botac and Development
B. Lease between Botac and Development commencing April 1, 1994
C. Lease to be entered into with Bailey's Moving and Storage
12. Insurance (must adhere to Allstate's current standard requirements,
including without limitation, a deductible of no more than $10,000.00)
13. Entity Documents
A. Botac VI Leasing, L.L.C.
(a) Articles of Organization - Received
(b) Operating Agreement, certified
(c) Resolution authorizing transaction and persons authorized to sign
for Botac
B. Bailey's Moving and Storage
(a) Resolution authorizing execution of Environmental Indemnity and
person authorized to sign for Bailey's
C. Big 0 Tires, Inc.
(a) Resolution authorizing Guarantee and person authorized to sign
D. Big 0 Development, Inc.
(a) Resolution authorizing Guarantee and person authorized to sign
14. Acquisition Documents
A. Assignment of Purchase Contract
B. Deed
C. Bill of Sale
D. Settlement statements confirming downpayment of $200,000.00
15. UCC -
A. Termination of Barclay UCC-1 Financing Statement
16. Operating Statement
17. Certification of Net Operating Income
18. Letter stating no management agreement exists
19. Opinions
-6-
<PAGE>
A. Counsel for Big 0 Tires, Inc. and Big 0 Development, Inc.
B. Counsel for Botac
(a) Utah Counsel
(b) Colorado Counsel
20. Escrow Instructions
21. Settlement Statement
A. 1% Assumption Fee
B. Payment of Legal Fees ($5,000-fees; $1,000-costs)
C. Payment of Title Fees
D. $10,000 holdback for potential add't legal fees
22. Termination of original Lease (BIG 0 Development - Landlord & BIG 0 Tire -
Tenant)
-7-
<PAGE>
EXHIBIT 10.66
[LOGO]
CB COMMERCIAL
The printed portion of this form, except (italicized) (differentiated)
additions, have been approved by the Colorado Real Estate Commission.
(CBS 2-1-94)
-------------------------------------------------------------------
THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL
AND TAX OR OTHER COUNSEL BEFORE SIGNING.
COMMERCIAL
CONTRACT TO BUY AND SELL REAL ESTATE
March 17, 1994
1. PARTIES AND PROPERTY. Bailey's Moving and Storage and/or Assigns
buyer(s) [Buyer] (as joint tenants/tenants in common) agrees to buy, and the
undersigned seller(s) [Seller], agrees to sell, on the terms and conditions set
forth in this contract, the following described real estate in the County of
Arapahoe, Colorado, to wit:
Lot 5, Lincoln Executive Center, an administrative replat of
Lot 5 of Filing No. 1
County of Arapahoe, State of Colorado
known as 11755 East Peakview Avenue, Englewood, Colorado 80111
------------------------------------------------------------------
Street Address City State Zip
together with all interest of Seller in vacated streets and alleys adjacent
thereto, all easements and other appurtenances thereto, all improvements thereon
and all attached fixtures thereon, except as herein excluded (collectively the
Property).
2. INCLUSIONS/EXCLUSIONS. The purchase price includes the following
items (a) if attached to the Property on the date of this contract: lighting,
heating, plumbing, ventilating, and air conditioning fixtures, TV antennas,
water softeners, smoke/fire/burglar alarms, security devices, inside telephone
wiring and connecting blocks/jacks, plants, mirrors, floor coverings, intercom
systems, built-in kitchen appliances, sprinkler systems and controls; (b) if on
the Property whether attached or not on the date of this contract: storm
windows, storm doors, window and porch shades, awnings, blinds, screens, curtain
rods, drapery rods, all keys and (c)
The above-described included items (Inclusions) are to be conveyed to Buyer by
Seller by bill of sale at the closing, free and clear of all taxes, liens and
encumbrances, except as provided in Section 12. The following attached fixtures
are excluded from this sale:
None.
3. PURCHASE PRICE AND TERMS. The purchase price shall be $3,200,000.00,
payable in U.S. dollars by Buyer as follows: (Complete the applicable terms
below.)
(a) Earnest Money:
$____ in the form of a promissory note, as earnest money deposit and part
payment of the purchase price, payable to and held by *See Addendum "A", broker,
in its trust account on behalf of both Seller and Buyer. Broker is authorized
to deliver the earnest money deposit to the closing agent, if any, at or before
closing. The balance of $3,150,000.00 (purchase price less earnest money) shall
be paid as follows: *See Addendum "A".
(b) Cash at Closing.
$100,000.00, plus closing costs, to be paid by Buyer at closing in funds which
comply with all applicable Colorado laws, which include cash, electronic
transfer funds, certified check, savings and loan teller's check, and cashier's
check (Good Funds). Subject to the provisions of Section 4, if the existing
loan balance at the time of closing shall be different from the loan balance in
Section 3, the adjustment shall be made in Good Funds at closing or paid as
follows: _____________________________________________________________________
_____________________________________________________________________________.
(d) Assumption.
$2,800,000.00 by Buyer's assuming and agreeing to pay an existing loan in this
approximate amount, presently payable at $_______ per month principal, interest
presently at ___% per annum, and including escrow for the following as
indicated: real estate taxes, property insurance premium, mortgage insurance
premium, and ________ Buyer agrees to pay a loan transfer fee not to exceed
$______. At the time of assumption, the new interest rate shall not exceed
_____% per annum and the new monthly payment shall not exceed $______ principal
and interest, plus escrow, if any. Seller ___ shall __ shall not be released
from liability on said loan. If applicable, compliance with the requirements
for release from liability shall be evidenced by delivery at closing of an
appropriate letter from lender. Cost payable for release of liability shall be
paid by _______ in an amount not to exceed $_______.
<PAGE>
7. ASSIGNABLE. This contract shall be assignable by Buyer without Seller's prior
written consent. Except as so restricted, this contract shall inure to the
benefit of and be binding upon the heirs, personal representatives, successors
and assigns of the parties.
8. EVIDENCE OF TITLE. Seller shall furnish to Buyer, at Seller's expense, a
current commitment for owner's ALTA title insurance policy in an amount equal to
the purchase price on or before April 8, 1994 (Title Deadline). Buyer may
require of Seller that copies of instruments (or abstracts of instruments)
listed in the schedule of exceptions (Exceptions) in the title insurance
commitment also be furnished to Buyer at Seller's expense. This requirement
shall pertain only to instruments shown of record in the office of the clerk and
recorder of the designated county or counties. The title insurance commitment,
together with any copies or abstracts of instruments furnished pursuant to this
Section 8, constitute the title documents (Title Documents) Buyer, or Buyer's
designee, must request Seller, in writing, to furnish copies or abstracts of
instruments listed in the schedule of exceptions no later than five (5) calendar
days after Title Deadline. If Seller furnishes a title insurance commitment,
Seller will pay the premium at closing and have the title insurance policy
delivered to Buyer as soon as practicable after closing.
9. TITLE.
(a) Title Review. Buyer shall have the right to inspect the Title
Documents or abstract. Written notice by Buyer of unmerchantability of title or
of any other unsatisfactory title condition shown by the Title Documents or
abstract shall be signed by or on behalf of Buyer and given to Seller on or
before five (5) calendar days after Title Deadline, or within five (5) calendar
days after receipt by Buyer of any Title Document(s) or endorsement(s) adding
new Exception(s) to the title commitment together with a copy of the Title
Document adding new Exception(s) to title. If Seller does not receive Buyer's
notice by the date(s) specified above, Buyer accepts the condition of title as
disclosed by the Title Documents as satisfactory.
(b) Matters Not Shown by the Public Records. Seller shall deliver to
Buyer, on or before the Title Deadline set forth in Section 8, true copies of
all lease(s) and survey(s) in Seller's possession pertaining to the Property and
shall disclose to Buyer all easements, liens or other title matters not shown by
the public records of which Seller has actual knowledge. Buyer shall have the
right to inspect the Property to determine if any third party(s) has any right
in the Property not shown by the public records (such as an unrecorded easement,
unrecorded lease, or boundary line discrepancy). Written notice of any
unsatisfactory condition(s) disclosed by Seller or revealed by such inspection
shall be signed by or on behalf of Buyer and given to Seller on or before May 6,
1994. If Seller does not receive Buyer's notice by said date, Buyer accepts
title subject to such rights, if any, of third parties of which Buyer has actual
knowledge.
(c) Special Taxing Districts. SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO
GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED FROM ANNUAL
TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN
SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND EXCESSIVE TAX
BURDENS TO SUPPORT THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE
RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS
WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYER SHOULD INVESTIGATE THE DEBT
FINANCING REQUIREMENTS OF THE AUTHORIZED GENERAL OBLIGATION INDEBTEDNESS OF SUCH
DISTRICTS, EXISTING MILL LEVIES OF SUCH DISTRICT SERVICING SUCH INDEBTEDNESS AND
THE POTENTIAL FOR AN INCREASE IN SUCH MILL LEVIES.
<PAGE>
In the event the Property is located within a special taxing district and
Buyer desires to terminate this contract as a result, if written notice is given
to Seller at or before the date set forth in subsection 9(b), this contract
shall then terminate. If Seller does not receive Buyer's notice by the date
specified above Buyer accepts the effect of the Property's inclusion in such
special taxing district(s) and waives the right to so terminate.
(d) Right to Cure. If Seller receives notice of unmerchantability of title
or any other unsatisfactory title condition(s) as provided in subsection (a) or
(b) above, Seller shall use reasonable effort to correct said unsatisfactory
title condition(s) prior to the date of closing. If Seller fails to correct
said unsatisfactory title condition(s) on or before the date of closing, this
contract shall then terminate; provided, however, Buyer may, by written notice
received by Seller, on or before closing, waive objection to said unsatisfactory
title condition(s).
10. INSPECTION. Buyer or any designee, shall have the right to have
inspection(s) of the physical condition of the Property and Inclusions, at
Buyer's expense, if written notice of any unsatisfactory condition, signed by or
on behalf of Buyer, is not received by Seller on or before May 27, 1994
(Objection Deadline), the physical condition of the Property and inclusions
shall be deemed to be satisfactory to Buyer. If such notice is received by
Seller as set forth above, and if Buyer and Seller have not agreed, in writing,
to a settlement thereof on or before June 1, 1994 (Resolution Deadline), this
contract shall terminate three calendar days following the Resolution Deadline,
unless, within the three calendar days, Seller receives written notice from
Buyer waiving objection to any unsatisfactory condition. Buyer is responsible
for and shall pay for any damage which occurs to the Property and Inclusions as
a result of such inspection.
11. DATE OF CLOSING. The date of closing shall be December 1, 1994, or by
mutual agreement at an earlier date. The hour and place of closing shall be
designated by Chicago Title Company.
12. TRANSFER OF TITLE. Subject to tender or payment at closing as
required herein and compliance by Buyer with the other terms and provisions
hereof, Seller shall execute and deliver a good and sufficient general warranty
deed to Buyer, on closing, conveying the Property free and clear of all taxes
except the general taxes for the year of closing. Title shall be conveyed free
and clear of all liens for special improvements installed as of the date of
Buyer's signature hereon, whether assessed or not: except (i) distribution
utility easements (including cable TV), (ii) those matters reflected by the
Title Documents accepted by Buyer in accordance with subsection 9(a), (iii)
those rights, if any, of third parties in the property not shown by the public
records in accordance with subsection 9(b), (iv) inclusion of the Property
within any special taxing district, and (v) subject to building and zoning
regulations.
13. PAYMENT OF ENCUMBRANCES. Any encumbrance required to be paid shall be
paid at or before closing from the proceeds of this transaction or from any
other source.
14. CLOSING COSTS, DOCUMENTS AND SERVICES. Buyer and Seller shall pay, in
Good Funds, their respective closing costs and all other items required to be
paid at closing, except as otherwise provided herein. Buyer and Seller shall
sign and complete all customary or required documents at or before closing.
15. PRORATIONS. General taxes for the year of closing, based on the taxes
for the calendar year immediately preceding closing, rents, water and sewer
charges, owner's association dues, and interest on continuing loan(s), if any,
and shall be prorated to date of closing.
16. POSSESSION. Possession of the Property shall be delivered to Buyer as
follows:
December 1, 1994
8:00 A.M.
Denver, Colorado
time , subject to the following lease(s) or tenancy(s):
See Addendum "A"
If Seller, after closing, fails to deliver possession on the date herein
specified. Seller shall be subject to eviction and shall be additionally liable
to Buyer for payment of $1,000.00 per day from the date of agreed possession
until delivered.
17. CONDITION OF AND DAMAGE TO PROPERTY. Except as otherwise provided in
this contract, the Property and inclusions shall be delivered in the condition
existing as of the date of this contract, ordinary wear and tear excepted. In
the event the Property shall be damaged by fire or other casualty prior to time
of closing, in an amount of not more than ten percent of the total purchase
price, Seller shall be obligated to repair the same before the date of closing.
In the event such damage is not repaired within said time or if the damages
exceed such sum, this contract may be terminated at the option of Buyer. Should
Buyer elect to carry out this contract despite such damage, Buyer shall be
entitled to credit for all the insurance proceeds resulting from such damage to
the Property and Inclusions, not exceeding, however, the total purchase price.
Should any Inclusion(s) or service(s) fail or be damaged between the date of
this contract and the date of this contract and the date of closing or the date
of possession, whichever shall be earlier, then Seller shall be liable for the
repair or replacement of such Inclusion(s) or service(s) with a unit of similar
size, age and quality, or an equivalent credit, less any insurance proceeds
received by Buyer covering such repair or replacement.
18. TIME OF ESSENCE/REMEDIES. Time is of the essence hereof. If any note
or check received as earnest money hereunder or any other payment due hereunder
is not paid, honored or tendered when due, or if any other obligation hereunder
is not performed or waived as herein provided, there shall be the following
remedies:
(a) IF BUYER IS IN DEFAULT:
(Check one box only.)
(1) Specific Performance.
---
Seller may elect to treat this contract as cancelled, in which case
all payments and things of value received hereunder shall be forfeited
and retained on behalf of Seller, and Seller may recover such damages
as may be proper, or Seller may elect to treat this contract as being
in full force and effect and Seller shall have the right to specific
performance or damages, or both.
X (2) Liquidated Damages
---
All payments and things of value received hereunder shall be forfeited
by Buyer and retained on behalf of Seller and both parties shall
thereafter be released from all obligations hereunder. It is agreed
that such payments and things of value are LIQUIDATED DAMAGES and
(except as provided in subsection (c)) are SELLER'S SOLE AND ONLY
REMEDY for Buyer's failure to perform the obligations of this
contract. Seller expressly waives the remedies of specific
performance and additional damages.
(b) IF SELLER IS IN DEFAULT:
---
Buyer may elect to treat this contract as cancelled, in which
case all payments and things of value received hereunder shall be
returned and Buyer may recover such damages as may be proper, or
Buyer may elect to treat this contract as being in full force and
effect and Buyer shall have the right to specific performance or
damages, or both.
(c) COSTS AND EXPENSES.
---
Anything to the contrary herein notwithstanding, in the event of
any arbitration or litigation arising out of this contract, the
arbitrator or court shall award to the prevailing party all
reasonable costs and expenses, including attorney fees.
19. EARNEST MONEY DISPUTE. Notwithstanding any termination of this
contract, Buyer and Seller agree that, in the event of any controversy regarding
the earnest money and things of value held by broker or closing agent, unless
mutual written instructions are received by the holder of the earnest money and
things of value, broker or closing agent shall not be required to take any
action but may await any proceeding, or at broker's or closing agent's option
and sole discretion may interplead all parties and deposit any moneys or things
of value into a court of competent jurisdiction and shall recover court costs
and reasonable attorney fees.
20. ALTERNATIVE DISPUTE RESOLUTION MEDIATION. If a dispute arises between
the parties relating to this contract, the parties agree to submit the dispute
to mediation. The parties will jointly appoint an acceptable mediator and will
share equally in the cost of such mediator. If mediation proves unsuccessful the
parties may then proceed with such other means of dispute resolution as they so
choose.
<PAGE>
21. ADDITIONAL PROVISIONS:
a. ACCEPTANCE/COMMISSION. Seller accepts the above proposal
this______day of__________________, 19___. Seller shall pay to the Listing
Company a commission of seven percent (7)% of the gross purchase price
or__________as agreed upon between the Seller and Listing Company for services
in this transaction. In the event of forfeiture of payments and things of value
received hereunder, such payments and things of value shall be divided between
Listing Company and Seller, one-half thereof to Listing Company, but not to
exceed the commission, and the balance to Seller. Listing company and CB
Commercial Real Estate Group, Inc. to divide commission equally.
____________________________________ ________________________________
Seller Date Seller Date
Seller's Address:___________________________________________
b. COMPLIANCE. The parties hereto agree to comply with all applicable
federal, state and local laws, regulations, codes, ordinances and administrative
orders having jurisdiction over the parties, property or the subject matter of
this Agreement, including, but not limited to, the 1964 Civil Rights Act and all
amendments thereto, the Foreign Investment In Real Property Tax Act, the
Comprehensive Environmental Response Compensation and Liability Act, and The
Americans With Disabilities Act.
22. RECOMMENDATION OF LEGAL COUNSEL. By signing this document, Buyer and
Seller acknowledge that the Selling Company or the Listing Company has advised
that this document has important legal consequences and has recommended the
examination of title and consultation with legal and tax or other counsel before
signing this contract.
23. TERMINATION. In the event this contract is terminated, all payments
and things of value received hereunder shall be returned and the parties shall
be relieved of all obligations hereunder, subject to Section 19.
24. SELLING COMPANY BROKER RELATIONSHIP. The selling broker CB Commercial
Real Estate Group, Inc., and its salespersons have been engaged as transaction
broker, Selling Company has previously disclosed in writing to the Buyer that
different relationships are available which include buyer agency, seller agency,
dual agency, or transaction broker.
25. NOTICE TO BUYER. Any notice to Buyer shall be effective when
received by Buyer, or, if this box is checked ___ when received by Selling
Company.
26. NOTICE TO SELLER. Any notice to Seller shall be effective when
received by Seller or Listing Company.
27. MODIFICATION OF THIS CONTRACT. No subsequent modification of any of
the terms of this contract shall be valid, binding upon the parties, or
enforceable unless made in writing and signed by the parties.
28. ENTIRE AGREEMENT. This contract constitutes the entire contract
between the parties relating to the subject hereof, and any prior agreements
pertaining thereto, whether oral or written, have been merged and integrated
into this contract.
29. NOTICE OF ACCEPTANCE COUNTERPARTS. This proposal shall expire unless
accepted in writing by Buyer and Seller, as evidenced by their signatures below,
and the offering party receives notice of such acceptance on or before 5:00 p.m.
Denver time, March 25, 1994 (Acceptance Deadline). If accepted, this document
shall become a contract between Seller and Buyer. A copy of this document may
be executed by each party, separately, and when each party has executed a copy
thereof, such copies taken together shall be deemed to be a full and complete
contract between the parties.
/s/ R. J. Walker
------------------------------ --------------------------------
Buyer Buyer
Date of Buyer's signature: 3/18, 1994 Date of Buyer's signature , 19__
Buyer's Address:
----------------------------------------------------------
/s/ Steven P. Cloward, Seller
------------------------------------- ---------------------------------
Seller Seller
Date of Seller's signature: 4/5, 1994 Date of Seller's signature , 19__
Seller's Address:
--------------------------------------------------------------
================================================================================
The undersigned Broker(s) acknowledges receipt of the earnest money deposit
specified in Section 3, and Selling Company confirms its Broker Relationship as
set forth in Section 24.
Selling Company________________________________________________________________
Name and Address
By:_________________________ _______________________,19____
Signature Date
Listing Company _______________________________________________________________
Name and Address
By:__________________________ ________________________,19___
Signature Date
--------------------------------------------------------------------------------
NOTE: Closing Instructions should be signed at the time this contract is signed.
--------------------------------------------------------------------------------
<PAGE>
ADDENDUM "A" TO THAT CONTRACT BETWEEN
BIG-O DEVELOPMENT, INC. (SELLER)
AND BAILEY'S MOVING AND STORAGE AND/OR ASSIGNS (BUYER)
DATED MARCH 17, 1994
1. Survey: The Seller shall, at the Seller's expense, furnish the Buyer on or
before April 15, 1994 with a current pinned or monumented boundary and
improvement ALTA survey by a registered engineer or licensed land surveyor,
reflecting the acreage and square footage of the Property, property
dimensions, location of all improvements on the ground, location of all
fences, ditches, easements, rights of way and adjacent roadways, and
containing a certified legal description. Following delivery of the survey
to the Buyer, the Buyer shall have five (5) business days to review the
survey and, if the survey reflects matters in conflict with this contract,
the Buyer shall give written notice of such fact to the Seller within five
(5) business days. If such written notice is received, this contract shall
be null and void and the deposit paid hereunder shall be refunded to the
Buyer. Failure of the Buyer to so notify the Broker in writing shall be
deemed a waiver on the part of the Buyer, and this contract shall remain in
full force and effect.
2. Seller's Materials: Seller shall deliver to Buyer the following information
and materials to the extent that it is available. Current preliminary
title report and copies of all exceptions to title, a copy of the current
property tax bill, copies of assessment payment schedules, if any, copies
of surveys or parcel maps, a list of subcontractors who constructed the
improvements, copies of management agreements and service contracts, copies
of governmental approvals including the building permit and final
inspection card, copies of construction drawings for the improvement
including architectural, structural, and landscape plans and "as built"
plans, copies of any leases and other agreements which will encumber the
Property following close of escrow.
3. Big-O Tire Lease: To satisfy the remaining balance of the purchase price in
accordance with Item Number 3 of this contract, Buyer to lease to Big-O
Tire (Tenant) approximately 13,425 square feet of office space in the
subject facility rent free for a period of four years commencing December
1, 1994. Tenant to be responsible for its pro rata share of the
building NNN expenses and operating costs. Big-O Tire is to occupy the
entire Second Floor of office space and the west half of the First Floor of
existing office space. Big-O Tire to have access to the First Floor
workout facility and adjoining restroom facilities. Bailey's Moving and
Storage to have periodic access to the Second Floor conference room. In
addition, Big-O Tire shall lease a 5,000 square foot fenced area in the
warehouse for the same term as the office lease at a lease rate of $3.00
per square foot plus NNN expenses. Big-O Tire and Bailey's Moving and
Storage will mutually execute a lease formalizing these terms and
conditions during Buyer's inspection period.
4. Environmental Report: Seller to pay for and provide a new Level I audit for
Buyer's review on or before April 22, 1994. Buyer's review of this report
shall become a part of Buyer inspection of the Property and Item Number 10
of the contract shall apply.
5 . Floor Repair: Seller to repair, at Seller's expense, the warehouse slab,
walls near the floor of the west side of the office areas, drainage and
curb on the south side of the office area, and any other damaged areas
within or outside the facility due to settling, all to Buyer's satisfaction
prior to closing.
<PAGE>
[LOGO]
CB COMMERCIAL
EARNEST MONEY
Promissory Note
CB Commercial Real Estate Group, Inc.
BROKERAGE AND MANAGEMENT
LICENSED REAL ESTATE BROKER
U.S.$50,000.00
Denver, Colorado Date _________________,1994
FOR VALUE RECEIVED, Bailey's Moving and Storage and/or assigns, jointly and
severally, promise to pay to the order of owner of 11755 E. Peakview, Englewood,
Colorado the sum of Fifty Thousand and No/100 ($50,000.00) Dollars, with
interest at 0% percent per annum from N/A until paid.
Both principal and interest are payable in U.S. dollars on or before May 27,
1994, payable at Chicago Title Company in accordance with the Commercial
Contract to Buy and Sell Real Estate or at such other address a note holder may
designate. Presentment, notice of dishonor, and protest are hereby waived. If
this note is not paid when due, I/we agree to pay all reasonable costs of
collection, including attorney's fees.
/s/ R. J. Walker
-----------------------------
Maker's signature
-----------------------------
Maker's signature
This note is given as earnest money for the contract on the following property:
The printed portions of this form approved by Colorado Real Estate Commission
(BAC 17-12-83)
<PAGE>
[LOGO]
CB COMMERCIAL
The printed portions of this form, except (italicized) (differentiated)
additions, have been approved by the Colorado Real Estate Commission (TBD 26-1-
94)
---------------------------------------
NOTE: DIFFERENT BROKERAGE RELATIONSHIPS ARE AVAILABLE WHICH INCLUDE SELLER
AGENCY, DUAL AGENCY, BUYER AGENCY, OR TRANSACTION-BROKER.
TRANSACTION-BROKER DISCLOSURE
(BUYER)
CB Commercial Real Estate Group, Inc. and its salespersons are working with you
as a transaction-broker. We assist you throughout the real estate transaction
with communication, advice, negotiation, contracting and closing without being
an agent or advocate for you or the seller. You are not vicariously liable
(legally responsible) for our actions and a written contract with us is not
required. For purposes of this disclosure, buyer also means "tenant" and seller
also means "landlord".
As a transaction-broker we will:
. Disclose to you any adverse material facts which we actually know about the
property:
. Perform any oral or written agreement made with you:
. Exercise reasonable skill and care:
. Present all offers in a timely manner:
. Advise you regarding the transaction, including suggesting that you obtain
expert advice on material matters about which we know but the specifics of
which are beyond our expertise:
. Account to you promptly for all money or property we receive:
. Assist you in complying with the terms and conditions of any contract and
with the closing of the transaction.
. Assist you and the seller without regard to race, creed, sex,
religion, national origin, familial status. marital status, or handicap.
As a transaction-broker we will not disclose the following information without
your informed consent:
. That you are willing to pay more than what you offer:
. What the motivating factors are for you in buying or leasing the property;
. That you will agree to financing terms other than those offered:
. Any material information about you unless disclosure is required by law or
if lack of disclosure would constitute dishonest dealing or fraud, except
that we are required to disclose all adverse material facts pertaining to
your financial ability to perform the terms of the transaction and whether
you intend to occupy the property as a principal residence.
THIS IS NOT A CONTRACT.
We have been given a copy of this Transaction-Broker Disclosure on
(date)______________________
BAILEY'S MOVING AND STORAGE AND/OR ASSIGNS
/s/ R. J. Walker
----------------------------------- -------------------------------
Buyer Buyer
On (date) 3/18/94 I provided the buyer(s) with a copy of this Disclosure and
have kept a copy for our records.
CB COMMERCIAL REAL ESTATE GROUP, INC.
------------------------------------ -------------------------------
Company Licensee
==============================================================================
No. TBD26-1-94. TRANSACTION-BROKER DISCLOSURE (BUYER)
<PAGE>
=============================================================================
The printed portions of this form, except (italicized) (differentiated)
additions, have been approved by the Colorado Real Estate Commission.
(CP 40-1-94)
---------------------------------------
THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL
AND TAX OR OTHER COUNSEL BEFORE SIGNING.
COUNTERPROPOSAL
March 25, 1994
RE: Proposed contract to buy and sell the following described real estate in
the County of Arapahoe Colorado, to wit:
Lot 5, Lincoln Executive Center, an administrative
replat of Lot 5 of Filing No. 1
County of Arapahoe, State of Colorado
known as No. 11755 East Peakview Avenue, Englewood, CO 80111, dated March 17,
1994, between Big O Tires, Seller, and Bailey's Moving and Storage and/or
assigns, Buyer.
The undersigned accepts the proposed contract, subject to the following
amendments:
Paragraph 3(b). Cash at closing to be $200,000.00 plus the earnest money
deposit of $50,000.00 payable after waiver of contingencies or May 27, 1994,
whichever is earlier.
Paragraph 3(d). Buyer and Seller shall share equally in the cost of assumption
fee.
Addendum "A" 1. Survey. Unless required from lender to process assumption,
Seller may reuse original survey used when constructing building.
Paragraph 21. Acceptance/Commission. Seller shall pay Listing Company six
percent (6%) of gross purchase price of $3,200,000.00
All other terms and conditions shall remain the same. This counterproposal
shall expire unless accepted in writing, by Buyer and Seller, as evidenced by
their signatures below, and the offering party to this document receives notice
of such acceptance on or before April 11, 1994. If accepted, the proposed
contract, as amended hereby, shall become a contract between Seller and Buyer.
Big O Tires, Inc. /s/ Steven P. Cloward
--------------------------- -------------------------------------------
Seller Seller
Date of Seller's signature 4/5/94 Date of Seller's signature __________, 19__
Seller's Address 11755 East Peakview Avenue, Englewood, CO 80111
---------------------------------------------------------------
Bailey's Moving and Storage
----------------------------- ------------------------------------------
Buyer Buyer
Date of Buyer's signature ______, 19___ Date of Buyer's signature ______, 19___
Buyer's Address ________________________________________________________________
N.B. When this counterproposal form is used, the proposed contract is not to
be signed by the party initiating this counterproposal. This counterproposal
must be securely attached to the proposed contract.
===============================================================================
<PAGE>
ATTACHMENT NO. 1
TO COUNTER PROPOSAL
ADDENDUM "A"
3. Big O Tires Lease. Buyer hereby agrees to lease back to Big O Tires, Inc.
("Big O"), the approximately 18,000 square feet of office space contained in the
office building that is separate from the warehouse facilities (and does not
includes offices within the warehouse facilities) (the "Big O Office Space").
As an inducement to Buyer to lease the Big O Office Space back to Big O, Big O
will build to Buyer's needs and specifications, office facilities adjacent to
the existing offices within the warehouse for use by the Buyer ("Buyer's Office
Space") and Big O will pay up to $80,000 in costs for such construction.
Big O will lease the Big O Office Space for a term of three (3) years, for a
base rent of $0.00 during this term, plus payment of a pro rata share of the
real estate taxes, insurance and the operating and maintenance expenses on the
entire premises. In the event Big O's cost to construct Buyer's Office Space
exceeds $80,000, Big O will be granted an additional term on its Lease that is
sufficient to provide Big O credit for such overage, on the basis of $6.00 per
square foot of annual rent, and Big O shall continue to lease Big O's Office
Space over the additional term under the same terms and conditions of the Lease.
In the event Big O does not incur $80,000 in construction of Buyer's Office
Space, Big O shall pay to Buyer such shortfall as base rent for a portion of the
three (3) year term, on the basis of $6.00 per square foot of annual rent for
the Big O Office Space.
The Lease for the Big O Office Space shall also grant to Big O two (2) three (3)
year options to extend the term of the Lease beyond the original term, at a base
rent determined by the parties to be at market rate at that time.
<PAGE>
EXHIBIT 10.67
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement ("Agreement") is made this ___ day of September,
1994 between Big O Tires, Inc., a Nevada corporation, having an address at 11755
East Peakview Avenue, Englewood, Colorado 80111 ("Big O" or "Company") and
Kenneth W. Pavia, Sr., individually and as the sole general partner of Balboa
Investment Group, L.P., a California Limited Partnership having an address at
1101 East Balboa Boulevard, Newport Beach, California 92661-1313, (collectively
referred to as "Balboa").
RECITALS
A. Big O's Board of Directors formed an investment committee ("Investment
Committee") comprised of the six independent directors to work with
the Company's investment banker, PaineWebber, Incorporated
("PaineWebber") to explore all alternatives for enhancing the values
of the Company.
B. Big O's Board of Directors unanimously agreed to invite Balboa as a
participant with the Investment Committee. Balboa has agreed to
accept such offer.
C. Big O desires that Balboa not disclose certain nonpublic information
pertaining to the Company that Big O may provide or which PaineWebber
may provide to Balboa.
NOW, THEREFORE, in consideration of Big O or PaineWebber disclosing certain
nonpublic information to Balboa, the receipt and adequacy of which consideration
is hereby acknowledged, Balboa agrees as follows:
1. Balboa acknowledges that all information, including, without limitation,
information pertaining to any discussions, negotiations and transactions
with third parties involving any acquisition, sale, merger or combination
of Big O, that Big O, PaineWebber and/or members or participants of the
Investment Committee may disclose to Balboa is confidential and proprietary
nonpublic information of Big O and, without the prior written consent of
Big O, Balboa agrees that it will not disclose such nonpublic information
directly or indirectly to any person or entity. Notwithstanding the
foregoing, Balboa may disclose such confidential and proprietary nonpublic
information to its representatives provided such Balboa representatives
sign a confidentiality agreement in the form of this Confidentiality
Agreement.
2. Balboa hereby acknowledges that it is aware (and that Balboa shall inform
any Balboa representative to whom it furnishes any of the information) that
the securities laws prohibit any person who has material, nonpublic
information concerning the Company from purchasing or selling securities of
the Company and from communicating any such information to any other person
under circumstances in which it is reasonably foreseeable that such person
is likely to purchase or sell any such securities or is likely to influence
the purchase or sell of any such securities.
3. Balboa agrees that all of the nonpublic information provided to Balboa by
Big O as described in paragraphs 1 and 2 hereof shall be deemed to be
confidential and proprietary nonpublic information of Big O, unless
otherwise designated by Big O. All such written Big O nonpublic
information provided to Balboa shall be immediately returned to Big O upon
termination of this Agreement and Balboa shall not keep any copies thereof.
Balboa acknowledges that any disclosure of such Big O nonpublic information
in breach of this Agreement will cause Big O
1
<PAGE>
irreparable harm, for which an adequate remedy at law shall not exist and,
that upon breach of this Agreement by Balboa, Big O may seek and receive an
immediate injunction, restraining order or preliminary injunction against
Balboa to further prevent the breach of this Agreement, in addition to any
other remedy to which Big O would be entitled as a result of the breach of
this Agreement by Balboa. Provided Balboa has been found by a court of
competent jurisdiction to have breached this Agreement, Big O shall be
entitled to an award of its reasonable costs and attorney fees incurred in
enforcing this Agreement.
4. Notwithstanding anything to the contrary in this Agreement, this Agreement
shall not restrict Balboa's disclosure or use of any of the information
which (a) is or becomes generally available to or known by the public
(other than as a result of any disclosure by Balboa or Balboa's
representatives), (b) was or becomes available to Balboa on a non-
confidential basis from a source (other than the Company or any of its
subsidiaries or any of their respective officers, directors, employees,
agents, including PaineWebber, affiliates or associates or any of their
respective representatives) which source is entitled to disclose such
information to Balboa on a non-confidential basis, or (c) has been
independently acquired or developed by Balboa without violating any of
Balboa's obligations under this Agreement.
If Balboa becomes legally compelled by subpoena or other legal process to
disclose any of the information (or if any person to whom Balboa has, or
any of Balboa's representatives have, furnished any of the information
becomes so compelled), Balboa will provide the Company with prompt written
notice thereof so that the Company may seek a protective order or other
appropriate remedy. If such a protective order or other remedy is not
obtained, or the Company waives compliance with the provisions of this
Agreement, Balboa (or Balboa's representative, as applicable) shall
disclose only that portion of the information which is legally required to
be disclosed and will exercise reasonable efforts to obtain assurances that
the information disclosed will be treated confidentially.
Notwithstanding anything contained in this Agreement to the contrary,
Balboa may disclose any information that it is required to disclose in
order that Balboa not commit a violation of law.
5. Big O hereby agrees to reimburse Balboa for all reasonable out of pocket
expenses incurred by Balboa in attending the Investment Committee meetings.
Such reimbursements will be paid within ten (10) business days of the date
Big O receives Balboa's expense voucher and expense receipts.
6. The provisions of this Agreement shall terminate as to Balboa on the
earlier of (i) mutual agreement of the parties; (ii) six months from the
date PaineWebber's assignment to explore alternatives to enhance the values
of the Company is terminated; or; (iii) in the event that the nonpublic
information covered by this Agreement becomes publicly available other than
through disclosure by Balboa in breach of this Agreement.
7. This Agreement shall be governed by and interpreted under the laws of the
state of Colorado.
2
<PAGE>
This Agreement is executed as of the date and year first above written, and
may be executed in counterparts.
BIG O TIRES, INC.,
a Nevada corporation
By: John E. Siipola
---------------------------------------
/s/ John E. Siipola
---------------------------------------
John E. Siipola, Chairman
ATTEST:
/s/ Philip J. Teigen
----------------------------
Philip J. Teigen, Secretary
(S E A L)
Individually,
By: /s/ Kenneth W. Pavia, Sr.
--------------------------------------
Kenneth W. Pavia, Sr., individually
Balboa Investments Group, L.P.
By: /s/ Kenneth W. Pavia, Sr. G.P.
----------------------------------------
Kenneth W. Pavia, Sr., general partner
/s/ Scott R. Haber
---------------------------------------
Legal Counsel
3
<PAGE>
EXHIBIT 10.68
AMENDMENT NO. 1 TO THE
BIG O TIRES, INC. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST AGREEMENT
-------------------------------------------------------------------
Pursuant to and in accordance with the provisions of Section 10.5(a) of the
Big O Tires, Inc. Employee Stock Ownership Plan and Trust Agreement dated June
30, 1994 ("Plan and Trust Agreement"), the Company hereby amends the Plan and
Trust Agreement, effective as of September 12, 1994, as follows:
SECTION 10.5(a): This Section is amended to read as follows:
---------------
"(a) AMENDMENTS BY CORPORATION. The Corporation may at any time and
from time to time amend this plan and trust agreement, provided, however,
that no amendment shall be made at any time by the Corporation pursuant to
which the trust fund may be diverted to purposes other than for the
exclusive benefit of the participants and their beneficiaries, and provided
further that no amendment shall discriminate in favor of the employees or
partners, officers, shareholders or Highly Compensated Employees. All
amendments shall be in writing. Notwithstanding the foregoing, the plan
shall not be amended more than once every six (6) months, other than to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act, or the rules thereunder pursuant to Section 10.5b,
below."
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the
Plan and Trust Agreement effective this 12th day of September, 1994.
BIG O TIRES, INC.
By: /s/ John B. Adams
------------------------------
John B. Adams
Executive Vice President
EMPLOYER
COLORADO STATE BANK
By: /s/ Sharon L. Mowatt
------------------------------
Sharon L. Mowatt
Assistant Vice President and Trust Officer
TRUSTEE
<PAGE>
EXHIBIT 10.69
DEVELOPMENT MANAGEMENT AGREEMENT
--------------------------------
THIS DEVELOPMENT MANAGEMENT AGREEMENT ("Agreement") made as of the _____
day of September, 1994, by and between ROSS DEVELOPMENT MANAGEMENT GROUP, INC.,
a Colorado corporation, (hereinafter called "Development Manager") and BIG O
DEVELOPMENT, INC., a Colorado corporation, and BIG O TIRE, INC., a California
corporation, jointly and severally (hereinafter collectively called "Owner").
WHEREAS, the Owner is desirous of developing certain real property which it
is in the process of acquiring (each parcel of real property is individually
referred to herein as a "Site" and collectively as the "Sites") as is more
particularly described in Exhibit A (as amended from time to time) attached
hereto and incorporated herein by this reference. For purposes of this
Agreement, the Owner has designated its responsibilities hereunder to Big O
Tires, Inc. Franchise Approval Review Management Committee ("Farm Committee");
WHEREAS, the Owner desires to develop each Site as a Big O Tire Store based
on prototypical designs of Owner (each Site and all improvements to be
constructed on each Site are each referred to as the "Project" and collectively
referred to as the "Projects"); and
WHEREAS the Owner desires to engage Development Manager to supervise the
development and construction of the Projects on the terms and conditions
hereinafter set forth.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the parties hereinafter set forth, it is hereby agreed as
follows:
1. General Project Management Responsibilities. Development Manager
shall be responsible for managing and supervising the development of each
Project so that each Project is completed in accordance with (i) those certain
designs for the Projects ("Project Design") of Owner, which initial Project
Design (known as "Prototype I") is attached hereto and incorporated herein by
this reference as Exhibit B; (ii) that certain budget for the Project ("Project
Target Budget"), which initial Project Target Budget is attached hereto as
Exhibit C and incorporated herein by this reference, approved by Owner (Exhibits
A, B, and C are hereinafter collectively referred to as "Plan Documents"), as
the Plan Documents or any of them shall be amended from time to time as
hereinafter provided.
The development and construction of each Project shall be accomplished
serially, in phases, (each a Phase and collectively "Phases"), as defined below,
and the Development Manager shall have the responsibilities set forth below as
to each Phase. The commencement of the work of Development Manager for each
Phase shall occur upon the execution of the Authorization to Proceed
substantially in accordance with Exhibit D attached hereto; provided that an
Authorization to Proceed is executed with respect to a Site by Owner. The
amounts set forth on Exhibit C are estimates and will likely be adjusted on a
Site by Site basis from
2
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time to time to reflect variations in acquisition costs and construction costs.
The Phases shall consist of the following:
A. Phase A Work - Preliminary Due Diligence, Site Design and
Budgeting. Development Manager shall, with respect to each site, commence the
following activities:
(1) Review
documentation submitted by Owner;
(2) Review status of title including development restrictions
imposed by private covenants and/or zoning, subdivision or similar ordinances;
(3) Review (to the extent available) soils and
environmental reports;
(4) Preparation of site plan sketches showing proposed layout,
parking configuration and adjacent streets in accordance with applicable
requirements and restrictions;
(5) Preparation of preliminary development budget;
(6) Preparation of Phase A Summary Report of findings, including
recommendation of Development Manager as to whether or not to proceed;
B. Phase B - Architectural, Engineering Entitlements and Final GMP
Budget. If Owner, after review of the Phase A Summary Report elects to proceed,
Development Manager shall, upon receipt of a Phase B Authorization to Proceed,
commence the following activities:
(1) To the extent not previously accomplished, obtain a
soils report;
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<PAGE>
(2) To the extent not previously accomplished, obtain a "Phase I"
environmental report of a Site from the seller of a Site;
(3) Finalize the site plan for a Project;
(4) Prepare Architectural/Engineering, Construction Documents and
Bid Specifications in accordance with an approved site plan;
(5) Prepare final budget;
(6) Negotiate and execute contracts for construction (Guaranteed
Maximum Price);
(7) Negotiate contracts for acquisition of a Site; and
(8) Prepare Phase B Summary Report of findings including
recommendation of Development Manager as to whether or not to proceed.
C. Phase C - Site Acquisition and Construction. If Owner, after
review of the Phase B Summary Report, elects to proceed, Development Manager
shall, upon receipt of a Phase C Authorization to Proceed, commence the
following activities:
(1) Acquire the Site in the name of the Owner at the price not in
excess of that amount set forth in Exhibit C;
(2) Obtain all required permits required for construction
activities; and
(3) Commence and complete construction.
4
<PAGE>
2. Controls.
A. Development Manager shall establish and implement appropriate
administrative and financial controls for the design and construction of each
Project in accordance with the requirements set forth herein. Without limiting
the foregoing, the Development Manager shall:
(1) select all professionals to be utilized in the acquisition of
a Site and the development of the Project, including, without limitation,
architects, engineers, attorneys, contractors, and consultants in connection
with the design and development of the Project (the "Project Team");
(2) subject to paragraph 6D hereof, contract with the individuals
comprising the Project Team, in Development Manager's own name, for completion
of the Project in accordance with the Project Design, at costs not to exceed the
Project Budget and within the time frame set forth in the Project Schedule,
subject to paragraph 19 of this Agreement, and each such contract shall be in
the name of Development Manager and include a provision that Owner is a third
party beneficiary of such contract and that Owner shall have the right, in
addition to Development Manager, to enforce such contract and exercise all
remedies under such contract (all warranties under each contract shall be
assigned to Owner);
(3) coordinate and administer the activities of the Project Team;
(4) perform all due diligence investigations related to a Site as
Development Manager deems reasonably necessary;
5
<PAGE>
(5) participate in conferences and render advice and assistance to
aid in developing economical, efficient and desirable design and construction
procedures;
(6) review, approve for payment, and submit to the Owner for
approval and payment of all certified applications for payments under any
architectural agreement, or general contractor's agreement providing funds for
the benefit of the Owner for the design or construction of the Project, which
submittal shall be made on a monthly basis;
(7) monitor and supervise compliance with all terms and conditions
applicable to the Owner or the Project contained in any governmental permit or
approval required or obtained for the lawful construction of the Project or in
any insurance policy affecting or covering the Project;
(8) furnish such consultation and advice relating to the Project
as may be reasonably requested from time to time by the Owner;
(9) keep the Owner fully informed on a regular basis, through the
furnishing of reports for Farm Committee review, together with attendance at
periodic meetings to discuss and review the status and the progress of the
design and construction of each Project.
(10) implement and review compliance of all of the Owner's
instructions, requirements, and approvals and all agreements with the Project
Team; and
(11) file on behalf of Owner any notices of completion required or
permitted to be filed upon the completion of
6
<PAGE>
any portion of the Project and take such customary and reasonable actions as may
be required to supervise the obtaining of all certificates of occupancy or
equivalent documents required to permit the occupancy of any portion of the
Project.
B. Development Manager shall use reasonable efforts to insure that
the Project Architect ("Architect"), and the other qualified consultants inspect
the progress of construction of the Project to verify, among other matters, that
the construction is being carried out substantially in accordance with the Plan
Documents and to have the Project Architect so certify in writing along with
each construction draw request. In the event construction or such inspections
are not being so carried out based upon Development Manager's own inspection of
the Project or reports obtained from such Architect or consultants, Development
Manager shall promptly notify the Owner and take appropriate action to minimize
loss or delay in the construction of the Project and to protect Owner's right to
enforce compliance with the Plan Documents and the respective agreements entered
into with the members of the Project Team.
C. Development Manager shall hire and retain, at the expense of
Development Manager and as employees of Development Manager, and not as
employees of the Owner, such personnel as may be required to properly perform
Development Manager's functions hereunder. The compensation, retention and
performance of Development Manager's employees shall be controlled exclusively
by Development Manager, and Development Manager shall be responsible for
complying with all laws and regulations affecting such
7
<PAGE>
employment, including the provisions of any benefits or compensation required by
statute or contract. Development Manager, on behalf of itself and any employee,
understands and agrees that it shall not be entitled to any of the rights and
privileges established for Owner's employees, including, but not limited to, the
following: retirement benefits, medical insurance coverage, life insurance
coverage, disability insurance coverage, severance pay benefits, paid vacation
and sick pay, overtime pay, or any of them. Development Manager understands and
agrees that Owner will not pay or withhold from the compensation paid to the
Development Manager pursuant to this Agreement any sums customarily paid or
withheld for or on behalf of employees for income tax, unemployment insurance,
Social Security, worker's compensation or any other withholding tax, insurance
or payment pursuant to any law or governmental regulation, and all such payments
as may be required by law are the sole responsibility of Development Manager.
Owner shall have no responsibility for any of Development Manager's debts,
liabilities or other obligations, or for the intentional, reckless or negligent
acts or omissions of Development Manager or Development Manager's employees or
agents.
D. Development Manager shall manage, review and monitor the
construction activities on the Project with regard to compliance with all
applicable laws, ordinances, orders, rules, regulations and requirements
(hereinafter called "Laws") of all federal, state and municipal governments,
courts, departments, commissions, boards and offices, any national or local
Board of Fire Underwriters or Insurance Services Offices having jurisdiction
8
<PAGE>
in any applicable state, or any political subdivision thereof, or any other body
exercising functions similar to those of any of the foregoing, or any insurance
carriers providing any insurance coverage for the Owner or the Project or any
part thereof. Development Manager retains the sole and absolute discretion in
the manner and means of the construction of the Project, subject to the approved
plans.
E. Development Manager shall assemble and retain all contracts,
agreements and other records and data as may be necessary to complete the
Project and to carry out Development Manager's functions hereunder.
F. Development Manager shall implement the decisions of the Owner
made in connection with the design, development and construction of the Project
and any policies and procedures relating thereto, and shall perform the other
services and responsibilities of Development Manager which are set forth in this
Agreement.
G. Development Manager shall make sure that, before payments are made
to general contractor, subcontractors, materialmen, laborers or suppliers for
work done on the Project or for services or materials supplied to the Project,
such contractors, materialmen, laborers and suppliers execute a lien waiver with
respect to all work being paid for by Owner.
H. Development Manager shall manage compliance of all contracts
entered into with respect to the Project and, in the event of a material default
under any such contract, Development
9
<PAGE>
Manager shall immediately notify Owner of such default and shall implement any
appropriate enforcement action.
3. Construction.
A. General Construction Covenants. In performing its duties
hereunder (and without limitation upon the same), Development Manager shall:
(1) manage, review, monitor and supervise all activities in
connection with the Project so that: (a) construction and completion of the
Project are in a good, workmanlike and substantial manner, free, to the actual
knowledge of Development Manager after due investigation, from material defects;
(b) there will be no encroachment onto adjoining land or onto any easements; and
(c) the Project will have adequate water supply, storm and sanitary sewage
facilities, telephone, electricity, fire protection, and means of ingress and
egress to and from public highways or areas of shopping centers or similar
developments and any other required public utilities for the Project as verified
in writing by the supplier of such utilities in accordance with the approved
plans. Development Manager shall promptly notify Owner of any problems with the
foregoing items.
B. Commencement and Completion Dates. Development Manager shall use
its reasonable efforts to cause commencement and completion of the Project in
accordance with the Project Schedule, subject to paragraph 19 of this Agreement
and if the Project Schedule is not being adhered to, the Development Manager
shall
10
<PAGE>
take appropriate action to rectify the problem after consultation with Owner.
C. Completion Evidence. Development Manager shall use its reasonable
efforts to cause to be delivered the following items to the Owner on or before
the date on which the Project shall be substantially completed (and shall
otherwise deliver the same as soon thereafter as is possible): (1) a
certificate from the Project Architect, addressed to the Owner and certifying
substantial completion in accordance of a Project; (2) certificates of occupancy
relating to a Project; (3) complete as-built plans and specifications for a
Project showing all the utilities and improvements; (4) detailed schedules
showing the percentage breakdown of the cost of construction to the components
of the Project; and (5) evidence that (a) all necessary utility services for the
Project are available and are fully operational, and (b) all work and materials
incorporated into the Project have been fully paid for and mechanics lien
waivers have been obtained from the general contractor, all subcontractors,
materialmen, and suppliers who have performed work on or supplied materials or
services to the Project.
D. Costs of Construction. The fixed and variable costs and expenses
of the acquisition of a Site and the construction and completion of the Projects
shall be borne by the Owner (collectively the "Costs"). From time to time
during the development and construction of the improvements for a Project, not
more than one (1) time per month, Development Manager shall submit
11
<PAGE>
to Owner a request for advance (the "Advance Request"), executed by both the
General Contractor or Construction Manager and by the Project Architect, as
updated from time to time in the form of Exhibit E, detailing the nature and
amount of work and materials furnished to the date of the Advance Request,
including identification of the parties furnishing such work and the materials,
supporting invoices and mechanic's lien waivers from each such party. Upon
receipt of the Advance Request, together with the support documentation set
forth above, the Owner shall disburse to Development Manager the amounts set
forth in the Advance Request within three (3) business days of receipt of the
Advance Request. Development Manager shall not be deemed to be in default
hereunder or to be responsible to the extent a default hereunder is caused by
the Owner's failure to provide the funds to pay for the costs and expenses
incurred in the construction and completion of the Project or to take any other
action required of Development Manager under this Agreement. Owner shall
indemnify and hold Development Manager harmless from any loss, damage, cost, or
expense, including reasonable attorneys' fees, arising out of the failure to
timely fund a Draw Request.
E. Security for Costs of Construction. In order to secure Owner's
obligations hereunder to pay the Costs, Owner shall:
(1) Deliver to Development Manager a clean irrevocable letter of
credit issued by a financial institution reasonably acceptable to Development
Manager pursuant to the following terms:
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<PAGE>
(i) Owner shall tender to Development Manager a letter of credit (the
"Letter of Credit") in an amount equal to 33 1/3% of the aggregate Costs for all
approved Projects (excluding the cost of any land acquisition), but no less than
Five Hundred Thousand Dollars ($500,000.00) at any time. The face amount of the
Letter of Credit will be adjusted from time to time in accordance with the
customary procedures of the issuer of the Letter of Credit to comply with the
requirements of this subsection.
(ii) In the event that Owner fails to timely pay an Advance Request,
Development Manager may one (1) day after notice to Owner, draw upon the Letter
of Credit from time to time in an amount necessary to fund an Advance Request.
(iii) Owner agrees not to interfere in any way with payment to
Development Manager of the proceeds of the Letter of Credit either prior to or
following presentment by Development Manager of the appropriate documents to
draw upon the Letter of Credit. Owner shall be liable to Development Manager
for any loss suffered by Development Manager as a result of such interference,
and Owner agrees that it may be enjoined from interfering or attempting to
interfere, directly or indirectly, with Development Manager's negotiation of the
letter of credit.
4. Warranties. Development Manager shall obtain customary warranties
from all Contractors and Suppliers and shall cause all warranties and guaranties
supplied by any party, including, but not limited to, the general contractor,
subcontractors and manufacturers on those appliances and fixtures installed in
or on
13
<PAGE>
the Project which shall run in favor of and be enforceable by the Owner and
Development Manager.
5. Accounts and Records.
A. Development Manager, on behalf of the Owner, shall keep or cause
to be kept by the contractors all construction books of account and other
records for the Project as customarily maintained, including, but not limited
to, records relating to the costs of construction and construction advances.
All accounts and records relating to a Project, including all correspondence,
shall be Owner's property and shall be delivered to the Owner upon demand
without charge therefor or upon completion of a Project.
B. Records and accounts shall be maintained on a basis reasonably
determined by the Owner and shall be sufficient to permit the preparation
therefrom of financial statements in accordance with generally accepted
accounting principles and shall be adequate to provide the Owner with all
financial information as may be needed by the Owner.
C. All books and records prepared or maintained by Development
Manager shall be kept and maintained at all times at the principal place of
business of Development Manager and shall be available for and subject to audit,
inspection and copying by the Owner, and any representative or auditor therefor
or supervisory or regulatory authority during ordinary business hours.
6. Insurance.
A. Development Manager shall cause to be obtained and maintained at
all times until final completion of construction of
14
<PAGE>
the Project, general public liability insurance, in an amount not less than
$2,000,000.00 covering claims for personal injury, including, but not limited
to, bodily injury, or property damage. Such insurance shall include contractual
liability, broad form property damage and personal injury (including, but not
limited to, bodily injury), covering the Development Manager's performance of
all work or services at or from the Project. Such policy shall also include
coverage thereunder, for bodily injury liability and property damage liability,
and automobile insurance on any owned or non-owned, hired or leased automotive
equipment used in furthering completion of any services or work.
B. In addition to the insurance coverage for the Project and the
Owner required to be maintained by Development Manager pursuant to subparagraph
A, at all times during the term of this Agreement, Development Manager shall, at
its own cost and expense, secure and maintain workers' compensation insurance
and employer's liability insurance covering all persons employed by Development
Manager in connection with the Project and with respect to whom death or bodily
injury claims could be asserted in an amount not less than the minimum amount
required to be carried as liability insurance pursuant to subparagraph A hereof.
C. All insurance provided for in this paragraph shall be effected
under valid, enforceable policies issued by insurers of recognized
responsibility and shall be subject to the approval of the Owner. Development
Manager shall furnish to the Owner, immediately upon execution hereof and
thereafter prior to
15
<PAGE>
expiration of each policy during the term of this Agreement, a certificate or
certificates evidencing the above insurance, such certificates shall name each
of the Additional Insureds, as hereinafter defined as additional insureds
thereunder. Development Manager shall immediately notify the Owner in the event
that any of its insurance carriers cancel or modify any of such insurance, and
shall also notify (and shall cause such insurance policies to provide for notice
to) the Owner at least thirty (30) days prior to changing insurance carriers or
cancellation of any policy; provided that the notification hereinabove required
shall not relieve Development Manager of its obligation to maintain continuously
in effect the types and amounts of insurance specified above.
7. Owner Approvals. Notwithstanding any provisions of this Agreement,
Development Manager shall not take any action, expend any sum, make any
decision, give any consent, approval or authorization, enter into any agreement
or incur any obligation with respect to any of the following matters unless and
until the same have been approved by the Owner in writing:
A. Any proposed material change in the plans and specifications of a
Project therefor as previously approved by the Owner, or in the cost thereof, or
any other change which would materially affect the design, cost, value or
quality of the Project.
B. Any expenditure or incurrence of any obligation which, when added
to any other expenditures, exceeds the Project Budget.
16
<PAGE>
8. Fees.
A. Development Manager shall be paid as its compensation pursuant to
this Agreement ("Development Manager's Fee") a fee of $25,000.00 per Project as
follows:
(1) The Development Manager's Fee shall be disbursed from time to
time as part of an Advance Request;
(2) Upon commencement of the Phase A work, Owner shall pay
Development Manager a fee of $1,000.00;
(3) Upon commencement of the Phase B work, Owner shall pay
Development Manager a fee of $9,000.
(4) Provided the Phase C activities are authorized, the balance of
Development Manager's fee shall be paid in three (3) monthly installments of
$5,000.00 each.
9. Duration and Termination. Unless sooner terminated as provided
herein, this Agreement shall remain in effect until the final completion date of
the Projects and payment of all sums to be paid under a Project Budget to third
parties.
10. Independent Contractor. In performing its services hereunder,
Development Manager shall be an independent contractor and not an employee,
agent, or partner of the Owner.
11. Ownership of Information and Materials. Development Manager shall,
upon completion of Development Manager's services or any sooner termination of
this Agreement, deliver to the Owner all written data and information generated
by or for Development Manager in connection with the Project or supplied to
Development Manager by the Owner, or any of the Contractors and Suppliers, and
17
<PAGE>
all drawings, plans, books, records, contracts, agreements and all other
documents and writings in its possession relating to its services or the Project
and the Owner shall have the right to use the same without further compensation
to Development Manager. Such data and information and all such documents shall
at all times be the property of the Owner. Development Manager agrees, for
itself and all persons retained or employed by Development Manager in performing
its services, to hold in confidence and not to use or disclose to others any
confidential or proprietary information of the Owner heretofore or hereafter
disclosed to Development Manager or any such persons designated as such by the
Owner, including, but not limited to, any data, information, plans, programs,
processes, equipment, costs, operations or customers which may come within the
knowledge of Development Manager or any such persons in the performance of, or
as a result of, its services.
12. Authority of Development Manager. Development Manager shall have no
right or authority, express or implied, to commit or otherwise obligate the
Owner in any manner whatsoever except to the extent specifically provided
herein. Development Manager shall have no right or interest in the Project, nor
any claim or lien with respect thereto, arising out of this Agreement or the
performance of its services.
13. Licenses. Development Manager shall, at its own expense, qualify to
do business and obtain and maintain such licenses as may be required for the
performance by Development Manager of its services. Further, Development
Manager shall verify that all of
18
<PAGE>
the Contractors and Suppliers have obtained and maintain all licenses required
for the performance of their duties on the Project, and Development Manager
shall take appropriate action within its ability to cause such Contractors and
Suppliers to obtain such licenses in the event such licenses are not held or
maintained.
14. Survival; Further Instruments. All warranties, representations,
covenants, obligations and agreements contained in this Agreement shall survive
the completion of the Project and other transactions hereunder and any and all
performances hereunder. All warranties and representations shall be effective
regardless of any investigation made or which could have been made. Each party
will, whenever and as often as it shall be requested to do so by the other,
cause to be executed, acknowledged and delivered any and all such further
instruments and documents as may be necessary or proper, in the reasonable
opinion of the requesting party, in order to carry out the intent and purpose of
this Agreement.
15. Miscellaneous. This Agreement contains the entire agreement between
the parties respecting the matters herein set forth and supersedes all prior
agreements between the parties hereto respecting such matters. Time is of the
essence of each provision of this Agreement; however, if any action is required
to be taken hereunder, or any event is required to occur hereunder, within a
time period the last day of which is a non-business day (i.e., a Saturday, a
Sunday or a national holiday), then such time
19
<PAGE>
period shall be deemed to be extended to the immediately following business day.
Paragraph headings shall not be used in construing this Agreement. If any party
obtains a judgment against any other party by reason of breach of this
Agreement, a reasonable attorneys' fee as fixed by the court shall be included
in such judgment. Except as herein expressly provided, no remedy conferred upon
a party in this Agreement is intended to be exclusive of any other remedy herein
or by law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Except as herein expressly provided, no waiver
by a party of any breach of this Agreement or of any warranty or representation
hereunder by the other party shall be deemed to be a waiver of any other breach
by such other party (whether preceding or succeeding and whether or not of the
same or similar nature), and no acceptance of payment or performance by a party
after any breach by any other party shall be deemed to be a waiver of any breach
of this Agreement or of any representation or warranty hereunder by such other
party whether or not the first party knows of such breach at the time it accepts
such payment or performance. No failure or delay by a party shall operate as a
waiver of default or modification of this Agreement or shall prevent the
exercise of any right by the first party while the other party continues to be
so in default. This Agreement shall be construed and enforced in accordance
with the laws of the State of Colorado.
20
<PAGE>
16. Successors and Assigns. Development Manager may not assign or
transfer its rights or obligations under this Agreement without the prior
written consent of the Owner (in which event such transferee shall assume in
writing all of the transferor's obligations hereunder, but such transferor shall
not be released from its obligations hereunder). No consent to such transfer or
assignment shall be construed as a consent to any other transfer or assignment.
No transfer or assignment in violation of the provisions hereof shall be
enforceable. Subject to the foregoing, this Agreement and the terms and
provisions hereof shall inure to the benefit of and be binding upon the
successors and assigns of the parties. In the event the rights and obligations
of a party shall be transferred and assigned as permitted hereunder or pursuant
to the consent of the other party, such transferee and assignee will be
substituted in place of such assignor in the documents, agreements and items
herein provided, and it shall be entitled to the benefit of and may enforce the
covenants, representations and warranties hereunder.
17. Notices. Any notice which a party is required or may desire to give
the other shall be in writing and may be personally delivered or given by United
States registered or certified mail, return receipt requested, addressed as
follows: to Development Manager, Cyrus A. Hackstaff, III, Executive Vice-
President, Ross Development Management Group, Inc., 730 17th Street, Suite 500,
Denver, Colorado 80202; if to the Owner, Big O Development, Inc., 11755 E.
Peakview, Englewood, Colorado 80111. Any notice so given
21
<PAGE>
by United States mail shall be deemed to have been given on the third (3rd) day
after the same is deposited in the United States mail as registered or certified
matter, addressed as above provided, with postage thereon fully prepaid. Any
such notice not given by registered or certified mail shall be deemed given upon
receipt of the same by the party to whom the same is to be given.
18. Confidentiality. Development Manager agrees to keep all matters with
respect to the Project, including the terms of this Agreement, strictly
confidential and shall not disclose such matters except as required by law or
except as necessary or appropriate for the development of the Project, and
except to persons having a confidential relationship with Development Manager
such as attorneys or accountants, without the prior written approval of Owner.
Development Manager shall be entitled, however, to announce its appointment as
the development manager for the Projects.
19. Force Majeure. Whenever there is, provided in this Agreement, a time
limitation for performance by Development Manager or Owner of any obligation of
such party under this Agreement, the time provided for shall be extended for as
long as and to the extent that delay in compliance with such limitation is due
to an act of God, governmental control or other factors beyond the reasonable
control of such party.
22
<PAGE>
20. Limited Liability. Except as to matters involving negligence or
misconduct by Development Manager as to which no limit of liability shall apply,
Development Manager's liability hereunder for damages, actual, punitive or
consequential, arising from its acts or omissions under this Agreement, shall be
limited to the amount payable hereunder plus costs and attorneys' fees incurred
by Owner in pursuing such claim.(*)
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
DEVELOPMENT MANAGER:
ROSS DEVELOPMENT MANAGEMENT GROUP,
INC., a Colorado corporation
/s/ Richard McClintock
By:______________________________________
President
Its:_____________________________________
OWNER:
BIG O DEVELOPMENT, INC., a Colorado corporation
/s/ Ronald Lautzenheiser
By:______________________________________
Vice President Business Development
Its:_____________________________________
BIG O TIRES, INC., a Nevada corporation
/s/ John B. Adams
By:______________________________________
Executive V. P.
Its:_____________________________________
23
<PAGE>
(*) Notwithstanding the foregoing, with respect to claims against Development
Manager related to claimed defects in construction or materials, Development
Manager's liability shall be limited to the liability contained in the
warranties of the general contractor and/or construction manager engaged by
Development Manager for a Project, and only for the warranty period set forth in
their respective agreements with Development Manager (collectively, "Contractor
Agreements"). Any claim for such defects must be asserted against Development
Manager within the period set forth in such Contractor Agreements and in no
event later than three (3) years after such defect (whether latent or patent)
arose.
23a
<PAGE>
EXHIBIT A
---------
Sites/Project in Process Between Big O Tire
and Ross Development Management Group, Inc.
<PAGE>
EXHIBIT B
---------
[Project Design - Elevation - Appears Here]
<PAGE>
[Project Design - Floor Plan - Appears Here]
<PAGE>
[Project Design - Equipment Locations - Appears Here]
<PAGE>
EXHIBIT C
---------
Project Target Budget
Big O Tire and Ross Development Management Group, Inc.
[Description of Fixed Costs made up of Hard and Soft Costs as well
as variable Costs made up of Land Acquisition and site works and
Big O Loan and Administrative Charges - Appears Here]
<PAGE>
EXHIBIT D
---------
Authorization to Proceed
Big O Tire and Ross Development Management Group, Inc.
[Authorization sheet to Proceed as to Phases A, B and C - Appears here]
<PAGE>
Exhibit E Project and Construction Draw Format
Big O Tire and Ross Development Management Group. Inc.
[Construction Draws as to Project Phases A, B, and C Appears Here]
<PAGE>
APPLICATION AND CERTIFICATION FOR PAYMENT
[Contractor's Application for Payment - Appears Here]
<PAGE>
EXHIBIT 10.70
HORST K. MEHLFELDT
207 LAKE POINTE DRIVE
AKRON, OHIO 44333-1788
February 20, 1995
Mr. John B. Adams
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, CO 80111
Dear John,
This confirms that the consulting agreement between Big O Tires, Inc. and myself
dated September 22, 1994 is cancelled by mutual agreement effective February 15,
1995.
Sincerely,
/s/ Horst K. Mehlfeldt
Horst K. Mehlfeldt
HKM/ctd
cc: Steve Cloward
John Siipola
<PAGE>
Exhibit 10.71
1995 INCENTIVE BONUS PLAN
FOR TOM STAKER - SENIOR V.P. OPERATIONS - CORPORATE
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
-----------
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. EARNINGS PER SHARE
This criterion is defined as the earnings per share for 1995 as reported in
the Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
25% 1994 Actual $ 1.16 $1.28
ANNUAL BONUS: $0 $13,490 150% of target
</TABLE>
SECTION 2. RETURN ON ASSETS
This criterion is defined as the ratio of the Company's total assets
(tangible and intangible) divided by the Company's net income before taxes
as reported in the 1995 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
30% 1994 Actual 6.66% 7.50%
ANNUAL BONUS: $0 $16,188 150% of target
</TABLE>
1
<PAGE>
SECTION 3. SALES GROWTH
This criterion is defined as the actual total sales dollar volume vs. the
budget total sales dollar volume as reported in the 1995 Annual Report on
Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
25% 1994 Actual 1995 Budget Target + 5%
ANNUAL BONUS: $0 $13,490 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $10,792 N/A
ANNUAL
TOTALS: 100% $0 $53,958 $75,541
</TABLE>
SECTION 5. TERMS AND CONDITIONS
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
2
<PAGE>
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided
by the sum of maximum goal minus target goals divided by 2 plus 1
times the target goal dollars.
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
----------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
(Signature of) 1/28/95
---------------------------------- -------
Steven P. Cloward Date
President & CEO - Corporate
BIG O TIRES, INC.
AGREED TO:
(Signature of) 1/24/95
---------------------------------- -------
Tom Staker Date
Senior V.P. Operations - Corporate
BIG O TIRES, INC.
Revised January 17, 1995
3
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR KELLEY O'REILLY - V.P. MARKETING - CORPORATE
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. EARNINGS PER SHARE
This criterion is defined as the earnings per share for 1995 as reported in
the Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% 1994 Actual $ 1.16 $1.28
ANNUAL BONUS: $0 $5,547 150% of target
</TABLE>
SECTION 2. SALES GROWTH
This criterion is defined as the actual total sales dollar volume vs. the
budget total sales dollar volume as reported in the 1995 Annual Report on Form
10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
40% 1994 Actual 1995 Budget Target + 5%
ANNUAL BONUS: $0 $11,094 150% of target
</TABLE>
4
<PAGE>
SECTION 3. DEPARTMENT 12/42/45 PROFITABILITY
This criterion is defined as the actual vs. budgeted net profit (loss)
before taxes for the year from the above referenced department(s) as
determined by Accounting and reported in your department's financial
statement.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $5,547 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $ 5,547 N/A
ANNUAL
TOTALS: 100% $0 $27,735 $38,829
</TABLE>
SECTION 5. TERMS AND CONDITIONS
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
5
<PAGE>
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided
by the sum of maximum goal minus target goals divided by 2 plus 1
times the target goal dollars.
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
----------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
(Signature of) 1/28/95
--------------------------- -------
Steven P. Cloward Date
President & CEO - Corporate
BIG O TIRES, INC.
AGREED TO:
(Signature of) 1/23/95
--------------------------- -------
Kelley O'Reilly Date
V.P. Marketing - Corporate
BIG O TIRES, INC.
Revised January 17, 1995
6
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR RON LAUTZENHEISER - V.P. BUSINESS DEVELOPMENT - CORPORATE
------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
-----------
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. NEW STORE OPENINGS - TOTAL
---------
This criterion is defined as the 1995 new store openings that are open for
business as of the 31st of December, 1995. New store openings may be
adjusted at year end as they are conditional upon available financing as
well as interest rates with the final determination made by the CEO.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
50% 21 36 42
ANNUAL BONUS: $0 $19,167 150% of target
</TABLE>
SECTION 2. DEPARTMENT 22/62 PROFITABILITY
---------
This criterion is defined as the actual vs. budgeted net profit (loss)
before taxes for the year from the above referenced department(s) as
determined by Accounting and reported in your department's financial
statement. Budgeted net profit will be adjusted for lack of store growth by
changing budgeted expense categories tied directly to new store growth
(i.e., training expense, franchise fee income, etc.).
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
15% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $5,750 150% of target
</TABLE>
<PAGE>
1995 MBO - Ron Lautzenheiser
Page 2
SECTION 3. FRANCHISE FEE INCOME
---------
This criterion is defined as actual income derived from opening new
franchises vs. 1995 budgeted income, as reported in your department's
financial statements. It may be adjusted for stores not opened as new store
openings are conditional upon available financing and interest rates. Any
adjustment made will tie back to the adjustment, if any, used for
calculations in Section 1.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ----------- ---------------
<S> <C> <C> <C>
15% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $5,750 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
---------
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ----------- ---------------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $7,667 N/A
ANNUAL
TOTALS: 100% $0 $38,333 $53,666
</TABLE>
SECTION 5. TERMS AND CONDITIONS
---------
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
<PAGE>
1995 MBO - Ron Lautzenheiser
Page 3
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided by
the sum of maximum goal minus target goals divided by 2 plus 1 times
the target goal dollars.
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
--------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75 bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
/s/ Steven P. Cloward 2/7/95
---------------------- -----------------
Steven P. Cloward Date
President & CEO - Corporate
BIG O TIRES, INC.
AGREED TO:
/s/ Ron Lautzenheiser 2-7-95
---------------------- -----------------
Ron Lautzenheiser Date
V.P. Business Development - Corporate
BIG O TIRES, INC.
Revised February 7, 1995
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR BRUCE WARE - REGIONAL V.P. - NORTHWEST REGION
-------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
-----------
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. REGIONAL PROFITABILITY
---------
This criterion is defined as the actual vs. budgeted profit before taxes
and warranty expense for your region, including area support and management
as reported in your region's consolidated, year-to-date income statement.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
40% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $12,750 150% of target
</TABLE>
SECTION 2. ACCOUNTS RECEIVABLE - % CURRENT - REGION
---------
This criterion is defined as the monthly average for the current (30 days
or less) A/R balance as reported on the Regional Aged Trial Balance report
run by due date as a percent of the total monthly average A/R balance
outstanding for the region excluding inter-warehouse receivables.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
20% 85% 90% 94%
ANNUAL BONUS: $0 $6,375 150% of target
</TABLE>
<PAGE>
SECTION 3. RETURN ON ASSETS
---------
This criterion is defined as the ratio of the Company's total assets
(tangible and intangible) divided by the Company's net income before taxes
as reported in the 1995 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
20% 1994 Actual 6.66% 7.50%
ANNUAL BONUS: $0 $6,375 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
---------
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $6,375 N/A
ANNUAL
TOTALS:100% $0 $31,875 $44,625
</TABLE>
SECTION 5. TERMS AND CONDITIONS
---------
1. The criteria outlined in the above sections are considered singular
and bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason
in 1995, no annual bonus or any part thereof shall be deemed to be
earned and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
<PAGE>
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided by
the sum of target goal minus threshold goal, times the target dollars, or;
2) For achievement above target - achievement divided by the sum of
maximum goal minus target goals divided by 2 plus 1 times the target goal
dollars.
Example:
<TABLE>
<CAPTION>
THRESHOLD TARGET MAXIMUM
--------- ------ -------
<S> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $1,000 $1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
/s/ Tom Staker 2/16/95
------------------------------ ------------
Tom Staker Date
Senior V.P. Operations - Corporate
BIG O TIRES, INC.
AGREED TO:
/s/ Bruce Ware 2/1/95
------------------------------ ------------
Bruce Ware Date
Regional V.P. - Northwest Region
BIG O TIRES, INC.
Revised March 27 1995
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR GREG ROQUET - REGIONAL V.P. SOUTHWEST REGION
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. REGIONAL PROFITABILITY
This criterion is defined as the actual vs. budgeted profit before taxes
and warranty expense for your region, including area support and management
as reported in your region's consolidated, year-to-date income statement.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
40% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $6,917 150% of target
</TABLE>
SECTION 2. ACCOUNTS RECEIVABLE - % CURRENT - REGION
This criterion is defined as the monthly average for the current (30 days
or less) A/R balance as reported on the Regional Aged Trial Balance report
run by due date as a percent of the total monthly average A/R balance
outstanding for the region excluding inter-warehouse receivables.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
20% 85% 90% 94%
ANNUAL BONUS: $0 $3,458 150% of target
</TABLE>
13
<PAGE>
SECTION 3. RETURN ON ASSETS
This criterion is defined as the ratio of the Company's total assets
(tangible and intangible) divided by the Company's net income before taxes
as reported in the 1995 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
20% 1994 Actual 6.66% 7.50%
ANNUAL BONUS: $0 $3,458 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $ 3,458 N/A
ANNUAL
TOTALS: 100% $0 $17,292 $24,209
</TABLE>
SECTION 5. TERMS AND CONDITIONS
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
14
<PAGE>
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided by
the sum of maximum goal minus target goals divided by 2 plus 1 times
the target goal dollars.
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
----------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
(Signature of) 2/20/95
---------------------------------- -------
Tom Staker Date
Senior V.P. Operations - Corporate
BIG O TIRES, INC.
AGREED TO:
(Signature of) 1-31-95
---------------------------------- -------
Greg Roquet Date
Regional V.P. - Southwest Region
BIG O TIRES, INC.
Revised January 17, 1995
15
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR GREG ROQUET - REGIONAL V.P. - WEST CENTRAL REGION
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. REGIONAL PROFITABILITY
This criterion is defined as the actual vs. budgeted profit before taxes
and warranty expense for your region, including area support and management
as reported in your region's consolidated, year-to-date income statement.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- -------
<S> <C> <C> <C>
40% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $6,917 150% of target
</TABLE>
SECTION 2. ACCOUNTS RECEIVABLE - % CURRENT - REGION
This criterion is defined as the monthly average for the current (30 days
or less) A/R balance as reported on the Regional Aged Trial Balance report
run by due date as a percent of the total monthly average A/R balance
outstanding for the region excluding inter-warehouse receivables.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% 85% 90% 94%
ANNUAL BONUS: $0 $3,458 150% of target
</TABLE>
16
<PAGE>
1995 MBO - Greg Roquet, West Central Region
Page 2
SECTION 3. RETURN ON ASSETS
This criterion is defined as the ratio of the Company's total assets
(tangible and intangible) divided by the Company's net income before taxes
as reported in the 1995 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% 1994 Actual 6.66% 7.50%
ANNUAL BONUS: $0 $3,458 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $ 3,458 N/A
ANNUAL
TOTALS: 100% $0 $17,292 $24,209
</TABLE>
SECTION 5. TERMS AND CONDITIONS
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
17
<PAGE>
1995 MBO - Greg Roquet, West Central Region
Page 3
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided by
the sum of maximum goal minus target goals divided by 2 plus 1 times
the target goal dollars.
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
----------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
(Signature of) 2/20/95
----------------------------------- -------
Tom Staker Date
Senior V.P. Operations - Corporate
BIG O TIRES, INC.
AGREED TO:
(Signature of) 2-1-95
----------------------------------- ------
Greg Roquet Date
Regional V.P. - West Central Region
BIG O TIRES, INC.
Revised January 17, 1995
18
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR ALLEN JONES - REGIONAL V.P. SOUTHEAST REGION
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
-----------
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. REGIONAL PROFITABILITY
---------
This criterion is defined as the actual vs. budgeted profit before taxes
and warranty expense for your region, including area support and management as
reported in your region's consolidated, year-to-date income statement.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ----------- ---------------
<S> <C> <C> <C>
40% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $12,417 150% of target
</TABLE>
SECTION 2. ACCOUNTS RECEIVABLE - % CURRENT - REGION
---------
This criterion is defined as the monthly average for the current (30 days
or less) A/R balance as reported on the Regional Aged Trial Balance report run
by due date as a percent of the total monthly average A/R balance outstanding
for the region excluding inter-warehouse receivables.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ --------------
<S> <C> <C> <C>
20% 85% 90% 94%
ANNUAL BONUS: $0 $6,208 150% of target
</TABLE>
<PAGE>
1995 MBO - Allen Jones
Page 2
SECTION 3. RETURN ON ASSETS
---------
This criterion is defined as the ratio of the Company's total assets
(tangible and intangible) divided by the Company's net income before taxes as
reported in the 1995 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------- ---------------
<S> <C> <C> <C>
20% 1994 Actual 6.66% 7.50%
ANNUAL BONUS: $0 $6,208 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
---------
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- -------- ---------
20% N/A
ANNUAL BONUS: $0 $6,208 N/A
ANNUAL
TOTALS:100% $0 $31,042 $43,459
SECTION 5. TERMS AND CONDITIONS
---------
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
<PAGE>
1995 MBO - Bruce Ware
Page 3
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided by
the sum of maximum goal minus target goals divided by 2 plus 1 times
the target goal dollars.
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
--------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $ 0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
/s/ Tom Staker 2/16/95
--------------------------------- ----------
Tom Staker Date
Senior V.P. Operations - Corporate
BIG O TIRES, INC.
AGREED TO:
/s/ Bruce Ware 2/1/95
--------------------------------- ---------
Bruce Ware Date
Regional V.P. - Southeast Region
BIG O TIRES, INC.
Revised March 27 1995
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR PHIL TEIGEN - GENERAL COUNSEL - CORPORATE
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
-----------
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. EARNINGS PER SHARE
---------
This criterion is defined as the earnings per share for 1995 as reported in
the Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
50% 1994 Actual $1.16 $1.28
ANNUAL BONUS: $0 $8,897 150% of target
</TABLE>
SECTION 2. LEGAL EXPENSES BUDGET
---------
This criterion is defined as the actual total sales dollar volume vs. the
budget total sales dollar volume as reported in the 1995 Annual Report on Form
10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
<S> <C> <C> <C>
30% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $5,338 150% of target
</TABLE>
<PAGE>
SECTION 3. DISCRETIONARY
---------
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
WEIGHT THRESHOLD TARGET MAXIMUM
------ --------- ------ -------
[S] [C] [C] [C]
20% N/A
ANNUAL BONUS: $0 $3,559 N/A
ANNUAL
TOTALS: 100% $0 $17,794 $24,912
SECTION 4. TERMS AND CONDITIONS
---------
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided by
the sum of maximum goal minus target goals divided by 2 plus 1 times
the target goal dollars.
<PAGE>
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
--------- ------- -------
<C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 =
$383.75 bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
[SIGNATURE OF JOHN B. ADAMS] 3/1/95
------------------------------- -------------
John B. Adams Date
Executive V. P. and CFO Corporate
BIG O TIRES, INC.
AGREED TO:
[SIGNATURE OF PHIL TEIGEN] 3/1/95
------------------------------- -------------
Phil Teigen Date
General Counsel - Corporate
BIG O TIRES, INC.
Revised February 7, 1995
<PAGE>
1995 INCENTIVE BONUS PLAN
FOR DENNIS FRYER - REGIONAL V.P. - CENTRAL REGION
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. REGIONAL PROFITABILITY
This criterion is defined as the actual vs. budgeted profit before taxes
and warranty expense for your region, including area support and management
as reported in your region's consolidated, year-to-date income statement.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
40% 1994 Actual 1995 Budget Target + 10%
ANNUAL BONUS: $0 $12,500 150% of target
</TABLE>
SECTION 2. ACCOUNTS RECEIVABLE - % CURRENT - REGION
This criterion is defined as the monthly average for the current (30 days
or less) A/R balance as reported on the Regional Aged Trial Balance report
run by due date as a percent of the total monthly average A/R balance
outstanding for the region excluding inter-warehouse receivables.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% 85% 90% 94%
ANNUAL BONUS: $0 $6,250 150% of target
</TABLE>
25
<PAGE>
SECTION 3. RETURN ON ASSETS
This criterion is defined as the ratio of the Company's total assets
(tangible and intangible) divided by the Company's net income before taxes
as reported in the 1995 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% 1994 Actual 6.66% 7.50%
ANNUAL BONUS: $0 $6,250 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $ 6,250 N/A
ANNUAL
TOTALS: 100% $0 $31,250 $43,750
</TABLE>
SECTION 5. TERMS AND CONDITIONS
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
26
<PAGE>
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided
by the sum of maximum goal minus target goals divided by 2 plus 1
times the target goal dollars.
<TABLE>
<CAPTION>
Example:
THRESHOLD TARGET MAXIMUM
----------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
---------------------------------- -------
Tom Staker Date
Senior V.P. Operations - Corporate
BIG O TIRES, INC.
AGREED TO:
/s/ Dennis Fryer 2/22/95
---------------------------------- -------
Dennis Fryer Date
Regional V.P. - Central Region
BIG O TIRES, INC.
Revised January 17, 1995
27
<PAGE>
EXHIBIT 10.71
1995 INCENTIVE BONUS PLAN
FOR JOHN ADAMS - EXECUTIVE V.P. & CFO - CORPORATE
--------------------------------------------------------------------------------
THIS AGREEMENT OUTLINES THE CRITERIA, GOALS AND REWARDS FOR YOUR 1995 INCENTIVE
PLAN AS WELL AS THE TERMS AND CONDITIONS AS THEY APPLY TO YOUR PLAN.
DEFINITIONS:
THRESHOLD - The expected achievement goal for the criteria, at which and
below no bonus will be paid.
TARGET - The stretch goal at which 100% of the bonus will be paid out.
MAXIMUM - The extraordinary goal at which 150% of the bonus will be paid.
No additional bonus will be paid for achieving beyond this point.
SECTION 1. EARNINGS PER SHARE
This criterion is defined as the earnings per share for 1995 as reported in
the Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
30% 1994 Actual $1.16 $1.28
ANNUAL BONUS: $0 $22,575 150% of target
</TABLE>
SECTION 2. RETURN ON ASSETS
This criterion is defined as the ratio of the Company's total assets
(tangible and intangible) divided by the Company's net income before taxes
as reported in the 1995 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
30% 1994 Actual 6.66% 7.50%
ANNUAL BONUS: $0 $22,575 150% of target
</TABLE>
28
<PAGE>
SECTION 3. SALES GROWTH
This criterion is defined as the actual total sales dollar volume vs. the
budget total sales dollar volume as reported in the 1995 Annual Report on
Form 10-K.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% 1994 Actual 1995 Budget Target + 5%
ANNUAL BONUS: $0 $15,050 150% of target
</TABLE>
SECTION 4. DISCRETIONARY
This criterion is defined by the immediate supervisor based on performance
issues he/she needs or wants to stress during 1995.
<TABLE>
<CAPTION>
WEIGHT THRESHOLD TARGET MAXIMUM
------ ----------- ------ -------
<S> <C> <C> <C>
20% N/A
ANNUAL BONUS: $0 $15,050 N/A
ANNUAL
TOTALS: 100% $0 $75,250 $105,350
</TABLE>
SECTION 5. TERMS AND CONDITIONS
1. The criteria outlined in the above sections are considered singular and
bonusable as specified.
2. This plan year shall commence January 1, 1995 and shall conclude
December 31, 1995.
3. If your employment with the Company should terminate for any reason in
1995, no annual bonus or any part thereof shall be deemed to be earned
and payable. You must be employed for the entire plan year.
4. Any annual bonus payable under this plan shall be paid by March 15,
1996.
29
<PAGE>
5. The method of annual calculation is on a percentage basis using the
difference between the threshold and target goals or target and maximum
goals as follows:
1) For achievement between threshold and target - achievement divided
by the sum of target goal minus threshold goal, times the target
dollars, or; 2) For achievement above target - achievement divided
by the sum of maximum goal minus target goals divided by 2 plus 1
times the target goal dollars.
<TABLE>
<CAPTION>
THRESHOLD TARGET MAXIMUM
----------- ------- -------
<S> <C> <C> <C>
$12,000 $16,000 $18,000
ANNUAL BONUS: $0 $ 1,000 $ 1,500
</TABLE>
Calculation of bonus between Target and Threshold with goal achievement of
$13,535:
(13,535 - 12,000) / (16,000 - 12,000) = .38375 x 1,000 = $383.75
bonus.
Calculation of bonus between Target and Maximum with goal achievement of
$16,393:
(16,393 - 16,000) / (18,000 - 16,000) = .1965 / 2 = .09825 + 1 =
1.09825 x 1,000 = $1,098.25 bonus.
AGREED TO:
(Signature of) 1/30/95
-------------------------------- -------
Steven P. Cloward Date
President & CEO - Corporate
BIG O TIRES, INC.
AGREED TO:
(Signature of) 1/30/95
-------------------------------- -------
John Adams Date
Executive V.P. & CFO - Corporate
BIG O TIRES, INC.
Revised March 27, 1995
30
<PAGE>
EXHIBIT 10.72
[LOGO OF AT&T Capital Corporation]
Suite 450
5613 D.T.C. Parkway
Englewood, CO 80111
303 741-4144
FAX 303 220-8336
February 16, 1994
John Adams
Executive Vice President
Big O Tires, Inc
11755 E. Peakview Ave.
Englewood, CO 80111
Dear Mr. Adams:
AT&T Commercial Finance Corporation ("Lender") is pleased to confirm that we
have established a line of credit not to exceed $9,750,000.00, including amounts
previously funded, under the terms and conditions described below. This
commitment supersedes the previous $5,000,000 line of credit described in the
letter dated July 22, 1992. All projects unfunded or without individual
commitment will be subject to the terms and conditions of this agreement.
A. BASIC CREDIT TERMS
BORROWER: Either Big O Development Inc. or a real estate joint venture
partnership consisting of the real estate developer
(identified by Big O Tires, Inc), and Big O Development,
Inc.
GUARANTOR: All stockholder(s)/partner(s) of the real estate developer,
including the spouse(s) of the stockholder(s)/partner(s).
Big O Development, Inc.
Big O Tires, Inc.
AMOUNT: Lender to advance 86% of the lower of MAI appraised value or
invoiced "hard costs" (see Schedule A attached for
definition of "hard costs") on land and building, not to
exceed $600,000.00 on any one location.
Lender will require invoices of hard costs, copies of
construction contracts and draws, copies of land purchase
contracts and an acceptable MAI appraisal certified to the
Lender and conforming to the terms and conditions outlined
in the attached Exhibit B.
TERM: Land and building: 10 year note, 20 year amortization. (At
the 1Oth year, Lender shall consider refinancing the
remaining principal balance for either Borrower, or the
franchisee, should the property have been sold to the
franchisee. However, said refinancing shall be at the sole
and absolute discretion of Lender.)
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 2
PURPOSE: Loan proceeds will be used for the development of new retail
locations for Big 0 Tires, Inc.
INTEREST RATE: The interest rate on the unpaid balance shall be:
Option 1 - Fixed rate of 395 basis points above the
published average yield on U.S. Treasury Notes maturing five
(5) years from the date of closing.
Option 2 - Floating rate of the Prime Rate plus 2.25%
adjusted monthly. The "Prime Rate" is defined as the Prime
Rate publicly announced as being charged by Chase Manhattan
Bank, N.A., New York, New York, from time to time (which may
not necessarily be the lowest rate charged).
Payments will be fixed at the time of funding based on the
Prime Rate plus 2.50. Based on this payment, an amortization
schedule outlining the remaining principal balance at each
quarter end will be developed. Should the remaining
principal balance at any quarter end be greater than the
amount stated in the amortization schedule, Borrower will be
responsible for an additional payment equal to the amount
necessary to reduce the principal balance to the
predetermined amount as stated in the amortization schedule.
CLOSING FEE: A non-refundable closing fee of 1.5% of the loan amount
shall be required at the closing of each transaction. Funds
held by Lender as the Commitment Fee shall be utilized as
the Closing Fee.
RATE REVIEW: At the 36th month, Borrower shall have four options:
1) To fix at a rate of 395 basis points above the then
published average yield on U.S. Treasury Notes maturing five
(5) years from that date.
2) To negotiate a new rate of interest, mutually agreeable
to both Borrower and Lender; or
3) If no new rate can be agreed upon by both parties,
Borrower may pay the account(s) in full without prepayment
penalty; or
4) The rate will automatically convert to the floating rate
of the Prime Rate plus 2.25%. The "Prime Rate" is defined as
the Prime Rate publicly announced as being charged by Chase
Manhattan Bank, N.A., New York, New York, from time to time
(which may not necessarily be the lowest rate charged).
Based on the payment at the time of funding, an amortization
schedule outlining the remaining principal balance at each
quarter end will have been developed. Should the remaining
principal balance at any quarter
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 3
end be greater than the amount stated in the amortization
schedule, Borrower will be responsible for an additional
payment equal to the amount necessary to reduce the
principal balance to the predetermined amount as stated in
the amortization schedule.
At the 72nd month, Borrower shall have three options:
1) To negotiate a new rate of interest, mutually agreeable
to both Borrower and Lender; or
2) If no new rate can be agreed upon by both parties,
Borrower may pay the account(s) in full without prepayment
penalty; or
3) The rate will automatically convert to the floating rate
of the Prime Rate plus 2.25%. The "Prime Rate" is defined as
the Prime Rate publicly announced as being charged by Chase
Manhattan Bank, N.A., New York, New York, from time to time
(which may not necessarily be the lowest rate charged).
Based on the payment at the time of funding, an amortization
schedule outlining the remaining principal balance at each
quarter end will have been developed. Should the remaining
principal balance at any quarter end be greater than the
amount stated in the amortization schedule, Borrower will be
responsible for an additional payment equal to the amount
necessary to reduce the principal balance to the
predetermined amount as stated in the amortization schedule.
PREPAYMENT PENALTIES: Prepayment penalties will be assessed on the unpaid
principal balance as follows:
% of Principal
Years of Contract Balance
----------------- ---------------
Year 1 3%
Year 2 2%
Year 3 1%
Year 4-10 0%
LATE CHARGE AND
DEFAULT INTEREST: A late payment charge of 5% of the payment amount will be
assessed on all payments received more than 10 days after
its scheduled due date.
In the event of default, the interest rate charged shall
increase to a rate 400 basis points over the rate otherwise
payable.
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 4
B. COLLATERAL REQUIREMENTS
COLLATERAL: Transaction to be secured by a first lien position in favor
of Lender on land and building of each Big O retail store
financed by Lender.
MAI APPRAISAL: Lender will require that the MAI appraisal be completed by
an appraiser satisfactory to Lender. The appraisal must be
certified to Lender and conform to the terms and conditions
outlined in the "appraisal engagement letter" (copy attached
as part of Exhibit B).
JUNIOR LIEN: No liens or encumbrances on the collateral will be permitted
except those in favor of Lender, or in favor of Big O Tires
Inc.'s principal lender, where such liens are required
pursuant to the company's credit agreement with such lender.
ENVIRONMENTAL
REQUIREMENTS: Federal and State Environmental Requirements:
---------------------------------------------
A) Borrower will complete an Environmental Questionnaire
regarding the property being pledged as collateral, in form
and substance satisfactory to Lender. Based on the
information provided by said Environmental Questionnaire,
Lender may 1) require a 50 year chain of title report,
satisfactory to Lender and/or 2) require Borrower to have an
Environmental Survey completed on the proposed property, in
form and substance satisfactory to Lender, at Lender's sole
discretion. Based on the information provided in the
Environmental Survey, Lender may require further action or
information on the property.
B) Borrower will execute an Environmental Warranty and
Indemnification Agreement, in form and substance
satisfactory to Lender.
C) Borrower will meet or exceed all EPA requirements or
regulations that are in effect and will meet or exceed all
applicable future EPA requirements or regulations as they
become effective.
D) Borrower will promptly take whatever action is necessary
when they have knowledge that an environmental accident has
occurred including the financial responsibility for the
clean up process.
C. FINANCIAL STATEMENTS
FINANCIAL: Annual financial statements and tax returns of Borrower,
shall be furnished to Lender within 120 calendar days of the
fiscal year-end period, Interim semi-annual financial
statements shall be provided to Lender within 30 calendar
days of the 6 month fiscal period.
OTHER FINANCIAL: In addition to the financial statements required in the
section "Financial" above, annual income tax returns and
personal financial statements of Guarantors shall be
furnished to Lender within 120 calendar days of the
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 5
end of each tax fiscal year-end. Should Guarantor(s) provide
Lender with certified annual financial statements, annual
income tax returns shall not be required.
D. CONDITIONS TO CLOSING
DOCUMENTATION: Documentation acceptable to Lender, at Lender's sole
discretion, will be required, including but not limited to
Promissory Notes, Guarantees, Security Agreements, Deed of
Trust/Mortgage, Assignment of Leases and Rents, UCC-1
Filings, and releases of prior liens.
FRANCHISE
AGREEMENT: A) This commitment is issued expressly contingent upon
Big O Tires, Inc. having issued a franchise agreement and
lease on the proposed location to the franchisee who is to
operate the proposed location, with remaining terms of no
less than 9 1/2 years on both the franchise agreement and
the lease.
B) Should Borrower desire to sell the property at any time
during the term of the proposed loan, Lender shall consider
the assignment of Lender's note to the prospective
purchaser. However, said assignment shall be to a
"qualified" buyer, with such determination to be at the sole
and absolute discretion of Lender. In addition, any
assignment of the note shall require that Borrower and all
Guarantors remain as obligors/guarantors on the loan.
FUNDING: Funding will take place upon Lenders confirmation of the
delivery and installation of the equipment, Lender's receipt
of the final Certificate of Occupancy, and compliance with
all other terms and conditions of the commitment.
COSTS: Borrower shall reimburse Lender for all "out of pocket"
expenses incurred which are necessary to close the
transaction and perfect Lender's security interest,
including but not limited to searches, inspections, title
insurance. and legal costs; to include travel expense
incurred by Lender to obtain signatures on closing
documents. Lender agrees that the maximum amount which
Borrower shall be responsible for reimbursing to Lender
shall be limited to $2,500.00 per transaction (excluding
title insurance. mortgage taxes, and recording fees). Lender
and Borrower agree that all expenses regarding the closing
are to be pre-approved by Borrower.
In the event the loan is not closed, Borrower shall
reimburse Lender for legal and other closing costs incurred
to a maximum of $2500.00.
SURVEYS: Borrower will deliver a survey of the property, acceptable
to Lender, showing all improvements thereon and all
easements affecting the property with ALTA certification in
favor of Lender and title insurer.
TITLE INSURANCE: An acceptable title commitment issued by either Lawyers
Title Insurance
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 6
Corporation or Transamerica Title insurance Corporation to
be followed by a policy will be required by Lender,
including deletion of all exceptions requested by Lender.
RISK INSURANCE: A copy of the property insurance policy to include the
following information is required prior to funding:
1) Expiration Date of Policy
2) AT&T Commercial Finance Corporation named as Mortgagee
and Loss Payee with correct spelling of AT&T Commercial
Finance Corporation and our address.
3) Location of Collateral.
4) Aggregate/Liability Limit.
5) Deductible Amount.
6) Coverage Amounts.
ATTORNEY'S OPINION
LETTER: Borrower will provide opinion of counsel at the closing of
each transaction in a form acceptable to Lender.
INSPECTION: Lender will require inspection of the store by Lender or
Lender's designate.
EVIDENCE OF
AUTHORIZATION: Borrower shall provide evidence satisfactory to the Lender
that Borrower (if a corporation) and all corporate
guarantors have taken all necessary corporate actions to
authorize the transaction contemplated herein.
OPTIONAL
TERMINATION: Upon the occurrence of any of the following events, Lender
at its sole option, may terminate this Commitment and such
termination shall be deemed effective as of the day
proceeding the date of occurrence of such event:
A) Borrower or any person named as a prospective guarantor,
mortgagor, pledgor, or grantor of a security interest:
1) sustains a material adverse change in financial
condition or financial performance, which determination
shall be a Lender's sole discretion:
2) becomes insolvent:
3) commits an act of bankruptcy:
4) voluntarily or involuntarily becomes the subject of a
proceeding under the bankruptcy act, as amended; or,
5) defaults on any present or future obligation to Lender,
its parent, or any subsidiary of either; or,
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 7
B) Borrower engages in any assignment or attempted
assignment of all or any part of this commitment or any
rights hereunder without the prior written consent of
Lender;
C) Borrower cannot comply with any of the closing
requirements set forth in the commitment.
MATERIAL CHANGE WITH
OPTIONAL TERMINATION: Lender is issuing this commitment in reliance of the
present management and financial condition of Borrower
and Guarantor. If there is any material change in either
the management or financial condition, Lender may, at its
option, void the commitment.
COMMITMENT FEE: Borrower shall remit a commitment fee of 1.5% of the loan
amount. The proposal fee received by Lender shall apply
against this amount. This commitment letter shall become
operative upon Lender's receipt of this commitment letter
executed by the appropriate parties.
TERM OF COMMITMENT: Upon receipt of the executed commitment letter by
Borrower, this commitment shall remain open through
December 31, 1994.
If this letter is not executed by Borrower, and the
proposal fee is not received by Lender on or before
February 18, 1994 this commitment will become null and
void.
OTHER: (A) All loan documents shall contain such
representations, warranties, covenants, events of
default. remedies and other provisions as Lender may deem
appropriate, it being understood that this commitment
letter is intended only as a brief outline of the basic
financial and other parameters of the transaction.
(B) Legal review of ownership/joint venture partnership
by Lender's legal counsel, and acceptance of the
ownership structure by Lender, in it's sole discretion.
(C) Review and approval of the credit and financial
information (as determined to be necessary by Lender) of
the real estate developer in the joint venture
partnership, and all stockholder(s)/partner(s) of the
real estate developer.
We thank you for the opportunity to be of service. If the terms of this proposal
are acceptable to you, please evidence your acceptance by signing below in the
space indicated, and return the executed copy of this letter to the undersigned
together with the proposal fee.
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 8
If you have any questions concerning this proposal, please feel free to call.
Sincerely,
AT&T COMMERCIAL FINANCE CORPORATION
/s/ Thomas J. Shaughnessy
Thomas J. Shaughnessy
Credit Manager
ACKNOWLEDGED AND ACCEPTED:
BY: /s/ John B. Adams
-----------------------------
TITLE: Executive Vice President
-----------------------------
DATE: 2/17/94
-----------------------------
Schedule A
Financeable Nonfinanceable
-----------------------------------------------------
Purchase price of land Broker Commissions
Cost of Construction under Title Insurance Premiums
Construction Contract Utility Deposits
Soil Compaction Fees Survey Fees
Tap Fees (water and Appraisal Fees
sanitary sewer Property Taxes
Building Permits Points and Interest on
Engineering Fees Construction Loans
Architectural Fees EPA Related Costs
Landscaping Fees Bond Premium
Construction Management Liquor License
Paving and Concrete Expense Legal Fees
Excavation Costs Closing Costs
AT&T Closing Fee Recording Costs
FF&E, Related Shipping, Taxes Insurance
Installation Costs Franchise Fees
<PAGE>
Exhibit B
Page 1
(Insert Address)
Re: Appraisal Engagement
Dear (Insert Name):
This letter will serve to authorize your firm, upon your firm's written
acceptance below, to prepare a documented appraisal which sets forth the "Market
Value" and Additional Values requested, which values are further defined herein,
on the attached Schedule of Property Locations. The Schedule will provide you
with the requisite information for access to the subject property(ies) and
specific information. To further assist your firm in the preparation of the
appraisal, the following information is provided:
. All appraisals must conform to the Appraisal Standards of AT&T Commercial
Finance Corporation and AT&T Small Business Lending Corporation, which
standards are attached as "Attachment A."
. All appraisals shall be addressed and certified to (insert AT&T Commercial
Finance Corporation or AT&T Small Business Lending Corporation its
successors and/or assigns), as client
. The Effective Date(s) in your appraisal should be the date of your
inspection.
. An appraisals must recite all of the instructions contained herein and be
fully supported by applicable market data.
. All appraisals must address the following approaches to value and, if not
applicable, an explanation of its/their absence must be included:
Cost Approach - the appraisal should address the estimated reproduction
cost of the improvements less depreciation plus the estimated market value
of the land as if vacant.
Income Approach - in addressing the Income approach to value, if the
subject property is in the lease up stage or sell out stage (in the case of
a lot or tract development), a discounted cash flow analysis reflecting
operating cash flow and the ultimate sales proceeds based on anticipated
market conditions should be prepared. Assumptions relative to market
conditions should be supported by a market study. If the property Is leased
on a long term basis, direct capitalization may be appropriate.
Comparable Sales Approach - the appraisal should utilize comparable sales
in the given market area with applicable valuation adjustments, if
necessary.
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 2
EXHIBIT B
PAGE 2
You have quoted a fee of (insert fee - $) to cover all fees and expenses related
to the preparation of the report including two (2) copies of each documented
appraisal. Please send two copies along with an invoice for the agreed
appraisal fee to the undersigned -at the address on the above letterhead.
Additionally, you have promised that the documented appraisal will be delivered
to the undersigned's attention on or before (insert date).
Your acceptance of the terms and conditions of this assignment as stated herein
shall be confirmed by
your signing and returning the original of this letter to the undersigned within
ten (10) days of the date of this letter. Please contact the undersigned should
you have any questions concerning the foregoing.
Very truly yours,
(Insert Your Name)
(Insert Your Title)
Appraiser's Acceptance of Assignment
------------------------------------
I certify that I have read, understood and will complete this assignment in
conformity with the Appraisal Standards of AT&T Commercial Finance Corporation
and AT&T Small Business Lending Corporation, receipt of which is hereby
acknowledged, and can comply with the promised delivery date set forth above.
Accepted By:______________________________
Date: ______________________________
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 3
PAGE 3
<TABLE>
<CAPTION>
Property Location* Property Contact and Telephone # Additional Valuations
--------------------- -------------------------------- -------------------------
<S> <C> <C>
A 1123 Anywhere Street Jim Smith Land & Building;
Morristown, NJ 07960 (201)395-3472 ----------------
(Lot 34, Block 23A) Fair Value
(Lot 34, Block 23A) Equipment:
----------
Orderly Liquidation Value
B 234 Long Road John Doe Equipment only
Anywhere NJ 07896 (609)235-6586 --------------
</TABLE>
*Include Lot and Block number for real property valuations
Property Description and Special Instructions:
----------------------------------------------
(For real property attach or type a full legal description of the subject
premises. For equipment give a full description of the equipment to be
appraised)
Example:
--------
Properties A and B are operated as Burger King restaurants. Attached Is a legal
description for Property A and schedule of specific equipment to be appraised at
Property B.
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 4
Exhibit B
Page 4
ATTACHMENT A
APPRAISAL STANDARDS OF
AT&T COMMERCIAL FINANCE CORPORATION AND
AT&T SMALL BUSINESS LENDING CORPORATION
-----------------------------------------------------------------------------
All appraisals prepared for AT&T Commercial Finance Corporation and AT&T Small
Business Lending Corporation shall adhere to the following standards:
. The appraisal must conform to the Uniform Standard of Professional
Appraisal Practice (USPAP) adopted by the Appraisal Standards Board of the
Appraisal Foundation, except that the Departure Provision of the USPAP
(which permits assignments calling for something less than a full
appraisal) shall not apply.
. The report must disclose any steps that were necessary or appropriate to
comply with the Competency Provision of the USPAP.
. The following definitions of value are to be recited and used, as
applicable depending on the type of property being appraised, in the
documented appraisal:
Market Value (Real Property)
----------------------------
"The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised and each acting in what
they consider their best interest;
3. A reasonable time Is allowed for exposure in the open market
4. Payment is made in terms of cash in US. dollars or in terms of
financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale."
Fair Value (Real Property)
--------------------------
"Cash price that might reasonably be anticipated in a current sale under
all conditions requisite to a fair sale. A fair sale means a sale in which
the buyer and seller are each acting prudently, knowledgeably and under no
necessity to buy or sell other than in a forced or liquidation sale. The
appraiser should estimate the cash price that might be received upon
exposure to the open market for a reasonable time, considering property
type and local market conditions. When a current sale Is unlikely (a sale
which can be consummated within twelve (12) months), the appraiser must
discount all cash flows generated by the property to obtain the estimate of
fair value. These cash flows include, but are not limited to, those arising
from ownership, development, operation and sale of the property.
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 5
EXHIBIT B
PAGE 5
The discount applied shall reflect the appraiser's judgment of what a
prudent, knowledgeable purchaser under no necessity to buy would be wiling
to pay to purchase the property in a current sale. In the determination of
this value, reasonable cost selling costs should be included based on local
market conditions."
Fair Market Value (Equipment and Personal Property)
---------------------------------------------------
"The price at which property would change hands between a willing buyer and
willing seller, neither being under any compulsion to buy or sell and both
having reasonable knowledge of relevant facts ... in the most common market
This value is determined on the basis of and equal in amount to the value
that would be obtained in an arm's - length transaction (other than a
lessee currently in possession or a used equipment dealer. The
determination of this value should not include a deduction of the costs of
removal from the location of current use from such value."
Orderly Liquidation Value (Equipment and Personal Property)
-----------------------------------------------------------
"The amount of gross proceeds that could be expected from the sale of
property held under orderly conditions given a period of time in which to
find a purchase(s) considering a complete sale of all assets, As Is, where
is, and all sales made free and clear of all liens and encumbrances."
Liquidation Value (Equipment and Personal Property)
---------------------------------------------------
"The estimated gross dollar amount that could be typically realized by a
properly conducted public auction held under forced conditions and under
present day economic trends to derive an asset value which takes into
consideration such inflationary or depreciable conditions as physical
location, difficulty of removal, adaptability or specialization,
marketability, physical condition and overall appearance."
. All appraisals shall report Market Value "As Is" on the Effective Date of
the appraisal. This means an estimate of the value of the property in the
condition observed upon inspection and as it physically and legally exists
without hypothetical conditions or assumptions.
. All appraisals shall be addressed and certified to AT&T Commercial Finance
corporation and/ or AT&T Small Business Lending Corporation as specified in
the engagement letter.
. All appraisal reports must be prepared in a narrative format or on forms
which are appropriate for the property type (i.e. current FNMA or FHLMC
approved forms for residential properties) and which result in a complete
appraisal report in compliance with the Uniform Standards of Professional
Practice:
A. An appraisal report shall be sufficiently descriptive to enable the
reader to ascertain the estimated Market Value and the rationale for the
estimate; and
B. An appraisal report should provide detail and depth of analysis which
reflects the complexity of the property appraised.
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 6
EXHIBIT B
PAGE 6
. The appraisal report shall analyze and report in reasonable detail any
prior sales of the property being appraised that occurred within the
following time periods:
A. For one to four family residential property, one year preceding the
Effective Date of the appraisal;
B. For all other types of real property, three years preceding to
Effective Date of the appraisal; and
C. For equipment also indicate original cost of the property.
. An appraisal of an existing income producing property should document
actual income, vacancy. expenses and net income for the two year period
prior to the date of valuation. The appraiser's forecast of future income,
vacancy, expenses and not income shall be fully explained and shall bear a
reasonable relationship to the past financial performance of the property.
. The appraisal should analyze and report on current market conditions and
trends that will affect projected income or the absorption period, to the
extent they affect the value of the subject property. Such trends might
include, for example, increasing vacancy rates, greater use of rental
concessions or declining sales prices. Identification of negative trends is
particularly important in avoiding extensions of credit on collateral which
is likely to decline in value.
. Appraisals of properties with proposed construction (or partially completed
construction) shall also report Market Value "as if completed" on the
Effective Date of the appraisal. This means the value of the property with
all proposed construction hypothetically completed and ready for occupancy
by tenants or for sale to end users, based upon market conditions
anticipated to prevail in the foreseeable future.
. Appraisals of properties with proposed construction should address the
project's marketability and feasibility prospects, including:
A. A market analysis should be provided which shows that there is
sufficient demand for the units to be absorbed in the market place and
concludes with an estimated absorption rate.
B. A feasibility analysis should be provided which shows that the value
of the completed project is sufficiently in excess of costs in order
to provide an adequate yield on Invested capital or level of
entrepreneurial profit.
C. The appraiser shall state an opinion as to whether the proposed
project represents the highest and best use of the property being
appraised.
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 7
EXHIBIT B
PAGE 7
. Appraisals of properties with proposed construction or with unleased space
or unsold units must analyze and report all appropriate deductions and
discounts, including:
A. An appraisal of a proposed or partially leased income producing
property for which market conditions indicate stabilized occupancy is
not likely on the date of completion, should employ a discounted cash
flow analysis to estimate the "Market Value as if completed but prior
to stabilized occupancy on the Effective Date of the appraisal." Such
a valuation should fully reflect the anticipated pattern of income and
pertinent operating expenses during the absorption period as well as
the impact of rental and other concessions.
B. An appraisal of a proposed or partially leased Income producing
property should also report the "Market Value as if completed and at
stabilized occupancy on the Effective Date of the appraisal." This
means the value of the property under the assumption that all
improvements are physically completed and the property has been leased
to its optimum level of long term occupancy.
C. An appraisal of a proposed tract development or a property with unsold
units must report the Market Value of the property in its entirety to
one purchase. The valuation must reflect all appropriate deductions
and discounts as well as the anticipated cash flows to be derived from
the disposition of the asset over time. Appropriate deductions and
discounts are considered to be those that reflect all expenses
associated with the disposition of the real property as well as the
cost of capital and entrepreneurial profit.
. An appraisal of a property with proposed construction or with unleased
space or unsold units should not be based on unrealistic assumptions about
the future. Forecasts of future prices, absorption rates and
discount/capitalization rates must be based on market conditions as of the
Effective Date of the appraisal.
. An appraisal must be self contained. That is, the appraisal report must
contain all information necessary for the reviewer to understand the
appraises's opinion. The appraisal should not incorporate by reference a
document that is not readily available to the reviewer. Studies prepared by
a third party must be verified and accepted by the appraiser to the extent
that assumptions or conclusions of such studies are used in the appraisal
report. The appraiser's acceptance or rejection of outside assumptions or
conclusions must be clearly stated the appraisal report.
. An appraisal must contain the legal description of the property appraised.
Typically, this should be a metes and bounds description. The legal
description is in addition to, and not in lieu of, the property description
required by the Uniform Standards of Professional Appraisal Practice.
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 8
EXHIBIT B
PAGE 8
. The value estimate must reflect the Market Value to the rights in real
estate separate and apart from any attributable to any other interest
including, but not necessarily limited to, furniture, fixtures, equipment,
goodwill, going concern or business value, etc. The value of any non-realty
interest(s) must be estimated based upon its Market Value and clearly
identified and set forth in the appraisal report.
. The property rights being appraised must be clearly identified. Properties
subject to arms-length leases as of the appraisal date are to be appraised
on a leased fee estate basis with recognition in the valuation of the terms
of all existing leases.
. An appraisal must address the Sales Comparison, Income, and Cost approaches
to value. It must incorporate a reasonable methology which reconciles these
approaches into a value conclusion. If one or more approaches are not used,
the appraiser must explain the reason for eliminating those approaches.
. The financing terms of comparable sales should be reported. If any sales
utilized as comparable sales were influenced by financing terms or
concessions, they must be adjusted to their cash equivalent price.
Moreover, all units of comparison extracted from these sales must reflect
the cash equivalent price.
. All adjustments for dissimilarities between the subject property and the
comparable transactions, as well as all discount and capitalization rates,
etc., must be adequately explained and supported by market evidence.
. The expected normal marketing period for the subject property must be
estimated. This means an estimate of the amount of time necessary to market
the property and achieve a sale to one buyer at a price consistent with the
appraiser's Market Value conclusion. Marketing period in this context is
not to be confused with absorption period.
. The appraisal report must contain a signed certification in substantially
the same form as specified in Standards Rule 2-3 of the Uniform Standards
of Professional Appraisal Practice. In addition, the appraiser must include
in the certificate to the statement that the appraisal assignment was not
based on a requested minimum valuation or specific valuation or approval of
a loan.
. One copy of these appraisal standards along with the engagement letter
written to the appraiser and any special instructions shall be made part of
each appraisal report submitted to AT&T Commercial Finance Corporation
and/or AT&T Small Business Lending Corporation, as specified in the
engagement letter.
. The specific individual who is engaged for this assignment must personally
inspect the subject property, prepare or actively supervise the preparation
of the appraisal report, and sign and accept full responsibility for the
contents of to report document.
<PAGE>
AT&T Commercial Finance Corporation
AT&T Small Business Lending Corporation
Appraisal Engagement Letter and
Appraisal Standards
Page 9
EXHIBIT B
PAGE 9
. The information to be included in, and the reasons for this Appraisal are
the property of AT&T Commercial Finance Corporation/AT&T Small Business
Lending Corporation, its successors and/or assigns and are Proprietary and
Confidential. As such the appraiser agrees to the following:
A. Not to use or allow the use of any portion of the Appraisal or any of
the information or other materials used by the appraiser in conducting
or formulating the Appraisal for any purpose other than for disclosure
of the Appraisal and its contents to AT&T Commercial Finance
Corporatio/ AT&T Small Business Lending Corporation its successors
and/or assigns; and
B. Not to disclose, or allow disclosure to others without the prior
written consent of AT&T Commercial Finance Corporation/AT&T Small
Business Lending Corporation its successors and/or assigns, any
portion of the Appraisal, or any of the information or other materials
used by the appraiser in conducting or formulating the Appraisal,
except to AT&T Commercial Finance Corporation/AT&T Small Business
Lending Corporation its successors and/or assigns, and then only to
and its affiliates, agents, advisors, consultants, affiliates,
representatives, and employees, as designated by authorized AT&T
Commercial Finance Corporation/AT&T Small Business Lending Corporate
personnel.
. If information required or deemed pertinent to the completion of an
appraisal is unavailable to the appraiser, that fact shall be clearly
disclosed and explained in the appraisal report.
<PAGE>
EXHIBIT 10.73
[LOGO OF AT&T Capital Corporation]
----------------------------------------------------------------------------
Suite 450
5613 D.T.C. Parkway
Englewood, CO 80111
303 741-4144
FAX 303 220-8336
February 16, 1994
John Adams
Executive Vice President
Big 0 Tires, Inc
11 755 E. Peakview Ave.
Englewood, CO 80111
Dear Mr. Adams:
AT&T Commercial Finance Corporation ("Lender") is pleased to confirm that we
have established a line of credit not to exceed $2,000,000.00, including amounts
previously funded, under the terms and conditions described below. This
approval supersedes and replaces the previous $1,000,000 line of credit
described in the letter dated July 22, 1992. All projects unfunded or without
individual commitment will be subject to the terms and conditions of this
agreement.
A. BASIC CREDIT TERMS
BORROWER: A retail joint venture partnership consisting of a
franchisee of Big O Tires, Inc. (identified by Big O Tires,
Inc), and Big O Retail Enterprises, Inc.
GUARANTOR: All stockholder(s)/partner(s) of the franchisee, including
the spouse(s) of the stockholder(s)/partner(s).
Big O Retail Enterprises, Inc.
Big O Tires, Inc.
AMOUNT: Lender to advance 100% of the cost of the equipment and
inventory for each Big O retail store, not to exceed
$120,000.00 (maximum of $40,000.00 for initial inventory.)
PURPOSE: Loan proceeds will be used for development of new retail
locations for Big O Tires, Inc.
TERM: Equipment: 5 year note, 5 year amortization
INTEREST RATE: The interest rate on the unpaid balance shall be:
Option 1 - Fixed rate of 410 basis points above the
published average yield on U.S. Treasury Notes maturing five
(5) years from the date of closing.
Option 2 - Floating rate of the Prime Rate plus 2.25%
adjusted monthly. The "Prime Rate" is defined as the Prime
Rate publicly announced as being charged by Chase Manhattan
Bank, N.A., New York, New York,
[Recycled Logo]
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 2
from time to time (which may not necessarily be the lowest
rate charged).
Payments will be fixed at the time of funding based on the
Prime Rate plus 2.50%. Based on this payment, an
amortization schedule outlining the remaining principal
balance at each quarter end will be developed. Should the
remaining principal balance at any quarter end be equal to
or greater than the amount stated in the amortization
schedule, Borrower will be responsible for an additional
payment equal to the amount necessary to reduce the
principal balance to the predetermined amount as stated in
the amortization schedule.
Option 3 - True Lease Option with a rate factor based on 370
basis points above the published average yield on U.S.
Treasury Notes maturing five (5) years from the date of
closing.
Lease Purchase Option - Lessee will have three options at
lease end: (1) renew the lease for a minimum of 12 months at
the then fair market value lease rate, (2) purchase the
equipment for the greater of its then fair market value (as
determined by an appraiser jointly determined by Lender and
Borrower) or 10% of the equipment's original cost, or (3)
return the equipment to Lender.
ADVANCE PAYMENTS: Borrower shall either: A) remit the 60th payment at closing,
if either Option #1 or #2 under Interest Rate is chosen, or
B) remit the first and the last payment at closing, if the
True Lease Option is chosen. Said Advance Payment(s) shall
be retained by Lender as a security deposit, and Lender
shall apply said payment when due, or shall reduce
Borrower's loan balance/lease balance if the account is
prepaid, or is in default. (On each closing, Lender shall
allow $500.00 from the Commitment Fee to be used as part of
the Advance Payments.)
PREPAYMENT
PENALTIES: Prepayment penalties will be assessed on the unpaid
principal balance as follows:
% of Principal
Year of Contract Balance
---------------- ---------------
Year 1 3%
Year 2 2%
Year 3 1%
Year 4-5 0%
LATE CHARGE AND
DEFAULT INTEREST: A late payment charge of 5% of the payment amount will be
assessed on all payments received more than 10 days after
its scheduled due date.
In the event of default, the interest rate charged shall
increase to a rate 400 basis points over the rate otherwise
payable.
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 3
B. COLLATERAL REQUIREMENTS
COLLATERAL: Transaction to be secured by a first lien position in favor
of Lender on all equipment and inventory of each Big O
retail store financed by Lender.
JUNIOR LIEN: No liens or encumbrances on the collateral will be permitted
except those in favor of Lender. Lender acknowledges and
agrees that Big O Tires, Inc. may place a junior lien on the
collateral.
ENVIRONMENTAL
REQUIREMENTS: Federal and State Environmental Requirements:
---------------------------------------------
A) Borrower will meet or exceed all EPA requirements or
regulations that are in effect and will meet or exceed all
applicable future EPA requirements or regulations as they
become effective.
B) Borrower will promptly take whatever action is necessary
when they have knowledge that an environmental accident has
occurred including the financial responsibility for the
clean up process.
C. FINANCIAL STATEMENTS
FINANCIAL: Annual financial statements and tax returns of Borrower
shall be furnished to Lender within 120 calendar days of the
end of each fiscal year-end period. Interim semi-annual
financial statements shall be provided to Lender within 30
calendar days of the end of each 6 month fiscal period.
OTHER FINANCIAL: In addition to the financial statements required in the
section "Financial" above, annual income tax returns and
personal financial statements of Guarantors shall be
furnished to Lender within 120 calendar days of the end of
each tax fiscal year-end. Should Guarantor(s) provide Lender
with certified annual financial statements, annual income
tax returns shall not be required.
D. CONDITIONS TO CLOSING
DOCUMENTATION: Documentation acceptable to Lender, at Lender's sole
discretion, will be required, including but not limited to
Promissory Notes, Guarantees, Security Agreements, UCC-1
Filings, and releases of prior liens. In addition,
appropriate waivers will be required from landlord,
mortgagor and/or mortgagee, unless such requirement is
waived by Lender in writing, at Lender's sole discretion.
FUNDING: Funding will take place upon Lender's confirmation of the
delivery and
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 4
installation of the equipment, and Lenders receipt of the
final Certificate of Occupancy.
COSTS: Borrower shall reimburse Lender for all "out of pocket"
expenses incurred which are necessary to close the
transaction and perfect Lender's security interest,
including but not limited to searches, inspections, title
insurance, and legal costs; to include travel expense
incurred by Lender to obtain signatures on closing
documents. In the event the loan is not closed, Borrower
shall reimburse Lender for legal and other closing costs
incurred. Lender agrees that the maximum amount which
Borrower shall be responsible for reimbursing to Lender
shall be limited to $1,000.00 per transaction. Lender and
Borrower agree that all expenses regarding the closing are
to be pre-approved by Borrower.
FRANCHISE
AGREEMENT: This commitment is expressly contingent upon Big 0 Tires,
Inc. having issued a franchise agreement on the proposed
location to the retail joint venture. Said franchise
agreement shall have a remaining term of no less than 8
years.
RISK INSURANCE: A copy of the property insurance policy to include the
following information is required prior to funding:
1) Expiration Date of Policy
2) AT&T Commercial Finance Corporation named as Mortgagee
and Loss Payee with correct spelling of AT&T Commercial
Finance Corporation and our address.
3) Location of Collateral.
4) Aggregate/Liability Limit.
5) Deductible Amount.
6) Coverage Amounts.
INSPECTION: Lender will require inspection of the store by Lender or
Lenders designate.
EVIDENCE OF
AUTHORIZATION: Borrower shall provide evidence satisfactory to the Lender
that Borrower (if a corporation) and all corporate
guarantors have taken all necessary corporate actions to
authorize the transaction contemplated herein.
OPTIONAL
TERMINATION: Upon the occurrence of any of the following events, Lender
at its sole option, may terminate this commitment and such
termination shall be deemed effective as of the day
proceeding the date of occurrence of such event:
A) Borrower or any person named as a prospective guarantor,
mortgagor, pledgor, or grantor of a security interest;
1) sustains a material adverse change in financial
condition or financial performance, which
determination shall be a Lender's sole
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 5
discretion;
2) becomes insolvent;
3) commits an act of bankruptcy;
4) voluntarily or involuntarily becomes the subject of
a proceeding under the bankruptcy act, as amended; or,
5) defaults on any present or future obligation to
Lender, its parent, or any subsidiary of either; or,
B) Borrower engages in any assignment or attempted
assignment of all or any part of this commitment or any
rights thereunder without the prior written consent of
Lender;
C) Borrower cannot comply with any of the closing
requirements set forth in the commitment.
MATERIAL CHANGE
WITH OPTIONAL
TERMINATION: Lender is issuing this commitment in reliance of the present
management and financial condition of Borrower and
Guarantor. If there is any material change in either the
management or financial condition, Lender may, at its
option, void the commitment.
COMMITMENT FEE: Borrower shall remit a commitment fee of .5% of the loan
amount. The proposal fee received by Lender shall apply
against this amount. This commitment letter shall become
operative upon Lender's receipt of this commitment letter
executed by the appropriate parties.
TERM OF COMMITMENT: Upon receipt by Lender of the executed commitment letter and
commitment fee, this commitment shall remain open through
12-31-94.
If this letter is not executed by Borrower, and received by
Lender on or before February 18, 1994 this commitment will
become null and void.
OTHER: (A) All loan documents shall contain such representations,
warranties, covenants, events of default, remedies and other
provisions as Lender
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 6
may deem appropriate, it being understood that this
commitment letter is intended only as a brief outline of the
basic financial and other parameters of the transaction.
(B) Legal review of ownership/joint venture partnership by
Lender's legal counsel, and acceptance of the ownership
structure by Lender, in R's sole discretion.
(C) Review and approval of the credit and financial
information (as determined to be necessary by Lender) of the
franchisee in the joint venture partnership, and all
stockholder(s)/partner(s) of the franchisee.
We thank you for the opportunity to be of service. If the terms of this
commitment are acceptable to you, please evidence your acceptance by signing
below in the space indicated, and return the executed copy of this letter to the
undersigned.
If you have any questions concerning this commitment, please feel free to call.
Sincerely,
AT&T COMMERCIAL FINANCIAL CORPORATION
/s/ Thomas J. Shaughnessy
-------------------------
Thomas J. Shaughnessy
Credit Manager
ACKNOWLEDGED AND ACCEPTED
By: /s/ John B. Adams
--------------------------
John B. Adams
Title: Executive Vice President and Chief Financial Officer
Date: 02/17/94
<PAGE>
Big O Tires, Inc.
February 16, 1994
Page 7
<TABLE>
<CAPTION>
Schedule A
Financeable Nonfinanceable
--------------------------------------------------------------
<S> <C>
Purchase price of land Broker Commissions
Cost of Construction under Title Insurance Premiums
Construction Contract Utility Deposits
Soil Compaction Fees Survey Fees
Tap fees (water and Appraisal Fees
sanitary sewer Property Taxes
Building Permits Points and interest on
Engineering Fees Construction Loans
Architectural Fees EPA Related Costs
Landscaping Fees Bond Premium
Construction Management Liquor License
Paving and Concrete Expense Legal Fees
Excavation Costs Closing Costs
AT&T Closing Fee Recording Costs
FF&E, Related Shipping, Taxes Insurance
installation Costs Franchise Fees
</TABLE>
<PAGE>
EXHIBIT 10.74
AT&T Capital Corporation
Suite 450
5613 D.T.C. Parkway
Englewood, CO 80111
1-800 525-3343
303 741-4144
FAX 303 220-8336
December 9, 1994
Mr. John Adams
Executive Vice President
Big O Tires Inc.
11755 E. Peakview Ave.
Englewood, CO 801 11
Dear Mr. Adams:
AT&T Capital is pleased to advise you that the existing lines of credit for Big
O Tires Inc. (aggregate financing up to $11,750,000) have been extended through
12-31-95. The terms and conditions of these credit facilities (more fully
described in the attached copies of commitment letters dated 2/16/94) remain in
full force and effect with the following additions:
1) At Big O Tires Inc.'s option, any remaining availability under the
equipment line of credit of $2,000,000 may be used to finance real estate,
subject to the terms and conditions of the real estate commitment.
2) When advances under the line are subsequently paid out by a Big O Tires
franchisee, and where Big O Tires Inc has no further financial obligation
to AT&T Capital relating to said loan, the availability under the line will
then increase by the amount repaid. Outstandings under the line shall
include all existing loans and any other obligations to AT&T Capital where
Big O Tires Inc. is directly or contingently liable.
If the above reflects our mutual understanding, please acknowledge where
indicated below.
Sincerely,
AT&T CAPITAL CORPORATION
/s/ Janet Rogers
--------------------
Janet Rogers
Credit Manager
ACKNOWLEDGED AND ACCEPTED:
By: /s/ John B. Adams
Title: Executive Vice President
Date: 12/9/94
<PAGE>
EXHIBIT 10.75
ROBERT L. PUCKETT
February 27, 1995
Big O Tires, Inc.
Attn: Mr. John B. Adams
11755 East Peakview Avenue
Englewood, CO 80111
Dear John:
In accordance with our mutual agreement, I am resigning as the Corporate
Controller of Big O Tires, Inc. effective Friday, February 24, 1995 and as an
employee effective March 31, 1995.
This letter sets forth our agreement with respect to certain matters relating to
my resignation as discussed between us on Thursday, February 23, 1995. If you
agree, please sign below.
1. Severance Pay: As the former Corporate Controller, I will be entitled
to severance pay commencing with my termination date of March 31, 1995
in accordance with the Executive Management Severance Pay Policy which
is attached to this letter.
2. Continuation of Other Benefits: Big O will continue to provide
medical, dental, life and AD&D insurance benefits according to the
same policy. I understand that all other benefits and perquisites as
specified in that policy will cease on March 31, 1995.
I am aware that if I am carrying Supplemental Life and Supplemental
Accidental Death and Dismemberment insurance, I may address the
continuation of those supplemental plans beyond my termination date by
contacting the insurance carrier directly. I further understand that
you will send to me special notice regarding my rights to continue
medical benefits under COBRA following the date of cessation of
coverage.
3. Other Plans: The plan documents of other benefit programs, e.g. Big O
Tires, Inc. Employee Stock Ownership Plan, the Big O Tires, Inc.
Director and Employee Stock Option Plan, the Big O Tires, Inc. Long
Term Incentive Plan, and the 401(k) Retirement Plan will govern my
rights and benefits under those plans.
4. Professional Outplacement Assistance: Big O Tires, Inc. will provide
me with Professional Outplacement Assistance through a mutually
agreeable outplacement firm and reimburse that firm for actual
expenses not to exceed Five Thousand, Five Hundred Dollars ($5,500).
5. Accumulated Vacation: Compensation for thirteen (13) days of earned
vacation will be added to my paycheck for the period including March
31, 1995. This represents the earned and unused vacation grant due to
me on that date.
1
<PAGE>
6. Expenses and Company Property: I will submit my claim for expenses
that I have incurred on behalf of the Company by April 10, 1995. I
will also return any Company property before my termination date.
7. Indemnification: Big O will indemnify and hold me harmless with
respect to any liability, damage, cost or expense (including
reasonable Counsel fees) incurred in connection with any threatened,
pending or contemplated claim, action, suit, proceeding or
investigation to which I am or was a party or threatened to be made a
party by reason of having been an Officer or Employee of the Company
to the full extent permitted by the Articles of Incorporation and By-
Laws of Big O Tires, Inc.
8. Confidentiality: I agree that I will treat as private and privileged
any trade secrets and other information, data, figures, projections,
estimates, customer lists, price lists, internal procedures, and the
like and I will not release any such information to any person, firm,
corporation or other entity, either by statement, deposition or as a
witness, except upon direct written authority of a member of the
Office of the CEO of Big O Tires, Inc. and Big O Tires, Inc. shall be
entitled to an injunction by any competent court to enjoin and
restrain the unauthorized disclosures of such information. This
information will also include, without limitation, that which has been
furnished to me by Big O with respect to its products and their
marketing, distribution, pricing and application, that is confidential
or proprietary and/or which is subject to Copyright and Trademark
protections.
I agree that I will not at any time talk about, write about or
otherwise publicize the terms or existence of this agreement with Big
O Tires, Inc. or any fact concerning its negotiation, execution or
implementation except as may be necessary to discuss such with my
attorney or tax advisor. I will not testify or give evidence in any
forum concerning my employment or termination of employment with Big O
Tires, Inc. unless required by law.
9. Non-Competition: For a period of twelve months (12) from my
termination date, i.e. until March 31, 1996, I will not compete with
Big O Tires, Inc. I will not engage in or assist any person, firm,
corporation or entity in the business of wholesaling or retailing of
tires and related automotive products or the business of automotive
franchise operations in the continental United States of America.
10. Release: (a) In further consideration of the rights and obligations
created by this Agreement, the receipt and sufficiency of which are
hereby acknowledged, I, for myself, my heirs, personal
representatives, successors and assigns, hereby fully and forever
release and discharge Big O, its subsidiaries, affiliates, and each of
them, as well as their officers, directors, shareholders, employees,
agents, attorneys, successors, and assigns, from any and all claims,
demands, obligations, actions, liabilities, and damages of every kind
and nature whatsoever, at law or in equity, known or unknown,
suspected or unsuspected, that I may now have or claim at any future
time to have, based in whole or in part upon any act or omission
through the date of my resignation from employment with Big O,
including without limitation those claims, demands, obligations,
actions, liabilities, and damages arising from, relating to or based
upon my employment with Big O or separation from employment with Big
O, except as provided herein. I do not release Big O from obligations
under the severance package or the indemnification described above.
2
<PAGE>
(b) I agree that the release in subparagraph 10 (a) includes, but is
not limited to, an express waiver of rights and claims under federal
and state statutes that prohibit employment discrimination on the
basis of sex, race, national origin, religion, disability and age,
such as the Age Discrimination in Employment Act of 1987, Title VII of
the Civil Rights Act of 1964, as amended, the Rehabilitation Act of
1973, the Americans With Disabilities Act, the Family and Medical
Leave Act, the Equal Pay Act, and the Colorado Civil Rights Act, as
well as all common law rights and claims, such as breach of contract,
express or implied, tort, whether negligent or intentional,
constructive discharge, and wrongful discharge. I agree that the
benefits under this Agreement, which I accept by signing this
Agreement and to which I would not otherwise be entitled, have value
to me. I, after having been advised to consult with an attorney,
affirm that I have been offered at least 21 days in which to consider
executing this Agreement. I am further aware of my right to revoke
the waiver of claims within 7 days after signing this Agreement. If I
revoke the waiver of claims contained in this paragraph within 7 days
after signing this letter, I shall immediately return to Big O all
sums I have received pursuant to this Agreement and in that event this
Agreement shall be of no further force or effect.
(c) It is intended that this release be construed in the broadest
possible manner, to further the intention of the parties that all
potential disputes between them arising out of or connected to my
employment with Big O be forever resolved.
11. Release by Big O: In consideration of the rights and obligations
created by this Agreement, the receipt and sufficiency of which are
hereby acknowledged, Big O, for itself, its subsidiaries, affiliates,
and each of them as well as their officers, directors, shareholders,
employees, agents, attorneys, successors and assigns, hereby fully and
forever releases and discharges me, my heirs, personal
representatives, successors and assigns, from any and all claims,
demands, obligations, actions, liabilities and damages of every kind
and nature whatsoever, at law or in equity, known or unknown,
suspected or unsuspected that Big O may now have or claim at any
future time to have, based in whole or in part upon any act or
omission through the date of my separation from employment with Big O,
including without limitation those claims, demands, obligations,
actions, liabilities, and damages arising from, relating to or based
upon my employment with Big O or separation from employment with
Big O.
Yours very truly,
/s/ Robert L. Puckett
----------------------------
Robert L. Puckett
Accepted, Big O Tires, Inc. by:
/s/ John B. Adams
----------------------------
By: John B. Adams
Executive Vice President
Attachment
3
<PAGE>
BIG O TIRES, INC.
HUMAN RESOURCES GUIDELINES
------------------------------------------------------------------------------
Executive Management
TITLE: Severance Pay Policy NUMBER: 2.11.1
-------------------- -----------
EFFECTIVE DATE: 06/07/94 REVISION DATE: -----------
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SCOPE:
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Big O Tires, Inc. executive management employees as indicated herein.
PURPOSE:
-------
To provide a fair and appropriate level of compensation to certain executive
management employees (as indicated herein) in the event of an involuntary
termination other than listed below.
GUIDELINE:
---------
1. Eligibility for this benefit is defined as any active, regular, full-time
employee who is employed by Big O in one of the following positions: Vice
President -- Regional or Corporate, General Counsel or Corporate Controller;
Vice President -- Senior or Executive; and President and CEO.
2. This guideline does not apply in the case of an executive who voluntarily
resigns (except where such resignation is mutually agreed upon) or who is
involuntarily terminated by Big O based on its good faith belief that the
termination was caused by the executive as a result of committing acts of
fraud, gross negligence, willful misconduct, or a crime involving moral
turpitude.
3. Severance pay will be granted in the form of continued base salary payments
for a specified period of time but in no event less than the minimum benefit.
If the individual finds new employment during the severance period, then Big
O will: 1) pay the individual the shortage (if any) between the individual's
new salary and his/her former base salary for the duration of the severance
period or 2) terminate the severance pay if the individual's new salary is
greater than his/her former base salary.
The severance period will vary according to job level and full years of
service as described below:
4
<PAGE>
BIG O TIRES, INC.
HUMAN RESOURCES GUIDELINES
------------------------------------------------------------------------------
Executive Management
TITLE: Severance Pay Policy NUMBER: 2.11.1
-------------------- -----------
EFFECTIVE DATE: 06/07/94 REVISION DATE: -----------
--------------------
PAGE 2 OF 3
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<TABLE>
===============================================================================
<S> <C>
POSITION SEVERANCE BENEFIT
================================================================================
Vice President, Regional & 3 weeks pay per each full year of service
Corporate; General Counsel; with the Company plus 1 week per each
Corporate Controller full $10,000 of salary.
MINIMUM BENEFIT: 6 MONTHS
MAXIMUM BENEFIT: 12 MONTHS
Professional outplacement assistance
after 5 full years of service, not to
exceed $5,500.
================================================================================
Vice President, Senior & Executive 2 months pay per each full year of
service with the Company plus the minimum
benefit, but not to exceed the maximum
benefit.
MINIMUM BENEFIT: 9 MONTHS
MAXIMUM BENEFIT: 18 MONTHS
Professional outplacement assistance
after 3full years of service, not to
exceed $8,000.
================================================================================
President/Chief Executive Officer 3 months pay per each full year of
service with the Company plus the minimum
benefit, but not to exceed the maximum
benefit.
MINIMUM BENEFIT: 12 MONTHS
MAXIMUM BENEFIT: 24 MONTHS
Professional outplacement assistance
after 2 full years of service, not to
exceed $10,000.
================================================================================
</TABLE>
4. Big O will continue to provide medical, dental, and life and AD&D insurance
benefits at the same level provided during employment until the severance
period ends or the executive begins a new position where benefits are
comparable/equal. All voluntary benefits elected by the executive will
continue unless the Company is instructed
5
<PAGE>
BIG O TIRES, INC.
HUMAN RESOURCES GUIDELINES
------------------------------------------------------------------------------
Executive Management
TITLE: Severance Pay Policy NUMBER: 2.11.1
-------------------- -----------
EFFECTIVE DATE: 06/07/94 REVISION DATE: -----------
--------------------
PAGE 3 OF 3
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otherwise. All other benefits and perquisites, such as short and long term
disability, top hat, 401(k), 125 flex plan, use of Company car or auto
allowance, club membership, D.S.O., etc. will cease with termination of
active employment. ESOP is governed by the ESOP document. The Company's
Annual Incentive Bonus Plan is prorated through the end of active employment
to an executive who qualifies for this guideline, and will be paid within 45
days after the end of such active employment. The Company's LTI program is
governed by the LTI plan document.
5. Big O will provide professional outplacement services as listed by management
level to assist the executive in locating a new position up to the amount
specified.
6. If an eligible executive's job duties are reduced significantly, such that
the executive can no longer be reasonably considered to be performing in a
job capacity of comparable job size/scope, the executive may terminate
employment with 90 days written notice. Upon termination, the executive will
be eligible for severance pay under the terms specified herein.
6
<PAGE>
EXHIBIT 10.76
DAVID W. DWYER
February 24, 1995
Big O Tires, Inc.
Attn: Mr. Horst K. Mehlfeldt
11755 East Peakview Avenue
Englewood, CO 80111
Dear Horst,
At your request, but not for cause, I am involuntarily terminating my employment
with Big O Tires, Inc. Accordingly, I an resigning as an Officer of Big O
Tires, Inc. effective today, February 24, 1995 and as an employee effective
March 10, 1995.
This letter sets forth our agreement with respect to certain matters relating to
my resignation as discussed between us today. If you agree, please sign below.
1. Severance Pay: As former Corporate Vice President, I will be entitled
to severance pay of $10,000 upon my termination date of March 10,
1995.
2. Continuation of Other Benefits: Big O will continue to provide
medical, dental, life and AD&D insurance benefits according to the
same policy. I understand that all other benefits and perquisites as
specified in that policy will cease on March 10, 1995. I acknowledge
that the benefits and perquisites which will cease on my termination
date include the golf membership at Heatheridge Country Club, the car
allowance and the Top Hat Disability Coverage.
I am aware that if I am carrying Supplemental Life and Supplemental
Accidental Death and Dismemberment insurance, I may address the
continuation of those supplemental plans beyond by termination date by
contacting the insurance carrier directly. I further understand that
you will send to me special notice regarding my rights to continue
medical benefits under COBRA following the date of cessation of
coverage.
3. Other Plans: The plan documents of other benefit programs, e.g.
Employee Stock Ownership Plan, the Big O Tires, Inc. Director and
Employee Stock Option Plan and the 401K Retirement Plan will govern my
rights and benefits under those plans, subject to the following
special provisions:
Grant number 000015, covering 3,559 shares, granted January 14, 1992,
at an option price of $5.15262, and
Grant number 000026, covering 4,841 shares, granted April 16, 1993, at
an option price of $12.25...
shall both be 100% vested and shall be exercisable within six months
of the date of this letter.
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4. Professional Out-Placement Assistance: Big O Tires, Inc. will provide
me with Professional Out Placement Assistance through a mutually
agreeable out placement firm and reimburse that firm for actual
expenses not to exceed Five Thousand Five Hundred Dollars ($5,500).
5. Accumulated Vacation: Compensation for my earned vacation from
January 1, 1995 through March 10, 1995 will be added to my last
paycheck.
6. Expenses and Company Property: I will submit my claim for expenses
that I have incurred on behalf of the Company by March 10, 1995. I
will also return any Company property before my termination date.
7. Indemnification: Big O will indemnify and hold me harmless with
respect to any liability, damage, cost or expense (including
reasonable Counsel fees) incurred in connection with any threatened,
pending or contemplated claim, action, suit, proceeding or
investigation to which I am or was a party or threatened to be made a
party by reason of having been an Officer or Employee of the Company
to the full extent permitted by the Articles of Incorporation and By-
Laws of Big O Tires, Inc.
8. Confidentiality: I agree that I will treat as private and privileged
any trade secrets and other information, data, figures, projections,
estimates, customer lists, price lists, internal procedures, and the
like and I will not release any such information to any person, firm,
corporation or other entity, either by statement, deposition or as a
witness, except upon direct written authority of a member of the
Office of the CEO of Big O Tires, Inc. and Big O Tires, Inc. shall be
entitled to an injunction by any competent court to enjoin and
restrain the unauthorized disclosures of such information. This
information will also include, without limitation, that which has been
furnished to me by Big O with respect to its products and their
marketing, distribution, pricing and application, that is confidential
or proprietary and or which is subject to Copyright and Trademark
protections.
I agree that I will not at any time talk about, write about or
otherwise publicize the terms or existence of this agreement with Big
O Tires, Inc. or any fact concerning its negotiation, execution or
implementation except as may be necessary to discuss such with my
attorney or tax advisor. I will not testify or give evidence in any
forum concerning my employment or termination of employment with Big O
Tires, Inc. unless required by law.
9. Release: (a) In further consideration of the rights and obligations
created by this Agreement, the receipt and sufficiency of which are
hereby acknowledged, I, for myself, my heirs, personal
representatives, successors and assigns, hereby fully and forever
release and discharge Big O, its subsidiaries, affiliated, and each of
them, as well as their officers, directors, shareholders, employees,
agents, attorneys, successors, and assigns, from any and all claims,
demands, obligations, actions, liabilities, and damages of every kind
and nature whatsoever, at law or in equity, known or unknown,
suspected or unsuspected, that I may now have or claim at any future
time to have, based in whole or in part upon any act or omission
through the date of my resignation from employment with Big O,
including without limitation those claims, demands,
obligations, actions, liabilities, and damages arising from relating
to or based upon my employment with Big O or separation from
employment with Big O, except as provided herein. I do not release
Big O from obligations under the severance package or the
indemnification described above.
2
<PAGE>
(b) I agree that the release in subparagraph 9 (a) includes but is
not limited to an express waiver of rights and claims under federal
and state statutes that prohibit employment discrimination on the
basis of sex, race, national origin, religion, disability and age,
such as the Age Discrimination in Employment Act of 1987, Title VII of
the Civil Rights Act of 1964, as amended, the Rehabilitation Act of
1973, the Americans With Disabilities Act, the Family and Medical
Leave Act, the Equal Pay Act, and the Colorado Civil Rights Act, as
well as all common law rights and claims, such as breach of contract,
express or implied, tort, whether negligent or intentional,
constructive discharge, and wrongful discharge. I agree that the
benefits under this Agreement, which I accept by signing this
Agreement and to which I would not otherwise be entitled, have value
to me. I, after having been advised to consult with an attorney,
affirm that I have been offered at least 21 days in which to consider
executing this Agreement. I am further aware of my right to revoke
the waiver of claims within 7 days after signing this Agreement. If I
revoke the waiver of claims contained in this paragraph within 7 days
after signing this letter, I shall immediately return to Big O all
sums I have received pursuant to this Agreement and in that event this
Agreement shall be of no further force or effect.
(c) It is intended that this release be construed in the broadest
possible manner, to further the intention of the parties that all
potential disputes between them arising our of or connected to my
employment with Big O be forever resolved.
10. Release by Big O: In consideration of the rights and obligations
created by this Agreement, the receipt and sufficiency of which are
hereby acknowledged, Big O, for itself, its subsidiaries, affiliates,
and each of them as well as their officers, directors, shareholders,
employees, agents, attorneys, successors and assigns, hereby fully and
forever releases and discharges me, my heirs, personal
representatives, successors and assigns, from any and all claims,
demands, obligations, actions, liabilities and damages of every kind
and nature whatsoever, at law or in equity, known or unknown,
suspected or unsuspected that Big O may now have or claim at any
future time to have, based in whole or in part upon any act or
omission through the date of my separation from employment with Big O,
including without limitation those claims, demands, obligations,
actions, liabilities, and damages arising from, relating to or based
upon my employment with Big O or separation from employment with
Big O.
Yours very truly,
/s/ David W. Dwyer
--------------------
David W. Dwyer
Accepted, Big O Tires, Inc. by:
/s/ Horst K. Mehlfeldt
-----------------------
By: Horst K. Mehlfeldt
Vice Chairman
encl.
3
<PAGE>
Exhibit 10.77
REVOLVING CREDIT AGREEMENT
DATED AS OF JANUARY 23, 1995
AMONG
BIG O TIRES, INC.,
THE AFFILIATE BORROWERS,
THE BORROWING BASE PARTIES,
THE LENDERS
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS ISSUER AND AS AGENT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I DEFINITIONS................................................................. 1
ARTICLE II THE CREDITS................................................................. 15
2.1. Commitment.................................................................. 15
2.2 Revolving Credit Loans...................................................... 16
2.2.1. Ratable Loans............................................................... 16
2.2.2. Types of Advances........................................................... 16
2.2.3. Minimum Amount of Each Advance.............................................. 16
2.2.4. Principal Payments.......................................................... 16
2.2.5. Method of Selecting Types and
Interest Periods for New Advances.......................................... 16
2.2.6. Conversion and Continuation of
Outstanding Advances....................................................... 17
2.2.7. Changes in Interest Rate, etc............................................... 18
2.2.8. Interest Payment Dates;
Interest and Fee Basis..................................................... 18
2.2.9. Notification of Advances, Interest Rates, Prepayments and Commitment
Reductions................................................................. 18
2.2.10. Rates Applicable After Default.............................................. 19
2.3. Facility Letters of Credit.................................................. 19
2.3.1. Obligation to Issue......................................................... 19
2.3.2. Conditions for Issuance..................................................... 19
2.3.3. Procedure for Issuance of Facility.......................................... 19
Letters of Credit.......................................................... 20
2.3.4. Reimbursement Obligations................................................... 21
2.3.5. Participation............................................................... 22
2.3.6. Compensation for Facility Letters of Credit................................. 23
2.3.7. Letter of Credit Collateral Account......................................... 23
2.3.8. Nature of Obligations....................................................... 23
2.4. Commitment Fee; Reductions in Aggregate Commitment; Early Termination Fee... 24
2.5. Method of Payment........................................................... 24
2.6. Notes; Telephonic Notices................................................... 25
2.7. Lending Installations....................................................... 25
2.8. Non-Receipt of Funds by the Agent........................................... 25
2.9. Withholding Tax Exemption................................................... 25
2.10. Application of Payments with Respect to Defaulting Lenders.................. 26
2.11. Borrowing Base; Reporting and Eligibility Requirements..................... 26
2.11.1. Collateral Reports.......................................................... 26
2.11.2. Eligible Accounts........................................................... 27
2.11.3. Account Warranties.......................................................... 28
2.11.4. Verification of Accounts.................................................... 29
2.11.5. Account Covenants........................................................... 29
2.11.6. Appointment of the Agent as Attorney-in-Fact................................ 29
2.11.7. Notice to Account Debtors................................................... 30
2.11.8. Eligible Inventory.......................................................... 30
2.11.9. Inventory Warranties........................................................ 31
2.11.10. Inventory Records........................................................... 31
2.11.11. Safekeeping of Inventory and
Inventory Covenants........................................................ 31
</TABLE>
2
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<TABLE>
<S> <C>
ARTICLE III CHANGE IN CIRCUMSTANCES..................................................... 32
3.1. Yield Protection............................................................ 32
3.2. Changes in Capital Adequacy Regulations..................................... 32
3.3. Availability of Types of Advances........................................... 33
3.4. Funding Indemnification..................................................... 33
3.5. Lender Statements; Survival of Indemnity.................................... 33
ARTICLE IV CONDITIONS PRECEDENT........................................................ 34
4.1. Initial Credit Extension.................................................... 34
4.2. Each Credit Extension....................................................... 36
4.3. Initial Credit Extension to a new Affiliate Borrower........................ 37
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BORROWER.............................. 38
5.1. Corporate Existence and Standing............................................ 38
5.2. Authorization and Validity.................................................. 38
5.3. No Conflict; Government Consent............................................. 38
5.4. Financial Statements........................................................ 39
5.5. Material Adverse Change..................................................... 39
5.6. Taxes....................................................................... 39
5.7. Litigation and Contingent Obligations....................................... 39
5.8. Subsidiaries and Affiliates................................................. 39
5.9. ERISA....................................................................... 40
5.10. Accuracy of Information..................................................... 40
5.11. Regulation U................................................................ 40
5.12. Material Agreements......................................................... 40
5.13. Compliance With Laws........................................................ 40
5.14. Environmental Warranties.................................................... 40
5.15. Ownership of Properties..................................................... 42
5.16. Investment Company Act...................................................... 42
5.17. Public Utility Holding Company Act.......................................... 42
5.18. Insurance................................................................... 42
5.19. Intellectual Property....................................................... 42
5.20. Solvency.................................................................... 42
5.21. Benefits.................................................................... 43
</TABLE>
3
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<TABLE>
<S> <C>
ARTICLE V-A REPRESENTATIONS AND WARRANTIES OF AFFILIATE BORROWERS....................... 43
5A.1. Corporate Existence and Standing............................................ 43
5A.2. Authorization and Validity.................................................. 43
5A.3. No Conflict; Government Consent............................................. 43
5A.4. Investment Company Act...................................................... 44
5A.5. Public Utility Holding Company Act.......................................... 44
5A.6. Regulation U................................................................ 44
5A.7. Litigation and Contingent Obligations....................................... 44
5A.8. Material Agreements......................................................... 44
5A.9. Compliance With Laws........................................................ 44
ARTICLE VI COVENANTS................................................................... 45
6.1. Financial Reporting......................................................... 45
6.2. Use of Proceeds............................................................. 47
6.3. Notice of Default........................................................... 47
6.4. Conduct of Business......................................................... 47
6.5. Taxes....................................................................... 48
6.6. Insurance................................................................... 48
6.7. Compliance with Laws; Environmental......................................... 48
6.8. Maintenance of Properties................................................... 48
6.9. Inspection.................................................................. 48
6.10. Dividends................................................................... 48
6.11. Indebtedness................................................................ 49
6.12. Merger...................................................................... 50
6.13. Sale of Assets.............................................................. 50
6.14. Sale of Accounts............................................................ 50
6.15. Sale and Leaseback.......................................................... 50
6.16. Investments and Acquisitions................................................ 50
6.17. Contingent Obligations...................................................... 51
6.18. Liens....................................................................... 52
6.19. Transactions with Affiliates................................................ 53
6.20. Letters of Credit........................................................... 53
6.21. Prepayment of Certain Indebtedness.......................................... 53
6.22. Amendments to Certain Agreements............................................ 54
6.23. Financial Undertakings...................................................... 54
6.24. Financial Covenants......................................................... 54
6.24.1. Leverage Ratio.............................................................. 54
6.24.2. Fixed Charge Coverage Ratio................................................. 54
6.24.3. Minimum Tangible Net Worth.................................................. 54
6.24.4. Cash Flow Coverage Ratio.................................................... 54
6.24.5. Rentals..................................................................... 55
6.24.6. Capital Expenditures........................................................ 55
ARTICLE VII DEFAULTS.................................................................... 55
</TABLE>
4
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<TABLE>
<S> <C>
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.............................. 58
8.1. Acceleration................................................................ 58
8.2. Amendments.................................................................. 59
8.3. Preservation of Rights...................................................... 60
ARTICLE IX GENERAL PROVISIONS.......................................................... 60
9.1. Survival of Representations................................................. 60
9.2. Governmental Regulation..................................................... 60
9.3. Taxes....................................................................... 60
9.4. Headings.................................................................... 61
9.5. Entire Agreement............................................................ 61
9.6. Several Obligations; Benefits of this Agreement............................. 61
9.7. Expenses; Indemnification................................................... 61
9.8. Numbers of Documents........................................................ 62
9.9. Accounting.................................................................. 62
9.10. Severability of Provisions.................................................. 62
9.11. Nonliability of Lenders..................................................... 62
9.12. Choice of Law............................................................... 62
9.13. Consent to Jurisdiction..................................................... 62
9.14. Waiver of Jury Trial........................................................ 63
9.15. Confidentiality............................................................. 63
9.16. Nonreliance................................................................. 63
</TABLE>
5
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<TABLE>
<S> <C>
ARTICLE X THE AGENT................................................................... 63
10.1. Appointment................................................................. 63
10.2. Powers...................................................................... 63
10.3. General Immunity............................................................ 64
10.4. No Responsibility for Loans, Recitals, etc.................................. 64
10.5. Action on Instructions of Lenders........................................... 64
10.6. Employment of Agents and Counsel............................................ 64
10.7. Reliance on Documents; Counsel.............................................. 64
10.8. Agent's Reimbursement and Indemnification................................... 65
10.9. Rights as a Lender.......................................................... 65
10.10. Lender Credit Decision...................................................... 65
10.11. Successor Agent............................................................. 65
10.12. Execution of Collateral Documents........................................... 66
10.13. Collateral Releases......................................................... 66
ARTICLE XI SETOFF; RATABLE PAYMENTS.................................................... 66
11.1. Setoff...................................................................... 66
</TABLE>
6
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<TABLE>
<S> <C>
11.2. Ratable Payments............................................................... 66
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.............................. 67
12.1. Successors and Assigns......................................................... 67
12.2. Participations................................................................. 67
12.2.1 Permitted Participants; Effect................................................. 67
12.2.2. Voting Rights.................................................................. 68
12.2.3. Benefit of Setoff.............................................................. 68
12.3. Assignments.................................................................... 68
12.3.1. Permitted Assignments.......................................................... 68
12.3.2. Effect; Effective Date......................................................... 69
12.4. Dissemination of Information................................................... 69
12.5. Tax Treatment.................................................................. 69
ARTICLE XIII GUARANTY....................................................................... 70
13.1. Guaranty of Payment and Performance of Obligations of Affiliate Borrowers...... 70
13.2. Borrower's Further Agreements to Pay........................................... 70
13.3. Waivers by Borrower: Agent's and Lenders' Freedom to Act....................... 70
13.4. Unenforceability of Affiliate Borrower Obligations Against Affiliate Borrowers. 71
13.5. Subrogation; Subordination..................................................... 72
13.6. Termination.................................................................... 72
13.7. Effect of Bankruptcy........................................................... 73
13.8. Setoff......................................................................... 73
13.9. Further Assurances............................................................. 73
13.10. Limitation..................................................................... 73
ARTICLE XIV NOTICES........................................................................ 74
ARTICLE XV COUNTERPARTS................................................................... 74
</TABLE>
7
<PAGE>
EXHIBIT 10.77
BIG O TIRES, INC.
REVOLVING CREDIT AGREEMENT
This Agreement, dated as of January 23, 1995, is among Big O Tires,
Inc., a Nevada corporation, the Affiliate Borrowers, the Borrowing Base Parties,
the Lenders and The First National Bank of Chicago, as Issuer and as Agent. The
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement:
"Account Debtor" means the party which is obligated on or under an
Account.
"Accounts" means all present and future rights of each Borrowing Base
Party to payment for goods sold or leased or for services rendered, which are
not evidenced by instruments or chattel paper, whether or not they have been
earned by performance.
"Accounts Trial Balance" is defined in Section 2.11.1.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower, any of its Subsidiaries or any Credit Party (i) acquires any going
business or all or substantially all of the assets of any firm, corporation or
division thereof, whether through purchase of assets, merger or otherwise or
(ii) directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in number of
votes) of the securities of a corporation which have ordinary voting power for
the election of directors (other than securities having such power only by
reason of the happening of a contingency) or a majority (by percentage or voting
power) of the outstanding partnership interests of a partnership.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by the Lenders to a Credit Party of the same
Type and, in the case of Eurodollar Advances, for the same Interest Period.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
A Person shall be deemed to control another Person if the controlling Person
owns 10% or more of any class of voting securities (or other ownership
interests) of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.
8
<PAGE>
"Affiliate Borrower" means BODI and, with the consent of the Lenders,
any other Affiliate of the Borrower which completes an Affiliate Borrower
Counterpart and satisfies the other conditions precedent to an initial Credit
Extension to an Affiliate Borrower as set forth in Section 4.3.
"Affiliate Borrower Counterpart" means a counterpart signature page in
the form of Exhibit "C".
"Affiliate Borrower MAE" means, with respect to any Affiliate
Borrower, a material adverse effect upon (a) the business, Property, condition
(financial or otherwise), results of operations or prospects of such Affiliate
Borrower and its Subsidiaries, taken as a whole, (b) the ability of such
Affiliate Borrower to perform its obligations under the Loan Documents to which
it is a party, or (c) the validity or enforceability (with respect to such
Affiliate Borrower) of any of the Loan Documents or the rights or remedies of
the Agent or the Lenders thereunder.
"Affiliate Borrower Obligations" is defined in Section 13.1.
"Agent" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual capacity
as a Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.4.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of Federal Funds Effective Rate for such day plus 1/2% per annum.
"Article" means an article of this Agreement unless another document
is specifically referenced.
"Authorized Officer" means (i) with respect to the Borrower, any of
the President, Chief Financial Officer, Secretary, Treasurer or Corporate
Controller of the Borrower, acting singly, (ii) with respect to BODI, any of the
President, Secretary, Treasurer or Corporate Controller of BODI, acting singly,
and (iii) with respect to any other Affiliate Borrower, such
9
<PAGE>
persons or the incumbents of such offices as are designated by such Affiliate
Borrower in writing at the time it completes its Affiliate Borrower Counterpart.
"Barclays Loan Agreement" is defined in Section 4.1.
"Big O Entities" means the Borrower, its Subsidiaries, the Affiliate
Borrowers and the Borrowing Base Parties.
"BODI" means Big O Development, Inc., a Colorado corporation and a
Subsidiary of the Borrower.
"Borrower" means Big O Tires, Inc., a Nevada corporation, and its
permitted successors and assigns.
"Borrower Security Agreement" means that certain Pledge and Security
Agreement dated as of January 23, 1995 between the Borrower and the Agent
securing the Credit Extensions hereunder.
"Borrowing Base" means, on any date of determination, an amount equal
to the sum of:
(i) 85% of the difference of (u) the face amount (less the most
recently calculated average discounts, credits and allowances which
may be taken by or granted to Account Debtors in connection therewith)
then outstanding under Eligible Accounts minus (v) Stipulated Account
Reserves, plus
(ii) 65% of the difference of (w) Eligible Class I Inventory minus (x)
Stipulated Inventory Reserves relating to Class I Inventory, plus
(iii) 40% of the difference of (y) Eligible Class II Inventory minus
(z) Stipulated Inventory Reserves relating to Class II Inventory
(provided that, notwithstanding any other provision of this definition, the
Inventory component of the Borrowing Base arrived at as a result of the
calculations in clauses (ii) and (iii) may not comprise more than 80% of the
Borrowing Base), all as evidenced by the most recent Borrowing Base Certificate.
"Borrowing Base Certificate" is defined in Section 2.11.1.
"Borrowing Base Parties" means the Borrower and Idaho.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.2.5.
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"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Capital Expenditures" of a Person means the aggregate amount of all
purchases or acquisitions of items considered to be capital items under
Agreement Accounting Principles, including, without limitation, all expenditures
relating to Property, plant or equipment which would be capitalized on a balance
sheet of such Person in accordance with Agreement Accounting Principles, but
excluding any such expenditures for real estate development activities of BODI
relating to new retail store locations.
"Capitalized Lease Obligations" of a Person means, without duplication, any
rental obligation which under Agreement Accounting Principles is or will be
required to be capitalized on a balance sheet of the Borrower or any Subsidiary,
or for which the amount of the asset and liability thereunder as if so
capitalized should be disclosed in a note to such balance sheet, in each case
taken at the amount thereof account for as indebtedness (net of interest
expense) in accordance with Agreement Accounting Principles.
"Cash Flow Coverage Ratio" means, for any period of determination, the
ratio of (x) the sum of (i) Net Income or deficit, as the case may be, plus (ii)
depreciation and amortization expense and other non-cash charges to Net Income,
plus or minus, as the case may be (iii) changes in working capital (excluding
any such changes resulting from restricted cash proceeds of the notes issued
pursuant to the indenture referred to in Section 4.1(xv)) to (y) Indebtedness
(long and short term), in each case calculated for the Borrower and its
Subsidiaries on a consolidated basis in accordance with Agreement Accounting
Principles.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List, as amended from time to time.
"Change in Control" means (i) the acquisition by any Person, or two or more
Persons acting in concert (other than the Big O Tires, Inc. Employee Stock
Ownership Plan or other Persons approved by the Lenders), of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or more of the
outstanding shares of voting stock of the Borrower; or (ii) the Borrower shall
cease to own, free and clear of all Liens or other encumbrances, at least 50% of
the outstanding shares of voting stock or other controlling interests of any
Affiliate Borrower on a fully diluted basis.
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"Class I Inventory" means all Inventory which is new tires, used tires,
seconds and retreads, wheels and wheel accessories, shock absorbers, struts and
coils.
"Class II Inventory" means all Inventory other than Class I Inventory.
"Closing Date" means the date upon which the Agent determines that the
conditions precedent set forth in Sections 4.1 and 4.2 have been fulfilled or
waived with respect to the initial Credit Extension.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means all of the "Collateral" under and as defined in each of
the Collateral Documents.
"Collateral Documents" means, collectively, the Borrower Security
Agreement, the Idaho Security Agreement and such other mortgages, security
agreements, pledge agreements and other documents relating to collateral for the
Credit Extensions hereunder as may be executed from time to time by the Borrower
or any Affiliate of the Borrower.
"Commitment" means, for each Lender, the obligation of such Lender to make
Loans and participate in Facility Letters of Credit not exceeding the amount set
forth opposite its signature below or as set forth in any Notice of Assignment
relating to any assignment that has become effective pursuant to Section 12.3.2,
as such amount may be modified from time to time pursuant to the terms hereof.
"Compliance Certificate" means a compliance certificate, in substantially
the form of Exhibit "D" hereto, with appropriate insertions, signed by the
Borrower's chief financial officer, showing the calculations necessary to
determine compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default exists,
describing the nature and status thereof and any action the Borrower is taking
or proposes to take with respect thereto.
"Condemnation" is defined in Section 7.8.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a Letter of Credit.
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"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.2.6.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.
"Credit Extension" means the making of any Advance or the issuance of any
Facility Letter of Credit pursuant to this Agreement.
"Credit Extension Date" means the date on which any Credit Extension is
made hereunder.
"Credit Parties" means the Borrower, BODI and any other Affiliate Borrower.
"Default" means an event described in Article VII.
"Defaulting Lender" means any Lender that (i) on any Borrowing Date fails
to make available to the Agent such Lender's Loans required to be made to the
Borrower on such Borrowing Date or (ii) shall not have made a payment to the
Issuer pursuant to Section 2.3.5(b). Once a Lender becomes a Defaulting Lender,
such Lender shall continue as a Defaulting Lender until such time as such
Defaulting Lender makes available to the Agent, the amount of such Defaulting
Lender's Loans and/or to the Issuer, such payments requested by the Issuer
together with all other amounts required to be paid to the Agent and/or the
Issuer pursuant to this Agreement.
"Eligible Account" is defined in Section 2.11.2.
"Eligible Class I Inventory" means all Eligible Inventory which is Class I
Inventory.
"Eligible Class II Inventory" means all Eligible Inventory which is Class
II Inventory.
"Eligible Inventory" is defined in Section 2.11.8.
"Environmental Laws" means all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"EBITDA" means for any period Consolidated Net Income plus (i) current and
deferred income taxes, plus (ii) the amount of all amortization of intangibles
and depreciation
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that was deducted in arriving at Net Income, plus (iii) interest expense
(including interest expense associated with Capitalized Lease Obligations), plus
(iv) one-time charges incurred in 1994 with respect to prepayment penalties in
connection with the refinancing of the Borrower's Boise facility, plus (v) one-
time charges (in an amount not to exceed $200,000) resulting from the Borrower's
termination of the Barclays Loan Agreement.
"ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at the
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the rate at which deposits in U.S. dollars are offered
by First Chicago to first-class banks in the London interbank market at
approximately 11 a.m. (London time) two Business Days prior to the first day of
such Interest Period, in the approximate amount of First Chicago's relevant
Eurodollar Loan and having a maturity approximately equal to such Interest
Period.
"Eurodollar Loan" means a Loan which bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) 2.25% per annum. The Eurodollar Rate shall be rounded to the next higher
multiple of 1/16 of 1% if the rate is not such a multiple.
"Facility Letter of Credit" means a Letter of Credit issued by the Issuer
pursuant to Section 2.3.
"Facility Letter of Credit Obligations" means, as at the time of
determination thereof, all liabilities, whether actual or contingent, of the
Borrower with respect to the Facility Letters of Credit, including the sum of
(a) Reimbursement Obligations and (b) the aggregate undrawn face amount of the
outstanding Facility Letters of Credit.
"Facility Termination Date" means the third anniversary of the Closing
Date.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
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"Financial Undertaking" of a Person means (i) any repurchase obligation or
liability of such Person or any of its Subsidiaries with respect to accounts or
notes receivable sold by such Person or any of its Subsidiaries, (ii) any sale
and leaseback transactions which do not create a liability on the consolidated
balance sheet of such Person and its Subsidiaries, (iii) any other transaction
which is the functional equivalent of or takes the place of borrowing but which
does not constitute a liability on the consolidated balance sheets of such
Person and its Subsidiaries or (iv) any agreements, devices or arrangements
designed to protect at least one of the parties thereto from the fluctuations of
interest rates, exchange rates or forward rates applicable to such party's
assets, liabilities or exchange transactions, including, but not limited to,
interest rate exchange agreements, forward currency exchange agreements,
interest rate cap or collar protection agreements, forward rate currency or
interest rate options.
"First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.
"Fixed Charges" means, for any period, the sum of (i) interest expense
(including interest expense associated with Capitalized Lease Obligations), both
paid and accrued, plus (ii) Rentals, plus (iii) dividends payable on preferred
stock of the Borrower and its Subsidiaries for such period.
"Fixed Charge Coverage Ratio" means, for any period of determination, the
ratio of (x) the sum of (i) EBITDA plus (ii) Rentals to (y) the sum of (iii)
Fixed Charges plus (iv) current maturities of long-term Indebtedness.
"Floating Rate" means, for any day, a rate per annum equal to the Alternate
Base Rate for such day, changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Hazardous Material" means (i) any "hazardous substance", as defined by
CERCLA; (ii) any "hazardous waste", as defined by the Resource Conservation and
Recovery Act, as amended; (iii) any petroleum product (but specifically
excluding tires from this clause (iii)); or (iv) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material or substance within the meaning
of any other federal, state or local law, regulation, ordinance or requirement
(including consent decrees and administrative orders) relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material, all as amended or hereafter amended, but
specifically excluding from such definition all motor oil, antifreeze, hydraulic
fluids and lead weights packaged for retail sale to customers and all motor oil
stored in bulk containers for use in retail operations.
"Idaho" means Big O Tire of Idaho, Inc., an Idaho corporation.
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"Idaho Security Agreement" means that certain Pledge and Security Agreement
dated as of January 23, 1995 between Idaho and the Agent securing the Credit
Extensions hereunder.
"Indebtedness" of a Person means, without duplication, such Person's (i)
obligations for borrowed money, (ii) obligations representing the deferred
purchase price of Property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (iii) obligations, whether or not assumed, secured by Liens or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capitalized Lease Obligations and (vi)
net liabilities under interest rate swap, exchange or cap agreements.
"Intangible Assets" means the amount (to the extent reflected in
determining consolidated stockholders' equity) of (i) all write-ups subsequent
to December 31, 1993 in the book value of any asset owned by the Borrower or a
Subsidiary, (ii) all Investments in unconsolidated Subsidiaries and all equity
Investments in Persons which are not Subsidiaries (but specifically excluding
equity Investments in BODI and in joint venture Affiliates of BODI made for the
purpose of developing real estate for new retail stores) and (iii) all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, organization or
developmental expenses and other intangible items.
"Interest Period" means a period of one, two, three or six months
commencing on a Business Day selected by the applicable Credit Party pursuant to
this Agreement. Such Interest Period shall end on (but exclude) the day which
corresponds numerically to such date one, two, three or six months thereafter,
provided, however, that if there is no such numerically corresponding day in
such next, second, third or sixth succeeding month, such Interest Period shall
end on the last Business Day of such next, second, third or sixth succeeding
month. If an Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.
"Inventory" means any and all goods which are held by the Borrowing Base
Parties for sale or lease or to be furnished under any contract of service,
wherever located, whether now owned or hereafter acquired by any Borrowing Base
Party, including, without limitation, all raw materials, supplies, materials
used or consumed in any Borrowing Base Party's business, work in process,
finished goods, goods in transit, and all property the sale or other disposition
of which has given rise to Accounts and which has been returned to or
repossessed or stopped in transit by any Borrowing Base Party.
"Investment" of a Person means any loan, advance, extension of credit
(other than accounts receivable arising in the ordinary course of business on
terms customary in the
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trade), deposit account or contribution of capital by such Person to any other
Person or any investment in, or purchase or other acquisition of, the stock,
partnership interests, notes, debentures or other securities of any other Person
made by such Person.
"Issuer" means The First National Bank of Chicago, in its capacity as
issuer of Facility Letters of Credit under Section 2.3.
"LC Issuance Request" is defined in Section 2.3.3.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Letter of Credit Collateral Account" is defined in Section 2.3.7.
"Leverage Ratio" means, as at any date of determination thereof, the ratio
of (i) Indebtedness (long and short-term) of the Borrower and its Subsidiaries
plus the aggregate principal amount of Advances to Affiliate Borrowers hereunder
on such date to (ii) Total Capitalization of the Borrower and its Subsidiaries
plus the aggregate principal amount of Advances to Affiliate Borrowers hereunder
on such date, all calculated on a consolidated basis in accordance with
Agreement Accounting Principles.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.
"Loan Documents" means this Agreement, the Notes and the Collateral
Documents.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower or any other Credit Party to perform its obligations
under the Loan Documents, or (iii) the validity or enforceability of any of the
Loan Documents or the rights or remedies of the Agent or the Lenders thereunder.
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"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Net Income" means, for any period, the consolidated net income (or net
loss) of the Borrower and its Subsidiaries for such period, but excluding:
(a) proceeds of insurance policies;
(b) net after tax gains arising from (i) any write-up of assets or (ii)
the acquisition of debt securities for a cost less than principal and
accrued interest;
(c) net after tax gains arising from (i) the sale or other disposition of
capital assets or (ii) extraordinary items or transactions of a non-
recurring or non-operating and material nature (including net
operating loss carry forward credits) or relating to the
discontinuance of operations;
(d) net income, prior to the date of acquisition, of any other Person
acquired in any manner; and
(e) any deferred credit (or amortization of a deferred credit) arising
from the acquisition in any manner of any other Person.
"Note" means a promissory note, in substantially the form of Exhibit "A"
hereto, duly executed by a Credit Party and payable to the order of a Lender in
the amount of its Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid fees, all Facility Letter of Credit
Obligations and all expenses, reimbursements, indemnities and other obligations
of the Borrower or any Affiliate Borrower to the Lenders or to any Lender, the
Agent or any indemnified party hereunder arising under the Loan Documents.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each March, June, September and
December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Construction Take-Out Indebtedness" means Indebtedness of the
Borrower (i) which refinances Indebtedness entered into to finance the
construction, acquisition or
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remodeling of retail store locations, (ii) which finances retail store locations
for which the Borrower has entered into written leases with the franchisees
operating such locations which leases contain rental payments sufficient to
cover the principal and interest on such Indebtedness, (iii) which contains
covenants and other terms not more restrictive than those contained in this
Agreement, provided that such Indebtedness may be priced at the then-current
market rates, may contain loan-to-value ratios and may require the grant of a
mortgage on the retail store locations financed thereby and (iv) which does not
exceed, in aggregate principal amount, (x) $2,500,000 at any time prior to the
first anniversary of the Closing Date, (y) $4,500,000 at any time from the first
anniversary of the Closing Date to but excluding the second anniversary of the
Closing Date and (z) an amount to be agreed upon by the Agent, the Lenders and
the Borrower for all periods on and after the second anniversary of the Closing
Date.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"Pro Rata Share" means, for each Lender, the ratio of such Lender's
Commitment to the Aggregate Commitment.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or cross-
currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official
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interpretation of said Board of Governors relating to reserve requirements
applicable to member banks of the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reimbursement Obligations" means, at any time, the aggregate of the
obligations of the Borrower to the Lenders and the Issuer in respect of all
unreimbursed payments or disbursements made by the Issuer and the Lenders under
or in respect of the Facility Letters of Credit (including, without limitation,
the Borrower's obligation to reimburse the Issuer for draws on Facility Letters
of Credit pursuant to Section 2.3.4(b)).
"Rentals" of a Person means the total amount paid or to be paid in any
fiscal year by a lessee under any lease having a remaining term in excess of one
year from the end of the lessee's most recently completed fiscal year,
including, without limitation, amounts paid on account of maintenance, ordinary
repairs, insurance, and other similar charges to the extent such amounts are
paid to the lessor or its designate(s), but excluding Capitalized Lease
Obligations. To the extent rental payments are received on leased property,
they will be credited against Rentals on each property to the extent they have
not been included in revenue, all in accordance with Agreement Accounting
Principles.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 66-2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 66-2/3% of the aggregate unpaid
principal amount of the outstanding Advances.
"Reserve Requirement" means the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed under Regulation D on Eurocurrency liabilities.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
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"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Stipulated Account Reserves" means, with respect to Accounts of the
Borrowing Base Parties, the convention reserve and Warranty Set-Aside.
"Stipulated Inventory Reserves" means, with respect to Inventory of the
Borrowing Base Parties, the obsolete wheel reserve, unrealized intercompany
profits, unamortized price reductions and reserves for write-downs to net
realizable value.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as at
the beginning of the four-quarter period ending immediately prior to the quarter
in which such determination is made.
"Tangible Net Worth" means at any date of determination the consolidated
stockholders' equity of the Borrower and its Subsidiaries determined in
accordance with Agreement Accounting Principles, less their consolidated
Intangible Assets, all determined as of such date.
"Total Capitalization" means the sum of (i) Indebtedness of the Borrower
and its Subsidiaries plus (ii) the stockholders' equity of the Borrower and its
Subsidiaries, all calculated on a consolidated basis in accordance with
Agreement Accounting Principles.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans.
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"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Warranty Set-Aside" means an amount equal to one-fourth of the total
amount of warranty claims paid or received during the twelve-month period
preceding the date of determination.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
THE CREDITS
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2.1. Commitment. (a) From and including the date of this Agreement and
prior to the Facility Termination Date, each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Credit
Parties and to participate in Facility Letters of Credit for the account of the
Borrower from time to time in amounts not to exceed in the aggregate at any one
time outstanding the amount of its Commitment. Subject to the terms of this
Agreement, the Credit Parties may borrow, repay and reborrow and the Borrower
may request the issuance of Facility Letters of Credit at any time prior to the
Facility Termination Date. The Commitments to lend and participate in Facility
Letters of Credit hereunder shall expire on the Facility Termination Date.
(b) Notwithstanding anything to the contrary contained in this Agreement
or in any other Loan Document, the sum of (i) the aggregate outstanding
principal balance of the Loans plus (ii) the Facility Letter of Credit
Obligations shall at no time exceed the lesser of (x) the Borrowing Base (as
reflected on the Borrowing Base Certificate most recently delivered to the
Agent), or (y) the Aggregate Commitment. The Credit Parties jointly and
severally agree that if at any time any such excess shall arise, they shall
immediately pay to the Agent (or deposit into the Letter of Credit Collateral
Account, to the extent that all Loans have been fully repaid) the amount
necessary to eliminate such excess, without presentment, demand, protest or
notice of any kind from the Agent or any Lender, all of which the Credit Parties
hereby expressly waive.
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(c) In addition to the foregoing provisions of this Section 2.1, the
aggregate outstanding principal balance of Loans to Affiliate Borrowers shall
not exceed (x) $6,000,000 for the period from the Closing Date to the first
anniversary of the Closing Date, (y) $8,000,000 for the period from the first
anniversary of the Closing Date to the second anniversary of the Closing Date
and (z) $10,000,000 thereafter.
2.2. Revolving Credit Loans.
----------------------
2.2.1. Ratable Loans. Each Advance hereunder shall consist of Loans
made from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.2.2. Types of Advances. The Advances may be Floating Rate Advances
or Eurodollar Advances, or a combination thereof, selected by the
applicable Credit Party in accordance with Sections 2.2.5 and 2.2.6.
2.2.3. Minimum Amount of Each Advance. Each Eurodollar Advance shall
be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in
excess thereof), and each Floating Rate Advance shall be in the minimum
amount of $50,000 (and in multiples of $25,000 if in excess thereof),
provided, however, that any Floating Rate Advance may be in the amount of
the unused Aggregate Commitment.
2.2.4. Principal Payments. (a) Optional. Each Credit Party may
from time to time pay, without penalty or premium, all of its outstanding
Floating Rate Advances, or, in a minimum aggregate amount of $50,000, any
portion of its outstanding Floating Rate Advances upon two Business Days'
prior notice to the Agent. A Eurodollar Advance may not be paid prior to
the last day of the applicable Interest Period.
(b) Mandatory. Upon any sale, transfer or other disposition
permitted under Section 6.13(iii), the Credit Party receiving the proceeds
thereof shall make a mandatory repayment of Advances in an amount equal to
100% of the proceeds of such sale, transfer or other disposition (net of
expenses), provided that if the development costs for such real property
were financed from (or, if applicable, if the take-out financing for such
development financing was obtained from) external sources other than
Advances hereunder, 100% of the proceeds of any such sale, transfer or
other disposition (net of expenses) shall be used by the applicable Credit
Party to repay the financing from such external sources, and any excess
remaining shall be used to make a mandatory repayment of Advances. Upon
any sale of notes receivable permitted under Section 6.14, the Borrower
shall make a mandatory repayment of Advances in an amount equal to 100% of
the proceeds of such sale (net of expenses).
2.2.5. Method of Selecting Types and Interest Periods for New
Advances. Any Credit Party which wishes to request an Advance hereunder
shall select the Type
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of Advance and, in the case of each Eurodollar Advance, the Interest Period
applicable to each Advance from time to time. Such Credit Party shall give
the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00
a.m. (Chicago time) on the Borrowing Date of each Floating Rate Advance and
three Business Days before the Borrowing Date for each Eurodollar Advance,
specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each Lender
shall make available its Loan or Loans, in funds immediately available in
Chicago to the Agent at its address specified pursuant to Article XIV. The
Agent will make the funds so received from the Lenders available to the
applicable Credit Party at the Agent's aforesaid address.
2.2.6. Conversion and Continuation of Outstanding Advances. Floating
Rate Advances shall continue as Floating Rate Advances unless and until
such Floating Rate Advances are converted into Eurodollar Advances. Each
Eurodollar Advance of any Type shall continue as a Eurodollar Advance of
such Type until the end of the then applicable Interest Period therefor, at
which time such Eurodollar Advance shall be automatically converted into a
Floating Rate Advance unless the applicable Credit Party shall have given
the Agent a Conversion/Continuation Notice (as defined below) requesting
that, at the end of such Interest Period, such Eurodollar Advance either
continue as a Eurodollar Advance of such Type for the same or another
Interest Period or be converted into an Advance of another Type. Subject
to the terms of Section 2.2.3, the applicable Credit Party may elect from
time to time to convert all or any part of an Advance of any Type into any
other Type or Types of Advances; provided that any conversion of any
Eurodollar Advance shall be made on, and only on, the last day of the
Interest Period applicable thereto. The applicable Credit Party shall give
the Agent irrevocable notice (a "Conversion/Continuation Notice") of each
conversion of an Advance or continuation of a Eurodollar Advance not later
than 10:00 a.m. (Chicago time) at least one Business Day, in the case of a
conversion into a Floating Rate Advance, or three Business Days, in the
case of a conversion into or continuation of a Eurodollar Advance, prior to
the date of the requested conversion or continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation;
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(ii) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion
into or continuation of a Eurodollar Advance, the duration of the
Interest Period applicable thereto.
2.2.7. Changes in Interest Rate, etc. Each Floating Rate Advance
shall bear interest on the outstanding principal amount thereof, for each
day from and including the date such Advance is made or is converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.2.6
to but excluding the date it becomes due or is converted into a Eurodollar
Advance pursuant to Section 2.2.6, at a rate per annum equal to the
Floating Rate for such day. Changes in the rate of interest on that
portion of any Advance maintained as a Floating Rate Advance will take
effect simultaneously with each change in the Alternate Base Rate. Each
Eurodollar Advance shall bear interest from and including the first day of
the Interest Period applicable thereto to (but not including) the last day
of such Interest Period at the interest rate determined as applicable to
such Eurodollar Advance. No Interest Period may end after the Facility
Termination Date.
2.2.8. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Floating Rate Advance shall be payable on each Payment
Date, commencing with the first such date to occur after the date hereof
and at maturity. Interest accrued on each Eurodollar Advance shall be
payable on the last day of its applicable Interest Period, on any date on
which the Eurodollar Advance is prepaid, whether by acceleration or
otherwise, and at maturity. Interest accrued on each Eurodollar Advance
having an Interest Period longer than three months shall also be payable on
the last day of each three-month interval during such Interest Period.
Interest for Eurodollar Advances and commitment fees shall be calculated
for actual days elapsed on the basis of a 360-day year. Interest for
Floating Rate Advances shall be calculated for actual days elapsed on the
basis of a 365/366-day year. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time) at the place of payment. If
any payment of principal of or interest on an Advance shall become due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection
with such payment.
2.2.9. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will
notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/Continuation Notice, and repayment
notice received by it hereunder. The Agent will notify each Lender of the
interest rate applicable to each Eurodollar
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Advance promptly upon determination of such interest rate and will give
each Lender prompt notice of each change in the Alternate Base Rate.
2.2.10. Rates Applicable After Default. Notwithstanding anything to
the contrary contained in Section 2.2.5 or 2.2.6, during the continuance of
a Default or Unmatured Default the Required Lenders may, at their option,
by notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare
that no Advance may be made as, converted into or continued as a Eurodollar
Advance. During the continuance of a Default the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (i) each Eurodollar Advance shall bear interest for the
remainder of the applicable Interest Period at the rate otherwise
applicable to such Interest Period plus 2% per annum and (ii) each Floating
Rate Advance shall bear interest at a rate per annum equal to the Floating
Rate otherwise applicable to the Floating Rate Advance plus 2% per annum.
2.3. Facility Letters of Credit.
--------------------------
2.3.1. Obligation to Issue. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of
the Borrower herein set forth, the Issuer hereby agrees to issue upon the
request of and for the account of the Borrower, through such of the
Issuer's Lending Installations or Affiliates as the Issuer and the Borrower
may jointly agree, one or more Facility Letters of Credit in accordance
with this Section 2.3, from time to time during the period, commencing on
the Effective Date and ending on the Business Day prior to the Facility
Termination Date.
2.3.2. Conditions for Issuance. In addition to being subject to the
satisfaction of the conditions contained in Section 4.2, the obligation of
the Issuer to issue any Facility Letter of Credit is subject to the
satisfaction in full of the following conditions:
(i) the aggregate maximum amount then available for drawing under
Facility Letters of Credit issued by the Issuer, after giving
effect to the Facility Letter of Credit requested hereunder,
shall not exceed any limit imposed by law or regulation upon the
Issuer;
(ii) after giving effect to the requested issuance of any Facility
Letter of Credit, the sum of (a) the Facility Letter of Credit
Obligations plus (b) the total aggregate unpaid principal balance
of the Advances does not
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exceed the lesser of (x) the Borrowing Base and (y) the Aggregate
Commitment;
(iii) the requested Facility Letter of Credit has an expiration date
not later than the earlier of (x) the Business Day prior to the
Facility Termination Date and (y) one year after its date of
issuance;
(iv) the Facility Letter of Credit Obligations, after giving effect to
the Facility Letter of Credit requested hereunder, shall not
exceed $3,000,000;
(v) the Borrower shall have delivered to the Issuer at such times and
in such manner as the Issuer may reasonably prescribe such
documents and materials as may be required pursuant to the terms
of the proposed Facility Letter of Credit and the proposed
Facility Letter of Credit shall be satisfactory to the Issuer as
to form and content; and
(vi) as of the date of issuance, no order, judgment or decree of any
court, arbitrator or governmental authority shall purport by its
terms to enjoin or restrain the Issuer from issuing the Facility
Letter of Credit and no law, rule or regulation applicable to the
Issuer and no request or directive (whether or not having the
force of law) from any governmental authority with jurisdiction
over the Issuer shall prohibit or request that the Issuer refrain
from the issuance of Letters of Credit generally or the issuance
of that Facility Letter of Credit.
2.3.3. Procedure for Issuance of Facility Letters of Credit. (a) The
Borrower shall give the Issuer five Business Days' prior written notice of
any requested issuance of a Facility Letter of Credit under this Agreement.
Such notice (the "LC Issuance Request") shall be on such standard form as
may be prescribed by the Issuer, shall be irrevocable and shall specify the
stated amount of the Facility Letter of Credit requested, the effective
date (which day shall be a Business Day) of issuance of such requested
Facility Letter of Credit, the date on which such requested Facility Letter
of Credit is to expire (which date shall be a Business Day and shall in no
event be later than the Facility Termination Date), the purpose for which
such Facility Letter of Credit is to be issued, and the Person for whose
benefit the requested Facility Letter of Credit is to be issued. At the
time such LC Issuance Request is delivered, the Borrower shall also provide
the Issuer with a copy of the form of the Facility Letter of Credit it is
requesting be issued. The Issuer shall promptly forward to the Lenders a
copy of the LC Issuance Request.
(b) Subject to the terms and conditions of this Section 2.3.3 and
provided that the applicable conditions set forth in Sections 4.2 and 2.3.2
hereof have been satisfied,
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the Issuer shall, on the requested date, issue a Facility Letter of Credit
on behalf of the Borrower in accordance with the Issuer's usual and
customary business practices.
(c) The Issuer shall not extend or amend any Facility Letter of
Credit unless the requirements of this Section 2.3.3 are met as though a
new Facility Letter of Credit was being requested and issued.
2.3.4. Reimbursement Obligations. (a) The Borrower agrees to pay to
the Agent the amount of all Reimbursement Obligations, interest and other
amounts payable to the Agent under or in connection with such Facility
Letter of Credit immediately when due, irrespective of any claim, set-off,
defense or other right which the Borrower or any Subsidiary or Affiliate of
the Borrower may have at any time against the Issuer or any other Person,
under all circumstances, including without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any Subsidiary or Affiliate of the Borrower may
have at any time against a beneficiary named in a Facility Letter of
Credit or any transferee of any Facility Letter of Credit (or any
Person for whom any such transferee may be acting), the Issuer, any
Lender, or any other Person, whether in connection with this
Agreement, any Facility Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transactions between the Borrower, or any Subsidiary or
Affiliate of the Borrower and the beneficiary named in any Facility
Letter of Credit);
(iii) any draft, certificate or any other document presented
under the Facility Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect (except to the extent any such
invalidity or insufficiency is found in a final judgment of a court of
competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Agent);
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents;
(v) the occurrence of any Default or Unmatured Default.
(b) The Issuer shall promptly notify the Borrower of any draw under a
Facility Letter of Credit. The Borrower shall reimburse the Issuer for the
amount of any drawings under a Facility Letter of Credit no later than the
Business Day after the payment by the Issuer. Any Reimbursement Obligation
with respect to any Facility
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Letter of Credit shall bear interest from the date of the relevant drawings
under the pertinent Facility Letter of Credit at the interest rate for past
due Floating Rate Loans calculated in accordance with Section 2.2.10.
2.3.5. Participation. (a) Immediately upon issuance by the Issuer of
any Facility Letter of Credit in accordance with the procedures set forth
in Section 2.3.3 each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuer, without recourse or
warranty, an undivided interest and participation equal to its Pro Rata
Share in such Facility Letter of Credit (including, without limitation, all
obligations of the Borrower with respect thereto) and any security therefor
or guaranty pertaining thereto.
(b) In the event that the Issuer makes any payment under any Facility
Letter of Credit and the Borrower shall not have repaid such amount to the
Issuer pursuant to Section 2.3.4, the Issuer shall promptly notify each
Lender of such failure, and each Lender shall promptly and unconditionally
pay to the Agent for the account of the Issuer the amount of such Lender's
Pro Rata Share of the unreimbursed amount of any such payment. If any
Lender fails to make available to the Issuer, any amounts due to the Issuer
pursuant to this Section 2.3.5(b), the Issuer shall be entitled to recover
such amount, together with interest thereon at the Federal Funds Effective
Rate, for the first three Business Days after such Lender receives such
notice and thereafter, at the Floating Rate, payable (i) on demand, (ii) by
setoff against any payments made to the Issuer for the account of such
Lender or (iii) by payment to the Issuer by the Agent of amounts otherwise
payable to such Lender under this Agreement. The failure of any Lender to
make available to the Agent its Pro Rata Share of the unreimbursed amount
of any such payment shall not relieve any other Lender of its obligation
hereunder to make available to the Agent its Pro Rata Share of the
unreimbursed amount of any payment on the date such payment is to be made,
but no Lender shall be responsible for the failure of any other Lender to
make available to the Agent its Pro Rata Share of the unreimbursed amount
of any payment on the date such payment is to be made.
(c) Whenever the Issuer receives a payment on account of a
Reimbursement Obligation, including any interest thereon, it shall promptly
pay to each Lender which has funded its participating interest therein, in
immediately available funds, an amount equal to such Lender's Pro Rata
Share thereof.
(d) The obligations of a Lender to make payments to the Agent with
respect to a Facility Letter of Credit shall be absolute, unconditional and
irrevocable, not subject to any counterclaim, set-off, qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances.
(e) In the event any payment by the Borrower or any Subsidiary or
Affiliate of the Borrower received by the Agent with respect to a Facility
Letter of Credit and
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distributed by the Agent to the Lenders on account of their participations
is thereafter set aside, avoided or recovered from the Agent in connection
with any receivership, liquidation, reorganization or bankruptcy
proceeding, each Lender which received such distribution shall, upon demand
by the Agent, contribute such Lender's Pro Rata Share of the amount set
aside, avoided or recovered together with interest at the rate required to
be paid by the Agent upon the amount required to be repaid by it.
2.3.6. Compensation for Facility Letters of Credit. (a) The
Borrower shall pay to the Issuer, for the ratable benefit of the Lenders, a
Facility Letter of Credit fee in the amount of 2.25% per annum on the
average daily undrawn amount of all Facility Letters of Credit outstanding,
such fee to be paid in arrears on each Payment Date and on the Facility
Termination Date.
(b) In addition, the Borrower shall pay to the Issuer, for its own
account, an issuance fee of $300 for each Facility Letter of Credit issued
by it as well as the Issuer's reasonable and customary costs of issuing and
servicing the Facility Letters of Credit.
2.3.7. Letter of Credit Collateral Account. The Borrower agrees that
it will, until the final expiration date of any Facility Letter of Credit
and thereafter as long as any amount is payable to the Lenders in respect
of any Facility Letter of Credit, maintain a special collateral account
(the "Letter of Credit Collateral Account") at the Agent's office at the
address specified pursuant to Article XIV, in the name of such Borrower but
under the sole dominion and control of the Agent, for the benefit of the
Lenders and in which such Borrower shall have no interest other than as set
forth in Section 8.1. The Agent will invest any funds on deposit from time
to time in the Letter of Credit Collateral Account in certificates of
deposit of the Agent having a maturity not exceeding 30 days. Nothing in
this Section 2.3.7 shall either obligate the Agent to require the Borrower
to deposit any funds in the Letter of Credit Collateral Account or limit
the right of the Agent to release any funds held in the Letter of Credit
Collateral Account other than as required by Section 8.1.
2.3.8. Nature of Obligations. (a) As among the Borrower, the Issuer
and the Lenders, the Borrower assumes all risks of the acts and omissions
of, or misuse of the Facility Letters of Credit by, the respective
beneficiaries of the Facility Letters of Credit (except such as are found
in a final judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Issuer). In
furtherance and not in limitation of the foregoing, the Issuer and the
Lenders shall not be responsible (absent gross negligence or willful
misconduct in connection therewith, as determined by the final judgment of
a court of competent jurisdiction) for (i) the forms, validity,
sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance
of any Facility Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (ii) the
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validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Facility Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of a Facility Letter of Credit to comply fully with conditions
required in order to draw upon such Facility Letter of Credit; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise; (v) errors in
interpretation of technical terms; (vi) misapplication by the beneficiary
of a Facility Letter of Credit of the proceeds of any drawing under such
Facility Letter of Credit; (viii) any consequences arising from causes
beyond the control of the Issuer or the Lenders.
(b) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuer
or any Lender under or in connection with the Facility Letters of Credit or
any related certificates, if taken or omitted in good faith, shall not put
the Issuer or such Lender under any resulting liability to the Borrower or
relieve the Borrower of any of its obligations hereunder to the Issuer, the
Agent or any Lender.
2.4. Commitment Fee; Reductions in Aggregate Commitment; Early Termination
Fee. The Borrower agrees to pay to the Agent for the account of each Lender a
commitment fee of 0.375% per annum on the daily unused portion of such Lender's
Commitment from the date hereof to and including the Facility Termination Date,
payable on each Payment Date hereafter and on the Facility Termination Date.
The Borrower may permanently reduce the Aggregate Commitment in whole, or in
part ratably among the Lenders in integral multiples of $1,000,000, upon at
least three Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction, provided, however, that (i) the amount
of the Aggregate Commitment may not be reduced below the aggregate principal
amount of the outstanding Advances and (ii) the amount of the Aggregate
Commitment may not be reduced below $10,000,000 prior to the first anniversary
of the Closing Date. All accrued commitment fees shall be payable on the
effective date of any termination of the obligations of the Lenders to make
Credit Extensions hereunder. If the obligations of the Lenders to make Credit
Extensions hereunder are terminated by the Borrower prior to the first
anniversary of the Closing Date, the Borrower will pay to the Agent for the
ratable account of the Lenders a non-refundable early termination fee in the
amount of $50,000.
2.5. Method of Payment. All payments of the Obligations hereunder shall
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Agent at the Agent's address specified pursuant to Article XIV, or
at any other Lending Installation of the Agent specified in writing by the Agent
to the Borrower, by noon (local time) on the date when due and shall be applied
ratably by the Agent among the Lenders. Each payment delivered to the Agent for
the account of any Lender shall be delivered promptly by the Agent to such
Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIV or at any Lending Installation specified in a
notice received by the Agent from such Lender. The Agent is hereby authorized
to charge the account of the
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Borrower or other applicable Credit Party maintained with First Chicago for each
payment of principal, interest and fees as it becomes due hereunder.
2.6. Notes; Telephonic Notices. Each Lender is hereby authorized to
record the principal amount of each of its Loans and each repayment on the
schedule attached to its Notes, provided, however, that the failure to so record
shall not affect the applicable Credit Party's obligations under each such Note.
Each Credit Party hereby authorizes the Lenders and the Agent to extend, convert
or continue Advances, effect selections of Types of Advances and to transfer
funds based on telephonic notices made by any person or persons the Agent or any
Lender in good faith believes to be acting on behalf of such Credit Party. Each
such Credit Party agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by one of its Authorized Officers. If the written
confirmation differs in any material respect from the action taken by the Agent
and the Lenders, the records of the Agent and the Lenders shall govern absent
manifest error.
2.7. Lending Installations. Each Lender may book its Loans and
participations in Facility Letters of Credit at any Lending Installation
selected by such Lender and may change its Lending Installation from time to
time. All terms of this Agreement shall apply to any such Lending Installation
and the Notes shall be deemed held by each Lender for the benefit of such
Lending Installation. Each Lender may, by written or telex notice to the Agent
and the Borrower, designate a Lending Installation through which Loans will be
made and participations in Facility Letters of Credit purchased by it and for
whose account Loan payments are to be made.
2.8. Non-Receipt of Funds by the Agent. Unless the applicable Credit
Party or a Lender, as the case may be, notifies the Agent prior to the date on
which it is scheduled to make payment to the Agent of (i) in the case of a
Lender, the proceeds of a Loan or a payment under Section 2.3.5(b) or (ii) in
the case of a Credit Party, a payment of principal, interest, fees or
Reimbursement Obligations to the Agent for the account of the Lenders, that it
does not intend to make such payment, the Agent may assume that such payment has
been made. The Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption. If such Lender or the applicable Credit Party, as the case may be,
has not in fact made such payment to the Agent, the recipient of such payment
shall, on demand by the Agent, repay to the Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to (i) in the case
of payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in
the case of payment by a Credit Party, the interest rate applicable to the
relevant Loan or Reimbursement Obligation.
2.9. Withholding Tax Exemption. At least five Business Days prior to the
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof,
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agrees that it will deliver to each of the Borrower and the Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes. Each Lender which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Borrower and the Agent two
additional copies of such form (or a successor form) on or before the date that
such form expires (currently, three successive calendar years for Form 1001 and
one calendar year for Form 4224) or becomes obsolete or after the occurrence of
any event requiring a change in the most recent forms so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such Lender
is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises the Borrower and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax.
2.10. Application of Payments with Respect to Defaulting Lenders. No
payments of principal, interest or fees delivered to the Agent for the account
of any Defaulting Lender shall be delivered by the Agent to such Defaulting
Lender. Instead, such payments shall, for so long as such Defaulting Lender
shall be a Defaulting Lender, be held by the Agent, and the Agent is hereby
authorized and directed by all parties hereto to hold such funds in escrow and
apply such funds as follows:
(i) First, if applicable to any payments due to the Issuer pursuant to
-----
Section 2.3.5(b); and
(ii) Second, to Loans required to be made by such Defaulting Lender on
any Borrowing Date to the extent such Defaulting Lender fails to make such
Loans.
Notwithstanding the foregoing, upon the termination of the Aggregate Commitment
and the payment and performance of all of the Obligations (other than those
owing to a Defaulting Lender), any funds then held in escrow by the Agent
pursuant to the preceding sentence shall be distributed to each Defaulting
Lender, pro rata in proportion to amounts that would be due to each Defaulting
Lender but for the fact that it is a Defaulting Lender.
2.11. Borrowing Base; Reporting and Eligibility Requirements.
-------------------------------------------------------
2.11.1. Collateral Reports. The Borrower shall submit to the Agent,
at the time of the initial Credit Extension hereunder and thereafter not
later than the tenth (10th) day of each month, a borrowing base
certificate, in substantially the form of Exhibit "E" hereto (the
"Borrowing Base Certificate"), duly executed by the President,
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Chief Financial Officer or Corporate Controller of the Borrower and each
other Borrowing Base Party, which Borrowing Base Certificate shall cover
all of the Borrowing Base Parties. The Borrowing Base Certificate shall
include, as of the last Business Day of the immediately preceding fiscal
month: (i) an aged trial balance of Accounts (the "Accounts Trial
Balance"); (ii) a schedule of Inventory owned by the Borrowing Base Parties
and in their respective possession valued at FIFO cost with such reserves
as the Agent deems appropriate; and (iii) the outstanding principal balance
of the Obligations. The Borrowing Base Certificates shall contain such
additional information as the Agent or any Lender shall reasonably require,
and the Borrower and each other Borrowing Base Party agrees to provide more
frequent reports regarding the Collateral from time to time upon request of
the Agent or any Lender. The Borrower and each other Borrowing Base Party
shall furnish copies of any other reports or information, in a form and
with such specificity as is satisfactory to the Agent, concerning Accounts
included, described or referred to in the Borrowing Base Certificates and
any other documents in connection therewith requested by the Agent.
2.11.2. Eligible Accounts. "Eligible Accounts" shall mean and
include all Accounts except: (i) Accounts which remain unpaid ninety (90)
days after the due date unless such Accounts are generated by the snow tire
and chain dating program, in which case such Accounts shall be "Eligible
Accounts" unless they remain unpaid on the earlier of ninety (90) days
after the due date or one hundred eighty (180) days after the invoice date,
provided that the Borrower and the Lenders may agree in writing to other
dating programs which vary the provisions of this clause (i); (ii) all
Accounts owing by a single Account Debtor, including a currently scheduled
Account, if fifteen percent (15%) or more of the balance owing by such
Account Debtor to the Borrowing Base Parties remains unpaid as specified in
clause (i) of this Section 2.11.2; (iii) Accounts with respect to which the
Account Debtor is a director, officer, employee, Subsidiary or Affiliate of
any Borrowing Base Party; (iv) Accounts with respect to which the Account
Debtor is an entity owned or controlled by a director, officer, employee,
Subsidiary or Affiliate of any Borrowing Base Party, unless (1) neither
such entity nor such director, officer, employee, Subsidiary or Affiliate
has control (as defined in the definition of "Affiliate") over the relevant
Borrowing Base Party and (2) such Account is subject to the Borrowing Base
Party's normal credit and collection policies and the terms of credit
extended to such Account Debtor are no more favorable than those routinely
extended to other Account Debtors in the ordinary course of business; (v)
Accounts with respect to which the Account Debtor is the United States of
America or any department, agency or instrumentality thereof; (vi) Accounts
with respect to which the Account Debtor is not a resident of the United
States unless the Account Debtor has supplied the applicable Borrowing Base
Party with an irrevocable Letter of Credit, issued by a financial
institution satisfactory to Agent, sufficient to cover such account in form
and substance satisfactory to the Agent; (vii) Accounts with respect to
which the Account Debtor has asserted or has a right to assert a
counterclaim or setoff or which are the subject of pending or
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threatened litigation or other legal challenge; (viii) Accounts for which
the prospect of payment or performance by the Account Debtor is or will be
impaired as determined by the Agent in the exercise of its reasonable
discretion; (ix) Accounts with respect to which the Agent does not have a
first and valid fully perfected security interest; (x) Accounts with
respect to which the Account Debtor is the subject of bankruptcy or a
similar insolvency proceeding or has made an assignment for the benefit of
creditors or whose assets have been conveyed to a receiver or trustee; (xi)
Accounts with respect to which the Account Debtor's obligation to pay the
Account is conditional upon the Account Debtor's approval or is otherwise
subject to any repurchase obligation or return right, as with sales made on
a bill-and-hold, guaranteed sale, sale-and-return, sale on approval or
consignment basis; (xii) Accounts to the extent that the Account Debtor's
indebtedness to the applicable Borrowing Base Party exceeds a credit limit
determined by the Agent in the Agent's sole discretion; (xiii) Accounts
with respect to which the Account Debtor is located in Minnesota (or any
other state which may from time to time enact a comparable statute
requiring the filing of a notice of business activities report or similar
form) unless the applicable Borrowing Base Party has received a certificate
of authority to do business and is in good standing in such states, or the
applicable Borrowing Base Party has filed a Notice of Business Activities
Report or similar required report with the appropriate governmental
authority in such State for the then current year; (xiv) Accounts comprised
of service charges owing to a Borrowing Base Party and (xv) Accounts which
the Agent reasonably determines to be ineligible upon written notice to the
applicable Borrowing Base Party. In the event that a previously scheduled
Eligible Account ceases to be an Eligible Account under the above described
criteria, the Agent shall notify the applicable Borrowing Base Party
thereof.
2.11.3. Account Warranties. With respect to Accounts scheduled,
listed or referred to on the initial Accounts Trial Balance or on any
subsequent Accounts Trial Balance, the applicable Borrowing Base Party
warrants and represents to the Agent and the Lenders that: (i) they are
genuine, are in all respects what they purport to be, and are not evidenced
by a judgment; (ii) they represent undisputed, bona fide transactions
completed in accordance with the terms and provisions contained in the
documents delivered to the Agent with respect thereto; (iii) the amounts
shown on the respective Accounts Trial Balance, the applicable Borrowing
Base Party's books and records and all invoices and statements which may be
delivered to the Agent with respect thereto are actually and absolutely
owing to the applicable Borrowing Base Party and are not in any way
contingent; (iv) there are no set offs, counterclaims or disputes existing
or asserted with respect thereto and the applicable Borrowing Base Party
has not made any agreement with any Account Debtor for any deduction
therefrom except a discount or allowance allowed by the applicable
Borrowing Base Party in the ordinary course of its business for prompt
payment; (v) there are no facts, events or occurrences which in any way
impair the validity or enforcement thereof or tend to reduce the amount
payable thereunder as shown on the respective Accounts Trial Balance, the
applicable Borrowing Base Party's books and records and all
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invoices and statements delivered to the Agent with respect thereto; (vi)
to the best of the applicable Borrowing Base Party's knowledge, all Account
Debtors have the capacity to contract and are solvent; (vii) the services
furnished and/or goods sold giving rise thereto are not subject to any
Lien, except that of the Agent, for the ratable benefit of the Lenders, and
except as specifically permitted herein; (viii) the applicable Borrowing
Base Party has no knowledge of any fact or circumstance which would impair
the validity or collectability thereof; and (ix) to the best of the
applicable Borrowing Base Party's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor which
might result in any material adverse change in such Account Debtor's
financial condition.
2.11.4. Verification of Accounts. The Agent shall have the right, at
any time or times hereafter, in the Agent's name or in the name of a
nominee of the Agent, to verify the validity, amount or any other matter
relating to any Accounts, by mail, telephone, telegraph or otherwise.
2.11.5. Account Covenants. The applicable Borrowing Base Party
shall, promptly upon learning thereof: (i) inform the Agent in writing, of
any material delay in the applicable Borrowing Base Party's performance of
any of its obligations to any Account Debtors or of any assertion of any
claims, offsets or counterclaims by any Account Debtors; (ii) furnish to
and inform the Agent of all material adverse information relating to the
financial condition of any material Account Debtor; and (iii) in addition
to its normal reporting on the Borrowing Base Certificate, notify the Agent
in writing if (x) any of its then existing material Accounts scheduled to
the Agent with respect to which the Lenders have made an advance are no
longer Eligible Accounts or (y) any of its then existing Accounts scheduled
to the Agent with respect to which the Lenders have made an advance are no
longer Eligible Accounts if such change in the status of such Accounts
would cause a Default or Unmatured Default.
2.11.6. Appointment of the Agent as Attorney-in-Fact. The Borrower
and each other Borrowing Base Party hereby irrevocably designates, makes,
constitutes and appoints the Agent (and all persons designated by the
Agent), after the occurrence of a Default or Unmatured Default, as its true
and lawful attorney-in-fact, and authorizes the Agent, in the Borrower's or
each such Borrowing Base Party's or the Agent's name, to: (i) demand
payment of Accounts; (ii) enforce payment of Accounts by legal proceedings
or otherwise; (iii) exercise all of the applicable Borrowing Base Party's
rights and remedies with respect to proceedings brought to collect an
Account; (iv) sell or assign any Account upon such terms, for such amount
and at such time or times as the Agent deems advisable; (v) settle, adjust,
compromise, extend or renew an Account; (vi) discharge and release any
Account; (vii) take control in any manner of any item of payment or
proceeds thereof; (viii) prepare, file and sign the applicable Borrowing
Base Party's name on any proof of claim in bankruptcy or other similar
document against an Account Debtor; (ix) endorse the applicable Borrowing
Base Party's name upon any items of payment or proceeds thereof and deposit
the same in
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the Agent's account on account of the Obligations; (x) endorse the
applicable Borrowing Base Party's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any
Account or any goods pertaining thereto; (xi) sign the applicable Borrowing
Base Party's name on any verification of Accounts and notices thereof to
Account Debtors; (xii) notify the post office authorities to change the
address for delivery of applicable Borrowing Base Party's mail to an
address designated by Agent, have access to any lock box or postal box into
which any of the applicable Borrowing Base Party's mail is deposited, and
open and dispose of all mail addressed to applicable Borrowing Base Party
and (xiii) do all acts and things which are necessary, in the Agent's sole
discretion, to fulfill the Borrower's and the other Borrowing Base Parties'
obligations under this Agreement.
2.11.7. Notice to Account Debtors. The Agent may, in its sole
discretion, at any time or times after a Default has occurred and is
continuing, and without prior notice to the applicable Borrowing Base
Party, notify any or all Account Debtors that the Accounts have been
assigned to the Agent and that the Agent, for the ratable benefit of the
Lenders, has a security interest therein. The Agent may direct any or all
Account Debtors to make all payments upon the Accounts directly to the
Agent. The Agent shall furnish the applicable Borrowing Base Party with a
copy of such notice.
2.11.8. Eligible Inventory. "Eligible Inventory" shall mean and
include all Inventory except for any Inventory: (i) which is obsolete (but
without duplication of the obsolete wheel reserve in calculating the
Borrowing Base), not in good condition, or not either currently usable or
currently salable in the ordinary course of applicable Borrowing Base
Party's business; (ii) which is in transit (other than any transit between
different warehouses used by the Borrowing Base Parties and with respect to
which the Agent has been granted a lien on the inventory therein) or is
located on premises other than those listed on Schedule "1" provided that,
(x) where such premises are not owned or leased by a Borrowing Base Party,
such Inventory shall only be Eligible Inventory if it is held by a bailee
pursuant to a bailee letter agreement acceptable to the Lenders (of which a
copy has been furnished to the Lenders) and (y) where such premises are
leased by a Borrowing Base Party, such Inventory shall only be Eligible
Inventory if the applicable Borrowing Base Party has furnished to the
Lenders landlord waivers acceptable to the Lenders; (iii) which is on
consignment; (iv) which is located outside of the United States of America;
(v) which is classified as "unidentified material" in the applicable
Borrowing Base Party's data processing system; (vi) which consists of
supplies or packaging materials including, without limitation, labels,
nameplates, cartons, inserts, and fasteners; (vii) which the Agent
determines, in the exercise of reasonable discretion and in accordance with
the Agent's customary business practices, to be unacceptable due to age,
type, category and/or quantity; (viii) with respect to which the Agent, for
the ratable benefit of the Lenders, does not have a first and valid fully
perfected security interest; and (ix) which the Agent reasonably determines
to be ineligible upon written notice to the applicable
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Borrowing Base Party. In the event that previously scheduled Eligible
Inventory ceases to be Eligible Inventory, the Agent shall notify the
applicable Borrowing Base Party thereof immediately.
2.11.9. Inventory Warranties. With respect to Inventory scheduled,
listed or referred to in any Borrowing Base Certificate, the applicable
Borrowing Base Party warrants that (i) it is located on the premises listed
on Schedule "1" and is not in transit; (ii) it is not subject to any Lien
whatsoever except for the security interest granted to the Agent, for the
ratable benefit of the Lenders, and except as specifically permitted
herein; and (iii) it is of good and merchantable quality, free from any
defect which would affect the market value of such Inventory.
2.11.10. Inventory Records. The Borrower shall at all times
hereafter maintain a perpetual inventory of its own and each other
Borrowing Base Party's Inventory, keeping correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory
and of Eligible Inventory, the applicable Borrowing Base Party's cost
therefor (such cost information to be adjusted for certain markups and
other charges) and upon the Agent's demand therefor, daily withdrawals
therefrom and additions thereto, all of which records shall be available
during the Borrower's usual business hours on reasonable demand to any of
the Borrower's officers, employees or agents. The Borrower or the relevant
Borrowing Base Party shall conduct a physical count of the Inventory at
least once each year and, promptly following such physical count of the
Inventory, the Borrower shall supply the Agent with a report in a form and
with such specificity as may be satisfactory to the Agent concerning such
physical count of the Inventory.
2.11.11. Safekeeping of Inventory and Inventory Covenants. Neither
the Agent nor any Lender shall be responsible for: (i) the safekeeping of
the Inventory; (ii) any loss or damage to the Inventory; (iii) any
diminution in the value of the Inventory; or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency or any other Person. All
risk of loss, damage, destruction or diminution in value of the Inventory
shall be borne by the applicable Borrowing Base Party. No Inventory shall
be at any time or times hereafter stored with a bailee, warehouseman,
consignee or similar third party without the Agent's prior written consent.
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ARTICLE III
CHANGE IN CIRCUMSTANCES
-----------------------
3.1. Yield Protection. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation thereof, or the compliance of
any Lender (which term, for the purposes of this Article III, shall be deemed to
include the Issuer in such capacity) therewith,
(i) subjects any Lender or any applicable Lending Installation to any tax,
duty, charge or withholding on or from payments due from any Credit
Party (excluding (x) federal taxation of the overall net income of any
Lender or applicable Lending Installation and (y) overall net income
and franchise or other similar taxes imposed on any Lender by a
jurisdiction under the laws of which such Lender is organized, in
which its principal office is located, or in which its applicable
Lending Installation is located), or changes the basis of taxation of
payments to any Lender in respect of its Loans or Facility Letters of
Credit (or participations therein) or other amounts due it hereunder,
or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
any Lender or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Eurodollar Advances), or
(iii) imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making,
funding or maintaining loans or letters of credit (or participations
therein) or reduces any amount receivable by any Lender or any
applicable Lending Installation in connection with loans or letters of
credit (or participations therein), or requires any Lender or any
applicable Lending Installation to make any payment calculated by
reference to the amount of loans or letters of credit (or
participations therein) held or interest received by it, by an amount
deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, issuing,
funding and maintaining its Loans and Facility Letters of Credit (or
participations therein) and its Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Lender determines the
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change,
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then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital which such Lender determines is
attributable to this Agreement, its Loans and Facility Letters of Credit (or
participations therein) or its obligation to make Loans and issue or participate
in Facility Letters of Credit hereunder (after taking into account such Lender's
policies as to capital adequacy). "Change" means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. "Risk-Based Capital Guidelines"
means (i) the risk-based capital guidelines in effect in the United States on
the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices Entitled "International Convergence
of Capital Measurements and Capital Standards," including transition rules, and
any amendments to such regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to a Type of Advance does not
accurately reflect the cost of making or maintaining such Advance, then the
Agent shall suspend the availability of the affected Type of Advance and require
any Eurodollar Advances of the affected Type to be repaid.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by a Credit Party for any reason other
than default by the Lenders, the applicable Credit Party will indemnify each
Lender for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain the Eurodollar Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of any Credit Party to
such Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type
of Advance under Section 3.3, so long as such designation is not disadvantageous
to such Lender. Each Lender shall deliver a written statement of such Lender as
to the amount due, if any, under Sections 3.1, 3.2 or 3.4. Such written
statement shall set forth in reasonable detail the calculations upon which such
Lender determined such amount and shall be final, conclusive and binding on the
Credit Parties in the
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absence of manifest error. Determination of amounts payable under such Sections
in connection with a Eurodollar Loan shall be calculated as though each Lender
funded its Eurodollar Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in the written
statement shall be payable on demand after receipt by the applicable Credit
Party of the written statement. The obligations of the Credit Parties under
Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and
termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.1. Initial Credit Extension. The Lenders shall not be required to make
the initial Credit Extension hereunder unless the Borrower has furnished to the
Agent with sufficient copies for the Lenders:
(i) Copies of the articles of incorporation of each Credit Party and of
each Borrowing Base Party, together with all amendments, and a
certificate of good standing for each Credit Party and each Borrowing
Base Party, all certified by the appropriate governmental officer in
each such entity's jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of each
Credit Party and each Borrowing Base Party, of its by-laws and of its
Board of Directors' resolutions (and resolutions of other bodies, if
any are deemed necessary by counsel for any Lender) authorizing the
execution of the Loan Documents.
(iii) An incumbency certificate, executed by the Secretary or Assistant
Secretary of each Credit Party and each Borrowing Base Party, which
shall identify by name and title and bear the signature of the
officers of such entity authorized to sign the Loan Documents and (in
the case of Credit Parties) to request Credit Extensions hereunder,
upon which certificate the Agent and the Lenders shall be entitled to
rely until informed of any change in writing by the applicable entity.
(iv) A written opinion of counsel to the Credit Parties and the Borrowing
Base Parties, addressed to the Lenders in substantially the form of
Exhibit "B" hereto.
(v) Notes from each Credit Party payable to the order of each Lender.
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(vi) Written money transfer instructions, in substantially the form of
Exhibit "F" hereto, addressed to the Agent and signed by an Authorized
Officer, together with such other related money transfer
authorizations as the Agent may have reasonably requested.
(vii) Fully executed copies of the Borrower Security Agreement and the
Idaho Security Agreement, together with (x) duly executed financing
statements to be recorded or filed in the appropriate public offices
in each jurisdiction which the Agent deems necessary or advisable to
perfect the security interest created thereby, (y) certificates of
insurance in respect of the insurance required to be maintained
thereunder, including, without limitation, the certificate of
insurance described in Section 5.18 and (z) copies of Lien searches,
in form and substance satisfactory to the Agent, conducted in each
jurisdiction which the Agent deems necessary or advisable.
(viii) (x) Landlord waivers, in form and substance satisfactory to the
Agent and the Lenders, for any locations in which Inventory is stored
and which are not owned by one of the Borrowing Base Parties and (y)
bailee agreements, in form and substance satisfactory to the Agent and
the Lenders, for any locations in which Inventory is stored and which
are not owned or leased by one of the Borrowing Base Parties.
(ix) Evidence satisfactory to the Agent and the Lenders that all principal,
interest and reimbursement and other obligations under the Loan and
Security Agreement dated October 15, 1991 among Barclays Business
Credit, Inc., the Borrower, Idaho and Big O Retail Enterprises Inc.
(the "Barclays Loan Agreement") have been repaid in full or otherwise
terminated, that such agreement has been terminated and is no longer
of any force or effect and that any Liens granted in connection
therewith have been or will be, concurrently with the initial Credit
Extension, released.
(x) An initial Borrowing Base Certificate and an initial Compliance
Certificate.
(xi) Such copies as the Agent may have requested of the Borrower's and its
Subsidiaries' filings with the Federal Trade Commission (the "FTC") or
state regulatory authorities regarding the franchising practices and
procedures of the Borrower and its Subsidiaries, including without
limitation any amendments, after the November 19, 1993 amendment, to
the Borrower's April 1, 1993 offering circular filed with the FTC.
(xii) The report described in Section 6.1(iii) for fiscal 1995.
(xiii) An intercreditor and subordination agreement between the Agent and
The Kelly-Springfield Tire Company ("Kelly") substantially in the form
of the
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Intercreditor and Subordination Agreement dated as of May 14, 1993
between Kelly and Barclays Business Credit, Inc ("Barclays").
(xiv) A consent, acknowledgment and access agreement among the Agent, The
Bank of Cherry Creek, N.A. ("Cherry Creek") and Kenneth B. Buckius, an
individual, substantially in the form of the Consent, Acknowledgment
and Access Agreement dated as of April 29, 1994 among Barclays, Cherry
Creek and Douglas R. Dix ("Dix"), acknowledged and agreed to by each
holder of the private placement notes referred to in such agreement.
(xv) An amendment to the Indenture, Mortgage, Deed of Trust, Security
Agreement, and Financing Statement (Fixture Filing) from the Borrower,
BODI and Idaho to Cherry Creek and Dix, dated as of April 27, 1994,
amending the reference to the intercreditor agreement described
therein to refer to the agreement delivered pursuant to Section
4.1(xiv), together with other necessary conforming changes to such
indenture.
(xvi) Such other documents as any Lender or its counsel may have
reasonably requested.
4.2. Each Credit Extension. The Lenders shall not be required to make any
Credit Extension (other than an Advance that, after giving effect thereto and to
the application of the proceeds thereof, does not increase the aggregate amount
of outstanding Advances) and the Issuer shall not be required to issue any
Facility Letter of Credit, unless on the applicable Credit Extension Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V are true and
correct as of such Credit Extension Date except to the extent any such
representation or warranty is stated to relate solely to an earlier
date, in which case such representation or warranty shall be true and
correct on and as of such earlier date.
(iii) If such Credit Extension is an Advance requested by an Affiliate
Borrower, (x) the representations and warranties of such Affiliate
Borrower contained in Article V-A are true and correct in all material
respects as of the date of such Advance, except to the extent any such
representation or warranty is stated to relate solely to an earlier
date, in which case such representation or warranty shall remain true
and correct in all material respects on and as of such earlier date,
(y) such Affiliate Borrower has complied with the provisions of
Section 4.3 and (z) such Affiliate Borrower has provided the Lenders
with a certificate in the form of Exhibit "G" containing information
satisfactory to the Lenders regarding the use of the proceeds of such
Advance, including, if the proceeds
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of such Advance are to be used to develop real property, (1) a
description of the parcel(s) to be developed (listing all such
parcel(s) by location), (2) an estimate of the total amount necessary
to develop such parcel(s), and a description of any other sources of
such development funds other than Advances hereunder, (3) a breakdown
of the portion of such Advance to be used for each such parcel, (4) a
cumulative statement of development expenditures to date on each such
parcel, including the portion thereof funded with Advances hereunder
and (5) an estimated date of completion for each parcel.
(iv) If such Credit Extension is an Advance requested by an Affiliate
Borrower between June 30 and September 30 of any year, the Borrower
has provided the Lenders with a certificate of its chief financial
officer stating that the Borrower will have adequate funds for its
working capital purposes during such June 30-September 30 period of
such year even after taking into account the reduction in availability
to the Borrower hereunder as a result of such Advance to such
Affiliate Borrower.
(v) All legal matters incident to the making of such Credit Extension
shall be satisfactory to the Lenders and their counsel.
Each Borrowing Notice or LC Issuance Request with respect to each such
Credit Extension shall constitute a representation and warranty by (a) the
Borrower that the conditions contained in Sections 4.2(i) and (ii) have been
satisfied and (b) by the applicable Affiliate Borrower, if such Credit Extension
is requested by it, that the conditions contained in Sections 4.2(i) and (iii)
have been satisfied. Any Lender may require a duly completed Compliance
Certificate and/or a duly completed Borrowing Base Certificate as a condition to
making a Credit Extension.
4.3. Initial Credit Extension to a new Affiliate Borrower. The
obligations of the Lenders to make Credit Extensions and the Issuer to issue
Facility Letters of Credit on the occasion of the first request for either by
each Affiliate Borrower other than BODI are subject to the satisfaction of the
conditions set forth in Section 4.2 hereof with respect to such Affiliate
Borrower and the Borrower and the following additional conditions:
(i) The Agent shall have received, in sufficient number of original
counterparts for each Lender, an Affiliate Borrower Counterpart dated
on or before the date of such first Credit Extension and duly executed
by the relevant Affiliate Borrower and the Borrower.
(ii) On or before the date of such first Credit Extension, such Affiliate
Borrower shall deliver to the Agent (x) its Notes, all of which shall
be duly executed by such Affiliate Borrower and dated on or before the
date of such Credit Extension, (y) the corporate documentation and
certificates identified in
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Sections 4.1(i)-(iii) with respect to such Affiliate Borrower and (z)
a written opinion of counsel addressed to the Lenders, dated the date
of such Credit Extension, in form and substance acceptable to the
Agent.
(iii) The identity, corporate structure and financial condition of the
Affiliate Borrower and all legal matters incident to the making of
such Credit Extension to such Affiliate Borrower shall be satisfactory
to the Lenders and their counsel.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
The Borrower represents and warrants to the Lenders that:
5.1. Corporate Existence and Standing. Each of the Borrower and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.
5.2. Authorization and Validity. The Borrower has the corporate power and
authority and legal right to execute and deliver the Loan Documents to which it
is a party and to perform its obligations thereunder. The execution and
delivery by the Borrower of the Loan Documents to which it is a party and the
performance of its obligations thereunder have been duly authorized by proper
corporate proceedings, and the Loan Documents to which it is a party constitute
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and delivery
by the Borrower of the Loan Documents to which it is a party, nor the
consummation of the transactions therein contemplated, nor compliance with the
provisions thereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower or any of its
Subsidiaries or the Borrower's or any Subsidiary's articles of incorporation or
by-laws or the provisions of any indenture, instrument or agreement to which the
Borrower or any of its Subsidiaries is a party or is subject, or by which it, or
its Property, is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien in, of or on the Property of
the Borrower or a Subsidiary pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision thereof, is
required to
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authorize, or is required in connection with the execution, delivery and
performance of, or the legality, validity, binding effect or enforceability of,
any of the Loan Documents to which the Borrower is a party.
5.4. Financial Statements. The December 31, 1993 consolidated financial
statements of the Borrower and its Subsidiaries heretofore delivered to the
Lenders were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition and operations of the Borrower and
its Subsidiaries at such date and the consolidated results of their operations
for the period then ended.
5.5. Material Adverse Change. Since December 31, 1993, there has been no
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries which could have a
Material Adverse Effect, other than matters disclosed in the Borrower's
quarterly reports to the U.S. Securities and Exchange Commission on form 10-Q
for the quarters ending after such date and prior to the date of this Agreement.
5.6. Taxes. The Borrower's federal tax I.D. number is 87-0392481.
Idaho's federal tax I.D. number is 82-0293051. The Borrower and its
Subsidiaries have filed all United States federal tax returns and all other tax
returns which are required to be filed and have paid all taxes due pursuant to
said returns or pursuant to any assessment received by the Borrower or any of
its Subsidiaries, except such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided. The United States
income tax returns of the Borrower and its Subsidiaries have been audited by the
Internal Revenue Service through the fiscal year ended December 31, 1991. No
tax liens have been filed and no claims are being asserted with respect to any
such taxes. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of any taxes or other governmental charges are
adequate.
5.7. Litigation and Contingent Obligations. Except as listed on Schedule
"2" hereto, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting the Borrower or any of its Subsidiaries which
could have a Material Adverse Effect. Other than any liability incident to such
litigation, arbitration or proceedings, the Borrower has no material contingent
obligations not provided for or disclosed in the financial statements referred
to in Section 5.4.
5.8. Subsidiaries and Affiliates. Schedule "3" hereto contains an
accurate list of all of the Subsidiaries of the Borrower and of all of the
Affiliates of the Borrower in which the Borrower or any Subsidiary owns,
directly or indirectly, 25% or more of the voting stock or other ownership
interests, setting forth their respective jurisdictions of incorporation or
organization and the percentage of their respective capital stock or other
ownership interests owned by the Borrower or other Subsidiaries. All of the
issued and outstanding shares of
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capital stock of such Subsidiaries have been duly authorized and issued and are
fully paid and non-assessable.
5.9. ERISA. There are no Unfunded Liabilities under any Single Employer
Plans. Neither the Borrower nor any other member of the Controlled Group has
incurred, or is reasonably expected to incur, any withdrawal liability to
Multiemployer Plans. Each Plan complies in all material respects with all
applicable requirements of law and regulations, no Reportable Event has occurred
with respect to any Plan, neither the Borrower nor any other members of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and no
steps have been taken to reorganize or terminate any Plan.
5.10. Accuracy of Information. No information, exhibit or report
furnished by any of the Big O Entities to the Agent or to any Lender in
connection with the negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading.
5.11. Regulation U. Neither the Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
purchasing or carrying margin stock (as defined in Regulation U), and such
margin stock constitutes less than 25% of those assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge, or other
restriction hereunder.
5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which could have a Material Adverse Effect. Neither the
Borrower nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in (i)
any agreement to which it is a party, which default could have a Material
Adverse Effect or (ii) any agreement or instrument evidencing or governing
Indebtedness or Contingent Obligations.
5.13. Compliance With Laws. The Borrower and its Subsidiaries have
complied in all material respects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
their respective businesses or the ownership of their respective Property.
Neither the Borrower nor any Subsidiary has received any notice to the effect
that its operations are not in material compliance with any of the requirements
of applicable federal, state and local environmental, health and safety statutes
and regulations or the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action could have a Material Adverse Effect.
5.14. Environmental Warranties. To the best of the Borrower's knowledge,
------------------------
except as set forth on Schedule "4" hereto:
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(i) all facilities and property (including underlying groundwater) owned
or leased by any Big O Entity have been, and continue to be, owned or
leased by such entity in material compliance with all Environmental
Laws;
(ii) there has been no past, and there are no pending or threatened (a)
claims, complaints, notices or requests for information received by
any Big O Entity with respect to any alleged violation of any
Environmental Law, or (b) complaints, notices or inquiries to any Big
O Entity regarding potential liability under any Environmental Law;
(iii) there have been no Releases of Hazardous Materials at, on or under
any property now or previously owned or leased by any Big O Entity
that, singly or in the aggregate, have, or may reasonably be expected
to have, a Material Adverse Effect or an Affiliate Borrower MAE;
(iv) each Big O Entity has been issued and is in material compliance with
all permits, certificates, approvals, licenses and other
authorizations relating to environmental matters and necessary or
desirable for its businesses;
(v) no property now or previously owned or leased by any Big O Entity is
listed or proposed for listing (with respect to owned property only)
on the National Priorities List pursuant to CERCLA, on the CERCLIS or
on any similar state list of sites requiring investigation or clean-
up;
(vi) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by any Big O Entity that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material
Adverse Effect or an Affiliate Borrower MAE;
(vii) no Big O Entity has directly transported or directly arranged for
the transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on CERCLIS or on any similar state list or which
is the subject of federal, state or local enforcement actions or other
investigations which may lead to material claims against any Big O
Entity for any remedial work, damage to natural resources or personal
injury, including, but not limited to, claims under CERCLA; and
(viii) there are no polychlorinated biphenyls or friable asbestos present
at any property now or previously owned or leased by any Big O Entity
that, singly or in the aggregate, have, or may reasonably be expected
to have, a Material Adverse Effect or an Affiliate Borrower MAE.
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5.15. Ownership of Properties. Except as set forth on Schedule "5" hereto,
on the date of this Agreement, the Borrower and its Subsidiaries will have good
title, free of all Liens other than those permitted by Section 6.18, to all of
the Property and assets reflected in the financial statements as owned by it.
5.16. Investment Company Act. Neither the Borrower nor any Subsidiary is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
5.17. Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.18. Insurance. The certificate signed by the President, Chief Financial
Officer or Corporate Controller of the Borrower, that attests to the existence
and adequacy of, and summarizes, the property and casualty insurance program
carried by the Big O Entities and that has been furnished by the Borrower to the
Agent and the Lenders, is complete and accurate. This summary includes the
insurer's or insurers' name(s), policy number(s), expiration date(s), amount(s)
of coverage, type(s) of coverage, exclusion(s), and deductibles. This summary
also includes similar information, and describes any reserves, relating to any
self-insurance program that is in effect.
5.19. Intellectual Property. The Borrower and its Subsidiaries own or
possess all of the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present and planned future conduct of their
respective businesses except as set forth on Schedule "6".
5.20. Solvency. (i) Immediately after the consummation of the transactions
to occur on the date hereof and immediately following the making of each Credit
Extension, if any, made on the date hereof and after giving effect to the
application of the proceeds of such Credit Extensions, (a) the fair value of the
assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, subordinated, contingent or
otherwise (taking into account, with respect to all contingent liabilities, the
likelihood of such liabilities becoming actual), of the Borrower and its
Subsidiaries on a consolidated basis; (b) the present fair saleable value of the
property of the Borrower and its Subsidiaries on a consolidated basis will be
greater than the amount that will be required to pay the probable liability of
the Borrower and its Subsidiaries on a consolidated basis on their debts and
other liabilities, subordinated, contingent or otherwise (taking into account,
with respect to all contingent liabilities, the likelihood of such liabilities
becoming actual), as such debts and other liabilities become absolute and
matured; (c) the Borrower and its Subsidiaries on a consolidated basis will be
able to pay their debts and liabilities, subordinated, contingent or otherwise
(taking into account, with respect to all contingent liabilities, the likelihood
of such liabilities becoming actual), as such debts and liabilities become
absolute and matured;
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and (d) the Borrower and its Subsidiaries on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be
conducted after the date hereof.
(ii) The Borrower does not intend to, or to permit any of its Subsidiaries to,
and the Borrower does not believe that it or any of its Subsidiaries will, incur
debts beyond its ability to pay such debts as they mature, taking into account
the timing of and amounts of cash to be received by it or any such Subsidiary
and the timing of the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
5.21. Benefits. Each of the Borrower, its Subsidiaries and the Borrowing
Affiliates will benefit from the financing arrangement established by this
Agreement. The Borrower acknowledges that, but for the agreement by each
Borrowing Base Party to execute and deliver its pledge and security agreement,
the Agent and the Lenders would not have made available the credit facilities
established hereby on the terms set forth herein.
ARTICLE V-A
REPRESENTATIONS AND WARRANTIES OF AFFILIATE BORROWERS
-----------------------------------------------------
Each Affiliate Borrower represents and warrants to the Lenders as provided in
this Article V-A that:
5A.1. Corporate Existence and Standing. Such Affiliate Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite authority to
conduct its business in each jurisdiction in which its business is conducted.
5A.2. Authorization and Validity. Such Affiliate Borrower has the corporate
power and authority and legal right to execute and deliver the Loan Documents to
which it is a party and to perform its obligations thereunder. The execution
and delivery by such Affiliate Borrower of the Loan Documents to which it is a
party and the performance by it of its obligations thereunder have been duly
authorized by proper corporate proceedings, and such Loan Documents constitute
legal, valid and binding obligations of such Affiliate Borrower enforceable
against such Affiliate Borrower in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
5A.3. No Conflict; Government Consent. Neither the execution and delivery by
such Affiliate Borrower of the Loan Documents to which it is a party, nor the
consummation by it of the transactions therein contemplated to be consummated by
it, nor compliance by
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such Affiliate Borrower with the provisions thereof will violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on such
Affiliate Borrower or its certificate or articles of incorporation or by-laws
(or similar documents) or the provisions of any indenture, instrument or
agreement to which such Affiliate Borrower is a party or is subject, or by which
it, or its Property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or on the
Property of such Affiliate Borrower pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with, or exemption by,
any Governmental Agency is required to authorize, or is required in connection
with the execution, delivery and performance of, or the legality, validity,
binding effect or enforceability of, any of the Loan Documents to which such
Affiliate Borrower is a party.
5A.4. Investment Company Act. Such Affiliate Borrower is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
5A.5. Public Utility Holding Company Act. Such Affiliate Borrower is not a
"holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
5A.6. Regulation U. Such Affiliate Borrower is not engaged principally, or
as one of its important activities, in the business of purchasing or carrying
margin stock (as defined in Regulation U), and such margin stock constitutes
less than 25% of those assets of such Affiliate Borrower which are subject to
any limitation on sale, pledge, or other restriction hereunder.
5A.7. Litigation and Contingent Obligations. Except as listed on Schedule
"2" hereto, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting such Affiliate Borrower which could have an
Affiliate Borrower MAE.
5A.8. Material Agreements. Such Affiliate Borrower is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
which could have an Affiliate Borrower MAE. Such Affiliate Borrower is not in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in (i) any agreement to which it is a party,
which default could have an Affiliate Borrower MAE or (ii) any agreement or
instrument evidencing or governing Indebtedness or Contingent Obligations.
5A.9. Compliance With Laws. Such Affiliate Borrower has complied with all
applicable statutes, rules, regulations, orders and restrictions of any domestic
or foreign government or any instrumentality or agency thereof, having
jurisdiction over the conduct of
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its business or the ownership of its Property. Such Affiliate Borrower has not
received any notice to the effect that its operations are not in material
compliance with any of the requirements of applicable federal, state and local
environmental, health and safety statutes and regulations or the subject of any
federal or state investigation evaluating whether any remedial action is needed
to respond to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could have an Affiliate
Borrower MAE.
ARTICLE VI
COVENANTS
---------
During the term of this Agreement, unless the Required Lenders shall otherwise
consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, and furnish to the Lenders:
(i) Within five days after the earlier of (x) the day the Borrower is
required to submit its annual report on form 10-K to the U.S.
Securities and Exchange Commission and (y) the day the Borrower
actually submits such report, an unqualified (except for
qualifications relating to changes in accounting principles or
practices reflecting changes in generally accepted principles of
accounting and required or approved by the Borrower's independent
certified public accountants) audit report certified by independent
certified public accountants, acceptable to the Lenders, prepared in
accordance with generally accepted accounting principles as in effect
at such time on a consolidated and consolidating basis (consolidating
statements need not be certified by such accountants) for itself and
the Subsidiaries, including balance sheets as of the end of such
period, related profit and loss and reconciliation of surplus
statements, and a statement of cash flows, accompanied by a
certificate of said accountants that, in the course of their
examination necessary for their certification of the foregoing, they
have obtained no knowledge of any Default or Unmatured Default, or if,
in the opinion of such accountants, any Default or Unmatured Default
shall exist, stating the nature and status thereof. Any management
letter prepared by said accountants in connection with the foregoing
annual audit report shall be furnished to the Lenders within five days
after it is received by the Borrower.
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(ii) Within 30 days after the close of each (x) month, for itself and the
Subsidiaries, consolidated and consolidating unaudited balance sheets
as at the close of each such month and consolidated and consolidating
profit and loss statements for such month and for the period from the
beginning of such fiscal year to the end of such month, (y) quarter,
for itself and the Subsidiaries, a consolidated and consolidating
unaudited statement of cash flows for such quarter, together with (in
the case of each statement in clause (x)) a comparison of such results
to its plan and forecast for such period as set forth in the report
for such fiscal year delivered pursuant to Section 6.1(iii), all
certified by its chief financial officer.
(iii) As soon as available, but in any event not later than December 15 of
each year, a copy of the plan and forecast (including a projected
consolidated and consolidating balance sheet, income statement and
funds flow statement) of the Big O Entities for the following fiscal
year, with such projections to be detailed on a month-by-month basis.
(iv) Together with the financial statements required hereunder, a
Compliance Certificate.
(v) Within 270 days after the close of each fiscal year, a statement of
the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA.
(vi) As soon as possible and in any event within 10 days after the Borrower
knows that any Reportable Event has occurred with respect to any Plan,
a statement, signed by the chief financial officer of the Borrower,
describing said Reportable Event and the action which the Borrower
proposes to take with respect thereto.
(vii) As soon as possible and in any event within 31 days after receipt by
any Big O Entity, a copy of (a) any notice or claim to the effect that
any Big O Entity is or may be liable to any Person as a result of the
release by any Big O Entity or any other Person of any toxic or
hazardous waste or substance into the environment, and (b) any notice
alleging any violation of any federal, state or local environmental,
health or safety law or regulation by any Big O Entity which, in
either case, could reasonably be expected to have a Material Adverse
Effect or an Affiliate Borrower MAE.
(viii) Promptly upon the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy
statements so furnished.
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which the Borrower or any
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of its Subsidiaries files with the Securities and Exchange Commission
or with the Federal Trade Commission.
(x) Within 90 days after the close of each fiscal year of each Affiliate
Borrower, for such Affiliate Borrower and its Subsidiaries,
consolidated and consolidating unaudited balance sheets as at the
close of such fiscal year and consolidated and consolidating profit
and loss and reconciliation of surplus statements and a statement of
cash flows for such fiscal year, all certified by the chief financial
officer of such Affiliate Borrower, provided that, for any Affiliate
Borrower which is a Subsidiary of the Borrower, delivery of the
financial statements described in Section 6.1(i) shall satisfy the
provisions of this clause (x).
(xi) The monthly Borrowing Base Certificate required by Section 2.11.1,
together with a statement showing the locations of all Inventory
included in the Borrowing Base as of the date of such Borrowing Base
Certificate.
(xii) Such other information (including non-financial information) as the
Agent or any Lender may from time to time reasonably request.
6.2. Use of Proceeds. The Borrower will, and will cause each of its
Subsidiaries to, use the proceeds of the Advances only (i) for general working
capital purposes, including Capital Expenditures (which shall not include
expenses of retail store development, which are to be funded by Advances to the
Affiliate Borrowers) within the restrictions set forth herein, (ii) to repay any
outstanding loans under the Barclays Loan Agreement and (iii) to repay
outstanding Advances hereunder. The Affiliate Borrowers will use the proceeds
of the Advances only for development costs of retail store locations and
expenses related thereto for stores which will become franchisees of the
Borrower and for development costs relating to the Borrower's Las Vegas
distribution center. Facility Letters of Credit may be issued only (i) to
replace existing letters of credit issued under the Barclays Loan Agreement and
(ii) for other uses acceptable to the Agent in its sole discretion. Neither the
Borrower nor any Affiliate Borrower will, nor will it permit any of its
Subsidiaries to, use any of the proceeds of the Advances to purchase or carry
any "margin stock" (as defined in Regulation U) or to make any other
Acquisition.
6.3. Notice of Default. The Borrower and each Affiliate Borrower will,
and will cause each of its Subsidiaries to, give prompt notice in writing to the
Lenders of the occurrence of any Default or Unmatured Default and of any other
development, financial or otherwise, which could reasonably be expected to have
a Material Adverse Effect or an Affiliate Borrower MAE.
6.4. Conduct of Business. The Borrower and each Affiliate Borrower will,
and will cause each of its Subsidiaries to, carry on and conduct its business in
substantially the same manner and in substantially the same fields of enterprise
as it is presently conducted and to do all things necessary to remain duly
incorporated, validly existing and in good standing as a
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domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.
6.5. Taxes. The Borrower and each Affiliate Borrower will, and will cause
each of its Subsidiaries to, pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside.
6.6. Insurance. The Borrower and each Affiliate Borrower will, and will
cause each of its Subsidiaries to, maintain with financially sound and reputable
insurance companies insurance on all their Property in such amounts and covering
such risks as is consistent with sound business practice, and the Borrower and
each Affiliate Borrower will furnish to any Lender upon request full information
as to the insurance carried by it and its Subsidiaries.
6.7. Compliance with Laws; Environmental. The Borrower and each Affiliate
Borrower will, and will cause each of its Subsidiaries to, comply with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject. Without limiting the effect of the preceding sentence,
the Borrower and each Affiliate Borrower will, and will cause each of its
Subsidiaries to, use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates and licenses in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance with all
applicable Environmental Laws.
6.8. Maintenance of Properties. The Borrower and each Affiliate Borrower
will, and will cause each of its Subsidiaries to, do all things necessary to
maintain, preserve, protect and keep its Property in good repair, working order
and condition, and make all necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times.
6.9. Inspection. The Borrower and each Affiliate Borrower will, and will
cause each of its Subsidiaries to, permit the Lenders, by their respective
representatives and agents, to inspect any of the Property, corporate books and
financial records of each of such entities, to examine and make copies of their
respective books of accounts and other financial records, and to discuss the
affairs, finances and accounts of each of such entities with, and to be advised
as to the same by, their respective officers at such reasonable times and
intervals as the Lenders may designate.
6.10. Dividends. The Borrower and each Affiliate Borrower will not, nor
will it permit any of its Subsidiaries to, declare or pay any dividends on its
capital stock (other than dividends payable in its own capital stock) or redeem,
repurchase or otherwise acquire or retire any of its capital stock at any time
outstanding, except that (i) any Subsidiary of the Borrower may declare and pay
dividends to the Borrower or to a Wholly-Owned Subsidiary
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of the Borrower and (ii) any Affiliate Borrower may declare and pay dividends to
the Borrower or to any Wholly-Owned Subsidiary of the Borrower.
6.11. Indebtedness. Neither the Borrower nor any Affiliate Borrower will,
nor will it permit any of its Subsidiaries to, create, incur or suffer to exist
any Indebtedness, except:
(i) The Credit Extensions.
(ii) Indebtedness existing on the date hereof and described in Schedule
"5" hereto, or any Indebtedness which refinances (without any increase
in the principal amount thereof) any such Indebtedness, provided that
the pricing and other terms and conditions of such replacment
Indebtedness are no less favorable to the Big O Entities obligated
with respect thereto than those of the Indebtedness being refinanced,
provided further, that with respect to any Indebtedness being
refinanced at the maturity thereof, such replacement Indebtedness may
be priced at the then-current market rates.
(iii) Indebtedness of any Subsidiary to the Borrower or to any Wholly-
Owned Subsidiary of the Borrower.
(iv) With respect to the Borrower, any Subsidiary or any Affiliate
Borrower, accounts payable to trade creditors that are not aged more
than ninety (90) days from the due date and current operating expenses
(other than for Indebtedness for borrowed money) which are not more
than sixty (60) days past due, in each case incurred in the ordinary
course of business and paid within such time period, unless the same
are being contested in good faith and appropriate reserves have been
set aside with respect thereto in accordance with Agreement Accounting
Principles.
(v) Contingent Obligations permitted under Section 6.17.
(vi) Additional Indebtedness in an aggregate principal amount not
exceeding $500,000 at any one time outstanding.
(vii) Permitted Construction Take-Out Indebtedness in amounts not to
exceed those set forth in the definition of such term, provided that
all Indebtedness of the Borrower, any Affiliate Borrower or any of
their Subsidiaries under the Borrower's line of credit letter with
AT&T Capital Corporation dated December 9, 1994, as amended, or,
notwithstanding the provisions of Section 6.11(ii) regarding
refinancing of existing Indebtedness, under any agreement which
refinances such line of credit letter shall be deemed to constitute
Permitted Construction Take-Out Indebtedness and shall be counted
against such dollar limitations whether or not such Indebtedness was
in existence on the date hereof.
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6.12. Merger. Neither the Borrower nor any Affiliate Borrower will, nor
will any of such entities permit any of its Subsidiaries to, merge or
consolidate with or into any other Person, except that (i) a Subsidiary of the
Borrower may merge with the Borrower or a Wholly-Owned Subsidiary of the
Borrower and (ii) a Subsidiary of an Affiliate Borrower may merge with such
Affiliate Borrower.
6.13. Sale of Assets. Neither the Borrower nor any Affiliate Borrower
will, nor will any of such entities permit any of its Subsidiaries to, lease,
sell or otherwise dispose of its Property, to any other Person except for (i)
sales of inventory in the ordinary course of business, (ii) with respect to the
Borrower and its Subsidiaries only, leases, sales or other dispositions of its
Property that, together with all other Property of the Borrower and its
Subsidiaries previously leased, sold or disposed of (other than inventory in the
ordinary course of business) as permitted by this Section during the twelve-
month period ending with the month in which any such lease, sale or other
disposition occurs, do not constitute a Substantial Portion of the Property of
the Borrower and its Subsidiaries and (iii) sales, transfers or other
dispositions by any Credit Party of real property which was purchased for
development as a retail store location and which is being sold to a franchisee
or other Person, provided that the applicable Credit Party makes all mandatory
prepayments required by Section 2.2.4(b).
6.14. Sale of Accounts. Neither the Borrower nor any Affiliate Borrower
will, nor will any of such entities permit any of its Subsidiaries to, sell or
otherwise dispose of any notes receivable or accounts receivable, with or
without recourse, except for sales by the Borrower of notes receivable which are
not and do not represent Collateral, provided that the Borrower makes the
mandatory prepayment required by Section 2.2.4(b).
6.15. Sale and Leaseback. Neither the Borrower nor any Affiliate
Borrower will, nor will any of such entities permit any of its Subsidiaries to,
sell or transfer any of its Property in order to concurrently or subsequently
lease as lessee such or similar Property, except that the Borrower and its
Subsidiaries may engage in such transactions with respect to Property having an
aggregate value, for all of such entities, not exceeding $2,500,000 at any one
time.
6.16. Investments and Acquisitions. Neither the Borrower nor any
Affiliate Borrower will, nor will any of such entities permit any of its
Subsidiaries to, make or suffer to exist any Investments (including without
limitation, loans and advances to, and other Investments in, its Subsidiaries),
or commitments therefor, or to create any Subsidiary or to become or remain a
partner in any partnership or joint venture, or to make any Acquisition of any
Person, except:
(i) Short-term obligations of, or fully guaranteed by, the United States
of America.
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(ii) Commercial paper rated A-l or better by Standard and Poor's Rating
Group, a division of McGraw-Hill Corporation or P-l or better by
Moody's Investors Service, Inc.
(iii) Demand deposit accounts maintained in the ordinary course of
business.
(iv) Certificates of deposit issued by and time deposits with commercial
banks (whether domestic or foreign) having capital and surplus in
excess of $100,000,000.
(v) Existing Investments in Subsidiaries and Affiliate Borrowers and other
Investments in existence on the date hereof and described in Schedule
"3" hereto.
(vi) Investments by the Borrower in new Affiliate Borrowers with the
consent of the Lenders and in compliance with the terms of Section
4.3.
(vii) Investments by Affiliate Borrowers in Subsidiaries with the consent
of the Lenders.
(viii) A certificate of deposit in the principal amount of $250,000
issued by Bank One of Arizona.
(ix) Funds or accounts acceptable to the Agent comprised of or which
invest primarily in short-term investments and which are used as
"sweep" accounts in connection with cash management services used by
any Big O Entity.
6.17. Contingent Obligations. Neither the Borrower nor any Affiliate
Borrower will, nor will any of such entities permit any of its Subsidiaries to,
make or suffer to exist any Contingent Obligation (including, without
limitation, any Contingent Obligation with respect to the obligations of a
Subsidiary), except:
(i) by endorsement of instruments for deposit or collection in the
ordinary course of business;
(ii) the Guaranty made by the Borrower in Article XIII;
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(iii) guarantees for retail store financing provided to the Borrower's
franchisees, the face amount of such guarantees to be limited to (x)
for the period from the Closing Date through and including December
31, 1995, the lesser of $6,800,000 or the amount of such guarantees
outstanding on December 31, 1994 plus $3,300,000, (y) for the period
from January 1, 1996 through and including December 31, 1996, the
lesser of $9,900,000 or the amount of such guarantees outstanding on
December 31, 1995 plus $3,300,000 and (z) from and after January 1,
1997, the lesser of $13,200,000 or the amount of such guarantees
outstanding on December 31, 1996 plus $3,300,000;
(iv) guarantees issued with respect to real estate leases entered into by
the Borrower's franchisees, the face amount of such guarantees to be
limited to (x) for the period from the Closing Date through and
including December 31, 1995, the lesser of $8,000,000 or the amount of
such guarantees outstanding on December 31, 1994 plus $5,500,000, (y)
for the period from January 1, 1996 through and including December 31,
1996, the lesser of $13,500,000 or the amount of such guarantees
outstanding on December 31, 1995 plus $5,500,000 and (z) from and
after January 1, 1997, the lesser of $19,000,000 or the amount of such
guarantees outstanding on December 31, 1996 plus $5,500,000;
(v) guarantees issued with respect to equipment leases entered into by the
Borrower's franchisees, the face amount of such guarantees to be
limited to (x) for the period from the Closing Date through and
including December 31, 1995, the lesser of $2,250,000 or the amount of
such guarantees outstanding on December 31, 1994 plus $1,000,000, (y)
for the period from January 1, 1996 through and including December 31,
1996, the lesser of $3,250,000 or the amount of such guarantees
outstanding on December 31, 1995 plus $1,000,000 and (z) from and
after January 1, 1997, the lesser of $4,250,000 or the amount of such
guarantees outstanding on December 31, 1996 plus $1,000,000;
(vi) recourse and repurchase obligations in connection with sales of notes
receivable permitted under Section 6.14 in an amount not to exceed at
any one time (x) for the period from the Closing Date through and
including December 31, 1995, $2,500,000 and (y) from and after January
1, 1996, the lesser of $3,500,000 or the amount of such recourse and
repurchase obligations outstanding on December 31, 1995 plus
$1,000,000; and
(vii) a guarantee in an amount not exceeding $2,800,000 of the
obligations of Allstate Insurance with respect to a mortgage loan of
the Borrower assumed by Allstate Insurance.
6.18. Liens. Neither the Borrower nor any Affiliate Borrower will, nor
will any of such entities permit any of its Subsidiaries to, create, incur, or
suffer to exist any Lien in, of or on its Property, except:
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(i) Liens for taxes, assessments or governmental charges or levies on its
Property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith and
by appropriate proceedings and for which adequate reserves in
accordance with generally accepted principles of accounting shall have
been set aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more than
60 days past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves shall have
been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other encumbrances
or charges against real property as are of a nature generally existing
with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere
with the use thereof in the business of the Big O Entities.
(v) Liens existing on the date hereof and described in Schedule "5"
hereto.
(vi) Liens in favor of the Lenders granted pursuant to any Collateral
Document.
6.19. Transactions with Affiliates. Neither the Borrower nor any
Affiliate Borrower will, nor will any of such entities permit any of its
Subsidiaries to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's, such Affiliate
Borrower's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Borrower, such Affiliate Borrower or such Subsidiary than
the Borrower, such Affiliate Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.
6.20. Letters of Credit. Neither the Borrower nor any Affiliate Borrower
will, nor will any of such entities permit any of its Subsidiaries to, apply for
or become liable upon any Letter of Credit other than a Facility Letter of
Credit.
6.21. Prepayment of Certain Indebtedness. Neither the Borrower nor any
Affiliate Borrower will, nor will any of such entities permit any of its
Subsidiaries to, make any amendment or modification to the indenture, note or
other agreement evidencing or governing any Indebtedness of the types described
in Section 6.11(ii) and (vii), or directly or indirectly voluntarily prepay,
defease or in substance defease, purchase, redeem, retire or otherwise
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acquire, any such Indebtedness, or make any payment on any such Indebtedness
during the continuation of a Default, except (i) such prepayments as are
required pursuant to Section 2.2.4(b), (ii) refinancings of the Indebtedness
described in Section 6.11(ii) to the extent specifically permitted by the
provisions of such Section and (iii) refinancings of any Indebtedness which is
replaced by Permitted Construction Take-Out Indebtedness in accordance with all
of the provisions of this Agreement.
6.22. Amendments to Certain Agreements. Neither the Borrower nor any
Affiliate Borrower will, nor will any of such entities permit any of its
Subsidiaries to, (i) amend or terminate any of the landlord waivers or bailee
agreements entered into pursuant to the requirements of this Agreement or (ii)
make any significant changes in the standard form of franchise agreement for the
Borrower from the form attached to the offering circular dated April 1, 1993 as
amended November 19, 1993.
6.23. Financial Undertakings. Neither the Borrower nor any Affiliate
Borrower will, nor will any of such entities permit any of its Subsidiaries to,
enter into or remain liable upon any Financial Undertaking, except (i) Rate
Hedging Obligations entered into with one of the Lenders, (ii) recourse and
repurchase obligations in the amount permitted under Section 6.17(vi) in
connection with sales of notes receivable permitted under Section 6.14 and (iii)
sale/leaseback transactions permitted under Section 6.15.
6.24. Financial Covenants.
-------------------
6.24.1. Leverage Ratio. The Borrower will maintain at all times a
--------------
Leverage Ratio not greater than 0.50 to 1.0.
6.24.2. Fixed Charge Coverage Ratio. The Borrower will maintain, as
at the last day of each fiscal quarter falling during the periods described
below, a Fixed Charge Coverage Ratio for the four most recently ended
fiscal quarters of not less than (i) 1.35 to 1.0 for the period from the
Closing Date through and including December 30, 1995 and (ii) 1.5 to 1.0
for the period from and after December 31, 1995.
6.24.3. Minimum Tangible Net Worth. The Borrower shall maintain at
all times a Tangible Net Worth of not less than the sum of $22,000,000 plus
50% of the cumulative amount of Net Income (without deducting for losses)
earned by the Borrower and its Subsidiaries for all fiscal periods
commencing after December 31, 1994.
6.24.4. Cash Flow Coverage Ratio. The Borrower will maintain, as at
the last day of each fiscal quarter falling during the periods described
below, a Cash Flow Coverage Ratio for the four most recently ended fiscal
quarters of not less than (i) 0.10 to 1.0 for the period from the Closing
Date through and including December 30, 1995, (ii) 0.125 to 1.0 for the
period from December 31, 1995 through and including
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December 30, 1997 and (iii) 0.15 to 1.0 for the period from and after
December 31, 1997.
6.24.5. Rentals. The Borrower will not, nor will it permit its
Subsidiaries to, create, incur or suffer to exist obligations for Rentals
in excess of (i) $3,000,000 for the period from the Closing Date through
and including December 30, 1995, (ii) $4,000,000 for the period from
December 31, 1995 through and including December 30, 1996 and (iii)
$5,000,000 for the period from and after December 31, 1996, measured on a
non-cumulative basis in the aggregate for the Borrower and its
Subsidiaries.
6.24.6. Capital Expenditures. The Borrower will not, nor will it
permit its Subsidiaries to, make, or be committed to make, Capital
Expenditures in excess of (i) $2,500,000 during fiscal 1995 and (ii)
$2,000,000 during any fiscal year thereafter, on a non-cumulative basis in
the aggregate for the Borrower and its Subsidiaries, provided that Capital
Expenditures relating to the construction of the Borrower's Las Vegas
distribution center shall be permitted and shall not count against the
limits in clauses (i) and (ii), above.
ARTICLE VII
DEFAULTS
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The occurrence of any one or more of the following events shall constitute
a Default:
7.1. Any representation or warranty made or deemed made by or on behalf of
any Big O Entity to the Lenders or the Agent under or in connection with this
Agreement, any other Loan Document, any Credit Extension, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made.
7.2. Nonpayment of principal of any Note or of any Reimbursement Obligation
when due (including, without limitation, failure to make any payment required by
Section 2.1(b)), or nonpayment of interest upon any Note or of any commitment
fee or other obligation under any of the Loan Documents within five days after
the same becomes due.
7.3. The breach by any Credit Party of any of the terms or provisions of
Article VI.
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7.4. The breach by any Credit Party (other than a breach which constitutes
a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of
this Agreement which is not remedied within five days after written notice from
the Agent or any Lender.
7.5. Failure of any Big O Entity to pay any Indebtedness or any Contingent
Obligation when due; or the default by any Big O Entity in the performance of
any term, provision or condition contained in any agreement under which any
Indebtedness or any Contingent Obligation was created or is governed, or any
other event shall occur or condition exist, the effect of which is to cause, or
to permit the holder or holders of such Indebtedness to cause, such Indebtedness
to become due prior to its stated maturity; or any Indebtedness of any Big O
Entity shall be declared to be due and payable or required to be prepaid (other
than by a regularly scheduled payment) prior to the stated maturity thereof; or
any Big O Entity shall not pay, or admit in writing its inability to pay, its
debts generally as they become due.
7.6. Any Big O Entity shall (i) have an order for relief entered with
respect to it under the Federal bankruptcy laws as now or hereafter in effect,
(ii) make an assignment for the benefit of creditors, (iii) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (iv) institute any proceeding seeking an order for relief under
the Federal bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v) take any
corporate action to authorize or effect any of the foregoing actions set forth
in this Section 7.6 or (vi) fail to contest in good faith any appointment or
proceeding described in Section 7.7.
7.7. Without such entity's application, approval or consent, a receiver,
trustee, examiner, liquidator or similar official shall be appointed for any Big
O Entity or any Substantial Portion of its Property, or a proceeding described
in Section 7.6(iv) shall be instituted against any Big O Entity and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of 30 consecutive days.
7.8. Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation"),
all or any portion of the Property of any Big O Entity which, when taken
together with all other Property of such Big O Entity so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such Condemnation occurs, could, in the
reasonable opinion of the Agent, have a Material Adverse Effect.
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7.9. Any Big O Entity shall fail within 30 days to pay, bond or otherwise
discharge any judgment or order for the payment of money in excess of $50,000,
which is not stayed on appeal or otherwise being appropriately contested in good
faith.
7.10. There shall be any Unfunded Liabilities with respect to any Single
Employer Plans or any Reportable Event shall occur in connection with any Plan.
7.11. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan.
7.12. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of Title IV
of ERISA.
7.13. Any Big O Entity shall be the subject of any proceeding or
investigation pertaining to the release by any Person of any toxic or hazardous
waste or substance into the environment, or any violation of any federal, state
or local environmental, health or safety law or regulation, which, in either
case, could have a Material Adverse Effect or an Affiliate Borrower MAE.
7.14. Any Change in Control shall occur.
7.15. The occurrence of any "default", as defined in any Loan Document
(other than this Agreement or the Notes) or the breach of any of the terms or
provisions of any Loan Document (other than this Agreement or the Notes), which
default or breach continues beyond any period of grace therein provided.
7.16. Nonpayment by the Borrower of any Rate Hedging Obligation or the
breach by the Borrower of any term, provision or condition contained in any
agreement, device or arrangement giving rise to any Rate Hedging Obligation.
7.17. Any Collateral Document shall for any reason fail to create a valid
and perfected first priority security interest in any collateral purported to be
covered thereby, except as permitted by the terms of any Collateral Document, or
any Collateral Document shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Collateral Document, or the Borrower or any other
Borrowing Base Party shall fail to comply with any of the terms or provisions of
any Collateral Document.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
----------------------------------------------
8.1. Acceleration.
------------
(a) If any Default described in Section 7.6 or 7.7 occurs, (i) the
obligations of the Lenders to make Loans hereunder and the obligations of the
Issuer to issue Facility Letters of Credit shall automatically terminate and the
Obligations shall immediately become due and payable without presentment,
demand, protest or notice of any kind, all of which the Credit Parties hereby
expressly waive and without any election or action on the part of the Agent or
any Lender and (ii) the Borrower will be and become thereby unconditionally
obligated, without the need for demand or the necessity of any act or evidence,
to deliver to the Agent, at its address specified pursuant to Article XIV, for
deposit into the Letter of Credit Collateral Account, an amount (the "Collateral
Shortfall Amount") equal to the excess, if any, of
(A) 100% of the sum of the aggregate maximum amount remaining
available to be drawn under the Facility Letters of Credit (assuming
compliance with all conditions for drawing thereunder) issued by the Issuer
and outstanding as of such time, over
(B) the amount on deposit in the Letter of Credit Collateral Account
at such time that is free and clear of all rights and claims of third
parties and that has not been applied by the Lenders against the
Obligations.
(b) If any Default occurs and is continuing (other than a Default described
in Section 7.6 or 7.7), (i) the Required Lenders may terminate or suspend the
obligations of the Lenders to make Loans and the obligation of the Issuer to
issue Facility Letters of Credit hereunder, or declare the Obligations to be due
and payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which the Credit Parties hereby expressly waive and (ii) the Required Lenders
may, upon notice delivered to the Borrower and in addition to the continuing
right to demand payment of all amounts payable under this Agreement, make demand
on the Borrower to deliver (and the Borrower will, forthwith upon demand by the
Required Lenders and without necessity of further act or evidence, be and become
thereby unconditionally and jointly and severally obligated to deliver), to the
Agent, at its address specified pursuant to Article XIV, for deposit into the
Letter of Credit Collateral Account an amount equal to the Collateral Shortfall
Amount.
(c) If at any time while any Default is continuing, the Agent determines
that the Collateral Shortfall Amount at such time is greater than zero, the
Agent may make demand on the Borrower to deliver (and the Borrower will,
forthwith upon demand by the Agent and without necessity of further act or
evidence, be and become thereby unconditionally obligated
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to deliver), to the Agent as additional funds to be deposited and held in the
Letter of Credit Collateral Account an amount equal to such Collateral Shortfall
Amount at such time.
(d) The Agent may at any time or from time to time after funds are
deposited in the Letter of Credit Collateral Account, apply such funds to the
payment of the Obligations and any other amounts as shall from time to time have
become due and payable by the Borrower to the Lenders under the Loan Documents.
(e) At any time while any Default is continuing, neither the Borrower nor
any Person claiming on behalf of or through the Borrower shall have any right to
withdraw any of the funds held in the Letter of Credit Collateral Account.
After all of the Obligations have been indefeasibly paid in full, any funds
remaining in the Letter of Credit Collateral Account shall be returned by the
Agent to the Borrower or paid to whoever may be legally entitled thereto at such
time.
(f) The Agent shall exercise reasonable care in the custody and
preservation of any funds held in the Letter of Credit Collateral Account and
shall be deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Agent accords its own property, it
being understood that the Agent shall not have any responsibility for taking any
necessary steps to preserve rights against any Persons with respect to any such
funds.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Credit Parties may enter into agreements supplemental hereto
for the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Credit Parties hereunder
or waiving any Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of each Lender affected thereby:
(i) Extend the maturity of any Loan or Note or forgive all or any portion
of the principal amount thereof, or reduce the rate or extend the time
of payment of interest or fees thereon.
(ii) Reduce or extend the Reimbursement Obligations, or reduce the rate or
change the time of payment of any fees related to Facility Letters of
Credit;
(iii) Reduce the percentage specified in the definition of Required
Lenders.
(iv) Extend the Facility Termination Date, or reduce the amount or extend
the payment date for, the mandatory payments required under Sections
2.1 or 6.13, or increase the amount of the Commitment of any Lender
hereunder, or permit any Credit Party to assign its rights under this
Agreement.
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(v) Amend this Section 8.2.
(vi) Release any guarantor of any Advance or, except as provided in the
Collateral Documents, release all or substantially all of the
Collateral (as defined in the Collateral Documents, respectively).
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Credit Extension notwithstanding the existence of a Default or the
inability of the applicable Credit Party to satisfy the conditions precedent to
such Credit Extension shall not constitute any waiver or acquiescence. Any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Agent and the
Lenders until the Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1. Survival of Representations. All representations and warranties of
the Credit Parties contained in this Agreement shall survive delivery of the
Notes and the making of the Loans herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to any
Credit Party in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Taxes. Any taxes (excluding (x) federal taxation of the overall net
income of the Agent or any Lender or applicable Lending Installation and (y)
overall net income and franchise or other similar taxes imposed on the Agent or
any Lender by a jurisdiction under the laws of which the Agent or such Lender is
organized, in which its principal office is located, or in which its applicable
Lending Installation is located) or other similar assessments or charges made by
any governmental or revenue authority in respect of the Loan Documents
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shall be paid by the Borrower, together with interest and penalties, if any
resulting from the Borrower's failure to fulfill its obligations hereunder.
9.4. Headings. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
9.5. Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Big O Entities, the Agent and the Lenders and supersede
all prior agreements and understandings among the Big O Entities, the Agent and
the Lenders relating to the subject matter thereof.
9.6. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.
9.7. Expenses; Indemnification. The Borrower shall reimburse the Agent for
any costs, internal charges and out-of-pocket expenses (including (i) attorneys'
fees and time charges of attorneys for the Agent, which attorneys may be
employees of the Agent and (ii) fees and expenses of the Agent's traveling
auditors and other professionals in connection with analysis and review of the
Collateral) paid or incurred by the Agent in connection with the preparation,
negotiation, execution, delivery, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Agent and the Lenders for any costs, internal charges and out-of-pocket expenses
(including (i) attorneys' fees and time charges of attorneys for the Agent and
the Lenders, which attorneys may be employees of the Agent or the Lenders and
(ii) fees and expenses of the Agent's traveling auditors and other professionals
in connection with analysis, review and disposition of the Collateral) paid or
incurred by the Agent or any Lender in connection with the collection and
enforcement of the Loan Documents. The Borrower further agrees to indemnify the
Agent and each Lender, its directors, officers and employees against all losses,
claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor whether
or not the Agent or any Lender is a party thereto) which any of them may pay or
incur arising out of or relating to this Agreement, the other Loan Documents,
the transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder, except that the
Borrower shall not be liable for any such losses, claims, damages, penalties,
judgments, liabilities or expenses to the extent that they are found in a final
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of the party to be indemnified. The
obligations of the Borrower under this Section shall survive the termination of
this Agreement.
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9.8. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
9.9. Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
9.10. Severability of Provisions. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11. Nonliability of Lenders. The relationship between the Credit
Parties, on the one hand, and the Lenders and the Agent, on the other, shall be
solely that of borrower and lender. Neither the Agent nor any Lender shall have
any fiduciary responsibilities to any of the Credit Parties. Neither the Agent
nor any Lender undertakes any responsibility to any of the Credit Parties to
review or inform any of them of any matter in connection with any phase of their
respective business or operations.
9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION. THE CREDIT PARTIES HEREBY IRREVOCABLY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS AND THE CREDIT PARTIES HEREBY IRREVOCABLY
AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE ANY OBJECTION ANY OF THEM MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS
AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY ANY CREDIT PARTY AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE
OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF,
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RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN CHICAGO, ILLINOIS.
9.14. WAIVER OF JURY TRIAL. THE CREDIT PARTIES, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
9.15. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Big O Entities pursuant to this
Agreement in confidence, except for disclosure (i) to other Lenders and their
respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee each of whom shall be
subject to the restrictions set forth in this Section, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which that Lender is a party, and (vi) as permitted by Section
12.4.
9.16. Nonreliance. Each Lender hereby represents that it is not relying
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.
ARTICLE X
THE AGENT
---------
10.1. Appointment. The First National Bank of Chicago is hereby appointed
Agent hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Agent to act as the agent of such Lender. The Agent
agrees to act as such upon the express conditions contained in this Article X.
The Agent shall not have a fiduciary relationship in respect of the Borrower or
any Lender by reason of this Agreement.
10.2. Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
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10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to any Credit Party, the Lenders
or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (i) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (iii) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent; (iv) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith; or (v) the value, sufficiency,
creation, perfection or priority of any interest in any collateral security.
The Agent shall have no duty to disclose to the Lenders information that is not
required to be furnished by the Big O Entities to the Agent at such time, but is
voluntarily furnished by any of such entities to the Agent (either in its
capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
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10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by the Borrower or another Credit
Party for which the Agent is entitled to reimbursement by the Borrower or
another Credit Party under the Loan Documents, (ii) for any other expenses
incurred by the Agent on behalf of the Lenders, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan
Documents and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan Documents or
any other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of any
such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Agent. The obligations of the Lenders under this Section 10.8
shall survive payment of the Obligations and termination of this Agreement.
10.9. Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with any Big O Entity in which such Big O Entity is not restricted hereby from
engaging with any other Person. The Agent, in its individual capacity, is not
obligated to remain a Lender.
10.10. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
10.11. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall have
the right to appoint, on behalf of the Credit Parties and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders within thirty days after the resigning Agent's giving notice of
its intention to resign, then the resigning Agent may appoint, on behalf of the
Credit Parties and the Lenders, a successor Agent. If the Agent has resigned
and no successor
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Agent has been appointed, the Lenders may perform all the duties of the Agent
hereunder and the Credit Parties shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning Agent. Upon the effectiveness of the resignation of the Agent, the
resigning Agent shall be discharged from its duties and obligations hereunder
and under the Loan Documents. After the effectiveness of the resignation of an
Agent, the provisions of this Article X shall continue in effect for the benefit
of such Agent in respect of any actions taken or omitted to be taken by it while
it was acting as the Agent hereunder and under the other Loan Documents.
10.12. Execution of Collateral Documents. The Lenders hereby empower and
authorize the Agent to execute and deliver to the Big O Entities on their behalf
the Collateral Documents and all related financing statements and any financing
statements, agreements, documents or instruments as shall be necessary or
appropriate to effect the purposes of the Collateral Documents.
10.13. COLLATERAL RELEASES. THE LENDERS HEREBY EMPOWER AND AUTHORIZE THE
AGENT TO EXECUTE AND DELIVER TO THE BIG O ENTITIES ON THEIR BEHALF ANY
AGREEMENTS, DOCUMENTS OR INSTRUMENTS AS SHALL BE NECESSARY OR APPROPRIATE TO
EFFECT ANY RELEASES OF COLLATERAL WHICH SHALL BE PERMITTED BY THE TERMS HEREOF
OR OF ANY OTHER LOAN DOCUMENT OR WHICH SHALL OTHERWISE HAVE BEEN APPROVED BY THE
REQUIRED LENDERS (OR, IF REQUIRED BY THE TERMS OF SECTION 8.2, ALL OF THE
LENDERS) IN WRITING.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
------------------------
11.1. Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if any Credit Party becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or not
collected or available) and any other Indebtedness at any time held or owing by
any Lender to or for the credit or account of any Credit Party may be offset and
applied toward the payment of the Obligations owing to such Lender, whether or
not the Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans or participations in Facility Letters of
Credit (other than payments
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received pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans or participations in Facility Letters of Credit
held by the other Lenders so that after such purchase each Lender will hold its
ratable proportion of Loans and participations in Facility Letters of Credit.
If any Lender, whether in connection with setoff or amounts which might be
subject to setoff or otherwise, receives collateral or other protection for its
Obligations or such amounts which may be subject to setoff, such Lender agrees,
promptly upon demand, to take such action necessary such that all Lenders share
in the benefits of such collateral ratably in proportion to their Loans and
Facility Letters of Credit. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
-------------------------------------------------
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Credit Parties
and the Lenders and their respective successors and assigns, except that (i) the
Credit Parties shall not have the right to assign their respective rights or
obligations under the Loan Documents and (ii) any assignment by any Lender must
be made in compliance with Section 12.3. Notwithstanding clause (ii) of this
Section, any Lender may at any time, without the consent of the Credit Parties
or the Agent, assign all or any portion of its rights under this Agreement and
its Notes to a Federal Reserve Bank; provided, however, that no such assignment
shall release the transferor Lender from its obligations hereunder. The Agent
may treat the payee of any Note as the owner thereof for all purposes hereof
unless and until such payee complies with Section 12.3 in the case of an
assignment thereof or, in the case of any other transfer, a written notice of
the transfer is filed with the Agent. Any assignee or transferee of a Note
agrees by acceptance thereof to be bound by all the terms and provisions of the
Loan Documents. Any request, authority or consent of any Person, who at the
time of making such request or giving such authority or consent is the holder of
any Note, shall be conclusive and binding on any subsequent holder, transferee
or assignee of such Note or of any Note or Notes issued in exchange therefor.
12.2. Participations.
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12.2.1 Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any participation
in Facility Letters of Credit owned by such Lender, any Note held by such
Lender, any Commitment of such Lender or any other interest of such Lender
under the Loan Documents. In the event of any such sale by a Lender
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of participating interests to a Participant, such Lender's obligations
under the Loan Documents shall remain unchanged, such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Credit
Parties under this Agreement shall be determined as if such Lender had not
sold such participating interests, and the Credit Parties and the Agent
shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan, Facility
Letter of Credit or Commitment in which such Participant has an interest
which forgives principal, interest or fees or reduces the interest rate or
fees payable with respect to any such Loan, Facility Letter of Credit or
Commitment, postpones any date fixed for any regularly-scheduled payment of
principal of, or interest or fees on, any such Loan, Facility Letter of
Credit or Commitment, releases any guarantor of any such Loan or Facility
Letter of Credit or releases any substantial portion of collateral, if any,
securing any such Loan or Facility Letter of Credit.
12.2.3. Benefit of Setoff. The Credit Parties agree that each
Participant shall be deemed to have the right of setoff provided in Section
11.1 in respect of its participating interest in amounts owing under the
Loan Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents,
provided that each Lender shall retain the right of setoff provided in
Section 11.1 with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in Section
11.1, agrees to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in accordance
with Section 11.2 as if each Participant were a Lender.
12.3. Assignments.
-----------
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, and with the
consent of the Issuer, at any time assign to one or more banks or other
entities ("Purchasers") all or any part of its rights and obligations under
the Loan Documents. Such assignment shall be substantially in the form of
Exhibit "H" hereto or in such other form as may be agreed to by the parties
thereto. The consent of the Credit Parties and the Agent shall be required
prior to an assignment becoming effective with respect to a Purchaser which
is not a Lender or an Affiliate thereof; provided, however, that if a
Default has
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occurred and is continuing, the consent of the Credit Parties shall not be
required. Such consent shall not be unreasonably withheld.
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of a
notice of assignment, substantially in the form attached as Exhibit "I" to
Exhibit "H" hereto (a "Notice of Assignment"), together with any consents
required by Section 12.3.1, and (ii) payment of a $2,500 fee to the Agent
for processing such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect
that none of the consideration used to make the purchase of the Commitment,
Loans and participation in Facility Letters of Credit under the applicable
assignment agreement are "plan assets" as defined under ERISA and that the
rights and interests of the Purchaser in and under the Loan Documents will
not be "plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to this
Agreement and any other Loan Document executed by the Lenders and shall
have all the rights and obligations of a Lender under the Loan Documents,
to the same extent as if it were an original party hereto, and no further
consent or action by the Credit Parties, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the percentage of
the Aggregate Commitment, Loans and participation in Facility Letters of
Credit assigned to such Purchaser. Upon the consummation of any assignment
to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the
Agent and the Credit Parties shall make appropriate arrangements so that
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case
in principal amounts reflecting their Commitment, as adjusted pursuant to
such assignment.
12.4. Dissemination of Information. The Credit Parties authorize each
Lender to disclose to any Participant or Purchaser or any other Person acquiring
an interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Credit Parties and their respective
Subsidiaries; provided that each Transferee and prospective Transferee agrees to
be bound by Section 9.15 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is transferred
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 2.9.
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ARTICLE XIII
GUARANTY
--------
13.1. Guaranty of Payment and Performance of Obligations of Affiliate
Borrowers. The Borrower hereby guarantees to the Agent and the Lenders, as a
primary obligor and not merely as a surety, the full and punctual payment when
due (whether at maturity, by acceleration or otherwise), as well as the
performance, of all of the Obligations incurred or owed by or chargeable to the
Affiliate Borrowers (the "Affiliate Borrower Obligations"). The Borrower's
obligation under this Article IX is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of all of the
Affiliate Borrower Obligations and not of their collectability only and is in no
way conditioned upon any requirement that the Agent or the Lenders first attempt
to collect any of the Affiliate Borrower Obligations from any Affiliate Borrower
or resort to any collateral security, any balance of any deposit account or
credit on the books of any Lender in favor of any Affiliate Borrower or any
other Person or other means of obtaining payment. Should any Affiliate Borrower
default in the payment or performance of any of the Affiliate Borrower
Obligations, the Agent or any one of the Lenders may cause the obligations of
the Borrower (as guarantor) hereunder with respect to such Affiliate Borrower
Obligations to become forthwith due and payable to the Agent and the Lenders,
without demand or notice of any nature (other than as expressly provided
herein), all of which are expressly waived by the Borrower.
13.2. Borrower's Further Agreements to Pay. The Borrower further agrees,
as the principal obligor and not as a guarantor only, to pay to the Agent and
the Lenders, forthwith upon demand in funds immediately available to the Agent
and the Lenders, all reasonable costs and expenses (including court costs and
legal expenses) incurred or expended by the Agent and the Lenders in connection
with the Affiliate Borrower Obligations, this Article XIII and the enforcement
thereof, together with interest on amounts recoverable under this Article XIII
from the time when such amounts become due until payment, at a rate of interest
(computed for the actual number of days elapsed based on a 365/6 day year) equal
to the Corporate Base Rate plus 2% per annum such changing when and as the
Corporate Base Rate changes.
13.3. Waivers by Borrower: Agent's and Lenders' Freedom to Act. The
Borrower waives notice of acceptance of this Article XIII, notice of any action
taken or omitted by the Agent or any Lender in reliance on this Article XIII,
and any requirement that the Agent or the Lenders be diligent or prompt in
making demands under this Article XIII, giving notice of any default by any
Affiliate Borrower or asserting any other rights of the Agent or any Lender
under this Article XIII. The Borrower also irrevocably waives all defenses that
at any
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time may be available in respect of the Affiliate Borrower Obligations by virtue
of any statute of limitations, valuation, stay, moratorium law of other similar
law now or thereafter in effect. The Borrower also irrevocably waives any
benefit of any collateral which may from time to time secure the Affiliate
Borrower Obligations and authorizes the Agent and the Lenders to take any action
or exercise any remedy with respect thereto which they in their discretion shall
determine, without notice to the Borrower. In the event the Agent or the
Lenders elect in their discretion to give notice to the Borrower of any action
with respect to such collateral, ten days written notice mailed to the Borrower
by U.S. mail at its address set forth in this Agreement shall be deemed
reasonable notice of the matters contained therein. Each of the Agent and the
Lenders shall be at liberty, without giving notice to or obtaining the assent of
the Borrower and without relieving the Borrower of any liability under this
Article XIII, to deal with any Credit Party and with each other party who now is
or after the date hereof becomes liable in any manner for any of the Affiliate
Borrower Obligations, in such manner as the Agent or any Lender in its sole
discretion deems fit, and to this end the Borrower agrees that the validity and
enforceability of this Article XIII shall not be impaired or affected by any of
the following: (a) any extension, modification or renewal of, or indulgence
with respect to, or substitutions for, the Affiliate Borrower Obligations or any
part thereof or any agreement relating thereto at any time; (b) any failure or
omission to enforce any right, power or remedy with respect to the Affiliate
Borrower Obligations or any part thereof or any agreement relating thereto, or
any collateral securing the Affiliate Borrower Obligations or any part thereof;
(c) any waiver of any right, power or remedy or of any default with respect to
the Affiliate Borrower Obligations or any part thereof or any agreement relating
thereto; (d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any other
obligation of any person or entity with respect to the Affiliate Borrower
Obligations or any part thereof; (e) the enforceability or validity of the
Affiliate Borrower Obligations or any part thereof or the genuineness,
enforceability or validity of any agreement relating thereto or with respect to
the Affiliate Borrower Obligations or any part thereof; (f) the application of
payments received from any source to the payment of indebtedness other than the
Affiliate Borrower Obligations, any part thereof or amounts which are not
covered by this Article XIII even though the Lenders or the Agent might lawfully
have elected to apply such payments to any part or all of the Affiliate Borrower
Obligations or to amounts which are not covered by this Article XIII or (g) the
existence of any claim, setoff or other rights which the Borrower may have at
any time against any of the Affiliate Borrowers in connection herewith or any
unrelated transaction, all whether or not the Borrower shall have had notice or
knowledge of any act or omission referred to in the foregoing clauses (a)
through (g) of this Section 13.3.
13.4. Unenforceability of Affiliate Borrower Obligations Against Affiliate
Borrowers. Notwithstanding (a) any change of ownership of any Affiliate
Borrower or the insolvency, bankruptcy or any other change in the legal status
of any Affiliate Borrower; (b) the change in or the imposition of any law,
decree, regulation or other governmental act which does or
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might impair, delay or in any way affect the validity, enforceability or the
payment when due of the Affiliate Borrower Obligations; (c) the failure of any
Affiliate Borrower or the undersigned to maintain in full force, validity or
effect or to obtain or renew when required all governmental and other approvals,
licenses or consents required in connection with the Affiliate Borrower
Obligations or this Article XIII, or to take any other action required in
connection with the performance of all obligations pursuant to the Affiliate
Borrower Obligations or this Article XIII; or (d) if any of the moneys included
in the Affiliate Borrower Obligations have become irrecoverable from any
Affiliate Borrower for any other reason other than final payment in full of the
Affiliate Borrower Obligations in accordance with their terms, this Article XIII
shall nevertheless be binding on the Borrower. This Article XIII shall be in
addition to any other guaranty or other security for the Affiliate Borrower
Obligations, and it shall not be rendered unenforceable by the invalidity of any
such other guaranty or security. In the event that acceleration of the time for
payment of any of the Affiliate Borrower Obligations is stayed upon the
insolvency, bankruptcy or reorganization of any Affiliate Borrower, or for any
other reason, all such amounts otherwise subject to acceleration under the terms
of the Credit Agreement, the other Loan Documents or any other agreement
evidencing, securing or otherwise executed in connection with the Affiliate
Borrower Obligations shall be immediately due and payable by the Borrower.
13.5. Subrogation; Subordination. The Borrower shall not enforce or
otherwise exercise any right of subrogation to any of the rights of any Lender
against any Affiliate Borrower until all of the Affiliate Borrower Obligations
are fully and indefeasibly paid in full. The payment of any amounts due with
respect to any indebtedness of any Affiliate Borrower now or thereafter owed to
the Borrower is hereby subordinated to the prior payment in full of all of the
Affiliate Borrower Obligations. The Borrower agrees that, after the occurrence
of any default in the payment or performance of any of the Affiliate Borrower
Obligations, the Borrower will not demand, sue for or otherwise attempt to
collect any such indebtedness of any Affiliate Borrower to the Borrower until
all of the Affiliate Borrower Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Borrower shall collect, enforce or
receive any amounts in respect of such indebtedness while any Affiliate Borrower
Obligations are still outstanding, such amounts shall be collected, enforced and
received by the Borrower as trustee for the Agent and the Lenders and be paid
over to the Agent on account of the Affiliate Borrower Obligations without
affecting in any manner the liability of the Borrower under the other provisions
of this Article XIII. The provisions of this Section 13.5 shall be supplemental
to and not in derogation of any rights and remedies of the Agent and the Lenders
under any separate subordination agreement which the Agent and the Lenders may
at any time and from time to time enter into with the Borrower.
13.6. Termination. The Borrower's obligations hereunder shall continue in
full force and effect until the Affiliate Borrower Obligations are finally paid
and satisfied in full and this Agreement is terminated, provided that this
Article XIII shall continue to be effective or shall be reinstated, as the case
may be, if at any time payment or other satisfaction of any of the Affiliate
Borrower Obligations is rescinded or must otherwise be restored or returned upon
the bankruptcy, insolvency, or reorganization of any Affiliate Borrower, or
otherwise, as
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though such payment had not been made or other satisfaction occurred, whether or
not the Lenders or the Agent is in possession of this Agreement. No invalidity,
irregularity or unenforceability by reason of the Bankruptcy Code or any
insolvency or other similar law, or any law or order of any government or agency
thereof purporting to reduce, amend or otherwise affect the Affiliate Borrower
Obligations shall impair, affect, be a defense to or claim against the
obligations of the Borrower under this Article XIII.
13.7. Effect of Bankruptcy. The Borrower's obligations under this Article
XIII shall survive the insolvency of any Affiliate Borrower and the commencement
of any case or proceeding by or against any Affiliate Borrower under the federal
Bankruptcy Code or other federal, state or other applicable bankruptcy,
insolvency or reorganization statutes. No automatic stay under the federal
Bankruptcy Code or other federal, state or other applicable bankruptcy,
insolvency or reorganization statutes to which any Affiliate Borrower is subject
shall postpone the obligations of the Borrower under this Article XIII.
13.8. Setoff. Regardless of the other means of obtaining payment of any
of the Affiliate Borrower Obligations, each of the Agent and the Lenders is
hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower) and to the
fullest extent permitted by law, to set off and apply such deposits and other
sums against the obligations of the Borrower under this Article XIII, whether or
not the Agent and the Lenders shall have made any demand under this Article XIII
and although such obligations may be contingent or unmatured.
13.9. Further Assurances. The Borrower agrees to do all such things and
execute all such documents as the Agent and the Lenders may consider necessary
or desirable to give full effect to this Article XIII and to perfect and
preserve the rights and powers of the Agent and the Lenders hereunder.
13.10. Limitation. The provisions of this Article XIII are severable, and
in any action or proceeding involving any state corporate law, or any state or
federal bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of the Borrower hereunder would
otherwise be held or determined to be avoidable, invalid or unenforceable on
account of the amount of the Borrower's liability under this guaranty, then,
notwithstanding any other provision of this guaranty to the contrary, the amount
of such liability shall, without any further action by the Borrower, the Agent
or any Lender, be automatically limited and reduced to the highest amount that
is valid and enforceable as determined in such action or proceeding.
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ARTICLE XIV
NOTICES
-------
Except as otherwise permitted by Section 2.2.5 with respect to borrowing
notices, any notice required or permitted to be given under this Agreement shall
be sent by United States mail, telegraph, telex, FAX or nationally established
overnight courier service, and shall be deemed received (i) when received by the
addressee if sent via the United States mail, postage prepaid, (ii) when
delivered to the appropriate office or machine operator for transmission,
charges prepaid, if sent by telegraph or telex (answerback confirmed in the case
of telexes), (iii) when receipt thereof by the addressee is confirmed by
telephone if sent by FAX and (iv) one business day after delivery to an
overnight courier service, if sent by such service, in each case addressed to
the relevant party at the address set forth for such party on the signature
pages hereto or at such other address as may be designated by such party in a
notice to the other parties.
ARTICLE XV
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Affiliate Borrowers,
the Borrowing Base Parties, the Agent and the Lenders and each party has
notified the Agent by telex or telephone, that it has taken such action.
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IN WITNESS WHEREOF, the Borrower, the Affiliate Borrowers, the Borrowing
Base Parties, the Lenders and the Agent have executed this Agreement as of the
date first above written.
BIG O TIRES, INC.
as the Borrower
By: /s/ John B. Adams
------------------
Print Name: John B. Adams
Title: Executive V.P. & C.F.O.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attention: John B. Adams
Executive Vice President and
Chief Financial Officer
FAX: (303) 790-6064
Telephone: (303) 790-2800
BIG O DEVELOPMENT, INC.
as an Affiliate Borrower
By: /s/ John B. Adams
----------------------
Print Name: John B. Adams
Title: V.P.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attention: John B. Adams
Vice President and
Chief Financial Officer
FAX: (303) 790-6064
Telephone: (303) 790-2800
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BIG O TIRE OF IDAHO, INC.
as a Borrowing Base Party
By: /s/ John B. Adams
Print Name: John B. Adams
Attention: John B. Adams
Vice President and
Chief Financial Officer
FAX: (303) 790-6064
Telephone: (303) 790-2800
Commitments
-----------
$20,000,000 THE FIRST NATIONAL BANK OF CHICAGO
Individually, as Agent and as Issuer
By: /s/ Nathan L. Bloch
------------------------
Print Name: Nathan L. Bloch
Title: Vice President
Address:
One First National Plaza, Ste. 0088
Chicago, Illinois 60670
Attention: Nathan L. Bloch, Vice President
FAX: (312) 732-5161
Telephone: (312) 732-2243
s:\coml\kwh\bigo\revolv.ca
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EXHIBIT "A"
NOTE
$____________ January 23, 1995
______________ , a _______________corporation (the "[Affiliate] Borrower"),
promises to pay to the order of __________________________________ (the
"Lender") the lesser of the principal sum of __________________ Dollars or the
aggregate unpaid principal amount of all Loans made by the Lender to the
[Affiliate] Borrower pursuant to Article II of the Credit Agreement (as the same
may be amended or modified, the "Agreement") hereinafter referred to, in
immediately available funds at the main office of The First National Bank of
Chicago in Chicago, Illinois, as Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The [Affiliate] Borrower shall pay the principal of and accrued and
unpaid interest on the Loans in full on the Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Credit Agreement, dated as of January 23, 1995 among [the
Borrower/Big O Tires, Inc.], the Affiliate Borrowers, the Borrowing Base
Parties, The First National Bank of Chicago, individually, as Issuer and as
Agent, and the lenders named therein, including the Lender, to which Agreement,
as it may be amended from time to time, reference is hereby made for a statement
of the terms and conditions governing this Note, including the terms and
conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Agreement.
By:
Print Name:
Title:
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<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF _________________,
DATED JANUARY 23, 1995
<TABLE>
<CAPTION>
Maturity
Maturity Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
---------- --------- ----------- --------- -------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
EXHIBIT "B"
FORM OF OPINION
January 23, 1995
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Gentlemen/Ladies:
We are counsel for ________________________ (the "Borrower"), Big O
Development, Inc. ("BODI" or the "Affiliate Borrower") and Big O Tire of Idaho,
Inc. (a "Borrowing Base Party"; collectively, together with the Borrower and
BODI, the "Initial Obligors") and have represented the Initial Obligors in
connection with their execution and delivery of a Revolving Credit Agreement
among the Initial Obligors and The First National Bank of Chicago, as a Lender,
as Issuer and as Agent dated as of ____________ (the "Agreement"). All
capitalized terms used in this opinion and not otherwise defined shall have the
meanings attributed to them in the Agreement.
We have examined each Initial Obligor's articles of incorporation, by-laws,
resolutions, the Loan Documents and such other matters of fact and law which we
deem necessary in order to render this opinion. Based upon the foregoing, it is
our opinion that:
l. The Borrower, each of its Subsidiaries and BODI are corporations duly
incorporated, validly existing and in good standing under the laws of their
states of incorporation and have all requisite authority to conduct their
business in each jurisdiction in which their business is conducted.
2. The execution and delivery of the Loan Documents by the Initial
Obligors and the performance by the Initial Obligors of the Obligations have
been duly authorized by all necessary corporate action and proceedings on the
part of each Initial Obligor and will not:
(a) require any consent of the Initial Obligors' shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower, any of its
Subsidiaries or BODI or the Borrower's, any Subsidiary's or BODI's articles
of incorporation or by-laws or any indenture, instrument or agreement
binding upon the Borrower, any of its Subsidiaries or BODI; or
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<PAGE>
(c) result in, or require, the creation or imposition of any Lien
pursuant to the provisions of any indenture, instrument or agreement
binding upon the Borrower, any of its Subsidiaries or BODI.
3. The Loan Documents have been duly executed and delivered by each
Initial Obligor and constitute legal, valid and binding obligations of each
Initial Obligor enforceable in accordance with their respective terms except to
the extent the enforcement thereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and
subject also to the availability of equitable remedies if equitable remedies are
sought. Without limiting the effect of the preceding sentence, the guaranty by
the Borrower of the Affiliate Borrower Obligations set forth in Article XIII of
the Credit Agreement constitutes a legal, valid and binding obligation of the
Borrower enforceable in accordance with its terms except to the extent the
enforcement thereof may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and subject also to the
availability of equitable remedies if equitable remedies are sought.
4. There is no litigation or proceeding against the Borrower, any of its
Subsidiaries or BODI which, if adversely determined, could have a Material
Adverse Effect or an Affiliate MAE.
5. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Borrower, any of its
Subsidiaries or BODI, is required to be obtained by the Borrower, any of its
Subsidiaries or BODI in connection with the execution and delivery of the Loan
Documents, the borrowings under the Agreement or in connection with the payment
by any Initial Obligor of the Obligations.
This opinion may be relied upon by the Agent, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
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<PAGE>
EXHIBIT "C"
AFFILIATE BORROWER COUNTERPART
Dated as of ______________, 199
Reference is made to the Revolving Credit Agreement, dated as of January
23, 1995 (the "Agreement"), among Big O Tires, Inc. (the "Borrower"), the
Affiliate Borrowers, the Borrowing Base Parties, the Lenders and The First
National Bank of Chicago, as Issuer and as Agent. Terms not defined herein
which are defined in the Agreement have for the purposes hereof the meanings
provided therein.
By its execution hereof, [name of Affiliate Borrower], a [jurisdiction of
incorporation] corporation (the "New Affiliate Borrower"), hereby elects to be
an Affiliate Borrower for purposes of the Agreement, effective as of the date
hereof. The New Affiliate Borrower confirms that the representations and
warranties set forth in Article V-A of the Agreement are true and correct in all
material respects as of the date hereof, and the New Affiliate Borrower hereby
agrees to perform all of its obligations as a "Affiliate Borrower" under, and to
be bound in all respects by the terms of, the Agreement, the same as if the New
Affiliate Borrower were a signatory "Affiliate Borrower" thereto.
The address (including telephone and telecopy numbers) to which all notices
to the New Affiliate Borrower under the Agreement should be directed is:
[NEW AFFILIATE BORROWER]
By:
Title:
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<PAGE>
The undersigned hereby confirms that [name of Affiliate Borrower] is an
"Affiliate Borrower" for purposes of the Agreement described above and reaffirms
its obligations under Article XIII of the Agreement with respect to the New
Affiliate Borrower.
BIG O TIRES, INC.
By:
Title:
The undersigned consent(s) to the addition of [Name of new Affiliate
Borrower] as an Affiliate Borrower under the Agreement effective as of the date
set forth above.
THE FIRST NATIONAL BANK OF CHICAGO, as
Agent, Issuer and Lender
By:
Title:
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<PAGE>
EXHIBIT "D"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Revolving
Credit Agreement dated as of January 23, 1995 (as amended, modified, renewed or
extended from time to time, the "Agreement") among the Borrower, the Affiliate
Borrowers, the Borrowing Base Parties, the lenders party thereto and The First
National Bank of Chicago, as Agent for the Lenders. Unless otherwise defined
herein, capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
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<PAGE>
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ____ day of ______________,
19___.
91
<PAGE>
[SAMPLE]
SCHEDULE I TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of with
Provisions of ______ and ________ of
the Agreement
92
<PAGE>
EXHIBIT "E"
BORROWING BASE CERTIFICATE
Data as of _________, 199 ($000)
Accounts Receivable Availability Calculation
--------------------------------------------
Gross Accounts Receivable $
Less: Average discounts, credits
and allowances $
90 Days Past Due/1/
15% Cross Age
Intercompany
Consignment Receivables
Accounts in Legal Action (current
portion)
Warranty Set-Aside (1/4 of 12 mos.)
Convention Reserve
Other Ineligibles
Add: Accrued [current month] Royalties
which are in General
Ledger but not in aging ( )
Total Ineligibles $
Total Eligible Receivables
Advance Rate x 85%
Net Availability (Accounts Receivable) $
Inventory Availability Calculation
----------------------------------
Class I (New tires, used tires, seconds and retreads, wheels and wheel
accessories, shock absorbers, struts and coils)
Gross Class I FIFO Inventory $
Less /2/: Supplies $
Consignment Inventory
Equipment
Obsolete Wheel Reserve
Unrealized Intercompany Profit
Unamortized Price Reductions
/1/ Or, with respect to accounts subject to agreed special dating
programs, ineligible under Section 2.11.2(i).
/2/ Relating to Class I Inventory
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<PAGE>
Writedowns to Net Realizable Value
In-Transit/3/
Other Ineligibles
Total Ineligibles/ 2/ $
---------------------
Total Eligible Class I Inventory
Advance Rate for Class I Inventory x65%
Net Availability (Class I Inventory) $
Class II (All Inventory not included in Class I)
--------
Gross Class II FIFO Inventory $
Less /4/: Supplies $
Consignment Inventory
Equipment
Obsolete Wheel Reserve
Unrealized Intercompany Profit
Unamortized Price Reductions
Writedowns to Net Realizable Value
In-Transit
Other Ineligibles
Total Ineligibles /4/ $
Total Eligible Class II Inventory
Advance Rate for Class II Inventory x40%
Net Availability (Class II Inventory) $
Net Availability (all Inventory) /5/ $
TOTAL AVAILABILITY
(INVENTORY AND ACCOUNTS RECEIVABLE) $
/2/ Relating to Class I Inventory
/3/ Pursuant to Section 2.11.8(ii)
/4/ Relating To Class II Inventory
/5/ Not to exceed 80% of Total Availability; if calculation would otherwise
show Net Availability (all Inventory) exceeding 80% of Total Availability,
Net Availability (all Inventory) shall be reduced to an amount equal to 80%
of Total Availability.
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EXHIBIT "F"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Revolving Credit Agreement dated as of January 23, 1995 (as amended,
modified, renewed or extended from time to time, the "Agreement") among the
Borrower, the Affiliate Borrowers, the Borrowing Base Parties, the lenders
party thereto and The First National Bank of Chicago, as Agent for the
Lenders. Terms used herein and not otherwise defined shall have the
meanings assigned thereto in the Agreement.
The Agent is specifically authorized and directed to act upon the following
standing money transfer instructions with respect to the proceeds of Advances or
other extensions of credit from time to time until receipt by the Agent of a
specific written revocation of such instructions by the Borrower, provided,
however, that the Agent may otherwise transfer funds as hereafter directed in
writing by the Borrower in accordance with Article XIV of the Agreement or based
on any telephonic notice made in accordance with Section 2.6 of the Agreement.
Facility Identification Number(s)
Customer/Account Name _____
Transfer Funds To
For Account No. _____ __
Reference/Attention To
Authorized Officer (Customer Representative) Date
(Please Print) Signature
Bank Officer Name Date
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
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EXHIBIT "G"
DISBURSEMENT INFORMATION RE PROPERTY DEVELOPMENT LOAN
TO AFFILIATE BORROWER
(In Dollars)
<TABLE>
<CAPTION>
Location Current Advances To Estimated Total Estimated Estimated
(City, State) Borrowing Date Total to Estimate of Completion Refinancing
Request (B) Completion Costs Date or Sale
(A) (C) (A+B+C) (MO., YR.) Date
(MO., YR.)
<S> <C> <C> <C> <C> <C> <C>
Total
===================================================================================================
</TABLE>
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<PAGE>
EXHIBIT "H"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
__________________________ (the "Assignor") and __________________ (the
"Assignee") is dated as of _________________, 19__. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit "I" attached hereto
has been delivered to the Agent. Such Notice of Assignment must include any
consents required to be delivered to the Agent by Section [12.3.1] of the Credit
Agreement. In no event will the Effective Date occur if the payments required
to be made by the Assignee to the Assignor on the Effective Date under Sections
4 and 5 hereof are not made on the proposed Effective Date. The Assignor will
notify the Assignee of the proposed Effective Date no later than the Business
Day prior to the proposed Effective Date. As of the Effective Date, (i) the
Assignee shall have the rights and obligations of a Lender under the Loan
Documents with respect to the rights and obligations assigned to the Assignee
hereunder and (ii) the Assignor shall relinquish its rights and be released from
its corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale and
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<PAGE>
assignment of Loans hereunder, (i) the Assignee shall pay the Assignor, on the
Effective Date, an amount equal to the principal amount of the portion of all
Floating Rate Loans assigned to the Assignee hereunder and (ii) with respect to
each Eurodollar Loan made by the Assignor and assigned to the Assignee hereunder
which is outstanding on the Effective Date, (a) on the last day of the Interest
Period therefor or (b) on such earlier date agreed to by the Assignor and the
Assignee or (c) on the date on which any such Eurodollar Loan either becomes due
(by acceleration or otherwise) or is prepaid (the date as described in the
foregoing clauses (a), (b) or (c) being hereinafter referred to as the "Payment
Date"), the Assignee shall pay the Assignor an amount equal to the principal
amount of the portion of such Eurodollar Loan assigned to the Assignee which is
outstanding on the Payment Date. If the Assignor and the Assignee agree that
the Payment Date for such Eurodollar Loan shall be the Effective Date, they
shall agree to the interest rate applicable to the portion of such Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such Eurodollar Loan (the "Agreed Interest Rate")
and any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period from
the Effective Date to but not including the Payment Date is not paid by the
Borrower with respect to any Eurodollar Loan sold by the Assignor to the
Assignee hereunder, the Assignee shall pay to the Assignor interest for such
period on the portion of such Eurodollar Loan sold by the Assignor to the
Assignee hereunder at the applicable rate provided by the Credit Agreement. In
the event a prepayment of any Eurodollar Loan which is existing on the Payment
Date and assigned by the Assignor to the Assignee hereunder occurs after the
Payment Date but before the end of the Interest Period applicable to such
Eurodollar Loan, the Assignee shall remit to the Assignor the excess of the
prepayment penalty paid with respect to the portion of such Eurodollar Loan
assigned to the Assignee hereunder over the amount which would have been paid if
such prepayment penalty was calculated based on the Agreed Interest Rate. The
Assignee will also promptly remit to the Assignor (i) any principal payments
received from the Agent with respect to Eurodollar Loans prior to the Payment
Date and (ii) any amounts of interest on Loans and fees received from the Agent
which relate to the portion of the Loans assigned to the Assignee hereunder for
periods prior to the Effective Date, in the case of Floating Rate Loans or fees,
or the Payment Date, in the case of Eurodollar Loans, and not previously paid by
the Assignee to the Assignor.]* In the event that either party hereto receives
any payment to which the other party hereto is entitled under this Assignment
Agreement, then the party receiving such amount shall promptly remit it to the
other party hereto.
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor a
fee on each day on which a payment of interest or [commitment] fees is made
under the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or commitment fees for the period
prior to the Effective Date or, in the case of Eurodollar Loans, the Payment
Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (i)
the interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (ii) the interest or fee, as applicable, which would
have been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was ___ of 1% less than the interest rate paid by the
Borrower or if the commitment fee was ___ of
98
<PAGE>
1% less than the commitment fee paid by the Borrower, as applicable. In
addition, the Assignee agrees to pay ___% of the recordation fee required to be
paid to the Agent in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
[(vii) confirms that it is an Eligible Assignee,]* [and (viii) attaches the
forms prescribed by the Internal Revenue Service of the United States certifying
that the Assignee is entitled to receive payments under the Loan Documents
without deduction or withholding of any United States federal income taxes].**
*to be inserted if required by the Credit Agreement.
99
<PAGE>
**to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section [12.3.1] of the Credit Agreement to assign
the rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under [Sections 4, 5 and 8] hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
100
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By: _____
Title:
[NAME OF ASSIGNEE]
By:
Title: _____
101
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2. Date of Assignment Agreement: , 19
3. Amounts (As of Date of Item 2 above):
Facility Facility Facility Facility
1* 2* *3 *4
------------------------------------- -------- -------- --------
a. Total of Commitments
(Loans)** under
Credit Agreement $ $ $ $
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement*** % % % %
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $ $ $ $
</TABLE>
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $_________
5. Proposed Effective Date:
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
Title: ___ __ Title:
* Insert specific facility names per Credit Agreement
** If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
*** Percentage taken to 10 decimal places
102
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
103
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
____________________, 19__
--------------------
To: [NAME OF BORROWER]*
[NAME OF AGENT]
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
****[the Borrower and]**** the Agent pursuant to Section [12.3.2] of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of ___________, 19__ (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the
Assignor the percentage interest specified in Item 3 of Schedule 1 of all
outstandings, rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment
shall be the later of the date specified in Item 5 of Schedule 1 or two Business
Days (or such shorter period as agreed to by the Agent) after this Notice of
Assignment and any consents and fees required by Sections [12.3.1 and 12.3.2] of
the Credit Agreement have been delivered to the Agent, provided that the
Effective Date shall not occur if any condition precedent agreed to by the
Assignor and the Assignee has not been satisfied.
*To be included only if consent must be obtained from the Borrower pursuant to
Section 12.3.1 of the Credit Agreement.
104
<PAGE>
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein. The Assignor
will confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $2,500 required by Section 12.3.2 of
the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacements notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment instructions
are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the
Loan Documents in accordance with the terms thereof. The Assignee acknowledges
that the Agent has no duty to supply information with respect to the Borrower or
the Loan Documents to the Assignee until the Assignee becomes a party to the
Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
Title: Title:
105
<PAGE>
ACKNOWLEDGED [AND CONSENTED ACKNOWLEDGED [AND CONSENTED TO]
TO BY [NAME OF AGENT] BY [NAME OF BORROWER]
By: By:
Title: Title: _____
[Attach photocopy of Schedule 1 to Assignment]
106
<PAGE>
SCHEDULE "1"
LOCATIONS OF INVENTORY
(See Sections 2.11.8 and 2.11.9)
A. Properties Owned by a Borrowing Base Party (show name of owner):
------------------------------------------
Big O Development, Inc:
3511 South T.K. Avenue 875 American Pacific Drive
Boise, ID 83705 Henderson, NV 80914
640 Park East Blvd.
New Albany, IN 47150
B. Properties Leased by a Borrowing Base Party (show name of owner and
-------------------------------------------
landlord's name):
The Prudential Insurance Company of America:
5400 E. Francis
Ontario, CA 91761
BOTAC VI Leasing, LLC:
11755 East Peakview Avenue
Englewood, CO 80111
C. Public Warehouses or other Locations pursuant to Bailment Arrangements
----------------------------------------------------------------------
(include name of warehouse operator or other bailee):
None.
107
<PAGE>
SCHEDULE "2"
LITIGATION
(See Sections 5.7, 5A.7)
108
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE "3"
SUBSIDIARIES AND OTHER INVESTMENTS
AMOUNT OF JURISDICTION
OWNED INVESTMENT PERCENT OF
INVESTMENT IN: BY: AT 12/31/94 OWNERSHIP ORGANIZATION
---------------------------------- ----------------------------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
BIG O TIRE OF IDAHO, INC. BIG O TIRES, INC. $ 1,301,382 100% IDAHO
BIG O RETAIL ENTERPRISES, INC. BIG O TIRES, INC. $ 1,590,371 100% COLORADO
BIG O DEVELOPMENT, INC. BIG O TIRES, INC. $ 50,000 100% COLORADO
O ADVERTISING, INC. BIG O TIRES, INC. $ 1,000 100% COLORADO
BIG O/CSB JOINT VENTURE BIG O RETAIL ENTERPRISES, INC. $ 148,714 50% CALIFORNIA
BIG O/SANDS JOINT VENTURE BIG O RETAIL ENTERPRISES, INC. $ 0 50% ARIZONA
BIG O/HERBERT HAWLEY JOINT VENTURE BIG O RETAIL ENTERPRISES, INC. $ 71,993 50% COLORADO
BIG O/CMT JOINT VENTURE BIG O RETAIL ENTERPRISES, INC. $ 0 50% CALIFORNIA
B & G TETON JOINT VENTURE BIG O RETAIL ENTERPRISES, INC. $ 84,990 50% WYOMING
TIRE INDUSTRIES, INC. BIG O RETAIL ENTERPRISES, INC. $ 133,397 50% UTAH
APEX TIRE, INC. BIG O RETAIL ENTERPRISES, INC. $ 206,860 51% UTAH
B&D MANAGEMENT, INC. BIG O RETAIL ENTERPRISES, INC. $ 305,694 51% UTAH
INTERMOUNTAIN REALTY BIG O DEVELOPMENT, INC. $ 538,231 50% COLORADO
SCB GROUP BIG O DEVELOPMENT, INC. $ 35,069 50% CALIFORNIA
SUMMIT TIRE AND BATTERY, INC. BIG O TIRES, INC. $ 46,600 10% FLORIDA
</TABLE>
109
<PAGE>
SCHEDULE "4"
ENVIRONMENTAL MATTERS
(See Section 5.14)
Big O Tires, Inc. ("Big O") has been designated as a Potentially
Responsible Party ("PRP") with regard to the Lowry Landfill a waste site that
has been designated by the appropriate environmental authorities as a "Super
Fund Site". This designation occurred in the late 1970s, primarily because Big
O's predecessor company, Big O Tire Dealers, Inc. was an operating business in
the Denver metropolitan area at that time. While the designation PRP apparently
continues today, it appears that Big O will not be called upon to share in any
responsibility for the clean up of this site.
110
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE "5"
INDEBTEDNESS AND LIENS
============================================================================================================================
AMOUNT
MATURITY OF INDEBTEDNESS
INDEBTEDNESS INCURRED BY INDEBTEDNESS OWED TO PROPERTY ENCUMBERED INDEBTEDNESS AT 12/31/94
=============================================================================================================================
<S> <C> <C> <C> <C>
Big O Tires, Inc. USG Annuity & Life Company 877 Cotting Court 2004 $5,000,000
Big O Development, Inc. Republic Western Insurance Vacaville, California 2004 $3,000,000
Big O Tire of Idaho, Inc. Company 3511 So. T.K. Avenue
Boise, Idaho
875 American Pacific Drive
Henderson, Nevada (when
acquired)
-----------------------------------------------------------------------------------------------------------------------------
Big O Tires, Inc. The Kelly-Springfield Tire Inventory 11/15/97 $4,355,339
Big O Tire of Idaho, Inc. Company
Big O Retail Enterprises, Inc.
-----------------------------------------------------------------------------------------------------------------------------
Big O Tires, Inc. Solano County, California 877 Cotting Court 1999 $32,837
Vaca Valley Industrial Park Vacaville, California
-----------------------------------------------------------------------------------------------------------------------------
Big O Development, Inc. National City Bank 501 Park East Blvd. 09/01/2001 $1,475,000
New Albany, Indiana
-----------------------------------------------------------------------------------------------------------------------------
Big O Development, Inc. The Steve and Bette Gibson Real Property located in 01/31/1995 $312,000
Charitable Remainder Unitrust Maricopa County, Arizona
-----------------------------------------------------------------------------------------------------------------------------
Big O Development, Inc. AT & T Commercial Finance 544 North State Street 07/01/2004 $412,565
Corporation Lake Oswego, Oregon
-----------------------------------------------------------------------------------------------------------------------------
Big O Development, Inc. Jack and Margaret Thorburn Parcel II, K-Mart Shopping 04/30/1995 $200,000
Center Ramona, California
-----------------------------------------------------------------------------------------------------------------------------
Big O Retail Enterprises, Inc. Colonial Pacific Leasing Equipment at 1530 S. Gilbert 04/01/1997 $82,406
Road
Mesa, Arizona
==============================================================================================================================
</TABLE>
111
<PAGE>
SCHEDULE "6"
INTELLECTUAL PROPERTY
(See Section 5.19)
112
<PAGE>
EXHIBIT 10.78
CONSENT, ACKNOWLEDGMENT AND ACCESS AGREEMENT
--------------------------------------------
This Consent, Acknowledgment and Access Agreement (this "Agreement") is
made and entered into as of this 23rd day of January, 1995 by and between The
Bank of Cherry Creek, N.A., a national banking association, and Kenneth B.
Buckius, an individual (collectively, "Trustees"), both having a business
address at 3033 East First Avenue, Denver, Colorado 80206, and The First
National Bank of Chicago, a national banking association ("FNBC"), having its
principal office at One First National Plaza, Chicago, Illinois 60670, with
reference to the following facts:
RECITALS
--------
A. FNBC, as agent and as a lender, Big O Tires, Inc., a Nevada corporation
("Big O"), Big O Tire of Idaho, Inc., an Idaho Corporation ("Idaho") and Big O
Development, Inc., a Colorado corporation ("BODI"; Big O, Idaho and BODI are
sometimes herein collectively referred to as the "Big O Parties"), are entering
into a Revolving Credit Agreement dated as of January 23, 1995 (the "Credit
Agreement; capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Credit Agreement), pursuant to which FNBC agrees
to make loans and provide certain other financial accommodations to the Big O
Parties.
B. All of the Bank Debt (as hereinafter defined) is secured by the grant
to FNBC,as agent, of liens on and security interests in the Bank Collateral (as
hereinafter defined).
C. Trustees, Big O, Idaho and BODI are parties to that certain Indenture,
Mortgage, Deed of Trust, Security Agreement, and Financing Statement (Fixture
Filing) dated as of April 27, 1994 (the "Indenture and Security Agreement") (Big
0, Idaho and BODI are sometimes hereinafter referred to collectively in their
capacities under the Indenture and Security Agreement as "Grantors"), pursuant
to which Grantors granted to Trustees liens on and security interests in the
Trustee Collateral (as hereinafter defined), none of which Trustee Collateral
constitutes or includes Bank Collateral, to secure the Placement Debt (as
hereinafter defined).
D. The Big O Parties have requested that FNBC consent to the continued
existence of the Placement Debt as well as the continued existence of a security
interest in the Trustee Collateral in favor of Trustees.
E. FNBC has advised the Big O Parties that it is willing to give such
consent, enter into the Credit Agreement, and to make available to the Big O
Parties the loans and other financial accommodations provided under the Credit
Agreement, subject to the terms and conditions therein contained and provided,
among other things, that this Agreement be executed by and among FNBC and
Trustees.
<PAGE>
F. FNBC and Trustees desire to confirm in this Agreement, as between
themselves, their rights and priorities with respect to those assets and
properties which are now or may hereafter be or become part of either Bank
Collateral or Trustee Collateral.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing, to induce FNBC to enter
into the Credit Agreement, and for other valuable consideration, the parties
hereto agree as follows:
1. Definitions. Unless the context otherwise requires, all terms used
herein that are defined in the Uniform Commercial Code of the State of Illinois
shall have the meanings given to them therein. In addition to the terms defined
elsewhere in this Agreement, as used herein, the following terms shall have the
following meanings:
"Accounts" means all present and future rights of Big O or Idaho to payment
for goods sold or leased or for services rendered, which are not evidenced by
instruments or chattel paper, whether or not they have been earned by
performance, together with all security interests or other security held by or
granted to Big O or Idaho to secure such rights to payment.
"Appurtenances" shall have the meaning set forth in the Indenture and
Security Agreement as in effect on the date hereof.
"Bank Collateral" means all Accounts, Documents, Inventory, Pledged
Deposits and Other Collateral, wherever located, in which Big O or Idaho now has
or hereafter acquires any right or interest, and the proceeds, insurance
proceeds and products thereof, and all books and records, customer lists, credit
files, computer files, programs, printouts and other computer materials and
records related to any of the foregoing, but specifically excluding any proceeds
of the Trustee Collateral.
"Bank Debt" shall mean all of the indebtedness, liabilities and obligations
of any of the Big O Parties to FNBC or any other Lender, whether now existing or
hereafter arising, under the FNBC Loan Documents, and any other indebtedness,
liabilities or obligations of any of the Big O Parties to FNBC, whether now
existing or hereafter arising, including, without limitation, all interest
accruing after the date of the filing of a petition by or against any of the Big
O Parties under the U.S. Bankruptcy Code or any similar federal or state
statute.
"Business Day" means any day other than a Saturday, Sunday or other day on
which national banks are required or permitted to close.
Page 2
<PAGE>
"Documents" means all documents of title and goods evidenced thereby,
including without limitation all bills of lading, dock warrants, dock receipts,
warehouse receipts and orders for the delivery of goods, and also any other
document which in the regular course of business or financing is treated as
adequately evidencing that the person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
"Equipment" shall mean all machinery, apparatus, equipment, goods other
than inventory (and specifically excluding any "Inventory" as defined herein),
systems, building materials, carpeting, furnishings, fixtures and property of
similar kind and nature, now or hereafter located in or upon or affixed to any
of the Sites or Improvements, or any part thereof, or used or usable in
connection with any construction on or any present or future operation of the
Sites or Improvements, now owned or hereafter acquired by Grantors.
"Facilities" shall have the meaning set forth in the Indenture and Security
Agreement as in effect on the date hereof.
"FNBC Loan Documents" means the Credit Agreement, the notes delivered in
connection therewith, the pledge and security agreement entered into between Big
O and FNBC, the pledge and security agreement entered into between Idaho and
FNBC, and such other mortgages, security agreements, pledge agreements and other
documents relating to collateral for the obligations of the Big O Parties under
the Credit Agreement as may be executed from time to time by Big O or any
affiliate of Big O.
"Facilities" shall have the meaning set forth in the Indenture and Security
Agreement as in effect on the date hereof.
"Improvements" shall have the meaning set forth in the Indenture and
Security Agreement as in effect on the date hereof.
"Inventory" means any and all goods which are held by Big O or Idaho for
sale or lease or to be finished under any contract of service, wherever located,
whether now owned or hereafter acquired by the Big O or Idaho, including,
without limitation, all raw materials, supplies, materials used or consumed in
Big O or Idaho's business, work in process, finished goods, goods in transit,
and all property the sale or other disposition of which has given rise to
Accounts and which has been returned to or repossessed or stopped in transit by
Big O or Idaho.
"Leases" shall have the meaning set forth in the Indenture and Security
Agreement as in effect on the date hereof.
"Lender" means each lending institution listed on the signature pages of
the Credit Agreement and its successors and assigns.
Page 3
<PAGE>
"Lien" shall mean any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind.
"Material Contracts" shall mean all contracts, instruments, licenses,
permits and other agreements which either individually or in the aggregate are
that are material to the conduct of the operation of any Facility, but excluding
any franchise, distribution, or similar agreements of any of the Big O Parties,
or any rights thereunder or proceeds from or of such franchise, distribution, or
similar agreements.
"Notes" shall have the meaning set forth in the Indenture and Security
Agreement as in effect on the date hereof.
"Other Collateral" means certain deposit accounts of Big O and BODI into
which Big O or BODI, as the case may be, has agreed to deposit proceeds of Bank
Collateral, all contract rights, rights to receive payments of money, choses in
action, causes of action, judgments, tax refunds and tax refund claims, computer
programs and software and licenses associated therewith, customer and supplier
contracts and guarantee and indemnity claims, but specifically excluding from
the foregoing any rights under Big O's franchise agreements with its franchisees
except for Big O's right to receive payments of money thereunder.
"Placement Debt" shall mean all of the indebtedness, liabilities and
obligations of Big O under the Placement Documents, whether now existing or
hereafter arising, including, without limitation, all interest accruing after
the date of the filing of a petition by or against any of the Big O Parties
under the U.S. Bankruptcy Code or any similar federal or state statute.
"Placement Documents" shall mean the Indenture and Security Agreement, the
Note Purchase Agreement dated as of April 27, 1994 among Big O, USG Annuity &
Life Company, and Republic Western Insurance Company, the Notes issued by Big O
in connection therewith, and all other instruments and documents executed and
delivered in connection with the foregoing, as amended, modified, extended, or
supplemented from time to time.
"Pledged Deposits" means all time deposits of money, whether or not
evidenced by certificates, which Big O or Idaho may from time to time designate
as pledged to FNBC or to any lender as security for any obligation to such
parties, and all rights to receive interest on said deposits.
"Proceeds" shall have the meaning set forth in the Indenture and Security
Agreement as in effect on the date hereof.
"Rents" shall have the meaning set forth in the Indenture and Security
Agreement as in effect on the date hereof.
Page 4
<PAGE>
"Sites" shall have the meaning set forth in the Indenture and Security
Agreement as in effect on the date hereof.
"Trustee Collateral" shall mean the Sites, Improvements, Appurtenances,
Leases, Rents, Equipment, Material Contracts, and any proceeds of the foregoing.
2. Consents.
2.1 Trustees hereby acknowledge and consent to each Big O Party's
execution and delivery of the FNBC Loan Documents to which it is a party and the
performance by each Big O Party of its obligations thereunder, notwithstanding
any term, covenant or condition of the Placement Documents to the contrary.
2.2 FNBC hereby acknowledges and consents to each Grantor's execution and
delivery of the Placement Documents to which it is a party and the performance
by each Grantor of its obligations thereunder, notwithstanding any term,
covenant or condition of the FNBC Loan Documents to the contrary.
3. Acknowledgments and Confirmations.
3.1 Trustees hereby acknowledge the validity of FNBC's Liens on the Bank
Collateral, confirm that the Trustee Collateral does not and shall not include
any Bank Collateral, and confirm that Trustees shall not have any interest or
assert any claim against the Bank Collateral, or any proceeds thereof, for any
reason.
3.2 FNBC hereby acknowledges the validity of Trustees' Liens on the
Trustee Collateral, confirms that the Bank Collateral shall not include any
Trustee Collateral, and FNBC shall not have any interest in or assert any claim
against the Trustee Collateral, or any proceeds thereof, for any reason.
4. Access to Bank Collateral.
4.1 In the event Trustees acquire ownership or possession of any of the
Facilities pursuant to the exercise of their rights under the Indenture and
Security Agreement, or any other documents executed by Grantors or under
applicable law, Trustees, while not to be deemed bailees of FNBC, agree to
cooperate with FNBC in the assembly, storage, and preservation of any Bank
Collateral located on the Sites, for a period of time (the "Disposition Period")
of up to 45 days from the date FNBC receives a notice from Trustees that
Trustees have acquired such an ownership or possessory interest in such
Facility.
4.2 Trustees acknowledge and agree that with respect to their interests in
the Facilities prior to any acquisition by them of an ownership or possessory
interest as described in Section 4. 1, Trustees have no objection and consent to
FNBC's entry into the Facilities for
Page 5
<PAGE>
the purposes of enforcing or preserving its security interest in the Bank
Collateral located thereon.
5. Continued Effectiveness of this Agreement. None of the terms of this
Agreement, or the rights or obligations of FNBC or Trustees arising hereunder,
shall be affected, modified, or impaired in any manner or to any extent by: (i)
any amendment or modification of or supplement to any of the FNBC Loan Documents
or any of the Placement Documents; (ii) the validity or enforceability of any of
such documents; and (iii) any exercise or non-exercise of any right, power, or
remedy under or in respect of the Bank Debt or Placement Debt or any of such
instruments or documents referred to in clause (i) above or in respect of any of
the properties or assets now or hereafter constituting Bank Collateral or
Trustee Collateral, whether or not Trustees or FNBC shall have had notice or
knowledge of any of the foregoing and whether or not it shall have consented
thereto.
6. Miscellaneous.
6.1 The provisions of this Agreement are solely for the purpose of
defining the relative rights of FNBC and any other Lenders on the one hand and
Trustees on the other hand, and nothing herein shall impair as between Trustees
and any of the Big 0 Parties, or FNBC and any of the Big 0 Parties, such party's
obligations to pay FNBC and Trustees the principal, interest, and other charges
due under the FNBC Loan Documents or the Placement Documents as and when the
same shall become due in accordance with their respective terms; nor shall
anything herein prevent FNBC or Trustees from exercising all rights and remedies
otherwise permitted by applicable law upon default, subject, however, to the
rights of FNBC and Trustees under the provisions of this Agreement
6.2 Except as otherwise provided herein, all notices, requests and demands
to or upon a party hereto shall be in writing and shall be sent by certified or
registered mail, return receipt requested, by overnight delivery service
providing evidence of receipt, by personal delivery against receipt, or by
facsimile transmission with receipt confirmed, and, unless otherwise expressly
provided herein, shall be deemed to have been validly served, given or delivered
when delivered against receipt, or, in the case of certified or registered mail,
three (3) Business Days after deposit in the U.S. mail, postage prepaid, or, in
the base OF overnight delivery service, one (1) Business Day after deposit with
the overnight carrier, or, in the case of facsimile transmission, when sent with
receipt confirmed, addressed as follows:
(i) If to FNBC: The First National Bank of Chicago
One First National Plaza
Suite 0088
Chicago, Illinois 60670
Attention: Nathan L. Bloch
Facsimile: (312) 732-5161
Page 6
<PAGE>
(ii) If to Trustees: Bank of Cherry Creek, N.A.
3033 East First Avenue
Denver, Colorado 80206
Attention: Corporate Trust Department
Facsimile: (303) 329-9629
or to such other address or facsimile transmission number as each party may
designate for itself by like notice given in accordance herewith. Any written
notice that is not sent in conformity with the provisions hereof shall
nevertheless be effective on the date that such notice is actually received by
the noticed party. Failure or delay in delivering copies of any notice, request
or demand to the Persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, request or demand.
6.3 This Agreement shall remain in effect so long as any portion of the
FNBC Debt or the Placement Debt remains outstanding; provided, however, that no
termination shall impair any rights, priorities or obligations created or
acquired hereunder by FNBC or Trustees.
6.4 FNBC and Trustees acknowledge that each executes this Agreement based
solely on its or their independent knowledge of the financial condition of the
Big O Parties.
6.5 This Agreement may not be amended or modified orally but may be
amended or modified only in writing, signed by all parties hereto. No waiver of
any term or provision of this Agreement shall be effective unless it is in
writing, making specific reference to this Agreement and signed by the party
against whom such waiver is sought to be enforced. This Agreement constitutes
the entire agreement among the parties hereto with respect to the subject matter
hereof.
6.6 This Agreement shall be binding upon and inure to the benefit of
Trustees and FNBC and their respective successors and assigns.
6.7 This Agreement may be signed in one or more counterparts each of
which shall be deemed to be an original and all of which when taken together
shall constitute but one and the same instrument.
6.8 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE PARTIES HERETO HEREBY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL COURTS LOCATED IN
CHICAGO, ILLINOIS WITH RESPECT TO ANY MATTERS ARISING OUT OF OR RELATED TO THIS
AGREEMENT. EACH OF THE PARTIES HERETO WAIVES ANY OBJECTION TO JURISDICTION AND
VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE.
Page 7
<PAGE>
6.9 EACH OF THE PARTIES HERETO HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO TRIAL THIS AGREEMENT OR ANY OTHER DOCUMENTS, OBLIGATIONS, OR
COLLATERAL RELATED THERETO OR AFFECTED THEREBY.
IN WITNESS WHEREOF, the parties hereto have executed this Consent,
Acknowledgment and Access Agreement as of the date first above written.
THE BANK OF CHERRY CREEK, N.A.,
a national banking association, as Trustee
By: ___________________________________
Title: ________________________________
_______________________________________
Kenneth B. Buckius, as Trustee
THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association,
individually and as agent
By: ___________________________________
Title: ________________________________
Page 8
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT
----------------------------
Each of the undersigned hereby acknowledges and agrees to all of the terms
and conditions of the foregoing Consent, Acknowledgment and Access Agreement.
The Big O Parties under the Credit Agreement dated as of January 23, 1995 with
The First National Bank of Chicago, individually and as agent:
BIG O TIRES, INC.
By: _________________________________
Title: ______________________________
BIG O DEVELOPMENT, INC.
By: _________________________________
Title: ______________________________
BIG O TIRE OF IDAHO, INC.
By: _________________________________
Title: ______________________________
Page 9
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT
----------------------------
Each of the undersigned hereby acknowledges and agrees to all of the terms
and conditions of the foregoing Consent, Acknowledgment and Access Agreement.
The Purchasers under the Note Purchase Agreement with Big O Tires, Inc.,
dated as of April 27, 1994:
USG ANNUITY & LIFE COMPANY
By Equitable Investment Services,
Inc., Agent
By: /s/ Robert H. Kunnen,
Managing Director
REPUBLIC WESTERN INSURANCE COMPANY
By: _________________________________
Title: ______________________________
Page 10
<PAGE>
Exhibit 10.79
--------------------------------------------------------------------------
-----------------------------
BIG O TIRES, INC.
-----------------------------
NOTE PURCHASE AGREEMENT
Dated as of April 27, 1994
-----------------------------
8.71% Senior Secured Notes Due 2004
--------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section 1. ISSUANCE OF NOTES........................................ 1
A. The Notes; Security......................................... 1
B. Purchase and Sale of Notes; the Closing..................... 1
Section 2. REPRESENTATIONS AND WARRANTIES........................... 2
A. Organization, Qualification, Authority and
Binding Effect........................................... 2
B. Business, Properties and Other Information
Regarding the Company.................................... 2
C. Incorporation, Good Standing and Ownership
of Subsidiaries.......................................... 4
D. Financial Statements........................................ 4
E. Compliance with Laws, Other Instruments, etc................ 5
F. Litigation; Observance of Statutes, Regulations
and Orders............................................... 6
G. Taxes....................................................... 6
H. Titles to Properties........................................ 7
I. Licenses, Permits, Etc...................................... 7
J. Compliance with ERISA....................................... 7
K. Governmental Authorization with Respect to
the Company............................................. 8
L. Offering of the Notes....................................... 8
M. Use of Proceeds; Margin Regulations......................... 9
N. Investment Company Act and Holding Company Status........... 9
O. Place of Business........................................... 9
P. No Defaults Under Existing Debt............................. 9
Q. Environmental Matters....................................... 10
R. Validity of Lien............................................ 13
Section 3. REPRESENTATIONS OF THE PURCHASERS........................ 13
A. Purchase of Notes........................................... 13
B. Source of Funds............................................. 13
Section 4. CONDITIONS............................................... 14
A. Documents................................................... 14
B. Representations True, Etc.; Officer's Certificate........... 15
C. Proceedings................................................. 15
D. Title Insurance, Etc........................................ 15
E. Insurance on Mortgaged Property............................. 16
F. Opinion of Counsel for the Company.......................... 16
G. Opinions of Special Counsel................................. 16
H. Environmental Compliance.................................... 17
I. Legality.................................................... 17
J. Private Placement Number.................................... 17
L. All Purchases of Notes Made................................. 17
Section 5. INSPECTION OF PROPERTIES AND BOOKS; ETC.................. 17
Section 6. FINANCIAL STATEMENTS AND INFORMATION..................... 18
<PAGE>
Section 7. HOME OFFICE PAYMENT...................................... 19
Section 8. LIABILITIES OF THE PURCHASERS............................ 20
Section 9. MISCELLANEOUS............................................ 20
A. Expenses.................................................... 20
B. Taxes....................................................... 21
C. Indemnification............................................. 21
D. Reliance on and Survival of Representations................. 22
E. Successors and Assigns...................................... 22
F. Communications.............................................. 22
G. Governing Law............................................... 23
H. Severability................................................ 23
I. Headings.................................................... 23
J. Counterparts................................................ 23
SCHEDULE I - Names and Addresses of the Purchasers
EXHIBIT 2(C) - Subsidiaries
EXHIBIT A - Form of Indenture
EXHIBIT B - Form of Subsidiary Guaranty
EXHIBIT C - Form of Opinion of Counsel to the Company
EXHIBIT D - Form of Opinion of Special Nevada, California, and Idaho Counsel
<PAGE>
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT ("Agreement") dated as of April 27, 1994
between Big O Tires, Inc., a Nevada corporation (the "Company"), and the
Purchasers whose names appear in the signature forms at the foot hereof
(individually a "Purchaser" and collectively the "Purchasers"). Big O
Development, Inc., a Colorado corporation ("BOD") and Big O Tire of Idaho,
Inc., an Idaho corporation ("Big O Idaho"), wholly owned subsidiaries of the
Company, are also parties hereto for the purposes set forth herein. BOD and Big
O Idaho are referred to herein together as the "Guarantors".
W I T N E S S E T H :
Section 1. ISSUANCE OF NOTES.
A. The Notes; Security. The Company has duly authorized an issue of its
--------------------
8.71% Senior Secured Notes due 2004 in an aggregate principal amount of
$8,000,000 (the "Notes"), which Notes shall be issued under and secured by an
Indenture, Mortgage, Deed of Trust, Security Agreement, and Financing Statement
(Fixture Filing) dated as of this same date substantially in the form of
Exhibit A hereto (the "Indenture"), made by the Company and certain of its
Subsidiaries to The Bank of Cherry Creek, N.A., as Indenture Trustee (the
"Indenture Trustee"), and Douglas R. Dix, as individual trustee (the
"Individual Trustee" and, together with the Indenture Trustee, the "Trustees").
Terms defined in the Indenture are used herein as so defined except as
otherwise defined herein. The Notes will mature, will bear interest and will
be payable as provided in the Indenture.
The Notes will be secured in accordance with the Indenture, which will
create a first mortgage or deed of trust lien upon real estate and improvements
thereon owned and operated by the Company or by a subsidiary of the Company and
more fully described in Schedules A-1 to A-3 to the Indenture (the "Operating
Properties"), and a security interest in the equipment accounts and other
Mortgaged Property referred to and described in the Indenture.
B. Purchase and Sale of Notes; the Closing. Subject to the terms and
----------------------------------------
conditions of this Agreement and on the basis of the representations and
warranties herein set forth herein and in the Indenture, the Company agrees to
sell to each purchaser, and each Purchaser hereby severally agrees to purchase
from the Company on the Closing Date referred to below, Notes in the aggregate
principal amount set forth opposite the name of such Purchaser in Schedule I, at
a purchase price of 100% of the principal amount thereof.
Delivery of and payment for the Notes to be purchased hereunder shall take
place on April 29, 1994, or such other date
<PAGE>
as may be mutually satisfactory to the Company and the purchaser (the "Closing
Date"). On the Closing Date, the Company will deliver to each Purchaser one or
more Notes registered in the name of such Purchaser or in the name of such
Purchaser's nominee, in any denominations (integral multiples of $500,000) and
in the aggregate principal amount to be purchased by such Purchaser, all as such
Purchaser may specify by timely notice to the Company (or, in the absence of
such notice, one Note registered in the name of such Purchaser), duly executed
and dated the Closing Date, against payment therefor, by wire transfer of
immediately available funds, in the amount of the purchase to be made by such
Purchaser as specified in Schedule I, to the Trustees under the Indenture for
deposit, maintenance and distribution in accordance with the Escrow established
under Section 5.4 of the Indenture. Receipt thereof by the Trustees shall
constitute receipt by the Company hereunder.
Section 2. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Purchasers as follows:
A. Organization, Qualification, Authority and Binding Effect. The
----------------------------------------------------------
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all requisite power and authority
to own or hold under lease the property it purports to own or hold under lease
and to carry on its business as now conducted and as proposed to be conducted
and to enter into the transactions contemplated hereby, to execute and deliver
this Agreement, the Indenture and the Notes and to observe and perform the
provisions hereof and thereof. The Company is duly qualified as a foreign
corporation and authorized to do business in the States of California, Idaho,
Colorado, and in each other jurisdiction in which the character of the
properties owned or held under lease by it or the nature of the business
transacted by it requires such qualification, except where the failure to be so
qualified in such other jurisdictions would not individually or in the aggregate
materially affect adversely the financial condition, business, properties or
prospects of the Company or the Company and its Subsidiaries taken as a whole.
This Agreement, the Indenture and the Notes have been duly authorized by all n
necessary corporate action on the part of the Company and constitute (or upon
delivery on or before the Closing Date as contemplated by this Agreement will
constitute) legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms.
B. Business, Properties and Other Information Regarding the Company. The
-----------------------------------------------------------------
Company is subject to the reporting requirements of Section 13 of the
Securities
-2-
<PAGE>
Exchange Act of 1934, as amended, and has delivered to each Purchaser copies of:
(i) its Annual Report on Form 10-K for its fiscal year ended December
31, 1993, filed pursuant to Section 13(a) of said Act;
(ii) a draft of its Quarterly Report on Form 10-Q for its fiscal
quarter ended March 31, 1994, to be filed pursuant to Section 13 (a) of said
Act; and
(iii) the Proxy Statement for its 1993 Annual Meeting of
Shareholders, filed pursuant to Section 14 of said Act.
Said reports and proxy statement include all regular and periodic reports and
proxy statements required to be filed by the Company with the Commission since
January 1, 1993, pursuant to the Act, and are collectively called the "SEC
Reports", which term shall also include on the Closing Date all further reports
and proxy statements which the Company may theretofore have furnished to the
Purchasers pursuant to Section 6 of this Agreement.
As of their respective dates neither the SEC Reports, nor this Agreement,
the Indenture, or any other document, certificate or written statement furnished
to any Purchaser by or on behalf of the Company or any Subsidiary in connection
herewith contained, nor did any statement made by officers of the Company or
other representatives of the Company in connection with such transactions
contain, any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements contained herein and therein not
misleading. Since the date of the Annual Report there has been no material
change in the financial condition, business, properties or prospects of the
Company or the Company and its Subsidiaries taken as a whole. The Company knows
of no fact (other than matters of a general economic nature or matters generally
affecting the businesses engaged in by the Company and its Subsidiaries) not
disclosed either in the SEC Reports listed above or otherwise to Purchasers in
writing that materially affects adversely or, so far as the Company can now
foresee, will materially affect adversely the financial condition, business,
properties or prospects of the Company or the Company and its Subsidiaries taken
as a whole or the ability of the Company to perform its obligations under this
Agreement, the Indenture and the Notes, or the ability of either of the
Guarantors to perform its obligations under the Subsidiary Guaranty.
-3-
<PAGE>
C. Incorporation, Good Standing and Ownership of Subsidiaries. Exhibit
-----------------------------------------------------------
2(C) is a complete and correct list of each of the Company's Subsidiaries,
showing as to each Subsidiary, the correct name thereof, the jurisdiction of
its organization, the percentage of shares of each class of securities of such
Subsidiary owned by the Company and each other Subsidiary and whether such
Subsidiary is a Material Subsidiary.
All of the outstanding shares of each of the Subsidiaries shown in Exhibit
2 (C) as being owned by the Company and its Subsidiaries have been validly
issued, are fully paid and nonassessable and are owned by the Company or another
Subsidiary free and clear of any Lien. No Subsidiary owns any shares of the
Company.
Each Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the character of the properties owned or held under lease by it or the
nature of the business transacted by it requires such qualification, except
where the failure to be so qualified individually and in the aggregate would not
materially affect adversely the financial condition, business, properties or
prospects of the Company or the Company and its Subsidiaries taken as a whole.
Each Subsidiary has all requisite power and authority to own or hold under lease
the property its purports to own or hold under lease and to transact the
business it transacts and proposes to transact and to execute, deliver and
perform any obligations undertaken hereunder or under the documents and
instruments referred to herein.
The Indenture and the Subsidiary Guaranty have been duly authorized by all
necessary corporate action of the Guarantor, and the Indenture and the
Subsidiary Guaranty constitute the valid obligations of the Guarantors,
enforceable in accordance with their terms.
D. Financial Statements. The Company has delivered to each Purchaser
--------------------
copies of:
(i) the consolidated balance sheets of the Company and its
Subsidiaries as at December 31, 1993 and 1992 and the related consolidated
statements of income, stockholders, equity and cash flows of the Company and
its Subsidiaries for each of the fiscal years ended December 31, 1993 and 1992,
all with reports thereon of
-4-
<PAGE>
the Company's independent public accountants; and
(ii) the consolidated balance sheet of the Company and its
Subsidiaries as at March 31, 1994 and the related consolidated statements of
income, stockholders, equity and cash flows of the Company and its
Subsidiaries for the three months then ended, all certified by the Treasurer
of the Company subject to year-end and audit adjustments.
All such financial statements (including any related schedules or notes) present
fairly the financial position of the Company and its Subsidiaries as at the
respective dates of such consolidated balance sheets and the results of their
operations for the fiscal periods ended on said dates, all in accordance with
GAAP. Since the end of the most recent fiscal year as to which financial
statements have been provided to Purchasers, there have been no changes in the
assets, liabilities or financial position of the Company and its Subsidiaries
from that set forth in said consolidated balance sheet as of said date, other
than changes in the ordinary course of business which have not, either
individually or in the aggregate, been materially adverse.
E. Compliance with Laws, Other Instruments, Etc. The execution, delivery
---------------------------------------------
and performance by the Company of this Agreement, the Indenture or the Notes,
and by the Guarantors of the Subsidiary Guaranty and the Indenture, will not (i)
contravene, result in any material breach of, or constitute a material default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, any indenture, mortgage, deed of trust, bank
loan or credit agreement, corporate charter or by-law, or any other agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any Order of any court, arbitrator or Governmental
Body known to the Company to be applicable to the Company or any Subsidiary or
(iii) violate any provision of any statute or any rule or regulation of any
Governmental Body applicable to the Company or any Subsidiary.
As used in this Agreement, the term "Governmental Body, includes any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign; and the
-5-
<PAGE>
term "Order, includes any order, writ, injunction, decree, judgment, award,
determination, direction or demand.
F. Litigation; Observance of Statutes, Regulations and Orders. There
-----------------------------------------------------------
are no actions, suits or proceedings (including counterclaims) pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Body (except
actions, suits or proceedings arising in the ordinary course of business and
which (i) individually, except for a counterclaim in Big 0 Tires, Inc. vs.
Fresh Tire, Incorporated (Los Angeles) and Thurman v. Big 0 Tires, Inc.
(Colorado; Civil Rights Agency), do not represent a potential uninsurable claim
in excess of $25,000 or (ii) in the aggregate, if adversely determined, would
not have a material adverse effect on the financial condition, business,
properties or prospects of the Company or the Company and its Subsidiaries taken
as a whole).
Neither the Company nor any Subsidiary is in default under any Order of any
court, arbitrator or Governmental Body known to the Company or is in violation
of any statute or other rule or regulation of any Governmental Body, which
default or violation might materially and adversely affect the financial
condition, business or properties of the Company or the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform its
obligations under this Agreement, the Indenture and the Notes.
G. Taxes. The Company and each Subsidiary have filed all tax returns in
------
all jurisdictions in which such returns are required to have been filed by them
and have paid all taxes shown to be due and payable on such returns and all
other taxes and assessments payable by them, in each case to the extent the same
have become due and payable and before they have become delinquent (provided the
tax returns for year-end December 31, 1993, are under extension and are to be
filed not later than October 17, 1994), except for any taxes and assessments the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or such
Subsidiary, as the case may be, has made provision in respect of such liability
in accordance with GAAP. Neither the Company nor any Subsidiary knows of any
proposed material tax assessment against the Company or any Subsidiary, and in
the opinion of the Company all tax liabilities are adequately provided for on
the books
-6-
<PAGE>
of the Company and its Subsidiaries. The federal income tax liabilities of
the Company have been determined by the Internal Revenue Service and paid for
all tax years up to and including the tax year ended December 31, 1990.
H. Title to Properties. Each of the Company and its Subsidiaries has
--------------------
good and marketable fee title to its respective real properties and good title
to its other properties and good title to its other properties reflect in the
consolidated balance sheet as at December 31, 1993 described in Section 2(D)(i)
above or purported to have been acquired by the Company and any Subsidiary after
said date (other than properties and assets disposed of in the ordinary course
of business), subject to no Lien of any kind that would be prohibited by the
Indenture.
I. Licenses, Permits, Etc. The Company and its Subsidiaries own or
-----------------------
possess all licenses, permits, franchises and authorizations of, and filings
with, Governmental Bodies and other Persons necessary or material to the
ownership, operation and maintenance of the Facilities (collectively the
"Operating Permits"), and all other licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names, or rights
thereto, material to the conduct of their respective businesses as now conducted
and as currently proposed to be conducted, in each case without known conflict
with the rights of others, and there are no agreements providing for the
expiration or termination of any of the same prior to the final maturity of
the Notes; provided, however, the Company's franchise agreements with its
franchises are limited in duration to ten years and such franchise agreements
will expire before the maturity of the Notes.
J. Compliance with ERISA. Neither the Company nor any Code Affiliate has
----------------------
incurred (1) any material ,accumulated funding deficiency" or "waived funding
deficiency" within the meaning of Section 412 of the Code or Sections 302 and
303(c) of ERISA, or (2) any material liability to the Pension Benefit Guaranty
Corporation established under ERISA in connection with any employee benefit plan
established or maintained by it; nor has the Company or any Code Affiliate had
any tax assessed against it by the United States Internal Revenue Service for
any alleged violation under Section 406 of ERISA or 4975 of the Code. The
current value of the benefit liabilities (as defined in Section 4001 (a) (16) of
ERISA) of each Plan other than a Multiemployer Plan does not exceed the fair
market value of the assets of such Plan as of the most recently ended plan year
of each such Plan. Neither the Company nor an ERISA Affiliate has
-7-
<PAGE>
made a complete or partial withdrawal from a Multiemployer Plan which has
resulted in a present or potential unsatisfied withdrawal liability obligation
to such Plan which is not reflected in the Company's most recent financial
statements. Neither the Company nor any of its Subsidiaries provides medical
benefits to retirees other than as required by the Comprehensive Omnibus Budget
Reconciliation Act of 1985, as amended. The transactions contemplated by this
Agreement will not involve a prohibited transaction (as such term is defined in
Section 4975 of the Code or Section 406 of ERISA) that could subject the
Company or any holder of a Note to any tax or penalty on prohibited
transactions imposed under said Section 4975 of the Code or by Section 502(i)
of ERISA. The representation by the Company in the preceding sentence is made
in reliance upon the representations of the Purchasers in Section 3.
As used in this Agreement, the term "Code" means the Internal Revenue code
of 1986, as amended from time to time; the term "Code Affiliate,, means each
trade or business (whether or not incorporated) which together with the Company
is treated as a "single employer" under subsection (b), (c), (m) or (o) of
Section 414 of the Code; the term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time; the term "ERISA Affiliate,,
means each trade or business (whether or not incorporated) which together with
the Company would be deemed to a "single employer" within the meaning of Section
4001 of ERISA; the term "Multiemployer Plan" means "multiemployer plan" (as such
term is defined in section 3(37) of ERISA and section 414(f) of the Code) to
which contributions are or have been made by the Company or any of its
Subsidiaries; and the term "Plan" means any employee pension benefit plan
maintained or contributed to by the Company or an ERISA Affiliate.
K. Governmental Authorization with Respect to the Company. No consent,
-------------------------------------------------------
approval or authorization of, or registration, filing or declaration with, any
Governmental.mental Body is required for the validity of the execution and
delivery or for the performance by the Company of this Agreement, the Indenture
or the Notes.
L. Offering of the Notes. Neither the Company nor anyone acting on its
----------------------
behalf has offered the Notes or any similar securities for sale to, or solicited
any offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any Person other than the Purchasers and not more than
seventy other institutional investors. Neither the
-8-
<PAGE>
Company nor anyone acting on its behalf has taken, or will take, any action
which would subject the issuance or sale of the Notes to Section 5 of the
Securities Act of 1933, as amended.
M. Use of Proceeds: Margin Regulations. The proceeds from the sale of
------------------------------------
the Notes will be used by the Company (i) to finance a portion of the costs
associated with the consolidation of the Company's distribution operations, (ii)
to retire outstanding indebtedness, and (iii) for general operations expenses.
No part of the proceeds from the sale of the Notes hereunder will be used,
directly or indirectly, for the purpose of buying or carrying any margin stock
within the meaning of Regulation G of the Board of Governors of the United
States Federal Reserve System (12 CFR 207), or for the purpose of buying or
carrying on or trading in any securities under such circumstances as to involve
the Company in a violation of Regulation X of said Board (12 CFT 224) or to
involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220). The assets of the Company do not include any margin stock, and
the Company will not acquire any margin stock. As used in this Section, the
terms "margin stock" and "purpose of buying or carrying" Shall have the
meanings assigned to them in the aforesaid Regulation G.
N. Investment Company Act and Holding Company Status. Neither the
------------------------------------------------
Company nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company", or a "public utility", within
the meaning of the Public Utility Holding Company Act of 1935, as amended, or a
"public utility" within the meaning of the Federal Power Act, as amended.
Neither the Company nor any of its Subsidiaries is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment adviser" within
the meaning of the Investment Advisers Act of 1940, as amended.
O. Place of Business. The chief executive office (as such term is used
------------------
in Article 9 of the Uniform Commercial Code) of the Company and the office where
it keeps records of all contracts is located at 11755 East Peakview Avenue,
Englewood, Colorado 80111. Such office for each of the respective Subsidiaries
is set forth on Schedule 2C attached hereto.
P. No Defaults Under Existing Debt. Neither the Company nor any
--------------------------------
Subsidiary is in default (whether or not
-9-
<PAGE>
waived) in the performance or observance of any of the terms, covenants or
conditions contained in any instrument evidencing any Debt and no event has
occurred and is continuing which, with notice or the lapse of time or both,
would become such a default.
Q. Environmental Matters. (i) The Company and its Subsidiaries have
----------------------
obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws necessary for the operation
of their respective businesses. Each such permit, license and authorization is
in good standing and the Company and its Subsidiaries are in substantial
compliance with the respective terms and conditions thereof. The Company and
any property owned or leased by the Company or any of its Subsidiaries is in
substantial compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
Order or demand letter issued, entered, promulgated or approved thereunder.
(ii) In addition to the foregoing:
(1) no notice, notification, demand, request for information,
citation, summons or order has been issued to, no complaint has been served on,
and no penalty has been assessed against the Company or any property owned or
leased by the Company or any of its Subsidiaries and no investigation or review
is pending or, to the knowledge of the Company, threatened by any Governmental
Body or other entity, with respect to any alleged failure by the Company or any
property owned or leased by the Company or any of its Subsidiaries, to have any
environmental, health or safety permit, license or other authorization required
under any Environmental Law or with respect to any generation, treatment,
storage, recycling, transportation, discharge or disposal, or any Release of
any Hazardous Materials or with respect to any violation or alleged violation
of any Environmental Law; provided that with respect to property other than the
property covered by the Indenture, such notice, service or assessment may have
been effected but in such event even if determined adversely to the Company or
a Subsidiary there would be no material adverse effect as a result thereof
-10-
<PAGE>
upon the financial condition of the Company or any Subsidiary;
(2) the Company is not a treatment, storage or disposal facility requiring
a permit under the United States Resource Conservation and Recovery Act, 42
U.S.C. Section 6291 et seq., as amended, or under any comparable state or local
statute; and
(a) no polychlorinated biphenyls (PCB) are present at any property
owned or leased by the Company or any of its Subsidiaries;
(b) no asbestos or asbestos-containing material is present at any
property owned or leased by the Company or any of its Subsidiaries;
(c) there are no underground storage tanks or surface impoundments for
Hazardous Materials, active or abandoned, at any property owned or leased by
the Company or any of its Subsidiaries; and
(d) no Hazardous Materials have been Released at, on or under any
property owned or leased by the Company or any of its Subsidiaries, except for
Releases in the ordinary course of the Company's business which, either
individually or when aggregated with other such Releases, could not have a
material adverse effect on the financial condition, business, properties or
prospects of the Company or the Company and its Subsidiaries taken as a whole.
(3) the Company has not transported or arranged for the transportation of
any Hazardous Material to any location that is listed on the National Priorities
List under the United States Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), or on any similar state or
local list or that is the subject of
-11-
<PAGE>
Federal, state or local enforcement actions or other investigations that may
lead to Environmental,mental Claims against the Company; the Company has
informed the Purchasers, however, that in the early 1980's the Company
transported tire casings to the Lowry Landfill, Denver, Colorado, the subject
of an EPA cleanup order and a "Superfund" site, which tire casings the Company
represents are not Hazardous Materials;
(4) no Liens have been filed under or pursuant to any Environmental Laws on
any property owned or leased by the Company or any of its Subsidiaries and no
government actions have been taken or are pending that could subject any
property owned or leased by the Company or any of its Subsidiaries to such Liens
and the Company would not be required to place any notice or restriction
relating to the presence of Hazardous Materials at any property owned or leased
by the Company or any of its Subsidiaries in any deed to any property owned or
leased by the Company or any of its Subsidiaries;
(5) neither any property owned or leased by the Company or any of its
Subsidiaries nor any portion thereof, is being used or has been used for the
treatment, generation, transportation, processing, handling, production or for
disposal of any Hazardous Materials or as a landfill or other waste disposal
Bite other than in the normal and lawful course of the operation of any property
owned or leased by the Company or any of its Subsidiaries; neither any property
owned or leased by the Company or any of its Subsidiaries nor any portion
thereof has been subject to investigation by any Governmental Body evaluating
the need to investigate or undertake remedial action at any property owned or
leased by the Company or any of its Subsidiaries; and neither any property owned
or leased by the Company or any of its Subsidiaries nor any portion thereof is
identified on the current or proposed National Priorities List under 40 CFR 300
Appendix B, Comprehensive Environmental Response Compensation and Liability
Inventory System list, or any list arising from any statute analogous to CERCLA;
and
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<PAGE>
(6) there are no ongoing negotiations with or agreement with any
Governmental Body relating to any remedial action or other Environmental Claim
with respect to any property owned or leased by the Company or any of its
Subsidiaries; and neither the Company nor any of its Subsidiaries has submitted
notice pursuant to Section 103 of CERCLA or analogous statute or notice under
any other applicable Environmental Law reporting a release of a Hazardous
Material into the environment.
R. Validity of Lien. As of the Closing Date (a) the Lien of and under the
-----------------
Indenture will constitute a valid first mortgage lien on and first priority
perfected security interest in the Mortgaged Property then existing, (b) all
documents and instruments will have been recorded and filed for record in such
manner and in such places as are required to establish and perfect such lien and
security interest under the Indenture intended to be created thereby and
thereunder, (c) no further action will be required to establish (other than the
filing of continuation statements), maintain and preserve such lien and security
interest and (d) all taxes and filing fees in connection with the execution,
delivery or recordation of the Indenture and all other appropriate documents and
instruments will have been paid.
Section 3. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser severally
represents to the Company as follows:
A. Purchase of Notes. Such Purchaser is purchasing the Notes to be
------------------
purchased by it on the Closing Date for investment and not with a view to the
distribution thereof, provided, however, that the disposition of such
Purchaser's property shall at all times be within its control.
B. Source of Funds. Either:
----------------
(i) no part of the funds used by such Purchaser to purchase Notes
hereunder will be from the assets of any separate account maintained by such
Purchaser in which any employee benefit plan (or its related trust) has an
interest; or
-13-
<PAGE>
(ii) if any part of such purchase will be from the assets of any
separate account maintained by such Purchaser in which any employee benefit
plan has an interest,
(1) on or prior to the Closing Date such Purchaser shall have
disclosed to the Company the name of each employee benefit plan the assets of
which are in such separate account, or
(2) such separate account is a "pooled separate account" entitled
to the exemption granted by the Prohibited Transaction Class Exemption 90-1
issued by the Department of Labor, and on or prior to the Closing Date such
Purchaser shall have disclosed to the Company the name of each employee benefit
plan whose assets in such separate account exceed or are expected to exceed 10%
of the total assets of such account as of the Closing Date.
For purposes of clause (2) above all employee benefit plan maintained by the
Same employer or employee organization are deemed to be a single employee
benefit plan. As used in this Section 3, the terms "separate account" and
"employee benefit plan" Shall have the respective meanings assigned to them in
ERISA.
Section 4. CONDITIONS. The obligation of each Purchaser to purchase and
pay for the Notes to be purchased by it hereunder shall be subject to the
satisfaction, on or before the Closing Date, of the following conditions:
A. Documents. The following documents shall have been duly executed and
----------
delivered and shall be in full force and effect:
1. the Indenture, substantially in the form as provided above;
2. a Subsidiary Guaranty, substantially in the form of Exhibit B
attached hereto (the "Subsidiary Guaranty") by Big O Development, Inc. and by
Big O Tire of Idaho, Inc.;
-14-
<PAGE>
3. an Intercreditor Agreement between the Trustees and Barclays
Business Credit, Inc.; and
4. such other mortgage, security agreements, financing statements and
other documents contemplated hereby or by the preceding documents.
B. Representations True, Etc.; Officer's Certificate. All
--------------------------------------------------
representations and warranties of the Company contained in Section 2 and
elsewhere contained in this Agreement or the Indenture shall (except as affected
by the transactions contemplated by this Agreement) be true on and as of the
Closing Date with the same effect as though said representations and warranties
had been made on and as of the Closing Date, except to the extent that Such
representations and warranties relate solely to an earlier date (in which case
such representations and warranties Shall be true as of such earlier date); no
Default or Event of Default shall exist on the Closing Date; the Company shall
not have consolidated with, merged into or sold, leased, transferred or
otherwise disposed of its properties substantially as an entirety to, any person
(whether or not the same would have been permitted by the Indenture); the
Company shall have performed all agreements on its part to be performed
hereunder and under the Indenture on or prior to the Closing Date; and such
Purchaser shall have received a satisfactory certificate or certificates, signed
by the President or the Chief Financial Officer of the Company, certifying to
the effect specified in this Subsection.
C. Proceedings. All other instruments relating to the issuance and sale
------------
of the Notes and all proceedings taken on and prior to the Closing Date in
connection with the performance of this Agreement shall be satisfactory to such
Purchaser; and such Purchaser shall have received copies of all such documents
and/or other evidence as it or its special counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
corporate proceedings in connection therewith, in form and substance
satisfactory to such Purchaser and said special counsel.
D. Title Insurance, Etc. Such Purchaser shall have received policies of
---------------------
title insurance as shall be satisfactory to such Purchaser, in an aggregate face
amount equal to at least $8,000,000 (less, prior to the inclusion of the Las
Vegas Facility under the Indenture,
-15-
<PAGE>
the amount held in the Escrow established under Section 5.4 of the Indenture)
and allocated among the respective Facilities in a manner satisfactory to such
Purchaser, insuring the Trustees for the benefit of the Purchasers and all
holders from time to time of the Notes the interest of the Trustees under the
Indenture in the real estate portions of the Mortgaged Property described in
the Indenture, and issued by the Title Companies, each in form and substance
satisfactory to such Purchaser (including without limitation as to allocation
of coverages among the Title Companies) and subject only to such exceptions as
are acceptable to such Purchaser, and said title insurance policies shall
affirmatively insure against such matters as such Purchaser shall reasonably
request.
E. Insurance on Mortgaged Property. Such Purchaser shall have received
--------------------------------
evidence that the Company has obtained policies of insurance in such amounts,
with such companies and against such risks as are required by the Indenture or
hereunder, and in the case of earthquake and business interruption insurance an
undertaking satisfactory to such Purchaser to obtain such insurance and provide
satisfactory evidence thereof within 30 days after the Closing Date. At least
three Business Days prior to the Closing Date such Purchaser shall have received
(i) a certificate signed by a senior officer of the Company responsible for
insurance matters, setting forth such insurance and stating that such insurance
is in full force and effect, that all premiums then due thereon have been paid
and that, in the opinion of the officer executing such certificate, such
insurance complies with the provisions of the Indenture and hereunder, and (ii)
written confirmation, dated reasonably near the Closing Date, as to such
insurance and such compliance with the provisions of the Indenture and
hereunder.
F. Opinion of Counsel for the Company. Such Purchaser shall have
-----------------------------------
received from Hopper & Kanouff, counsel for the Company, the opinion dated the
Closing Date, substantially in the form set forth in Exhibit C hereto. Such
opinion shall also cover such other matters incident to the transactions
contemplated hereby as the Purchasers may reasonably request.
G. Opinions of Special Counsel. Such Purchaser shall have received
----------------------------
from (i) Lionel, Sawyer & Collins, Fitzgerald, Abbott & Beardsley, and Elam &
Burke, who are acting as special Nevada, California and Idaho counsel,
respectively, for the Company and the Guarantors in connection with this
transaction, an opinion dated the
-16-
<PAGE>
Closing Date, substantially in the form set forth in Exhibit D hereto. Each
such opinion shall also cover such other matters incident to the transactions
contemplated hereby as the Purchasers may reasonably request.
H. Environmental Compliance. Such Purchaser and the Trustees shall have
-------------------------
received Such evidence as to environmental matters relating to the Mortgaged
Property as the Purchasers or the Trustees may reasonably request.
I. Legality. On the Closing Date the Notes to be purchased by such
---------
Purchaser hereunder shall be a legal investment by such Purchaser under the laws
of each jurisdiction to which it may be subject, and such Purchaser shall have
received such certificates or other evidence as it may reasonably request
demonstrating the legality of such purchase under such laws.
J. Private Placement Number. The Notes shall have been assigned a
-------------------------
Private Placement Number by Standard & Poors Corporation.
K. All Purchases of Notes Made. On the Closing Date each other Purchaser
----------------------------
shall have made the purchase of Notes to be made by it as hereinabove provided.
Section 5. INSPECTION OF PROPERTIES AND BOOKS; ETC. So long as any
Purchaser shall be obligated to purchase, or such Purchaser or any other
institutional investor shall hold, Notes, Such Purchaser or such other holder
Shall have the right, upon reasonable notice to the Company and during normal
business hours, to visit and inspect any of the properties of the Company or any
of its Subsidiaries, to examine their books of account and records and make or
be provided with copies and extracts therefrom, to discuss their affairs,
finances and accounts with, and to be advised as to the same by, their officers,
employees and independent public accountants (and by this provision the Company
authorizes such accountants to discuss such affairs, finances and accounts,
whether or not a representative of the Company is present), all at such
reasonable times and to such reasonable extent as such Purchaser or such other
holder may desire. The Company agrees to pay all out-of-pocket expenses
incurred by each Purchaser and each such other holder in connection with such
Purchaser's and such other holder's exercise of rights pursuant to this Section
5 at any time after a Default or an Event of Default has occurred.
The Company will keep at its chief executive office a true copy of this
Agreement and the Indenture, and cause the same to be available for inspection
at said office during normal
-17-
<PAGE>
business hours by any holder of a Note or any
prospective purchaser of a Note designated by a holder thereof.
Section 6. FINANCIAL STATEMENTS AND INFORMATION. The Company will furnish
to each Purchaser, so long as such Purchaser Shall be obligated to purchase or
shall hold any of the Notes, and to the Indenture Trustee and each other
institutional investor holder of a Note (in duplicate):
A. as soon as practicable but in any event within five (5) days after
filing the same with the SEC, (i) the Company's Annual Report on Form 10-K as
filed with the SEC; and (ii) a written statement of the Company's certified
public accountants preparing the Annual Report above stating that in making the
examination necessary for such Annual Report they obtained no knowledge of any
Default or Event of Default or, if such accountants Shall have obtained any such
knowledge, Specifying the same and the nature and status thereof;
B. as soon as practicable but in any event within five (5) days after
filing the same with the SEC, the Company's Quarterly Report on Form 10-Q and a
balance sheet of the Company as of the end of such quarter;
C. concurrently with the Reports and financial statements furnished
pursuant to Subsection A or B above, a certificate of a senior financial officer
of the Company (i) demonstrating and confirming compliance with all of the
covenants contained herein and in the Indenture, and (ii) stating that, based
upon such examination or investigation and review of this Agreement and the
Indenture as in the opinion of the Signer is necessary to enable the signer to
express an informed opinion with respect thereto, no Default or Event of Default
has occurred during such period or, if any Default or Event of Default shall
have occurred, specifying all such Defaults and Events of Default, and the
nature and period of existence thereof, and what action the Company has taken,
is taking or proposes to take with respect thereto;
D. as soon as available but in no event later than five Business Days
after the distribution or filing thereof, copies of all financial information
that the Company makes generally available to its security holders and copies of
all regular and periodic reports and of all registration statements filed by the
Company or any Subsidiary with the Securities and Exchange Commission or any
stock exchange;
-18-
<PAGE>
E. promptly upon a Responsible Officer becoming aware of the existence of
a Default or Event of Default, notice of a Responsible Officer specifying the
nature and period of existence thereof and what action the Company has taken, is
taking or proposes to take with respect thereto;
F. promptly upon the receipt and prompt analysis thereof by the Company
(and in any event within five Business Days after such receipt), copies of any
notice of any Governmental Body in respect of a matter or event that, in the
good faith opinion of the Company, may have a material adverse effect on the
financial condition, business, properties or prospects of the Company, in each
case accompanied by a written statement of a Responsible Officer specifying what
action the Company has taken, is taking or proposes to take with respect
thereto;
G. promptly upon receipt (and in any event within five Business Days
after such receipt) copies of any notice of (i) any lapse or other termination
of any license, permit, franchise or other authorization issued to the Company
or any Subsidiary by any Governmental Body which lapse or termination may have a
material and adverse effect on the financial condition, business, properties or
prospects of the Company or the Company and its Subsidiaries taken as a whole or
(ii) any refusal by any Governmental Body to renew or extend any such license,
permit, franchise or other authorization, which refusal may have a material and
adverse effect on the financial condition, business or properties of the Company
or the Company and its Subsidiaries taken as a whole, an Officer's Certificate
specifying the nature of Such event, the period of existence thereof, and what
action the Company is taking, has taken or proposes to take with respect
thereto; and
H. such other information relating to the performance of this Agreement
and the Indenture and the business and affairs of the Company and its
Subsidiaries as such Purchaser or other holder or the Indenture Trustee may from
time to time reasonably request.
Section 7. HOME OFFICE PAYMENT. Notwithstanding anything to the contrary
in the Indenture or the Notes, the Company agrees that so long as any Purchaser
or any nominee designated by such Purchaser shall be the holder of any Note, the
Company will punctually pay or advise the Indenture Trustee punctually to pay
all amounts which become due and payable on such Note by wire transfer of
immediately available funds to such Purchaser in the manner and at the address
set forth in Schedule I, or in such other manner or at such other address as
such Purchaser may designate to
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<PAGE>
the Company and the Indenture Trustee in writing, without the surrender or
presentation of such Note to the Indenture Trustee. Each Purchaser severally
agrees that it will not sell, transfer, or otherwise dispose of any Note unless
the amount of all payments of principal previously made thereon and the date to
which interest thereon has been paid shall be noted thereon, or surrender the
same in exchange for a Note or Notes aggregating the same principal I amount of
the Note so surrendered. In furtherance of the foregoing, the Company agrees
to file with the Indenture Trustee an executed counterpart or a conformed copy
of this Agreement, pursuant to the Indenture. The Company shall enter into an
agreement similar to that contained in this Section with any other
institutional investor that is a holder of a Note (or nominee thereof) who
shall have agreed to comply with the requirements of this Section.
Section 8. LIABILITIES OF THE PURCHASERS. Neither this Agreement nor the
Indenture or any other document relating hereto or thereto nor any disposition
of any of the Notes shall be deemed to create any liability or obligation of any
Purchaser or any other holder of any Note to enforce any provision hereof or
thereof for the benefit or on behalf of any other person who may be the holder
of any Note.
Section 9. MISCELLANEOUS.
A. Expenses. The Company agrees, whether or not the transactions hereby
---------
contemplated shall be consummated, to pay, or cause to be paid, all of the
Purchasers' reasonable expenses incident to the transactions contemplated by
this Agreement and in connection with any modification, waiver, amendment,
alteration or enforcement of this Agreement, the Indenture, the Notes or any
other document relating hereto or thereto, or any requested modification,
waiver, amendment or alteration hereof or of any thereof (whether or not the
same shall become effective), including without limitation (i) the reasonable
fees, charges and disbursements of counsel to the Purchasers with relation to
this Agreement and the transactions contemplated hereby, the furnishing of the
opinions referred to herein and any other opinions which any Purchaser may
request on questions incident to such transactions, (ii) the charges and
expenses in connection with the furnishing of the surveys, the title insurance,
the environmental compliance report, the appraisal and the Private Placement
Number pursuant to Section 4, (iii) the fees and disbursements of the Trustees
and their counsel in connection with such transactions, (iv) all document
preparation, recording and other expenses, fees and taxes in connection with
such transactions, (v) all reasonable fees and expenses incurred in connection
with any investigation of any Default or Event of Default
-20-
<PAGE>
(including investment banking and financial consultant fees), and (vi) any
reasonable out-of-pocket expenses of the Purchasers in connection
therewith. The obligations of the Company under this Subsection shall survive
the payment of the Notes.
In furtherance of the foregoing, on the Closing Date the Company will pay,
or cause to be paid, in accordance with this Subsection, the fees and
disbursements reflected in the statements of Purchasers' counsel delivered to
the Company on or prior to the Closing Date. Thereafter the Company will pay,
or cause to be paid, promptly upon receipt of supplemental statements therefor
from time to time, reasonable additional fees, if any, and disbursements of such
counsel in connection with the transactions hereby contemplated (including
disbursements unposted as of the Closing Date).
B. Taxes. The Company agrees to pay, or cause to be paid, and save, or
------
cause to be saved, the Purchasers and all other holders of any of the Note's
harmless against any and all liabilities with respect to amounts payable as a
result Of (i) any taxes (other than income taxes) which may be determined to be
payable in connection with the execution and delivery of any of the Notes, this
Agreement, the Indenture or any other document or any modification, amendment or
alteration of the terms or provisions of any of said agreements, instruments or
documents and (ii) any interest or penalties resulting from any non-payment or
delays in the payment of such expenses, charges, disbursements, liabilities,
taxes or levies. The obligations of the Company under this Subsection Shall
Survive the payment of the Notes.
C. Indemnification. The Company agrees, to the extent permitted by
----------------
applicable law, to defend, indemnify, exonerate and hold each Purchaser and each
of such Purchaser's officers, directors, employees and agents (collectively the
"indemnitees" and individually an "indemnitee") free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities and
damages, and expenses in connection therewith, including without limitation
reasonable counsel fees and disbursements (collectively the "Indemnified
Liabilities") incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to any transaction financed or to be financed in
whole or in part directly or indirectly with proceeds from the sale of any of
the Notes, or the execution, delivery, performance or enforcement of this
Agreement, the Indenture, or any instrument contemplated hereby by any of the
Indemnitees, except as to any Indemnitee for
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<PAGE>
any such Indemnified Liabilities arising on account of such Indemnitee Is gross
negligence or willful misconduct; and if and to the extent the foregoing
undertaking may be unenforceable for any reason, the Company agrees to make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The obligations of the
Company under this Subsection shall survive the payment of the Notes.
D. Reliance on and Survival of Representations. All agreements,
--------------------------------------------
representations and warranties of the Company herein and in any certificates or
other instruments delivered pursuant to this Agreement and the Indenture shall
(i) be deemed to have been relied upon by each Purchaser, notwithstanding any
investigation heretofore or hereafter made by any Purchaser or on any
Purchaser's behalf, and (ii) survive the execution and delivery of this
Agreement and the delivery of the Notes to the Purchasers, and shall continue in
effect so long as any Note is outstanding and thereafter as provided in
Subsections A, B and C above.
E. Successors and Assigns. This Agreement shall bind and inure to the
-----------------------
benefit of and be enforceable by the Company and its respective permitted
successors and assigns hereunder, the Purchasers and the Purchasers, respective
successors and assigns, and, in addition, shall inure to the benefit of and be
enforceable by all holders from time to time of the Notes.
F. Communications. All notices and other communications provided for in
---------------
this Agreement shall be in writing and shall be sent by confirmed facsimile
transmission (with hard copy sent by first class mail) or delivered by hand or
sent by a reputable overnight courier service prepaid (with confirmation of
receipt)
(i) if to the Company, at 11755 East Peakview Avenue, Englewood,
Colorado 80111 Attention: Chief Financial Officer, with a copy thereof to the
Company's General Counsel (at that same address), or at such other address as
the Company may hereafter designate by notice to each Purchaser and to each
other holder of a Note at the time outstanding,
(ii) if to any Purchaser, at Such Purchaser's address as set forth in
Schedule I or at such other address as such Purchaser may hereafter designate by
notice to the Company, or
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<PAGE>
(iii) if to any other holder of a Note, at the address of such holder
as it appears on the Register.
Any notice or other communication herein provided to be given to the
holders of all outstanding Notes shall be deemed to have been duly given if sent
as aforesaid to each of the registered holders of the Notes at the time
outstanding at the address for such purpose of such holder as it appears on the
Register.
G. Governing Law. This agreement shall be governed by and construed in
--------------
accordance with the laws of the state of Colorado.
H. Severability. If any term or provision of this Agreement or any
-------------
application hereof shall be invalid or unenforceable, the remainder of this
Agreement and any other application of such term or provision shall not be
affected thereby.
I. Headings. The headings in this Agreement are for convenience of
---------
reference and shall not limit or otherwise affect any of the terms hereof.
J. Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the Same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed and delivered all as of the date first above written.
[SIGNATURE PAGES (2) FOLLOW]
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<PAGE>
BIG O TIRES, INC. BIG O DEVELOPMENT, INC.
By: /s/ John B. Adams By: /s/ John B. Adams
------------------------------- -------------------------
Name: John B. Adams Name: John B. Adams
Title: Executive Vice President Title: Vice President
BIG O TIRE OF IDAHO, INC.
By: /s/ John B. Adams
-------------------------------
Name: John B. Adams
Title: Vice President
[SIGNATURE PAGE TO NOTE PURCHASE
AGREEMENT DATED APRIL 27, 1994 - BIG O TIRES, INC.]
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<PAGE>
USG ANNUITY & LIFE COMPANY REPUBLIC WESTERN INSURANCE COMPANY
By Equitable Investment Services,
Inc., Agent
By: /s/ Robert H. Kunnen By: /s/ Bradley P. Newman
------------------------------ ------------------------------
Name: Robert H. Kunnen Name: Bradley P. Newman
Title: Managing Director Title: Treasurer
[SIGNATURE PAGE TO NOTE PURCHASE
AGREEMENT DATED APRIL 27, 1994 - BIG O TIRES, INC.]
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<PAGE>
SCHEDULE I
This Schedule I shows the names and addresses of the Purchasers under
the foregoing Note Purchase Agreement and the respective principal amounts of
the Notes to be purchased by each.
<TABLE>
<CAPTION>
Name and Address of Purchaser Principal Amount
----------------------------- ----------------
<S> <C>
USG ANNUITY & LIFE COMPANY $5,000,000
(1) All payments in respect of the
Notes shall be made by wire transfer
of federal or other immediately
available funds to:
Bank of New York
Acct. #8900084820
Bank ABA #021000018
Attn: Securities Accounting
Ref: Big O Tires, Inc., with
sufficient information setting forth
the full name, interest rate and
maturity date of the Notes.
(2) Address for all notices of payments:
USG Annuity & Life Company
c/o Equitable Investment Services,
Inc.
604 Locust St.
Des Moines, Iowa 50309
Attn: Director, Settlements
Telecopy: (515) 282-9538
(3) Address for all other communications:
USG Annuity & Life Company
c/o Equitable Investment Services,
Inc.
604 Locust St.
Des Moines, Iowa 50309
Attn: Director, Settlements
Telecopy: (515) 282-9538
(4) Tax Identification No.: 73-0663836
REPUBLIC WESTERN INSURANCE COMPANY $3,000,000
(1) All payments in respect of the Notes
shall be made by wire transfer of
federal or other immediately
available funds to:
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Bank One Arizona, N.A./Trust A803
Acct. #0686527
Bank ABA #122100024
Attn: Securities Accounting
Ref: Big 0 Tires, Inc. with
sufficient information setting forth
the full name, interest rate and
maturity date of the Notes.
(2) Address for all notices of payments:
Republic Western Insurance Company
2721 North Central Avenue
Phoenix, Arizona 85004
Attn: Bradley P. Newman
Facsimile: (602) 263-6587
(3) Address for all other communications:
Republic Western Insurance Company
2721 North Central Avenue
Phoenix, Arizona 85004
Attn: Bradley P. Newman
Facsimile: (602) 263-6587
(4) Tax Identification No.: 86-0274508
</TABLE>
<PAGE>
Exhibit 2(c)
Subsidiaries
1. O Advertising, Inc.
a. Incorporated in Colorado
b. Chief Executive Office: 11755 East Peakview Avenue
Englewood, Colorado 80111
2. Big O Tire of Idaho,
a. Incorporation in Idaho
b . Chief Executive Office: 11755 East Peakview Avenue
Englewood, Colorado 80111
3. Big O Retail Enterprises, Inc.
a. Incorporated in Colorado
b. Chief Executive Office 11755 East Peakview Avenue
Englewood, Colorado 80111
4. Big O Development, Inc.
a. Incorporated in Colorado
b. Chief Executive Office 11755 East Peakview Avenue
Englewood, Colorado 80111
5. Big O Distributors, Inc.
a. Incorporated in California
b. Chief Executive Office 11755 East Peakview Avenue
Englewood, Colorado 80111
<PAGE>
EXHIBIT A
Form of Indenture
<PAGE>
Recorded at the rest of and WE HEREBY CERTIFY THAT THIS IS A FULL
return when recorded to: TRUE AND CORRECT COPY OF THE ORIGINAL
DOCUMENT AS THE SAME APPEARS IN THE
OFFICE OF THE COUNTY RECORD OF
SOLANO COUNTY, STATE OF CALIFORNIA
RECORDED ON 4-29-94 @2:00 PM IN BOOK
OF OFFICIAL RECORDS AT PAGE SERIAL
NO 1994-00044387 CHICAGO TITLE
INSURANCE COMPANY BY MARK TORDUCH
Nyemaster, Goode, McLaughlin,
Voigts, West, Hansell & O'Brien, P.C.
1900 Hub Tower
Des Moines, Iowa 50309
Attn: Bradford L. Austin
------------------------------------------------------------------------------
INDENTURE, MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, AND FINANCING STATEMENT (FIXTURE FILING)
from
BIG O TIRES, INC.
BIG O DEVELOPMENT, INC.,
and
BIG O TIRE OF IDAHO, INC.
as Grantors
to
The Bank of Cherry Creek, N.A.
as Indenture Trustee
and
Douglas R. Dix
as Individual Trustee
-----------------------
Dated as of April 27, 1994
------------------------------------------------------------------------------
THIS INSTRUMENT IS TO BE INDEXED IN THE OFFICES OF THE COUNTY RECORDERS IN THE
COUNTIES OF SOLANO, CALIFORNIA, ADA, IDAHO, AND (SUBJECT TO SECTION 4.6 HEREIN)
CLARK, NEVADA AS A MORTGAGE OR DEED OF TRUST AND A FIXTURE FILING.
Recorded at the request of and return when recorded to: Nyemaster, Goode,
McLaughlin, Voigts, West, Hansell & O'Brien, P.C., 1900 Hub Tower, Des Moines,
Iowa, Attention: Bradford L. Austin
<PAGE>
TABLE OF CONTENTS
-----------------
Page
PRELIMINARY STATEMENT...................................... 1
GRANTING CLAUSES ...................................... 2
ARTICLE 1 DEFINITIONS...................................... 4
Section 1.1 Certain Definitions................... 4
Section 1.2 Accounting Terms...................... 15
ARTICLE 2 THE NOTES ....................................... 16
Section 2.1. Issuance and Form of Notes............ 16
Section 2.2. Payment of Notes; Home Office
Payment............................. 16
Section 2.3. The Register.......................... 17
Section 2.4. Registered Owners..................... 17
Section 2.5. Transfer and Exchange or Notes........ 17
Section 2.6. New Notes............................. 18
Section 2.7. Cancellation of Notes................. 19
ARTICLE 3 PARTICULAR COVENANTS............................. 19
Section 3.1. Title to Mortgaged Property........... 19
Section 3.2. Further Assurances.................... 19
Section 3.3. Recording............................. 19
Section 3.4. Payment of Notes and Other
Obligations......................... 20
Section 3.5. Maintenance of Mortgaged Property..... 20
Section 3.6. Payment of Taxes, Liens............... 20
Section 3.7. Leases................................ 22
Section 3.8. Insurance of Mortgaged Property....... 22
Section 3.9. Existence; Governmental
Requirements, etc................... 24
Section 3.10. Continuing Priority................... 25
Section 3.11. After-acquired Property............... 26
Section 3.12. Sale, Demolition of Mortgaged
Property............................ 26
Section 3.13. Performance by Trustees............... 26
Section 3.14. Subrogation; Purchase Money Liens..... 27
Section 3.15. Compensation of Trustees.............. 27
Section 3.16. Maintenance of Character of Business.. 27
Section 3.17. Condemnation.......................... 28
Section 3.18. Environmental Protection.............. 28
Section 3.19. Keep Books, Reserves; Payment of
Taxes; Compliance with Laws;
Corporate Existence; Maintenance
of Properties; Insurance............ 30
Section 3.20. Transactions with Affiliates.......... 31
Section 3.21. Limitations on current Indebtedness... 31
Section 3.22. Limitations on Funded Debt............ 32
Section 3.23. Maintenance of Net Worth.............. 32
Section 3.24. Dividends............................. 32
<PAGE>
Section 3.25. Restrictions on Merger and Sale
of Assets........................... 33
Section 3.26. Limitations on Liens.................. 34
Section 3.27. Restricted Investments................ 35
ARTICLE 4 POSSESSION, USE AND RELEASE OF
MORTGAGED PROPERTY................... 35
Section 4.1. Possession and Use of Mortgaged
Property............................ 35
Section 4.2. Dispositions of Equipment............. 35
Section 4.3. Confirmatory Instruments.............. 36
Section 4.4. Purchaser Protected................... 36
Section 4.5. Lien on Remaining Mortgaged
Property............................ 36
Section 4.6. Release of Vacaville and Recording
of Indenture........................ 36
ARTICLE 5 APPLICATION OF MONEYS............................ 38
Section 5.1. Proceeds of Insurance and
Condemnation Awards; Restoration.... 38
Section 5.2. Moneys Held as Mortgaged Property..... 39
Section 5.3. Proceeds During Default............... 39
Section 5.4. Escrow................................ 39
ARTICLE 6 REPAYMENT OF NOTES............................... 40
Section 6.1. Mandatory Prepayments of Notes........ 40
Section 6.2. Optional Prepayment of Notes.......... 40
Section 6.3. Notice of Prepayment; Markewhole
Computations........................ 40
Section 6.4. Allocation of Partial Prepayments..... 41
Section 6.5. Surrender of Notes; Notation
Thereon............................. 41
Section 6.6. Purchase of Notes..................... 41
ARTICLE 7 DEFAULT AND REMEDIES............................. 42
Section 7.1. Events of Default..................... 42
Section 7.2. Sale of Mortgaged Property;
Application of Proceeds............. 47
Section 7.3. Purchase by the Trustees.............. 48
Section 7.4. Receivers............................. 49
Section 7.5. Suits by the Trustees................. 49
Section 7.6. Waiver of Remedies.................... 49
Section 7.7. Remedies Cumulative................... 50
Section 7.8. Waiver of Rights...................... 50
Section 7.9. Retention of Possession............... 51
Section 7.10. Direction of Remedies................. 51
Section 7.11. Suit by Registered Owners............. 51
Section 7.12. Waiver of Certain Rights with
Respect to Sale of the Security..... 52
ARTICLE 8 THE TRUSTEES..................................... 54
Section 8.1. Rights and Obligations of Trustees.... 54
Section 8.2. The Individual Trustee................ 58
Section 8.3. Resignation of Indenture Trustee...... 58
<PAGE>
Section 8.4. Successor Indenture Trustee........... 59
Section 8.5. Resignation and Removal of
Individual Trustee.................. 60
Section 8.6. Separate and Co-Trustees.............. 61
Section 8.7. Liability of Trustees................. 62
Section 8.8. Segregation of Moneys................. 62
Section 8.9. Illegal Acts.......................... 62
ARTICLE 9 SUPPLEMENTAL INDENTURES; WAIVERS................. 63
Section 9.1. General............................... 63
Section 9.2. Without Consent of Beneficiaries...... 63
Section 9.3. Consent of All Beneficiaries.......... 63
Section 9.4. Consent of Less Than All
Beneficiaries....................... 64
Section 9.5. Exchange; Legend or Notation;
Effect.............................. 64
Section 9.6. Consents in Writing................... 65
Section 9.7. Delivery of Supplements............... 65
ARTICLE 10 GENERAL......................................... 65
Section 10.1. Costs and Expenses.................... 65
Section 10.2. Operative Documents................... 65
Section 10.3. Security Agreement; Fixture Filing.... 65
Section 10.4. Reconveyance.......................... 66
Section 10.5. Notices............................... 66
Section 10.6. Successors; Gender.................... 67
Section 10.7. Care by the Beneficiaries or the
Trustees............................ 67
Section 10.8. No Obligation on the Beneficiaries
or the Trustees..................... 67
Section 10.9. No Waiver; Writing.................... 67
Section 10.10. GOVERNING LAW; SEVERABILITY........... 68
Section 10.11. Waiver................................ 68
Section 10.12. No Merger............................. 69
Section 10.13. Beneficiaries or Trustees Not
Joint Venturers or Partners......... 69
Section 10.14. No Third Party Benefits............... 69
Section 10.15. Counterparts.......................... 69
Section 10.16. Table of Contents; Headings........... 69
Section 10.17. No Impairment......................... 69
Section 10.18. Maximum Interest Payable.............. 70
SCHEDULE A-1 - A-3 - Description of the Sites (Vacaville,
Bosie, Las Vegas, respectively)
SCHEDULE B-1 - B-3 - Certain Permitted Liens (Vacaville,
Bosie, Las Vegas, respectively)
SCHEDULE C - Form of Note
<PAGE>
INDENTURE, MORTGAGE, DEED OF TRUST
----------------------------------
SECURITY AGREEMENT, AND FINANCING STATEMENT (FIXTURE FILING)
------------------------------------------------------------
THIS INDENTURE, MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, AND FINANCING
STATEMENT (FIXTURE FILING) (the "Indenture") is made as of April 27, 1994 by and
from each of Big O Tires, Inc., a Nevada corporation (the "Company"), having an
address at 11755 East Peakview Avenue, Englewood, Colorado 80111, Taxpayer
Identification Number 87-0392481, Big O Development, Inc., a Colorado
corporation ("BOD"), having an address at 11755 East Peakview Avenue,
Englewood, Colorado 80111, Taxpayer Identification Number 84-1105178, and Big O
Tire of Idaho, Inc. ("Big O Idaho"), a Idaho corporation, having an address at
11755 East Peakview Avenue, Englewood, Colorado 80111, Taxpayer Identification
Number 82-0293051, each as mortgagor, grantor and trustor, to The Bank of Cherry
Creek, N.A., a national banking association (the "Indenture Trustee"), and
Douglas R. Dix (the "Individual Trustee"), each of such Trustees having an
address at 3033 East First Avenue, Denver, Colorado 80206, Attention: Corporate
Trust Department, as trustees, mortgagees, and secured parties, for the benefit
of the Purchasers referred to below and all subsequent holders from time to time
of the Notes described below, as beneficiaries.
PRELIMINARY STATEMENT
---------------------
The defined terms used but not otherwise defined herein have the meanings
set forth in Article 1.
---------
The Company and BOD are the owners, subject to certain permitted exceptions
described in Schedules B-1 through B-3 hereto, of the Sites described in
------------- ---
Schedules A-1 through A-3 hereto, and the Improvements located thereon, and the
------------- ---
Appurtenances and Equipment with respect to such Sites (the Sites, the
Improvements, the Appurtenances and the Equipment are sometimes collectively
called the "Facilities"). The specific party who is the record owner of each
respective Site is designated on the appropriate Schedule. In order to
refinance bank debt and finance certain business operations, the Company is
entering into the Note Purchase Agreement with the Purchasers pursuant to which
the Company will issue to the Purchasers its Notes in an aggregate principal
amount of $8,000,000. BOD and Big O Idaho (together, the "Guarantors") are each
entering into a guaranty of the obligations of the Company under the Notes for
the benefit of the Trustees and the Registered Owners. The Company and the
Guarantors are executing and delivering this Indenture for the purpose of
Granting their respective interest in the Mortgaged Property as security for
the payment of the Notes, the interest and premium, if any, due thereon and all
other Obligations, including without limitation amounts payable hereunder or
under the Note Purchase Agreement to the Purchasers. The Mortgaged Property
shall be and remain subject to the lien of
-1-
<PAGE>
this Indenture and shall constitute security for the Obligations so long as the
Notes shall remain outstanding and any Obligations remain unpaid.
The Company is duly authorized to issue the Notes. The Company and the
Guarantors are duly authorized to execute and deliver this Indenture, and all
actions required by law and all actions of the Company required therefor have
been duly taken. In order to induce the Purchasers to purchase Notes and as a
condition of the Purchasers, agreement to purchase Notes, the Company and the
Guarantors have agreed to execute, acknowledge and deliver this Indenture. The
Company and the Guarantors are sometimes collectively referred to in this
Indenture as the "Grantors".
GRANTING CLAUSES
----------------
NOW, THEREFORE, THIS INDENTURE WITNESSETH: that the Company and the
Guarantors, in consideration of the premises, and in order to secure the payment
of the Obligations, including without limitation principal, interest and
premium, if any, and other sums payable on the Notes, and to secure the
performance of the covenants and agreements contained in the Note Purchase
Agreement, the Notes and this Indenture, and to declare the terms and conditions
upon and subject to which the Notes are to be issued and delivered, has
executed and delivered this Indenture.
The Company and the Guarantors have irrevocably Granted, and by these
presents each of them does hereby irrevocably Grant, with power of sale and
right of entry and possession, unto Trustees and their successors and assigns
forever, all of the Company's and Guarantors I respective right, title and
interest, whether now owned or hereafter acquired, in and to the Mortgaged
Property described in the following Granting Clauses, subject only to those
certain permitted exceptions described in Schedules B-1 through B-3:
-------------- ---
Granting Clause First
---------------------
The two separate land parcels respectively described in Schedules A-1 and
-------------
A-2, and, concurrently with the exchange described in Section 4.6, the land
---- ------------
parcel described in Schedule A-3 (said land parcels are individually called a
------------
"Site") and collectively called the "Sites"), together with (a) all of the
Improvements and the Appurtenances, (b) all claims or demands of the Grantors,
in law or in equity, in possession or expectancy of, in and to the Facilities,
(c) any insurance or condemnation proceeds to which the Grantors may be entitled
with respect to the Facilities, and (d) all rents, income, revenues, issues,
awards, proceeds and profits from and in respect of the property described in
this Granting Clause First; it being the intention of the parties hereto that,
so far as may be permitted by law, all
-2-
<PAGE>
property of the character hereinabove described which is now owned or held or is
hereafter acquired by the Grantors and is affixed, attached and annexed to the
Sites or the Improvements shall be and remain or become and constitute a portion
of the Mortgaged Property and the security covered by and subject to the lien
hereof.
Granting Clause Second
----------------------
All leases, subleases, licenses, concessions or other agreements, written
or verbal, now or hereafter in effect (collectively the "Leases"), which grant a
possessory right in and to, or the right to use, the Mortgaged Property or any
part thereof, and any and all guarantees of the lessees' performance under the
Leases, together with all rents, issues, awards, royalties, revenues, income,
deposits, proceeds, earnings, profits (including those derived from business
operations) and other benefits paid or payable pursuant to the Leases or in
connection with the Mortgaged Property or any part thereof (the "Rents"), and
the Grantors are hereby given the license to collect and retain the Rents prior
to an Event of Default; it being the Grantors' intention to establish an
absolute transfer and assignment of the Leases and Rents, which shall be deemed
vested in the Trustees as of the date hereof.
Granting Clause Third
---------------------
The Equipment and all Proceeds thereof.
Granting Clause Fourth
----------------------
Any and all Material Contracts (subject to the Intercreditor Agreement),
any and all moneys, any and all accounts containing such moneys, and other
property which may from time to time become subject to the lien hereof or which
may come into the possession or be subject to the control of Trustees pursuant
to this Indenture or any other instrument related to the Mortgaged Property,
including without limitation insurance proceeds and all awards which may at any
time be made to the Company for the taking by eminent domain of the whole or any
part of the Mortgaged Property, or any easement therein and other property, if
any, delivered to the Trustees by or on behalf of the Company; it being the
intention of the Company and it being hereby agreed that all Mortgaged Property
hereafter acquired by the Company, required to be subjected to the lien of this
Indenture or intended so to be shall forthwith upon the acquisition thereof by
the Company be subject to the lien of this Indenture as if such property were
now owned by the Company and were specifically described in this Indenture and
Granted hereby or pursuant hereto.
-3-
<PAGE>
TO HAVE AND TO HOLD all and singular the Mortgaged Property, whether now
owned or hereafter acquired, unto the Trustees and their respective successors
and assigns forever;
IN TRUST, NEVERTHELESS, WITH POWER OF SALE AND RIGHT OF ENTRY, upon the
terms and conditions herein set forth for the equal and ratable benefit and
security of the Notes, without preference, priority or distinction of any Note
over any other Note, if any, by reason of difference in time of issuance, sale
or otherwise, and for the enforcement of the payment of the principal, premium,
if any, and interest on the Notes in accordance with their respective terms, and
all other Obligations, including without limitation the other sums payable
hereunder or under the Notes or the Note Purchase Agreement, and the performance
and observance of the provisions of the Notes, the Note Purchase Agreement and
this Indenture, all as herein set forth.
PROVIDED ALWAYS, that if the Company or its successors shall pay or cause
to be paid in full the Obligations, including without limitation the principal
of and interest and premium, if any, on the Notes according to their respective
terms and all other sums becoming due and payable hereunder, and the Company
shall abide by and comply with each and every covenant and condition set forth
herein or in the Notes, then this Indenture and the lien hereof shall cease,
terminate and become void, or at the option of the Company be assigned to the
Company, and the Trustees, if requested by the Company or required by law, Shall
execute and deliver to the party entitled thereto an instrument in form for
recording discharging, releasing, reconveying or so assigning this Indenture.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Notes are to be
issued and secured, and that the Mortgaged Property is to be held and disposed
of by the Trustees pursuant and subject to the provisions of this Indenture.
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Definitions. As used in this Indenture, the
--------------------
following terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
-----
"Affiliate" shall mean with respect to any Person, any other Person (i)
-----------
directly or indirectly controlling (including, but not limited to, all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person or (ii) that directly or indirectly owns more than 5%
of the Voting Stock of such Person. A Person shall be deemed to
-4-
<PAGE>
control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"Appurtenances," shall mean and include all and singular the tenements,
--------------
rights, easements, hereditaments, rights of way, privileges, liberties,
appendages and appurtenances now or hereafter belonging or in any way
appertaining to any of the Sites or the Improvements (including, without
limitation, all rights relating to storm and sanitary Sewer, water, gas,
electric, railway and telephone Services); all development rights, air rights,
water, water rights, water stock, gas, oil, minerals, coal and other substances
of any kind or character underlying or relating to any of the Sites; all estate,
claim, demand, right, title or interest of the Grantors in and to any street,
road, highway or alley (vacated or otherwise) adjoining any of the Sites or any
part thereof; all strips and gores belonging, adjacent or pertaining to any of
the Sites; and any after-acquired title to any of the foregoing.
"Beneficiaries" shall mean the Purchasers and the holders from time to
---------------
time of Any of the Notes.
"BOD" shall mean Big O Development, Inc., a Colorado corporation, and its
-----
permitted successors and assigns as owner of the Boise Facility and of the Las
Vegas Facility.
"Big O Idaho" shall mean Big O Tire of Idaho, Inc., a Idaho corporation,
-------------
and its Permitted successors and assigns.
"Boise Facility" shall mean the Site described in Schedule A-2 and the
---------------- ------------
related Improvements and Appurtenances.
"Business Day" shall mean any day other than a Saturday or Sunday or other
--------------
national holiday.
"Capitalized Lease Obligation" shall mean any rental obligation which
------------------------------
under GAAP is or will be required to be capitalized on a balance sheet of the
Company or any Subsidiary, or for which the amount of the asset and liability
thereunder as if so capitalized should be disclosed in a note to such balance
sheet, in each case taken at the amount thereof accounted for as indebtedness
(net of interest expense) in accordance with GAAP.
"Closing Date" shall mean April 29, 1994.
--------------
"Collateral" shall mean, collectively, the Equipment and all Proceeds
------------
thereof.
"Company" shall mean Big O Tires, Inc., a Nevada corporation, and its
---------
permitted Successors and assigns as owner of
-5-
<PAGE>
the Vacaville Facility, and shall include all Persons claiming under or through
it and all Persons liable for the payment or performance by it of any of the
Obligations, whether or not such Persons shall have executed the Notes or this
Indenture.
"Corporate Trust Office" shall mean the corporate trust office of the
------------------------
Indenture Trustee, which at the date hereof is located at 3033 East First
Avenue, Denver, Colorado 80206, Attention:Corporate Trust Department.
"Consolidated" shall mean, when used in combination with any other
--------------
capitalized term, such term with the respect to the Company and its Subsidiaries
determined on a consolidated basis.
"Consolidated Total Capitalization" shall mean Consolidated Net Worth plus
-----------------------------------
Debt of the Company and its Subsidiaries taken on a consolidated basis.
"Current Indebtedness" shall mean any Debt which is properly classified
----------------------
as a current liability in accordance with GAAP.
"Debt" of any Person shall mean all obligations other than trade payables,
------
accrued expenses, warranty reserve, deferred taxes and income taxes incurred in
the ordinary course of business which would in accordance with GAAP be
classified as debt and in any event will include Capitalized Lease Obligations
and Guarantees. In any case undrawn letters of credit shall be excluded from
this definition of Debt.
"Default" shall mean an event which, with the giving of notice or lapse of
---------
time, or both, would constitute an Event of Default.
"EBITDA" shall mean for any period Consolidated Net Income, adjusted by
--------
adding back (i) current and deferred income taxes, (ii) the amount of all
amortization of intangibles and depreciation that were deducted in arriving at
Net Income (iii) Fixed Charges (excluding dividends payable on any
preferred stock of the Company) (iv) one-time charges incurred in 1993 related
to the Company's withdrawn equity offering, reserves for warehouse
consolidations costs, and cumulative effective of changes in accounting
principles, and (v) one-time charges to be incurred in 1994 with respect to
prepayment penalties in connection with the refinancing of the Boise Facility.
"Environmental Claims" shall mean, with respect to any Person, any written
----------------------
notice, claim, demand or other written communication (collectively, a "Claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the
-6-
<PAGE>
presence, or Release into the environment, of any Hazardous Materials at any
location, whether or not owned by such Person, or (ii) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law. The
term "Environmental Claim" shall include, without limitation, any claim by any
Governmental Body for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and any claim
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Laws" shall mean any and all present and future Federal,
--------------------
state, local and foreign laws, rules or regulations, and any orders or decrees,
in each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including without limitation ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equipment" shall mean all machinery, apparatus, equipment, goods (other
-----------
than inventory), systems, building materials, carpeting, furnishings, fixtures
and property of similar kind and nature, now or hereafter located in or upon or
affixed to the Sites or Improvements, or any part thereof, or used or usable in
connection with any construction on or any present or future operation of the
Sites or Improvements, now owned or hereafter acquired by Grantors.
"Escrow" shall mean the escrow fund and account established pursuant to
--------
Section 5.4 of this Indenture.
"Event of Default" shall have the meaning set forth in Section 7.1.
------------------ -----------
"Facility" shall mean, collectively with respect to a particular Site, the
----------
Site and the Appurtenances, Improvements and Equipment with respect to such
Site; and "Facilities" shall mean, collectively, all of the Facilities then
purported to be subjected to the lien of this Indenture.
"Fixed Charges" shall mean for a period the total consolidated (i) interest
---------------
expense (including interest expense associated with Capitalized Lease
Obligations) both paid and accrued, (ii) Rental Expense and (iii) dividends
payable on
-7-
<PAGE>
preferred stock of the Company and its Subsidiaries for such period.
"Fixed Charges Coverage Ratio" shall mean the ratio the numerator of which
------------------------------
is EBITDA and the denominator of which is Fixed Charges.
"Funded Debt" shall mean any Debt other than Debt which is properly
-------------
classified as Current Indebtedness.
"GAAP" shall mean generally accepted accounting principles from time to
------
time in the United States.
"Governmental Body" shall mean any federal, state, municipal or other
-------------------
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
"Grant" shall mean grant, convey, assign, create a security interest in,
-------
bargain, sell, pledge, give, transfer, mortgage and set over.
"Guarantee" shall mean all debt guaranteed, directly or indirectly, or
-----------
transactions which are substantially equivalent to, or have similar economic
effect of, a guarantee such as any agreement to (a) purchase debt on property or
(b) support or maintain a balance sheet condition.
"Guarantors" shall mean BOD and Big O Idaho, jointly and severally.
------------
"Hazardous Material" shall mean, collectively, (i) any petroleum or
--------------------
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCBS), (ii) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous Substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"special wastes," "toxic substances," "toxic pollutants," "contaminants,"
"pollutants" or words of similar import under any Environmental Law, and (iii)
any other chemical or other material or substance or waste, exposure to which is
now or hereafter prohibited, limited or regulated under any Environmental Law.
"Improvements" shall mean and include all buildings, structures, fixtures
--------------
and other improvements and property of every kind and character now or hereafter
erected on or -affixed or attached to any of the Sites, together with all
building, storage tanks or construction materials, equipment, appliances,
machinery, plant equipment, fittings, apparatus, fixtures and other articles
-8-
<PAGE>
of any kind or nature whatsoever now or hereafter owned by the Company and
affixed to or attached to any of the Sites.
"Indenture Trustee" shall mean The Bank of Cherry Creek, N.A., a national
-------------------
banking association, and its successors and permitted assigns as indenture
trustee under this Indenture.
"Individual Trustee" shall mean Douglas R. Dix and his successors and
--------------------
permitted assigns as individual trustee under this Indenture.
"Intercreditor Agreement" shall mean the Consent, Acknowledgement and
-------------------------
Access Agreement dated this same date between the Trustees and Barclays Business
Credit, Inc. ("Barclays").
"Investment" shall mean any direct or indirect purchase or other
------------
acquisition of stock or other securities of or any partnership interest in any
other Person, any direct or indirect loan, advance (other than advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by such
Person to any other Person, including all Debt and accounts receivable from such
other Person which are not current assets or did not arise from sales to such
other Person in the ordinary course of business, and any direct or indirect
purchase or acquisition by such Person of any assets other than assets used in
the ordinary course of business.
"Las Vegas Facility" shall mean the Site described in Schedule A-3 and the
-------------------- ------------
related Facility.
"Lien" shall mean any mortgage, deed of trust, security interest, pledge,
------
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement and any lease having substantially the same effect as any of
the foregoing).
"Lien (or 'lien') of this Indenture" and terms of like import shall mean
------------------------------------
the Lien granted to the Trustees hereby (including the after-acquired property
clauses hereof) or subsequently granted hereunder or pursuant hereto to the
Trustees.
"Makewhole Premium Amount" means, in connection with any prepayment of a
--------------------------
Note, in whole or in part, the amount (but not less than zero) equal to the
excess, if any, of
(a) the sum of the Present Values (as hereinafter defined) of (1) the
principal amount of such Note or portion thereof being prepaid (assuming the
mandatory prepayments pursuant to Section 6.1 are paid when due) and (2) the
-----------
amount
-9-
<PAGE>
of interest which would have been payable on each interest payment date on
the amount of such principal being prepaid (assuming the mandatory
prepayments pursuant to Section 6.1 and interest payments are paid when
-----------
due), over
----
(b) the principal amount of such Note being prepaid.
For purposes of this definition, "Present Value" shall be determined in
accordance with generally accepted financial practice by discounting (on a
Semiannual basis for interest and principal) to the date of such prepayment at a
discount rate per annum equal to the sum of the applicable Treasury Yield plus
0.50%; and the "Treasury Yield" for such purpose shall be determined as of the
date of such prepayment by reference to the yields of those actively traded "On
The Run" United States Treasury securities having a maturity equal to the
then-remaining weighted average life to maturity of such Note, provided that if
such weighted average life to maturity is not equal to the maturity of an
actively traded "On The Run" United States Treasury security, such yield shall
be obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the yields of actively traded "On The Run" Treasury securities having
a maturity closest to such weighted average life to maturity, using the latest
one-week moving average ending on the date of prepayment for the closest term to
maturity prior to and the closest term to maturity after such weighted average
life For purposes hereof, "On The Run" United States Treasury securities refers
to those United States Treasury securities which are most recently auctioned.
"Material Contracts" shall mean all contracts, instruments, licenses,
--------------------
permits and other agreements which either individually or in the aggregate are
material to the conduct of the operation of any Facility.
"Moody's" shall mean Moody's Investors Service, Inc.
---------
"Mortgaged Property" shall mean and include all property subjected or
--------------------
intended to be subjected to the lien of this Indenture.
"Net Income" shall mean net income (or net loss), determined in accordance
------------
with GAAP, but excluding:
(a) proceeds of insurance policies;
(b) net after tax gains arising from (i) from any write-up of assets or
(ii) the acquisition of debt securities for a cost less than
principal and accrued interest;
(c) net after tax gains arising from (i) the sale or other disposition of
capital assets or (ii) extraordinary items or transactions of a non-
recurring or non-operating and
-10-
<PAGE>
material nature (including net operating loss carry forward credits)
or relating to the discontinuance of operations;
(d) net income, prior to the date of acquisition, of any other Person
acquired in any manner;
(e) any deferred credit (or amortization of a deferred credit) arising
from the acquisition in any manner of any other Person.
"Net Worth" shall mean with respect to any Person the net worth of such
-----------
Person determined in accordance with GAAP.
"New Note" shall have the meaning set forth in Section 2.6.
---------- -----------
"Note Purchase Agreement" shall mean the Note Purchase Agreement dated as
-------------------------
of this same date between the Company and the Purchasers, relating to the Notes.
"Note Rate" shall mean Eight and seventy-one hundredths percent (8.71%)
-----------
per annum.
"Notes" shall mean the Company's 8.71% Senior Secured Notes due 2004 in the
-------
aggregate original principal amount of $8,000,000, substantially in the form of
Schedule C hereto, together with any notes executed in exchange or substitution
----------
for any thereof pursuant to Section 2.5.
-----------
"Obligations" shall mean and include all of the following: (a) the
-------------
principal of, and interest and premium, if any, on, the Notes; (b) all
indebtedness of any kind arising under, and all amounts of any kind which at any
time become due or owing by the Company to the Trustees or the Beneficiaries
under or with respect to this Indenture, the Note Purchase Agreement or the
Notes; (c) all of the covenants, obligations and agreements of the Company (and
the truth of all representations and warranties of the Company) to or for the
benefit of the Trustees or the Beneficiaries in, under or pursuant to this
Indenture, the Note Purchase Agreement and the Notes; (d) all advances, costs or
expenses paid or incurred by the Trustees or the Beneficiaries to protect any or
all of the Mortgaged Property and other collateral under this Indenture, the
Note Purchase Agreement or the Notes, to perform any obligation of the Company
hereunder and any obligation of the Company under the Note Purchase Agreement or
the Notes, or to collect any amount owing by the Company to the Trustees or the
Beneficiaries which is secured hereby; (e) any and all other obligations of the
Company to the Trustees or the Beneficiaries, in each case howsoever created,
arising or evidenced, whether direct or indirect, joint or several, absolute or
contingent, or now or hereafter existing, or due or to become due, arising out
of
-11-
<PAGE>
or in connection with this Indenture, the Note Purchase Agreement or the
Notes; (f) interest on all of the foregoing to the extent provided in this
Indenture, the Note Purchase Agreement or the Notes; and (g) all costs of
enforcement and collection of this Indenture, the Note Purchase Agreement, the
Notes and the Obligations.
"Old Note" has the meaning set forth in Section 2.6.
---------- -----------
"Opinion of Counsel" shall mean an opinion of any attorney or firm of
--------------------
attorneys reasonably acceptable to the Trustees, who may be counsel for the
Company or a Registered Owner; but who may not be a full-time employee or
affiliate of the Company.
"Operating Permits" has the meaning set forth in Section 2(I) of the Note
------------------
Purchase Agreement.
"Operative Documents" shall mean the Note Purchase Agreement, this
---------------------
Indenture and the Notes.
"Order" shall mean any order, writ, injunction, decree, judgment, award,
-------
determination, direction or demand.
"Outstanding" shall mean, with reference to Notes, as of any particular
-------------
time, all Notes theretofore issued pursuant to this Indenture, except (a) Notes
theretofore cancelled by the Indenture Trustee or surrendered to the Indenture
Trustee for cancellation; (b) Notes theretofore paid in full or Notes required
to be prepaid in full within 30 days thereafter, provided that, in the case of
Notes so to be prepaid, cash sufficient for such prepayment thereof shall
theretofore have been deposited with, or shall then be held by, the Indenture
Trustee in accordance with the provisions of this Indenture; (c) Notes in
exchange or substitution for which other Notes shall theretofore have been
issued pursuant to Section 2.6; and (d) for purposes of determining whether the
-----------
Registered Owners of the requisite principal amount of Notes outstanding have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes registered in the name of the Company or any nominee, Affiliate
or agent of any thereof, or any successors in interest to its interests in the
Facilities.
"Overdue Rate" shall mean a rate per annum equal to the lesser of (a) the
--------------
Note Rate plus 4% per annum, and (b) the maximum non-usurious rate from time to
time permitted by applicable law to be contracted for, or charged to, or
received from the Person involved.
"Permitted Liens" with respect to any Facility shall mean:
-----------------
-12-
<PAGE>
(a) easements, rights-of-way, servitudes, other similar reservations,
rights and restrictions and other minor defects and irregularities affecting
title to such Facility, none of which individually or in the aggregate
materially lessens the value of such Facility or materially impairs the use
thereof for the purpose held by the Company;
(b) the right reserved to or vested in any municipality or public authority
by the terms of any right, power, franchise, grant, license, permit,
provisions of law, zoning law or use regulation to terminate such right,
power, franchise, grant, license, permit, provision of law, zoning law or
use regulation or to condemn, appropriate, recapture or designate a
purchaser of such Facility;
(c) any liens for taxes, assessments and other governmental charges and any
liens of mechanics, materialmen and laborers for work or services performed or
materials furnished in connection with such Facility, which, in any case, are
not due and payable, or the amount or validity of which are being contested at
the time as permitted pursuant to Section 3.9;
-----------
(d) the matters identified as Permitted Liens in the applicable Schedule B
----------
(1-3) with respect to such Facility; and
-----
(e) the lien of this Indenture and any rights Granted hereby.
"Person" or "person" shall mean any individual, partnership, joint venture,
-------- --------
corporation, trust, unincorporated organization or a government or agency or
political subdivision thereof, or any other entity.
"Proceeds" shall have the meaning assigned that term under the Uniform
----------
Commercial Code as in effect in any relevant jurisdiction or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Trustees or Company from time to time with respect to any of the Collateral,
(ii) any and all payments (in any form whatsoever) made or due and payable to
Company from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental authority (or any person acting under color of governmental
authority), (iii) products of the Collateral described herein and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
-12-
<PAGE>
"Purchasers" shall mean each of USG Annuity & Life Company, and Republic
------------
Western Insurance Company, so long as each (or its nominee) is the Registered
Owner of any of the Notes.
"Qualified Institutional Buyer" shall have the meaning set forth in Rule
-------------------------------
144A promulgated under the Act.
"Recordable Documents" has the meaning set forth in Section 3.3.
---------------------- -----------
"Register" shall have the meaning set forth in Section 2.3.
---------- -----------
"Registered Owner" means the Person in whose name a Note is registered on
------------------
the Register.
"Registry Office" has the meaning set forth in Section 2.3.
----------------- ------------
"Release" shall mean any release, spill, emission, leaking, pumping,
--------
injection, deposit, disposal, "discharge, dispersal, leaching or migration into
the indoor or outdoor environment including without limitation the movement of
Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Rental Expense" shall mean the total amount paid or to be paid in any
----------------
fiscal year by a lessee under any lease having a remaining term in excess of one
year from the end of the lessee's most recently completed fiscal year. Amounts
paid on account of maintenance, ordinary repairs, insurance, and other similar
charges to the extent such amounts are paid to the lessor or his designate(s)
are included in rental expense. To the extent rental payments are received on
leased property, they will be credited against Rental Expense on each property
to the extent they have not been included in revenue, all in accordance with
GAAP.
"Required Holders" shall mean the Registered Owners of at least a majority
------------------
of the unpaid principal amount of Outstanding Notes.
"Responsible Officer" shall mean the Chief Executive Officer, the
---------------------
President, the Chief Financial Officer or the Treasurer of the Company.
"Senior Funded Debt" shall mean the Notes and any Funded Debt of the
--------------------
Company which by its terms is not subordinated in right of payment to the Notes.
"Sites" has the meaning set forth in Granting Clause First.
------ ---------------- -----
-14-
<PAGE>
"S&P" shall mean Standard & Poor's Corporation.
-----
"Subsidiary" Shall mean a corporation with respect to which more than 50%
------------
of the Voting Stock (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by the Company or by one or
more Subsidiaries of the Company.
"Subsidiary Guaranty" shall mean the Guaranty, dated as of the date hereof,
---------------------
from the Guarantors in favor of the Trustees and the Beneficiaries.
"Substantial Part" shall mean, as of the date, assets having a net book
------------------
value equal to or in excess of 15% of Consolidated Total Assets.
"Trustees" shall mean the Indenture Trustee and the Individual Trustee as
----------
trustees under this Indenture, together with all co-trustees and separate
trustees appointed as provided herein.
"Vacaville Facility" shall mean the Site described in Schedule A-1 and the
-------------------- ------------
related Improvements and Appurtenances.
"Voting Stock" shall mean securities of any class or classes, the holders
--------------
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Wholly Owned Subsidiary" shall mean any Subsidiary all of the equity
-------------------------
ownership of which (other than directors' qualifying shares required by law) is
at the time owned by the Company and/or one or more other Wholly Owned
Subsidiaries.
Section 1.2 Accounting Terms. All accounting terms used herein which are
-----------------
not expressly defined in this Indenture have the meanings respectively given to
them in accordance with GAAP. Except as otherwise specifically provided herein,
all computations made pursuant to this Indenture or the Note Purchase Agreement
shall be made in accordance with GAAP and all balance sheets and other financial
statements shall be prepared in accordance with GAAP consistently applied. Any
consolidated financial statement or financial computation with respect to the
Company and its Subsidiaries required by this Indenture or the Note Purchase
Agreement shall be done in accordance with GAAP; and, if at the time that any
such statement or computation is required to be made the Company shall not have
any Subsidiary, such terms shall mean a financial statement or a financial
computation, as the case may be, with respect to the Company only.
-15-
<PAGE>
ARTICLE 2
THE NOTES
Section 2.1. Issuance and Form of Notes. The Company shall execute and
---------------------------
deliver to the Indenture Trustee for authentication Notes in the original
principal amount of $8,000,000, together with a written order of its president
or any vice president requesting authentication and delivery thereof to each of
the Purchasers. The Indenture Trustee shall authenticate and deliver such Notes
in accordance with such order. Notes shall be issued pursuant to this Indenture
and shall be substantially in the form of Schedule C hereto duly completed. All
----------
Notes shall be dated and accrue interest at the Note Rate from the date of
authentication thereof, which shall be the Closing Date in the case of all Notes
originally issued hereunder, and accrued interest shall be due and payable
quarterly in arrears in accordance with the terms of the Notes. No Note shall
be valid or become obligatory for any purpose or be binding upon the Company, or
be entitled to the benefits and security of this Indenture, unless and until it
has been authenticated by the Indenture Trustee's execution of the certificate
of authentication thereon in the form set forth at the end of the form of Note
in Schedule C hereto. The authentication and delivery by the Indenture Trustee
----------
of any Note shall be conclusive evidence that such Note has been duly issued and
is entitled to the benefits and security of this Indenture.
Section 2.2. Payment of Notes; Home Office Payment. The principal of,
--------------------------------------
premium, if any, and interest on the Notes shall be payable at the Corporate
Trust office in lawful money of the United States of America, against
presentation of the Notes for notation of the payment or prepayment made
thereon, or in the case of a payment or prepayment which will discharge all
indebtedness of the Company evidenced thereby, against surrender thereof.
Notwithstanding the foregoing sentence, if there shall be filed with the
Indenture Trustee an executed copy of an agreement between the Company and the
Registered Owner of any Note or the Person for whom such registered Owner is a
nominee, or a conformed copy thereof certified by the Company to be a true and
complete copy thereof, to the effect that (i) the Company will cause all amounts
which become due and payable on such Note to be paid by wire transfer of
immediately available funds to such Registered Owner at its address for the
payment or prepayment of Notes specified in such agreement, without presentation
of such Note to the Indenture Trustee, and (ii) such Registered Owner or Person
will not sell, transfer or otherwise dispose of such Note, other than as
provided in Section 2.5, then the Company and the Indenture Trustee shall, until
-----------
such Note has been transferred, pay all amounts which become due and payable on
such Note in accordance with such agreement. The Note Purchase Agreement, which
shall be treated as if filed with the Indenture Trustee, constitutes such an
agreement.
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<PAGE>
Section 2.3. The Register. The Company will cause to be kept at the
-------------
Corporate Trust Office (the "Registry Office"), one or more books (the
"Register") for the registration of the Notes (including all transfers) and the
names and addresses of the Registered Owners of the Notes. The Company hereby
appoints the Indenture Trustee (i) its registrar to keep the Register, and (ii)
its agent for the payment, transfer and exchange of Notes. All transfers of the
Notes and the names and addresses of the transferees of the Notes shall be
registered in the Register under such reasonable regulations as the Indenture
Trustee may prescribe.
Section 2.4. Registered Owners. The Company and the Indenture Trustee will
------------------
deem and treat the Registered Owners of the Notes as the absolute owners
thereof (whether or not such Notes shall be overdue) for all purposes, and
neither the Company nor the Indenture Trustee will be affected by any notice to
the contrary, and payment of the principal of, premium, if any, and interest on
the Notes shall be made only to the Registered Owners thereof. All such
payments so made shall be valid and effective to satisfy and discharge the
liability of the Company upon the Notes to the extent of the sum or sums so
paid.
Section 2.5. Transfer and Exchange of Notes. (a) The Notes may be
-------------------------------
transferred only on the Register. Any Note may be transferred on the Register
if such Note is surrendered for cancellation at the Registry Office and is
accompanied by an instrument of transfer reasonably satisfactory to the
Indenture Trustee. A new Note, executed by the Company and authenticated by the
Indenture Trustee and registered in the name of the transferee in a principal
amount equal to the original principal amount of the transferred Note, shall be
delivered by the Indenture Trustee to the transferee in exchange of the
transferred Note. A Note shall not be registered in the name of and delivered
to any transferee unless such transfer is: (1) to the Company; (2) to a Person
the Registered Owner reasonably believes is a Qualified Institutional Buyer
purchasing for its own account or for the account of a Qualified Institutional
Buyer that is aware that the transfer is being made in reliance on Rule 144A of
the Act; or (3) pursuant to an exemption from registration in accordance with
Rules 144 or 145 under the Act. The Trustees shall conclusively rely upon an
Opinion of Counsel as to the compliance of any transfer with the requirements
set forth herein. With a view to making available to each Registered Owner the
benefits of Rule 144A promulgated under the Act (which Rule as used herein
includes the present Rule 144A and any other, additional, supplemented or
analogous rule or regulation of the Securities Exchange Commission) Company
covenants and agrees to provide to each Registered Owner desiring to avail
itself of Rule 144A, within 10 Business Days of written request, such
information as is required to be furnished pursuant to Rule 144A by an issuer to
a prospective purchaser of securities.
-17-
<PAGE>
(b) Any Note may be exchanged for a new Note or Notes if the Note to be so
exchanged is surrendered for cancellation at the Registry Office and is
accompanied by the request of the Registered Owner thereof specifying the
denomination of the new Note or Notes to be issued in exchange therefor. A new
Note or Notes, executed by the Company and authenticated by the Indenture
Trustee and payable to such Registered Owner in the denominations so requested
and in an aggregate principal amount equal to the original principal amount of
the Note to be so exchanged, shall be delivered by the Indenture Trustee to such
Registered Owner in exchange for the Note to be so exchanged. No service charge
shall be made for any exchange or transfer of any Note, but the Company may
require payment of a sum to cover any tax or governmental charge that may be
imposed with respect thereto.
(c) If any Note shall become mutilated or be destroyed, lost or stolen,
upon request of the Registered Owner thereof, a new Note, executed by the
Company and authenticated by the Indenture Trustee and payable to such
Registered Owner in the same original principal amount as the Note so mutilated,
destroyed, lost or stolen, shall be delivered by the Indenture Trustee to such
Registered Owner in exchange for the Note so mutilated, destroyed, lost or
stolen, provided that (i) in the case of a mutilated Note, such Note shall be
surrendered for cancellation at the Registry Office and (ii) in the case of a
destroyed, lost or stolen Note, the Registered Owner thereof shall furnish to
the Company and the Indenture Trustee such security or guaranty as may be
reasonably required by them to save them harmless and to evidence to their
reasonable satisfaction the destruction, loss or theft of such Note and the
ownership thereof, provided that in the case of any Purchaser or any other
Registered Owner that is an institutional investor, its unsecured agreement of
indemnification shall be deemed sufficient security or guaranty.
Section 2.6. New Notes. Each new Note (herein, in this Section 2.6, called
---------- -----------
a "New Note") issued pursuant to Section 2.5 in exchange for, in substitution
-----------
for or in lieu of any of the Notes (herein, in this Section 2.6, called an "Old
-----------
Note") shall be dated the date of such Old Note. The Indenture Trustee shall
mark on each New Note (i) the date to which interest has been paid on such Old
Note, and (ii) all payments and prepayments of principal made on such Old Note
which are allocable to such New Note. Interest shall be deemed to have been
paid on such New Note to the date to which interest was paid on such Old Note,
and all payments and prepayments of principal marked on such New Note, as
provided in clause (ii) above, shall be deemed to have been made thereon. Any
New Note issued pursuant to Section 2.5 in exchange for or in substitution for
-----------
or in lieu of an Old Note shall be the valid obligation of the Company
evidencing the same debt as such Old Note and shall be entitled to the benefits
and security of this Indenture to the same extent as such old Note. No service
charge shall be made for any exchange or transfer of the Note, but the
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<PAGE>
Company may require payment of a sum to cover any tax or governmental charge
imposed with respect thereto.
Section 2.7 Cancellation of Notes. All Notes surrendered to the Indenture
----------------------
Trustee for the purpose of payment, prepayment, transfer or exchange Shall be
cancelled by it, and no Notes shall be issued in lieu thereof except as
expressly required or permitted by this Indenture. The Indenture Trustee shall
hold all such cancelled Notes until this Indenture shall have been discharged,
at which time the Indenture Trustee shall deliver such cancelled Notes to the
Company in the manner necessary to effect the discharge and release of this
Indenture.
ARTICLE 3
PARTICULAR COVENANTS
FURTHER TO PROTECT THE SECURITY OF THIS INDENTURE AND TO SECURE THE
PAYMENT AND PERFORMANCE OF THE OBLIGATIONS, THE COMPANY REPRESENTS AND WARRANTS
TO, AND COVENANTS WITH, THE TRUSTEES AND THE BENEFICIARIES AS FOLLOWS:
Section 3.1. Title to Mortgaged Property. The Company warrants that (a)
---------------------------
the Company, with respect to the Vacaville Facility, and BOD with respect to
the Boise Facility and the Las Vegas Facility, is lawfully and indefeasibly
seized and possessed of the Mortgaged Property, and has good and marketable
title to the same, free and clear of all Liens, other than Permitted Liens, (b)
the Company and the Guarantors have good and lawful right and full power and
authority to Grant the Mortgaged Property owned by them, and (c) the Company and
the Guarantors and their respective successors and assigns will forever warrant
and defend the Mortgaged Property against all claims and demands whatsoever.
While both the Vacaville Site and the Boise Site are adjacent to real estate
owned by the Company and by BOD, respectively, such adjacent property contains
no structures or other improvements (except streets, utilities and the like).
Section 3.2. Further Assurances. The Company will, at its expense, do,
-------------------
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all such further acts, instruments and assurances reasonably required
by the Trustees for the better Granting to the Trustees of the Company's
interest in the Mortgaged Property hereby Granted or for carrying out the
intention of, or facilitating the performance of, this Indenture.
Section 3.3. Recording. The Company will, upon the execution and delivery
---------
hereof and thereafter from time to time, cause this Indenture, each supplement
and amendment to this Indenture, each recordable instrument or document
delivered pursuant to Section 3.2 and all financing statements with respect
-----------
-19-
<PAGE>
to the Mortgaged Property (collectively called the "Recordable Documents") to be
filed, indexed, registered and recorded as may be required by law to publish
notice of and maintain the lien of this Indenture upon the Mortgaged Property,
to publish notice of and protect the validity and enforceability of the
Recordable Documents and to perfect and to preserve the priority of the
respective Liens of the Recordable Documents. The Company and Guarantors will,
from time to time, perform or cause to be performed any other act as required by
law, and will execute or cause to be executed any and all further instruments
(including financing statements, continuation statements and similar statements
with respect to any of said documents) reasonably requested by the Trustees or
the Purchasers for such purposes. If the Company or the Guarantors shall fail
to comply with this Section, the Trustees and each of them shall be and is
hereby irrevocably appointed the agent and attorney-in-fact of the Company and
the Guarantors to comply therewith (including the execution, delivery and filing
of such financing statements and other instruments), but this sentence shall not
create an obligation of the Trustees or either of them to take any action and
shall not prevent any default in the observance of this Section from
constituting an Event of Default. To the extent permitted by law, the Company
will pay all filing, registration and recording fees and charges, documentary
stamps, mortgage taxes and intangible taxes incident to or in connection with
the preparation, execution, delivery or acknowledgment of the Recordable
Documents, any instruments of further assurance and the Notes. The Company also
will pay all reasonable costs and expenses of the Trustees and the
Beneficiaries, including without limitation attorney's fees, costs and
disbursements, title insurance premiums, search fees and survey costs incident
to or in connection with the preparation, execution, delivery or acknowledgment
of the Recordable Documents, any instruments of further assurance and the Notes.
Section 3.4. Payment of Notes and Other Obligations. The Company agrees
---------------------------------------
that it will duly and punctually pay all amounts to become due under the Notes
in accordance with this Indenture and the Notes and all other Obligations in
accordance with this Indenture, the Note Purchase Agreement and the Notes.
Section 3.5. Maintenance of Mortgaged Property. The Company will maintain
---------------------------------
and operate, or cause to be maintained or operated, the Facilities and other
Mortgaged Property in good repair, working order and condition, ordinary wear
and tear excepted.
Section 3.6. Payment of Taxes, Liens. (a) The Company will pay and
------------------------
discharge before the date on which any fine, penalty, interest or cost may be
added or imposed by law for the nonpayment thereof, all taxes of every kind and
nature, water rates, sewer rents and assessments, levies, permits, inspection
and license fees and all other charges imposed upon or assessed against
-20-
<PAGE>
the Mortgaged Property or any part thereof (collectively, "Taxes") or upon the
-------
revenues, rents, issues, income and profits of the Sites or arising in respect
of the occupancy, uses or possession thereof, and the Company will exhibit to
the Indenture Trustee, within ten days after the same shall have been paid, a
copy of the tax statement and of the check issued in payment of the same,
together with the certificate of a Responsible Officer that the check was duly
delivered in payment thereof, with respect to the payment of the Taxes and other
charges which may be or become a prior lien on the Mortgaged Property or any
portion thereof. Should the Company default in the payment of any of the Taxes
or other charges, the Trustees or the Beneficiaries may, but shall not be
obligated to, pay the same or any part thereof and the Company will, on demand,
reimburse the Trustees or the Beneficiaries, as the case may be, for all amounts
so advanced, together with interest thereon at the Overdue Rate from the date
such amounts are advanced until the same are paid to the Trustees or the
Beneficiaries, as the case may be.
(b) the Company at all times will keep the Mortgaged Property free from
the liens of mechanics, laborers, contractors, subcontractors and materialmen
and, except for the Permitted Liens, free from any and all other liens of any
kind or nature whatsoever. If any such liens shall be recorded, the Company
will forthwith deliver copies thereof to the Indenture Trustee and, within ten
days after such recording, the Company will cause the same to be discharged of
record by payment, bonding or in such other manner as shall be satisfactory to
the Indenture Trustee, in its sole discretion, and will exhibit to the Indenture
Trustee, upon demand, evidence satisfactory to the Indenture Trustee, in its
sole discretion, of such discharge.
(c) Nothing in this Section 3.6 shall require the payment or discharge of
-----------
any obligation imposed upon the Company by subsection (a) or (b) of this
Section 3.6 as long as the Company shall in good faith and at its own expense
-----------
contest the same or the validity thereof by appropriate legal proceedings which
operate to prevent the collection thereof or other realization thereon and the
sale or forfeiture of the Mortgaged Property or any part thereof to satisfy the
same; provided, however, that (i) during such contest the Company will, at the
option of the Indenture Trustee, provide security satisfactory to the Indenture
Trustee, assuring the discharge of the Company's obligation hereunder and of any
additional interest charge, penalty or expense arising from or incurred as a
result of such contest, (ii) during such contest the Company will deliver
evidence satisfactory to the Indenture Trustee of such contest, (iii) such
proceeding is diligently prosecuted, and (iv) if at any time forfeiture, loss or
diminution of the value of the Mortgaged Property or any portion thereof is
threatened, then the Company will make such payment in sufficient time to
prevent such forfeiture, loss or diminution of value.
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<PAGE>
Section 3.7. Leases. The Company and BOD will not enter into any Lease or
------
modify, amend, cancel, extend, renew, accept for surrender or otherwise change
in any manner any of the terms, covenants or conditions of any Lease or consent
to any assignment of any lease or any subletting of any portion of the Site
subject to any Lease, in each case except for Leases entered into in the
ordinary course of the Company's or BOD's business as conducted on the Closing
Date and other Leases approved by the Required Holders (which approval shall not
be unreasonably withheld). The Company will not assign, mortgage or otherwise
encumber any of the Leases or any of the Rents due or to become due thereunder
or to which the Trustees or the Beneficiaries may now or hereafter become
entitled.
Section 3.8. Insurance of Mortgaged Property. (a) The Company will provide
-------------------------------
and keep in full force and effect, or require to be provided and kept in full
force and effect, for the benefit of the Trustees and the Beneficiaries,
insurance with respect to the Mortgaged Property as hereinafter provided:
(i) insurance for the Facilities (A) against loss or damage by fire,
lightning, windstorm, tornado, hail and such other further and additional
hazards of whatever kind or nature as are now or hereafter may be covered by
standard extended coverage "all risk" endorsements (including, without
limitation, vandalism, malicious mischief and damage by water) of whatsoever
kind, (B) against war risks as, when and to the extent such insurance is
obtainable from the United States of America or an agency thereof, (C) against
flood disaster pursuant to the Flood Disaster Protection Act of 1973, 84 Stat.
572, 42 U.S.C. 4001 for each Facility located in an area identified by the
United States Department of Housing and Urban Development as a flood hazard
area, and (D) when and to the extent required by the Trustees or the
Beneficiaries, against loss or damage by earthquake and loss of rentals and
business interruption due to any of the foregoing causes and any other risk
insured against by persons operating properties similar to the Facilities and
located in the vicinity of the Facilities or operations similar to the
operations conducted at the Facilities;
(ii) insurance for demolition and increased cost of construction coverage;
(iii) if a sprinkler system is or shall be located in the Facilities,
sprinkler leakage insurance;
(iv) comprehensive public liability insurance with respect to the
Facilities and the operations related thereto, whether conducted on or off the
Facilities,
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<PAGE>
against liability for personal injury, including bodily injury and death, and
property damage. Such comprehensive public liability insurance shall be
on an occurrence basis or on a "modified occurrence basis (seven-year claim
period)" and shall specifically include, without limitation, sprinkler leakage
legal liability (if a sprinkler is or shall be located in the Facilities), motor
vehicle liability for all owned and non-owned vehicles, including rented and
leased vehicles, and contractual indemnification; and
(v) such other insurance in such amounts as may from time to time be
required by the Trustees or the Beneficiaries against such other insurable
hazards as at the time are commonly insured against in the case of properties
similar to the Facilities and located in the vicinity of the Facilities or
operations similar to the operations conducted at the Facilities.
All insurance provided hereunder shall be in such form and in such amounts
(including deductibles) as from time to time shall be acceptable to the Required
Holders and otherwise shall be acceptable to the Required Holders in their sole
discretion. Anything contained herein to the contrary notwithstanding, in no
event shall the insurance provided under clause (i) (A) or clause (ii) of this
Section 3.8(a) be in an amount which is less than the full replacement cost of
--------------
the Facilities, including the cost of debris removal, but excluding the value of
foundations and excavations, as determined from time to time by the Required
Holders. The Company hereby assigns to the Trustees all such policies of
insurance, or duplicate originals thereof, and will deliver the same (or a
certificate of insurance evidencing the same) to the Trustees.
(b) All insurance provided hereunder shall name the Trustees and the
Beneficiaries as named insureds under a standard "non-contributory mortgagee"
endorsement or its equivalent, which shall be acceptable to the Indenture
Trustee, and shall provide for loss payable to the Indenture Trustee. Every
policy of insurance referred to in this Section 3.8 shall contain an agreement
-----------
by the insurer that it will not cancel such policy except after 30 days prior
written notice to the Trustees and the Beneficiaries.
(c) All insurance proceeds with respect to the FacilitieS Shall be paid to
the Indenture Trustee, and the Trustees and the Beneficiaries are hereby
authorized to adjust, collect and compromise, in their sole discretion, all
claims under all insurance policies and to execute and deliver on behalf of the
Company all necessary proofs of loss, receipts, vouchers and releases required
by the insurers. The Company agrees to execute, upon demand by the Trustees or
any Beneficiary, all such proofs of loss, receipts, vouchers and releases and to
cooperate with the
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<PAGE>
Trustees and the Beneficiaries in connection therewith. Each insurer is hereby
authorized and directed to make payment of any proceeds under any policies of
insurance, including the return of unearned premiums, directly to the Indenture
Trustee instead of to the Company and the Indenture Trustee jointly, and the
Indenture Trustee is hereby authorized to endorse any draft therefor as the
Company's attorney-in-fact.
(d) The Company will not take out any separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
Section 3.8(a).
--------------
(e) The Company will, concurrently with the execution and delivery hereof,
deliver or cause to be delivered to the Indenture Trustee duplicate original
copies of all policies of insurance (or certificates evidencing the same) as may
be required pursuant hereto to be maintained or to be caused to be maintained by
the Company. Thereafter, within 10 days of the issuance of any additional
policies or amendments or supplements to any of such policies, the Company will
deliver or cause to be delivered duplicate original copies of the same (or
certificates evidencing the same) to the Indenture Trustee. If insurance is
maintained under blanket policies, additional policies, amendments and
supplements will be delivered only to the extent that they relate to coverage
allocable to the Facilities. Promptly following its receipt thereof, the
Indenture Trustee shall forward to each Registered Owner a copy of each such
policy or certificate.
(f) The Company will (i) pay as they become due all premiums for the
insurance required under this Section 3.8, and (ii) not later than 10 days prior
-----------
to the expiration of each such policy, deliver a binder evidencing a renewal
policy and within 30 days after such renewal deliver a duplicate original of the
renewal policy or a certificate of insurance certified to the Indenture Trustee
by the insurer evidencing the insurance required to be provided hereunder,
marked "premium paid", or accompanied by such other evidence of payment as shall
be satisfactory to the Indenture Trustee in its sole discretion.
Section 3.9. Existence; Governmental Requirements, etc. (a) The Company
------------------------------------------
will at all times maintain, and will cause each Subsidiary at all times to
maintain, its corporate existence, material rights, (charter and statutory) and
keep in full force and effect all of its franchises, rights, permits, licenses
and consents as may be required by any Governmental Body for the conduct of its
business and the ownership, leasing, mortgaging and encumbering of the Mortgaged
Property. Unless required by applicable law or unless the Required Holders or
the Trustees have otherwise first agreed in writing, the Company will not make
or allow any changes to be made in the nature of the currently contemplated
occupancy or use of any Facility or any portion thereof. The Company will not
initiate or acquiesce in any change
-24-
<PAGE>
in any zoning or other land use classification now or hereafter in effect and
affecting any Facility or any part thereof without in each case obtaining the
prior written consent of the Required Holders or the Trustees thereto.
(b) The Company will comply with or cause to be complied with, and will
cause each Subsidiary to comply with, (i) every law or other legal requirement
or Order of the United States or any other Governmental Body applicable to the
Mortgaged Property, to the property used in the business of such Subsidiary, to
the Company or to such Subsidiary, as the case may be, and (ii) every contract,
agreement or other instrument applicable to the Mortgaged Property or the
ownership, occupancy or use of any Facility or to the Company or such
Subsidiary, as the case may be, in effect at the date of delivery hereof or to
which the Company or such Subsidiary, as the case may be, is a party or has
given its consent. Notwithstanding the foregoing, the Company shall have the
right diligently to contest any requirement of any Governmental Body so long as
(A) the contest is in good faith and by appropriate proceedings, (B) such
contest Shall operate to suspend the collection of any disputed amount from the
Facilities or the Mortgaged Property, and (C) such contest will not (i) subject
any of the Mortgaged Property or any part thereof to loss, forfeiture or sale,
(ii) adversely affect the lien of this Indenture thereon, (iii) interfere with
the possession, use or occupancy of the Facilities, (iv) interfere with the due
and punctual payment by the Company as provided in the Notes and this Indenture
of any amount payable hereunder or thereunder or (v) Subject the Trustee or any
of the Beneficiaries to any civil or criminal liability.
(c) The Company will promptly notify each Trustee and beneficiary in
writing in the event that the Company or any of its Subsidiaries receives any
notice, claim or demand from any governmental Body which alleges that the
Company or any of its Subsidiaries is or may be in violation of any law or other
legal requirement or order of the United States or any other Governmental Body,
the result of which might have a material adverse effect on the Company or any
of its Subsidiaries.
Section 3.10. Continuing Priority. The Company and each Guarantor will:
-------------------
(a) pay such fees, taxes and charges, execute and file (at the Company's
expense) such financing statements, obtain such acknowledgements or consents,
notify such obligors or providers of services and materials and do all such
other acts and things as the Trustees may from time to time request or as may be
required by law to establish and maintain a valid and perfected first priority
lien on and security interest in the Mortgaged Property (subject to the
Intercreditor Agreement) subject only to Permitted Liens; (b) maintain its chief
executive office and principal place of business at all times at the address
shown above or give the Trustee 30 days, prior written notice of any change in
address of such chief executive office and principal place of
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<PAGE>
business; and (c) keep all of its books and records relating to the Mortgaged
Property at the respective Facilities or at the address so furnished to the
Trustees. Neither the Company nor the Guarantors will change its name without
having given the Trustee 60 days, prior written notice and without having
delivered to the Trustee all additional agreements, financing statements,
instruments or other documents which in the reasonable judgment of the Trustees
are necessary to maintain such valid and perfected first priority lien and
security interest (subject to the Intercreditor Agreement).
Section 3.11. After-acquired Property. The Company agrees that all
-----------------------
right, title and interest of the Company in and to all improvements,
alterations, substitutions, restorations and replacements of, and all additions
and appurtenances to, any Facility, hereafter acquired by or released to the
Company, immediately upon Such acquisition or release and without any further
Granting by the Company Shall become part of the applicable Facility and the
Mortgaged Property and shall be Subject to the lien of this Indenture fully,
completely and with the Same effect as though now owned by the Company and
specifically described in the Granting Clauses; and the Company will execute
----------------
and deliver to the Trustees any further assurances, mortgages, grants,
conveyances or assignments thereof as the Trustees or any Registered Owner may
reasonably require tO Subject the same to the lien of this Indenture.
Section 3.12. Sale, Demolition of Mortgaged Property. The Company and
--------------------------------------
Guarantors will not
(a) sell, contract to sell, lease, convey, alienate, transfer or otherwise
dispose of all or any portion of the Mortgaged Property or any interest therein,
whether voluntarily or involuntarily, by operation of law or otherwise, except
as permitted by Section 3.25, Section 4.2 and Section 4.6 (and any attempted
------------- ----------- -----------
transfer or disposition without such consent shall be void).
(b) demolish or materially alter any Improvements, except for demolitions
or alterations of Improvements having a value individually or in the aggregate
of less than $100,000.
Section 3.13 Performance by Trustees. If the Company or either Guarantor
-----------------------
fails to pay or perform any of its obligations herein contained (including
payment of expenses of foreclosure and court costs), the Trustees may (but need
not), as agent or attorney-in-fact of the Company and Guarantors (upon ten days,
notice to the Company or Guarantor, as the case may be, or without any such
notice if such failure relates to the obligation to maintain insurance as
provided in Section 3.8 or shall (i) subject the Mortgaged Property, or any part
-----------
thereof, to any risk of loss,
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<PAGE>
forfeiture or sale, or (ii) subject the Trustees or any Beneficiary to any civil
or criminal liability), make any payment or perform (or cause to be performed)
any obligation of the Company or Guarantors hereunder, in any form and manner
deemed expedient by the Trustees, and any amount so paid or expended (plus
reasonable compensation to the Trustees for their out-of-pocket and other
expenses for each matter for which they act under this Indenture), with interest
thereon at the Overdue Rate, shall be added to the principal debt hereby secured
and shall be repaid to the Trustees upon demand. By way of illustration and not
in limitation of the foregoing, the Trustees may (but need not) do all or any of
the following: make payments or principal of interest or other amounts on any
lien, encumbrance or charge on any of the Mortgaged Property; make repairs;
collect rents; prosecute collection of the Mortgaged Property or proceeds
thereof; purchase, discharge, compromise or settle any tax lien or any other
lien, encumbrance, suit, proceeding, title or claim thereof; contest any tax or
assessment; and redeem from any tax sale or forfeiture affecting any Facility.
In making any payment or Securing any performance relating to any obligation of
the Company hereunder, the Trustees shall be the sole judge of the legality,
validity and amount of any lien or encumbrance and of all other matters
necessary to be determined in satisfaction thereof. No such action of the
Trustees shall ever be considered as a waiver of any right accruing to it on
account of the occurrence of any matter which constitutes a Default or an Event
of Default.
Section 3.14 Subrogation; Purchase Money Liens. To the extent that the
---------------------------------
Trustees pay any sum under any provision of law or any instrument or document
creating any Lien or other interest prior or superior to the lien of this
Indenture, or the Company or any other Person pays any Such sum with the
proceeds of the issuance of the Notes secured hereby, then, to the extent
permitted by law, the Trustees shall have and be entitled to a Lien or other
interest on the Mortgaged Property equal in priority to the Lien or other
interest discharged and the Trustees shall be subrogated to, and receive and
enjoy all rights and Liens possessed, held or enjoyed by, the holder of such
Lien, which shall remain in existence and benefit the Trustees in securing the
obligations.
Section 3. 15 Compensation of Trustees. The Company will promptly pay or
------------------------
cause to be paid the compensation to which the Trustees are entitled hereunder
and all proper disbursements and expenses incurred by them hereunder (including
without limitation all reasonable attorneys fees and disbursements).
Section 3.16 Maintenance of Character of Business. The Company and its
------------------------------------
Subsidiaries will continue to carry on substantially the same type of business
carried on during the fiscal year ended December 31, 1993 and activities which
are ancillary, incidental or necessary to the ongoing business of the Company
and
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<PAGE>
its present and future Subsidiaries and Affiliates as presently conducted
or as conducted from time to time.
Section 3.17. Condemnation. The Company and BOD, immediately upon
------------
obtaining actual knowledge of (i) any proceedings for the taking of any Facility
or any part thereof in condemnation or other eminent domain proceeding or (ii)
any threat of institution of any such proceeding, shall notify the Trustees and
each Registered Owner of a Note of the pendency thereof. The Trustees may
participate in such proceeding or in the negotiations arising by reason of the
threat of such proceeding, and the Company will deliver all instruments
reasonably requested by the Trustees to permit such participation. Neither the
Company nor BOD will settle or compromise any such claim without the prior
written consent of the Trustees. Any award or compensation payable in such
proceedings to the Company is hereby assigned to the Trustees, and shall be
payable as provided in Article 5 hereof. The Trustees shall be under no
---------
obligation to question the amount of the award or compensation and may accept
the same. In any such proceeding the Trustees may be represented by counsel
satisfactory to them at the expense of the Mortgaged Property. Any award or
compensation payable to the Trustees pursuant to this Indenture shall be applied
pursuant to Article 5.
---------
Section 3.18. Environmental Protection. (a) The Company and its
------------------------
Subsidiaries will not take any of the following actions (unless such action is
taken in the ordinary course of business as con conducted on the Closing Date
and unless such action individually or when aggregated with other such actions
then or theretofore taken or proposed will not have a material adverse effect on
the financial condition, business, properties or prospects of the Company or the
Company and its Subsidiaries taken as a whole): (i) cause or suffer to occur a
Release at, upon, under or within any of the Facilities or any contiguous real
estate, (ii) be involved in operations at the Facilities which could lead to the
imposition on the Company or any other owner of the Facilities of liability or
the creation of a Lien on the Facilities under any Environmental Law, and (iii)
permit any tenant or occupant of the Facilities to engage in any activity that
could lead to the imposition of liability on such tenant or occupant, the
Company or any other owner of any of the facilities, or the creation of a Lien
on the Facilities, under any Environmental Law. Provided, however, that the
foregoing shall not prohibit the Company or its Subsidiaries or tenants from
handling Hazardous Materials in minor quantities in the ordinary course of
business.
(b) The Sites will not at any time prior to the payment of the entire
Obligations contain any underground or aboveground tanks for the storage of fuel
oil, gasoline and/or other petroleum products or byproducts.
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<PAGE>
(c) The Company and its Subsidiaries will comply in all material respects
with the requirements of all Environmental Laws and related regulations and
shall notify the Trustees and the Beneficiaries immediately in the event of any
Release, discovery of any Hazardous Material at, upon, under, within or
contiguous to, any of the Facilities, or receipt by the Company of any
Environmental Claim. The Company promptly will forward to the Trustees and the
Beneficiaries copies of all Environmental Claims and all other orders, notices,
permits, applications or other communications and reports in connection with any
Release or the presence of any Hazardous Material or any other matters relating
to Environmental Laws as they may affect any of the Facilities. If the Company
or any of its Subsidiaries shall fail to comply with any Environmental Law, the
Trustees or the Beneficiaries, may at their election, but without the obligation
so to do, give such notices and/or cause such work to be performed at the
Facilities and/or take any and all other actions as the Trustees or the
Beneficiaries shall deem necessary or advisable in order to remedy any Release
or cure said failure of compliance.
(d) The Company at all times will indemnify, defend and hold harmless the
Trustees and the Beneficiaries and each of their respective officers, directors,
employees and agents against and from any and all claims, suits, actions, debts,
damages, costs, losses ' obligations, judgments, charges, and expenses
(including without limitation reasonable attorneys fees and disbursements), of
every nature whatsoever suffered or incurred by the Trustees or the
Beneficiaries, including without limitation, all Environmental Claims resulting
from, arising out of or incurred with respect to the Mortgaged Properties,
whether as lenders, mortgagees, mortgagees in possession or successors in
interest to the Company by foreclosure of deed in lieu of foreclosure, under or
on account of any Hazardous Material or the Environmental Laws or any similar
laws or regulations, including the assertion of any lien thereunder or
otherwise. The Company also agrees to reimburse the Trustees and the
Beneficiaries for any costs and expenses incurred by the Trustees or the
Beneficiaries that arise directly or indirectly from or in connection with the
presence, suspected presence, Release or suspected Release of any Hazardous
Material in or into the air, soil, groundwater or surface water at, on, about,
under or within the Mortgaged Properties or any of the Facilities, or any
portion thereof, or elsewhere in connection with the transportation of Hazardous
Materials to or from the Mortgaged Properties or Facilities or any portion
thereof.
Without limiting the generality of the foregoing, the indemnification
provided by this Subsection shall specifically include capital, operating and
maintenance costs, incurred in connection with any investigation or monitoring
of site conditions, any clean-up, containment, remedial, removal or restoration
work required or performed by an Governmental Body or performed by an
nongovernmental entity or person because of the presence, suspected
-29-
<PAGE>
presence, Release or suspected Release of any Hazardous Materials in or into the
air, soil, groundwater or surface water at, on, about, under or within the
Mortgaged Properties or Facilities, or elsewhere in connection with the
transportation of Hazardous Materials to or from the Mortgaged Properties or
Facilities, and any claims of their parties for loss or damage due to such
Hazardous Materials.
Section 3.19. Keep Books, Reserves: Payment of Taxes; Compliance with
-------------------------------------------------------
Laws; Corporate Existence; Maintenance of Properties, Insurance. Without
----------------------------------------------------------------
limiting the other obligations of the Company under this Article 3 with respect
---------
to the Mortgaged Property, the Company will, and will cause each of its
Subsidiaries to,
(a) keep proper books of record and account, and keep appropriate reserves,
all in accordance with GAAP;
(b) pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any of its property, real, personal or mixed, or upon
any part thereof, when due, as well as all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon its property,
provided, however, that neither the Company nor any Subsidiary shall be required
to pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall be contested on a timely basis in good
faith by appropriate proceedings (provided that the enforcement of any Lien
arising out of such nonpayment shall be stayed during the proceedings) and if
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(c) in addition to the requirements contained in Section 3.9, obtain,
-----------
comply in all material respects, preserve and keep in full force and effect all
permits, licenses and consents as may be required by any Governmental Body for
the conduct of its business and the ownership and leasing of its properties and
comply with or cause to be complied with every law or other legal requirement or
Order of the United States or any other Governmental Body in respect to the
conduct of its business and the ownership and leasing of its properties
(including without limitation applicable Environmental Laws and statutes, and
Orders relating to equal employment opportunities);
(d) in addition to the requirements contained in Section 3.9 and subject
-----------
to Section 3.25, do or cause to be done all things necessary to maintain its
------------
corporate existence and material rights (charter and statutory) and keep in
full force and effect all of its franchises and rights;
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<PAGE>
(e) in addition to the requirements contained in Section 3.5, maintain and
-----------
operate, or cause to be maintained and operated, its properties in good repair,
working order and condition, ordinary wear and tear excepted; and
(f) in addition to the requirements contained in Section 3.8, maintain or
-----------
cause to be maintained with financially sound and reputable insurers, insurance
with respect to its respective properties and business against loss or damage of
the kinds customarily insured against by entities of established reputation
engaged in the same or similar business and similarly situated, and in such
amounts (and with such deductibles) as are customarily carried under similar
circumstances by such other entities in accordance with good business practice;
provided, however, that nothing contained in this Subsection shall prevent the
Company from maintaining a system of self-insurance in such amount as such
insurance is customarily carried by such entities in accordance with good
business practice.
Section 3.20. Transactions With Affiliates. The Company will not, and will
----------------------------
not permit any Subsidiary to, directly or indirectly, enter into any
transaction, whether or not in the ordinary course of business, with any
Affiliate of the Company or any Affiliate of its Subsidiaries other than on
terms and conditions at least as favorable to the Company (or the Subsidiary) as
those that would be obtained through an arm's length negotiation with an
unaffiliated third party.
Section 3.21. Limitations on Current Indebtedness. The Company will not
-----------------------------------
have any Consolidated Current Indebtedness except that the Company may incur
Consolidated Current Indebtedness if during every period of twelve (12)
consecutive calendar months after issuance of the Notes there is a period of at
least 45 consecutive days during which Consolidated Current Indebtedness does
not exceed $1,500,000. In the event Consolidated Current Indebtedness is not
reduced to $1,500,000 or less during any such period of twelve consecutive
months, then a determination shall be made as to the date during such twelve
month period upon which the amount of Consolidated Current Indebtedness was
least, and a period of 45 days thereafter within such period of twelve
consecutive months (and, if an insufficient number of days remains in such
twelve-month period, then the balance of the 45 days shall be measured prior to
the date at which Consolidated Current Indebtedness is least) shall be
determined. The maximum,m amount outstanding during such 45 day period by which
Consolidated Current Indebtedness exceeds $1,500,000 Shall be considered Funded
Debt for such 45-day period for purposes of the Funded Debt limitations set
forth below.
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<PAGE>
Section 3.22. Limitations on Funded Debt. The Company and its Subsidiaries
--------------------------
will not incur, assume, or in any manner become liable with respect to any
Funded Debt except the following:
(a) the Notes;
(b) Funded Debt outstanding at the date of Closing;
(c) additional Funded Debt provided that immediately after giving effect to the
amount of Funded Debt proposed to be created, incurred or assumed and to
the application of proceeds thereof required under the terms on which it is
created, incurred or assumed, (x) the total pro forma Funded Debt of the
Company and its Subsidiaries on a consolidated basis does not exceed 65% of
Consolidated Total Capitalization; and (y) the Company's pro forma
Consolidated Fixed Charges Coverage Ratio for the twelve month period
ending with the Company's most recently completed fiscal quarter would not
have been less than 2.00:1.0 prior to February 23, 1995; 2.25:1.0 prior to
February 23, 1997; and 2.50:1.0 thereafter.
(d) Funded Debt of any Subsidiary owing to the Company or another Subsidiary;
(e) other Funded Debt of any Subsidiary, provided that after giving effect
thereto, the aggregate Funded Debt of all Subsidiaries plus liens permitted
under subsection (f) of Section 3.26 does not exceed 10% of total assets;
------------
and
(f) all renewals, extensions, substitutions, refinancings or replacements, in
an amount not to exceed the amount so refinanced, of any Funded Debt.
Section 3.23. Maintenance of Net Worth. The Company will at all times
------------------------
maintain a Consolidated Net Worth of at least 80% of existing Net Worth as of
the most recently completed fiscal quarter prior to Closing.
Section 3.24. Dividends. The Company will not (a) declare or pay any
---------
dividends (other than dividends payable in shares of its own stock); or (b) make
any distribution on any shares of any class of its own stock; or (c) redeem,
retire, purchase or otherwise acquire for value any shares of any class of its
own stock otherwise than by the issuance of stock of the Company (i) in exchange
therefor or (ii) the proceeds from the sale of which will be used for the
redemption or other acquisition of the stock of the Company, if, as a result,
the sum of (x) the total of all such dividends and payments made after December
31, 1993, and (y) the amount of Investments (other than Investments described in
Subsections (a) through (g) of Section 3.27 below) of the
------------
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<PAGE>
Company and its Subsidiaries existing at the time of such declaration or payment
will exceed the sum of (a) $1,000,000, (b) 50% (minus 100% of any deficit) of
Consolidated Net Income accrued on a cumulative basis after December 31, 1993,
and (c) the aggregate amount of proceeds received by the Company from the
issuance or sale of its capital stock Subsequent to December 31, 1993; and
provided further the Company would be able to incur at least $1.00 of additional
Debt and no Event of Default would exist before or after giving effect to Such
payment.
Section 3.25. Restrictions on Merger and Sale of Assets. The Company and
-----------------------------------------
Guarantors may not enter into any transaction or merger or consolidation with
any other corporation, except that:
(a) any Subsidiary may merge with the Company (provided that the Company shall
be the surviving corporation) or with any one or more other Subsidiary; and
(b) any Subsidiary may sell, lease, transfer or otherwise dispose of its assets
to the Company or any other Subsidiary.
(c) the Company may merge or consolidate with any other corporation or sell all
or substantially all of its assets provided that: (i) the continuing or the
surviving entity or the Person to which such assets are transferred
expressly assumes the punctual payment of the Notes and observance of all
the covenants of the Notes; (ii) the continuing or surviving entity or the
Person to which such assets are transferred shall be incorporated in the
United States; (iii) an Event of Default with regard to the surviving
entity or the Person to which such assets have been transferred shall not
immediately after such merger have occurred and be continuing on the Notes;
and (iv) the surviving entity or Person to which such assets have been
transferred could incur at least $1.00 of additional Debt.
Other than for the sale of the Vacaville Facility, as provided in this
Indenture, the Company will not and will not permit its Subsidiaries to sell,
lease, transfer or otherwise dispose of a Substantial Part of the assets of the
Company or its Subsidiaries unless the proceeds from the sale of such assets are
invested in capital assets used, or to be used, by the Company and its
Subsidiaries in the lines of business or related business in which the Company
and its Subsidiaries are engaged at the date of Closing, (including the ongoing
development and sale of Company-owned stores and real estate to franchises)
within the succeeding twelve-month period. With respect to the sale of the
Vacaville Facility, to the extent there is any outstanding mortgage financing on
the Las Vegas Facility, the proceeds from the sale of the
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Vacaville Facility must be used to reduce any Lien Debt (other than under the
Notes) on the Las Vegas Facility.
Section 3.26. Limitations on Liens. Neither the Company nor any Subsidiary
--------------------
will create, incur, or assume any pledge, mortgage, lien, encumbrance or
security interest of any kind upon any of its property or assets owned or
hereafter acquired other than those provided pursuant to the Notes and except
(i) the security interest held by Barclay's in the Company's and Guarantor's
property, including, but not limited to, inventory, accounts and general
intangibles, and (ii) the construction financing for the Las Vegas Facility,
except:
(a) presently outstanding Liens and encumbrances (other than those described
above);
(b) deposits or pledges in connection with or to secure payment of workers I
compensation, unemployment insurance, old-age pensions or other social
security, or in connection with the good faith contest of any,tax lien;
(c) current taxes not delinquent or being contested in good faith in such
manner as not to make the property forfeitable, mechanics, liens or
landlords, liens for sums not due and owing or making the property subject
to such liens forfeitable, liens of judgment or awards, rights of way and
like encumbrances or title defects which do not interfere materially with
the business operations of the Company;
(d) security interest in or mortgage or Capitalized Lease Obligation on
(collectively a "Purchase Money Lien") any property acquired or improved by
the Company or a Subsidiary and created within twelve months of such
acquisition or improvement to secure borrowings made to finance the
purchase or improvement of such property provided that at the time it is
created such Purchase Money Lien extends only to the property acquired or
improved and that the aggregate principal amount of indebtedness secured by
such Purchase Money Lien and all other indebtedness secured by a security
interest in or mortgage on such property or such improvement does not
exceed in the aggregate 80% (or 100% in the case of a Capitalized Lease
Obligation) of the lesser of (i) the cost of such property or improvement
or (ii) the fair market value thereof at the time of incurrence;
(e) minor Liens incidental to the conduct of the business of the Company or its
Subsidiaries which were not incurred in connection with the borrowing of
money or the obtaining of advances or credits, and which do not in the
aggregate materially detract from the value of its
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property or assets or materially impair the use thereof in the operation of
its business; and
(f) other Liens not expressly permitted by Subsections (a) through (e) above,
provided that (x) in the aggregate, such Liens plus all Liens permitted
under (a) above plus Debt of all Subsidiaries incurred under Section (e) of
Section 3.22 above does not exceed 10% of total assets, and (y) the Company
------------
would be able to incur at least $1.00 of additional Debt.
Section 3.27. Restricted Investments. The Company and its Subsidiaries
----------------------
shall not make any Investments in any Persons (including stock purchases,
capital contributions and advances, loans, guarantees and other extensions of
credit) other than in the ordinary course of business except as permitted under
the Investment Policy Number 6.1.2 of the Company dated September 1, 1993 and
effective August 16, 1993, Revision 02, a copy of which has been delivered to
the Trustees and the Beneficiaries.
ARTICLE 4
POSSESSION, USE AND RELEASE OF MORTGAGED PROPERTY
Section 4.1. Possession and Use of Mortgaged Property. Unless and until an
----------------------------------------
Event of Default shall have occurred and be continuing, the Company and the
Guarantors shall be permitted to possess, use and enjoy all the Mortgaged
Property and receive and use the rents, revenues, issues, income, products,
profits and proceeds thereof, with power in the ordinary course of business,
freely and without hindrance on the part of the Trustees or any of the
Registered Owners of the Notes and without any release from or consent of the
Trustees or any of the Registered Owners of the Notes:
(a) to use and consume materials and supplies comprising part of the
Equipment, and
(b) to enter into, alter, amend, supplement, cancel and otherwise deal with
choses in action, contracts, agreements, permits, licenses and other instruments
comprising part of or affecting the use of the Mortgaged Property and to
exercise the rights and powers conferred upon the Company and the Guarantors
thereby,
provided that such action (i) is in the best interest of the Company
and (ii) is not materially prejudicial to the interests of the Registered Owners
of the Notes.
Section 4.2. Dispositions of Equipment. Except as permitted by
-------------------------
Section 3.25, the Company and the Guarantors will not,
------------
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and will not purport to, sell, assign, lease, transfer or dispose of any of the
Equipment, except that, unless and until an Event of Default shall have occurred
and be continuing, the Company and the Guarantors shall have the right at any
time and from time to time, freely and without hindrance on the part of the
Trustees or any of the Registered Owners of the Notes and without any release
from or consent of the Trustees or any of the Registered Owners of the Notes, to
demolish, dismantle, tear down, scrap, abandon, surrender, sell or otherwise
dispose of, free from the lien of this Indenture, Equipment which has become
worn out, obsolete, unserviceable, unfit, unprofitable or unnecessary for use in
the conduct of the business of the Company and the Guarantors, provided that
such Equipment shall be replaced by other Equipment in at last as good operating
condition as, and having a value and utility at least equal to, the Equipment
replaced, assuming such replaced Equipment was in the condition and repair
required to be maintained by the terms hereof. All replacement Equipment shall
be free and clear of all Liens except the Permitted Liens.
Section 4.3. Confirmatory Instruments. The Trustees shall, from time to
-------------------------
time, execute any release or other written instrument to confirm any action
taken or to be taken by the Company or the Guarantors under Section 4.1 or 4.2
----------- ---
upon receipt by the Trustees of a request from the Company for the same together
with a certificate of an officer of the Company stating that the action so to be
confirmed was duly taken or is to be duly taken in conformity with Section 4.1
-----------
or 4.2.
---
Section 4.4. Purchaser Protected. No purchaser in good faith of property
-------------------
purporting to be released herefrom shall be bound to ascertain the authority of
the Trustees to execute the release or to inquire as to the existence of any
condition herein provided for the exercise of such authority; nor shall any
purchaser or grantee of any property of rights permitted by this Article 4 to be
---------
sold, granted, exchanged or otherwise disposed of by the Company or a Guarantor,
be under any obligation to ascertain or inquire into the authority of the
Company to make any Such sale, grant, exchange or other disposition. Any
release executed by the Trustees shall be sufficient for the purpose of this
Indenture and shall constitute a good and valid release of the property therein
described from the lien of this Indenture to the extent provided in such
release.
Section 4.5. Lien on Remaining Mortgaged Property. No release of any part
------------------------------------
of the Mortgaged Property shall in any way alter, vary or diminish the lien of
this Indenture on the remainder of the Mortgaged Property.
Section 4.6. Release of Vacaville Facility and Recording of Indenture. It
---------------------------------------------------------
is understood and acknowledged that Company is in the process of constructing
the Las Vegas Facility, with the anticipated completion date of December 15,
1994. It is the
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intention of the Company to consolidate the Company's operations presently being
undertaken at the Vacaville Facility at the Las Vegas Facility, and to sell or
otherwise dispose of the Vacaville Facility.
The Trustees agree to release the Vacaville Facility from the lien of this
Indenture upon satisfaction of the Trustees and the Registered Owners that the
Las Vegas Facility has been made subject to this Indenture and has become a part
of the Mortgaged Property and that all of the covenants, representations and
warranties of this Indenture and the Note Purchase Agreement are true and
correct and apply fully to the Las Vegas Facility including, but not limited to,
establishment of a first priority mortgage lien thereon in favor of the Trustees
(and provided there shall be no other consensual liens or liens arising out of
the construction of the Improvements) and receipt of appraisals, surveys, and
title policies as to such Las Vegas Facility in accordance with this Indenture
and the Note Purchase Agreement. Provided, that in the event the Las Vegas
Facility has not been completed at the time of the Closing of the sale of the
Vacaville Facility and therefore this Indenture will not constitute a first
mortgage lien thereon due to the lien of construction financing, the Trustees
agree to release the Vacaville Facility from the lien of this Indenture upon
receipt by the Trustees of the proceeds Of such sale in the escrow account
established in Section 5.4 of this Indenture.
Notwithstanding the provisions of Section 3.3 this Indenture will not be
-----------
recorded in Clark County, Nevada except in accordance with this Section 4.6.
-----------
Concurrently with and as a condition precedent to any release of the
Vacaville Facility, or of the proceeds thereof placed in escrow in accordance
with the foregoing if the Las Vegas Facility was not completed at the time of
the sale of the Vacaville Facility, as the case may be, Company shall and
effective as of such time does hereby declare the Las Vegas Facility to be and
become Mortgaged Property hereunder and Grants to the Trustees the Las Vegas
Facility, and the provisions of Section 3.11 shall be applicable to the Las
------------
Vegas Facility as, but not limited to, after acquired property, and this
Indenture shall be recorded in Clark County, Nevada, with the County Recorder.
In addition, and as a further condition precedent to such a release, Trustees
shall receive an opinion of Nevada counsel similar to the opinions described in
Section 4.G. of the Note Purchase Agreement.
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ARTICLE 5
APPLICATION OF MONEYS
Section 5.1. Proceeds of Insurance and Condemnation Awards; Restoration.
-----------------------------------------------------------
(a) Moneys received by the Trustees as payment for casualty loss (excluding
inventory insurance and business interruption insurance and similar coverage not
intended to compensate for the property loss) under any policy of insurance or
as an award or compensation for the taking, in condemnation or other eminent
domain proceedings, of any Facility or any part thereof or interest therein,
shall (i) at the election of the Required Holders in their sole discretion (or
if such amount is less than $250,000, at the election of the Company), either be
(A) paid over or assigned either in their entirety or in a lesser amount (the
balance to be applied in accordance with the following clause (B) of this
Section 5.1(a)(i)) to the Company for Restoration (as defined below) of the
-----------------
affected Facility in accordance with Section 5.1(b) (after deduction
--------------
therefrom all costs and expenses, including without limitation attorneys' fees,
costs and disbursements, incurred by the Trustees and the Beneficiaries in
connection with the collection thereof), provided no Default or Event of Default
shall have occurred and be continuing, or (B) applied on the next succeeding
principal and interest payment date for the Notes, but after the regular payment
of the interest and prepayment of principal, if any, due and payable on such
date, first, to the prepayment of the Notes pursuant to Section 6.2 and second,
----- ----------- ------
the excess, if any, shall be paid over or assigned, if no Default or Event or
Default shall have occurred and be continuing, to the Company or upon its
written order, or (ii) if such amount is less than $100,000 and no Default or
Event of Default shall have occurred and be continuing, be paid over or assigned
to the Company for Restoration of the affected Facility in accordance with
Section 5.1(b).
--------------
(b) If any Facility or any portion thereof becomes damaged, destroyed or
injured by fire or other casualty (whether insured or uninsured) or is the
subject of a taking, in condemnation or other eminent domain proceedings, the
Company will give immediate notice thereof to the Trustees and the Beneficiaries
and, provided that the Required Holders shall have elected to apply the proceeds
of the insurance paid with respect thereto (if any), or the award with respect
to such taking to the Company toward the restoration of the Facility in
accordance with the provisions of Section 5.1(a)(i), or if the amount thereof is
-----------------
less than $100,000 and, pursuant to Section 5.1(a)(ii), is paid to the Company,
------------------
then the Company promptly will commence and diligently will continue and
complete the repair, restoration, replacement or rebuilding ("Restoration") of
such Facility or portion thereof so damaged, destroyed, injured or taken
substantially to its value, condition and character immediately prior to such
damage, destruction, injury or taking, in accordance with plans and
specifications (bearing the
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<PAGE>
signed approval of an architect Satisfactory to the Required Holders) which
shall have been approved by the Required Holders prior to the commencement of
such Restoration. The Company diligently will complete, and pay for the cost of,
the Restoration of the Facility located on the Site which is at any time in the
process of construction, alteration or Restoration. Notwithstanding any damage
to, or destruction of, or injury to, a Facility or any portion thereof by fire
or other casualty or any taking of any Facility, the Company will continue to
make all payments due under the Notes, this Indenture and the other Operative
Documents in accordance with their respective terms. Any insurance proceeds or
condemnation awards remaining after completion of such Restoration shall be
retained by the Trustees and shall be applied to the payment of the Obligations
in accordance with Section 5.1(a)(i)(B).
--------------------
Section 5.2. Moneys Held as Mortgaged Property. Moneys held by the Trustees
---------------------------------
pursuant to any provision of this Indenture (other than the Escrow), shall, at
the election of the Required Holders, be applied to the cure of any Default or
Event of Default or be held as part of the Mortgaged Property as a special
deposit in trust as held pending application thereof in accordance with the
other provisions of this Article 5. Such moneys held by the Trustees shall be
---------
invested in short term (90 days maturity or less) United States Treasury
obligations, with interest thereon paid to the Company.
Section 5.3. Proceeds During Default. Any amounts retained by the Trustees
-----------------------
pursuant to any provision of this Indenture due to the existence of a Default or
an Event of Default shall be held as provided in Section 5.2, and upon the
-----------
occurrence of an Event of Default, may be applied in payment of any amount then
due and owing under this Indenture.
Section 5.4. Escrow. There is hereby established a special escrow fund and
------
account to be held and administered by the Trustees in accordance with this
Section (the "Escrow"). The Escrow shall be comprised of (i) the proceeds from
the sale of the Notes pursuant to the Note Purchase Agreement to the extent such
proceeds have not been used to satisfy the indebtedness against the Vacaville
Facility and the Boise Facility, and (ii) the proceeds of the sale of
the Vacaville Facility as provided in Section 4.6 of this Indenture. The
Trustees shall remit to the holders of Liens against the Vacaville Facility and
the Boise Facility, as of the Closing Date, such of the proceeds from the sale
of the Notes as shall be necessary to satisfy and discharge such Liens, and
shall disburse to persons designated by the Company (or to the Company) costs
of this transaction not to exceed an aggregate of $300,000.
The Escrow shall be held by the Trustees in a segregated account which
shall be invested in United States Treasury obligations and/or money market
funds which invest solely in United
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<PAGE>
States Treasury obligations as the Trustees shall be directed in writing by the
Company. All earnings on the Escrow shall be paid to and shall be the sole
property of the Company.
At such time as the construction of the Las Vegas Facility has been
completed and this Indenture has been insured as a first mortgage lien thereon,
and the other conditions described in Section 4.6 have been satisfied with
respect to the Las Vegas Facility, the Escrow shall be closed and any remaining
funds held therein shall be distributed to the Company. Provided, however,
that the funds in the Escrow may be applied directly to the payment and
satisfaction of any prior or paramount Liens against the Las Vegas Facility for
the purpose of assuring the first mortgage lien of this Indenture thereon.
Until the release of such funds and the close of the Escrow the funds and the
Escrow are assigned by the Company to the Trustees, and the Trustees are
granted a security interest therein, to further secure the performance by the
Company of the Obligations.
ARTICLE 6
PREPAYMENT OF NOTES
Section 6.1. Mandatory Prepayments of Notes. On August 1, 1998 and on the
------------------------------
first day of each third month thereafter to and including May 1, 2004 (so long
as any of the Notes shall be Outstanding), the Company will prepay $333,333.33
aggregate principal amount of the Notes (or, if less, the unpaid balance
thereof), in each case at the principal amount so to be prepaid, together with
accrued interest thereon to the date of such prepayment, without premium, and
allocated as provided in Section 6.4. No partial prepayment of Notes pursuant to
-----------
Section 6.2 shall relieve the Company to any extent from its obligation to make
-----------
mandatory prepayments pursuant to this Section 6.1 so long as any Notes shall
-----------
remain Outstanding.
Section 6.2. Optional Prepayment of Notes. Upon notice given as provided
----------------------------
in Section 6.3, the Company may at any time prepay the Notes as a whole, or from
-----------
time to time in part (in a minimum amount of $500,000 and otherwise in multiples
of $100,000), in each case at the principal amount so to be prepaid, together
with interest accrued thereon to the date fixed for such prepayment, plus an
amount equal to the Makewhole Premium Amount for each such Note.
Section 6.3. Notice of Prepayment; Makewhole Computations. The Company
--------------------------------------------
shall call Notes for prepayment pursuant to Section 6.2 by giving written
-----------
notice thereof to the Indenture Trustee and to each Registered Owner of a Note
which notice shall be given not less than 30 nor more than 60 days prior to the
date fixed for such prepayment, shall specify the principal amount so
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<PAGE>
to be prepaid and the date fixed for such prepayment. Notice of prepayment
having been so given, the aggregate principal amount of the Notes so to be
prepaid as specified in such notice, together with interest accrued thereon to
the date of such prepayment, plus the Makewhole Premium Amount, if any, with
respect to each such Note, shall become due and payable on the specified
prepayment date.
The Makewhole Premium Amount to be paid in connection with any prepayment
of Notes pursuant to Section 6.2 shall be determined by the Company and written
-----------
notice of the amount thereof shall be furnished to the Indenture Trustee and
each Registered Owner of a Note at least two Business Days prior to the date
fixed for such prepayment, which notice shall be accompanied by a certificate of
a principal financial officer of the Company setting forth in reasonable detail
the computation thereof and the methodology and assumptions made in connection
therewith and attaching a copy of the source of the market data by reference to
which the Treasury Yield was determined in connection with such computations.
Section 6.4. Allocation of Partial Prepayments. In the event of any
---------------------------------
prepayment of less than all of the Outstanding Notes pursuant to Section 6.1 or
-----------
6.2, the Company will allocate the principal amount so to be prepaid among all
---
Outstanding Notes in proportion to the respective unpaid principal amounts
thereof.
Section 6.5. Surrender of Notes; Notation Thereon. Subject to the
------------------------------------
provisions of Section 2.2, the Company may, as a condition of payment on account
-----------
of any Note, require the holder of such Note to present such Note to the
Indenture Trustee for notation of such payment and, if such Note be paid in
full, require the surrender thereof to the Indenture Trustee.
Section 6.6. Purchase of Notes. The Company will not, and will not permit
-----------------
any Subsidiary or Affiliate to, acquire directly or indirectly by purchase or
prepayment or otherwise any of the Outstanding Notes except (a) by way of
payment or prepayment in accordance with the provisions of the Notes and of this
Indenture or (b) pursuant to an offer to purchase made by the Company or any
Affiliate to the Registered Owners of all Notes at the time outstanding upon the
same terms and conditions. All Notes purchased by the Company or any Affiliate
in accordance with this Section 6.6 shall be cancelled and no Notes shall be
-----------
issued in substitution or exchange therefor.
Section 6.7. Maturity. In all events, the Notes will mature May 1, 2004,
--------
at which time the entire remaining principal balance and all unpaid accrued
interest shall be due and payable in full.
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<PAGE>
ARTICLE 7
DEFAULT AND REMEDIES
Section 7.1 Events of Default. Each of the following, whether voluntary or
-----------------
involuntary, shall constitute an "Event of Default" hereunder:
(a) Non-Payment of Interest. Default in the payment when due of any
-----------------------
interest on any Note and continuance of such default for a period of five days.
(b) Non-Payment of Principal or Premium. Default in the payment when due
-----------------------------------
of all or any part of the principal of, or premium on, any Note, whether at
stated maturity, by acceleration, by notice of prepayment or otherwise.
(c) Other Payments. Default in the payment when due of any other
--------------
Obligation, including any amount payable by the Company under this Indenture or
the Note Purchase Agreement, and continuance of such default for a period of ten
days.
(d) Non-Compliance with Certain Provisions. Default in the performance or
--------------------------------------
observance by the Company of any provision of Sections 3.1, 3.8, 3.9(a), 3.12,
--------------------------------
3.21, 3.22, 3.23, 3.24, 3.25, and 3.27.
--------------------------------------
(e) Other Covenants. Default in the performance or observance by the
---------------
Company or any provision of this Indenture or the Note Purchase Agreement, and
continuance of such default for thirty days.
(f) Representations and Warranties. Any representation or warranty made by
------------------------------
the Company or any Subsidiary in this Indenture or the Note Purchase Agreement
or any other certificate or other instrument delivered pursuant hereto or
thereto, proves to be inaccurate or incorrect or is breached or false or
misleading, in all cases in any material respect, as of the date such
representation or warranty is made or deemed made or reaffirmed.
(g) Default under Other Debt. Default Shall be made in any payment of the
------------------------
principal of or premium or interest on any Debt of the Company or any Subsidiary
which is outstanding in an aggregate unpaid principal amount equal to or
exceeding $500,000, when and as the same shall become due and payable (whether
at stated maturity, by notice of prepayment or otherwise), and any applicable
grace period shall have expired; or any other
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<PAGE>
event shall occur or condition shall exist in respect of any Debt of the Company
or any Subsidiary which is outstanding in an aggregate unpaid principal amount
equal to or exceeding $500,000, or under any agreement or instrument relating to
any such debt, the effect of which is to cause (or permit the holder of such
debt or a trustee to cause) the acceleration of the maturity of such Debt or to
require the repayment or repurchase of such Debt.
(h) Bankruptcy, Insolvency, etc. The Company or any Subsidiary shall (1)
----------------------------
apply for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (2) be generally unable to pay its debts as such debts
become due, (3) make a general assignment for the benefit of its creditors, (4)
commence a voluntary case under any law relating to bankruptcy, insolvency or
reorganization, (5) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (6) fail to controvert in a timely or
appropriate manner (but within thirty days in any event), or acquiesce in
writing to, any petition filed against it in an involuntary case under any law
relating to bankruptcy, insolvency or reorganization, (7) take any action under
the laws of its jurisdiction or incorporation analogous to any of the foregoing,
or (8) take any corporate action for the purpose of effecting any of the
foregoing.
(i) Involuntary Proceedings. A proceeding or case shall be commenced,
-----------------------
without the application or consent of the Company or any Subsidiary in any court
of competent jurisdiction seeking (1) its liquidation, reorganization,
dissolution or winding up, or composition or readjustment of its debts, (2) the
appointment of a trustee, receiver, custodian, liquidator, encumbrancer or the
like of it or of all or any substantial part of its assets or (3) similar relief
in respect of it under any law providing for the relief of debtors, and such
proceeding or case shall continue undismissed, or unstayed and in effect, for a
period of thirty days; or an order for relief shall be entered in an involuntary
case under any law relating to bankruptcy, insolvency or reorganization against
the Company or any Subsidiary.
(j) Final Judgment for Payment of Money. Any final judgment for the
-----------------------------------
payment of money shall be rendered by a court of competent jurisdiction against
the Company or any Subsidiary and the Company or such Subsidiary shall not
discharge the terms, or procure a stay of execution thereof within sixty days
from the date of entry thereof
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<PAGE>
and within said period of sixty days, or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal, and the maximum liability
for such judgment together with all other such judgments not covered by
insurance proceeds actually received by the Company or such Subsidiary shall
equal or exceed in the aggregate $500,000.
Then in every such case, during the continuance of any Event of Default:
I . Upon the occurrence of an Event of Default with respect to the Company
described in subsection (h) or (i) above, the entire unpaid principal amount of
all Notes shall automatically be due and payable, together with interest accrued
thereon and, to the extent permitted by law, the Makewhole Premium Amount, if
any, for each Note that would be payable if the Company had elected to prepay
such Note in full pursuant to Section 6.2 on the date of acceleration, all
-----------
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived. Upon the occurrence of any other Event of
Default, the Trustees, by notice to the Company, may, and upon the request of
the Registered Owners of 30% of the unpaid principal amount of the Outstanding
Notes, shall, declare the entire unpaid principal amount of all Notes to be due
and payable immediately, together with the interest accrued thereon and, to the
extent permitted by law, the Makewhole Premium Amount, if any, for each Note
that would be payable if the Company had elected to prepay such Note in full
pursuant to Section 6.2 on the date of acceleration, provided that during the
-----------
existence of an Event of Default described in subsection (a) or (b) above with
respect to any Note the Registered Owner of such Note may, by written notice to
the Company, declare such Note to be, and the same shall forthwith become, due
and payable, together with the interest accrued thereof and, to the extent
permitted by law, the Makewhole Premium Amount, if any, for each Note that would
be payable if the Company had elected to prepay such Note in full pursuant to
Section 6.2 on the date of acceleration. If the Registered Owner of any Note
-----------
shall exercise the option specified in the proviso to the preceding sentence of
this Paragraph I, the Company will forthwith give written notice thereof to the
Registered Owners of all other Outstanding Notes and each such Registered Owner
may (whether or not such notice is given or received), by written notice to the
Company, declare the principal of all Notes held by it to be, and the same shall
forthwith become, due and payable, together with the
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interest accrued thereon and the Makewhole Premium Amount, if any, for each Note
that would be payable if the Company had elected to prepay such Note in full
pursuant to Section 6.2 on the date of acceleration.
-----------
II. Either Trustee personally, or by such Trustee's agents or attorneys,
may enter into and upon the Facilities and may exclude the Company and its
agents and servants wholly therefrom; and, at the expense of the Mortgaged
Property, may use, operate, manage and control the same and conduct the business
thereof, may maintain and restore the Facilities, may insure and reinsure the
Same and may make all necessary or proper repairs, renewals and replacements and
any useful alterations, additions, betterments and improvements thereto and
thereon, all as the Trustees may deem advisable; and in every case, the Trustees
shall have the right to manage and operate the Facilities and to carry on the
business thereof and exercise all rights and powers of the Company with respect
thereto either in the name of the Company or otherwise as the Trustees shall
deem best. The Trustees shall be entitled to collect and receive all earnings,
revenues, rents, issues, awards, proceeds, profits and income of the Mortgaged
Property and said earnings, revenues, rents, issues, awards, proceeds, profits
and income of the Mortgaged Property are hereby assigned to the Trustees, their
respective successors and assigns. After deducting the expenses of conducting
the business thereof and of all maintenance, repairs, renewals, replacements,
alterations, additions, betterments and improvements and taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged Property, as
well as reasonable compensation for the services of all attorneys, servants and
agents by the trustees properly engaged and employed (including compensation
and expenses in connection with any appeal), the moneys arising as aforesaid
shall be applied as follows:
(1) in case the Notes have not been declared due and payable as
described in Paragraph I above, first to the mandatory prepayments of principal
and scheduled payments of interest on the Notes, when and as the same shall
become payable, and second to the payment of any other sums required to be paid
by the Company under this Indenture; or
(2) in case the Notes shall have been declared due and payable as
described in Paragraph I above, in the order of priorities
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set forth in clauses second, third, fourth and fifth of Section 7.2(e).
--------------
III. The Trustees shall have the right to foreclose the lien of this
Indenture by notice and sale under the power of sale or to proceed by judicial
foreclosure, in either case in accordance with applicable law.
(A) The Trustees, with or without entry, personally or by their agents
or attorneys, may exercise the power of sale hereby conveyed and granted by the
Company and Guarantors and sell the Mortgaged Property and all estate, right,
title, interest, claim and demand therein and right of redemption thereof at one
or more private or public sales, as an entirety or in parcels and at such times
and places and upon such terms as may be specified in the notice or notices of
sale to be given to the Company and Guarantors or as may be required by law. Any
number of sales may be conducted from time to time. The power of sale shall not
be exhausted by any one or more of such sales as to any part of the Mortgaged
Property remaining unsold, but shall continue unimpaired until all of the
Mortgaged Property shall have been sold or the Notes and all indebtedness of the
Company secured hereby shall have been paid.
(B) In addition, the Trustees will have and may exercise the statutory
power of sale provided by the laws of the State of California governing trust
deeds with respect to Mortgaged Property within the State of California, and the
Trustees will have and may exercise the statutory power to foreclose a trust
deed by advertisement and sale as provided by the laws of the State of Idaho
with respect to Mortgaged Property within the State of Idaho and by the laws of
the State of Nevada with respect to Mortgaged Property within the State of
Nevada.
IV. The Trustees may take all steps to protect and enforce their rights
and remedies provided hereby or by applicable law, whether by action, suit or
proceeding in equity or at law (for the complete or partial foreclosure hereof,
for the specific performance of any covenant, condition or agreement contained
in the Notes or herein or in aid of the execution of any power herein granted or
for the enforcement of any other appropriate legal or
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equitable remedy) or otherwise as the Trustees shall deem most effectual to
protect and enforce the same.
V. The Trustees will have all the rights and remedies provided to a
secured party by the Uniform Commercial Code with respect to such portion of the
Mortgaged Property as is governed by the Uniform Commercial Code, and this
instrument shall constitute a security agreement under the Uniform Commercial
Code.
Section 7.2. Sale of Mortgaged Property; Application of Proceeds. (a) The
----------------------------------------------------
Trustees may postpone any sale of all or any part of the Mortgaged Property
under or by virtue of this Article by public announcement at the time and place
of such sale, and from time to time thereafter may further postpone such sale by
public announcement made at the time of sale fixed by the preceding
postponement.
(b) Upon the completion of any sale or sales made by the Trustees under or
by virtue of this Article, the Trustees shall execute and deliver to the
purchaser good and sufficient deeds and other instruments conveying, assigning
and transferring all of their estate, right, title and interest in and to the
property and rights sold. The Trustees are hereby irrevocably appointed the
true and lawful attorneys of the Company and any subsequent owner of the
Mortgaged Property or any part thereof to make, in their own name and stead or
in the name of the Company or any such subsequent owner, all necessary
conveyances, assignments, transfers and deliveries of the property and rights so
sold, and for that purpose the Trustees may execute all necessary deeds and
instruments of assignment and transfer and may substitute persons with like
power, the Company and every such subsequent owner hereby ratifying and
confirming all that their said attorneys or such substitutes shall lawfully do
by virtue hereof. Nevertheless, the Company and any such subsequent owner, if
so requested by the Trustees, shall ratify and confirm any such sale by
executing and delivering to the Trustees, without recourse, or to such purchaser
any instrument which, in the judgment of the Trustees, is suitable or
appropriate therefor. Any such sale made under or by virtue of this Article,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of the Company and any Person claiming
from, through or under the Company in and to the property and rights so sold,
and shall be a perpetual bar at law and in equity against the Company and its
successors, assigns and any and all persons who claim or may claim the same
from, through or under any of them.
(c) The receipt of the Trustees, or either of them of the purchase money
paid as a result of any such sale shall be a sufficient discharge therefor to
any purchaser of the Mortgaged
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Property sold as aforesaid; and no such purchaser or its representatives,
grantees or assigns, after paying such purchase money and receiving such
receipt, shall be bound to see to the application of such purchase money upon or
for any purpose hereof, shall be answerable in any manner whatsoever for any
loss, misapplication or non-application of any of such purchase money or shall
be bound to inquire as to the authorization, necessity, expediency or regularity
of any such sale.
(d) In the event of any sale made under or by virtue of this Article
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale), the
entire principal of and interest on the Notes and all other sums required to be
paid by the Company pursuant hereto, if not previously due and payable, shall
immediately become due and payable, anything in the Notes or in this Indenture
to the contrary notwithstanding.
(e) The purchase money, proceeds or avails of any sales made under or by
virtue of this Article, together with any other sums which then may be held by
the Trustees as part of the Mortgaged Property or the proceeds thereof, whether
under the provisions of this Article or otherwise, Shall be applied to the
extent not prohibited by applicable law: first, to the payment of the costs and
-----
expenses of such sale, including reasonable compensation to the Trustees, their
agents and counsel, and of any judicial proceedings wherein the same may be
made; second, to the payment of the whole amount then owing on the Notes for
------
premium, if any; third, to the payment of the whole amount then owing on the
-----
Notes for interest; fourth, to the payment of the whole amount then owing on the
------
Notes for principal; fifth, to the payment of any other sums secured by this
-----
Indenture; and sixth, to the payment of the surplus, if any, to whomsoever shall
-----
be lawfully entitled thereto.
(f) In case of any proceedings against or involving the Company in
insolvency or bankruptcy (including any proceedings under any federal or state
bankruptcy or insolvency statute or similar law) or any proceedings for its
reorganization or involving the liquidation of its assets, the Trustees shall be
entitled to prove the whole amount of principal, interest and premium, if any,
due upon the Notes to the full amount thereof and all other payments, charges
and costs due under this Indenture without deducting therefrom any proceeds
obtained from the sale of the whole or any part of the Mortgaged Property;
provided, however, that in no case shall be the Trustees receive a greater
amount than such principal, interest and premium, if any, and such other
payments, charges and costs from the aggregate amount of the proceeds of all
sales of the Mortgaged Property and the distribution from the estate of the
Company.
Section 7.3. Purchase by the Trustees. Upon any sale made under or by
------------------------
virtue of this Article (whether made under any
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power of sale herein granted or under or by virtue of judicial proceedings or of
a judgment or decree of foreclosure and sale), to the extent permitted
by applicable law, the Trustees, on behalf of the Registered Owners of the
Notes, may bid for and acquire the Mortgaged Property or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness of the Company secured by this Indenture the net
proceeds of sale after deduction of all costs, expenses, compensations and other
charges to be paid therefrom as herein provided and any other sums which the
Trustees are authorized to deduct under this Indenture. The Person making such
sale shall accept such settlement without requiring the production of the Notes,
and without such production there shall be deemed credited thereon the net
proceeds of sale ascertained and established as aforesaid. The Trustees, or
either of them, upon so acquiring the Mortgaged Property or any part thereof,
shall be entitled to hold, deal with and sell the same in any manner permitted
by applicable laws.
Section 7.4. Receivers. After the happening of any Event of Default
---------
hereunder, immediately upon the commencement of any legal proceeding by the
Trustees for or in aid of the enforcement of the Notes or of this Indenture, and
without regard to the adequacy of the security of the Mortgaged Property, the
Trustees shall be entitled to the appointment of a receiver or receivers of the
Mortgaged Property and of all the earnings, revenues, rents, issues, profits and
income thereof, and the Company hereby irrevocably consents to any such
appointment.
Section 7.5. Suits by the Trustees. All rights of action under this
---------------------
Indenture or under any of the Notes may be enforced by the Trustees without the
possession of any of the Notes and without the production thereof at any trial
or other proceeding relative thereto. A copy of any Note, if properly certified
by the Trustees to be true and correct, shall constitute conclusive evidence of
all matters that could be proven by production of the original of that Note in
any trial or proceeding relative thereto. Any such suit or proceeding instituted
by the Trustees shall be brought in their names as the Trustees, and any
recovery of judgment shall be, subject to the rights of the Trustees for the
ratable benefit of the Registered Owners of the Notes.
Section 7.6. Waiver of Remedies. The Trustees, subject to the proviso to
------------------
this sentence, upon the request of the Registered Owners of at least 66 2/3% of
the unpaid principal amount of Outstanding Notes shall waive any Default or
Event of Default and its consequences, except a Default or Event of Default (i)
in the payment or prepayment of the principal and interest and premium, if any,
on any Notes when and as the same shall become due and payable or (ii) depriving
the Trustees or the Registered Owner of any Note or a lien upon the Mortgaged
Property, waiver of which Defaults or Events of Default specified in clause (i)
or (ii) above
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shall require the consent of all Registered Owners at the time; provided,
however, that if the Registered Owner shall have exercised the option specified
in the proviso to Paragraph I of Section 7.1 to accelerate such Note and not all
----------- -----------
of the Registered Owners of Outstanding Notes shall have exercised their option
specified in the last sentence of Paragraph I of Section 7.1 to accelerate their
----------- -----------
respective Notes, then in such case the Registered Owners of the Notes who have
so exercised such option to accelerate such Notes specified in such proviso or
Such last sentence, as the case may be, by written notice to the Company, may
rescind and annul any such acceleration and its consequences; but no Such action
shall affect any subsequent Default or Event of Default or impair any right
consequent thereon. In case of any such waiver or in case any proceeding taken
on account of any such Default or Event of Default shall have been discontinued
or abandoned or determined adversely to the Trustees, then and in every Such
case, the Company, the Trustees and the Registered Owners of the Notes shall be
restored to their former positions and rights hereunder respectively. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
Section 7.7. Remedies Cumulative. No remedy herein conferred upon or
-------------------
reserved to the Trustees or the Registered Owners of the Notes is intended to be
exclusive of any other remedy or remedies, and each Such remedy shall be
cumulative and in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity. No delay or omission of the Trustees to
exercise any right or power accruing upon any Event of Default Shall impair any
such Event of Default or in acquiescence therein, and every power and remedy of
the Trustees hereunder may be exercised from time to time and as often as may be
deemed expedient by the Trustees or the Registered Owners Of the Notes. No
delay or omission of the Trustees or the Registered Owners of the Notes to
exercise any right or power accruing upon an Event of Default shall impair any
such right or power or shall be construed to be a waiver of any such Event of
Default or an acquiescence therein.
Section 7.8. Waiver of Rights - The Company agrees that it will not at any
----------------
time or in any manner whatever claim or take any benefit of any stay, extension
or moratorium law which may affect the terms of this Indenture; nor claim or
take any benefit of any law providing for the valuation or appraisal of the
Mortgaged Property or any part thereof prior to any sale thereof; nor, prior to
or after any such sale, claim or exercise any right to redeem the property so
sold or to be sold or any part thereof; and the Company hereby expressly waives
all benefit or advantage of any such law and covenants not to hinder delay or
impede the execution of any power or remedy herein granted or available at law
or in equity, but to suffer and permit the execution of every power and remedy
as though no such law existed. The Company waives all right to have the
Mortgaged Property marshalled upon any foreclosure hereof.
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Section 7.9. Retention of Possession. Notwithstanding the appointment of
-----------------------
any receiver, liquidator or trustee of the Company, or of any of its property,
or of the Mortgaged Property or any part thereof, the Trustees shall be entitled
to retain possession and control of all property now or hereafter granted to or
held by the Trustees under this Indenture.
Section 7.10. Direction of Remedies. Subject to the proviso contained in
---------------------
Paragraph I of Section 7.1, the Required Holders shall have the right by an
----------- -----------
instrument in writing delivered to the Trustees to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustees with
respect to this Indenture or of exercising any power or trust conferred upon the
Trustees, and the Indenture Trustee shall have the right to decline to follow
any such direction if the Indenture Trustee in good faith shall, by action of
the President or a Vice President of the Indenture Trustee, determine that the
proceeding so directed would involve it in personal liability or would be
unjustly prejudicial to the Registered Owners of Notes not joining in such
direction. The Trustees, or either of them, shall not be liable with respect to
any action taken or omitted to be taken by them in good faith in accordance with
any written instruction furnished to the Trustees, or either of them, by the
Required Holders (or Registered Owners of such other percentage of unpaid
principal amount of Outstanding Notes provided for in this Indenture) in
response to a written application by the Indenture Trustee therefor. It no such
instrument or instruction has been received from the Required Holders, the
Trustees, or either of them, may take such action, if any, as the Trustees or
either of them, shall determine.
7.11. Suit by Registered Owners. If an Event of Default shall have
-------------------------
occurred and be continuing and the Registered Owner or Registered Owners of at
least 30% of the unpaid principal amount of the Outstanding Notes shall have
requested the Trustees, or either of them, to act with respect thereto against
the Mortgaged Property as specified in Section 7.1 and the Indenture Trustee or
-----------
the Individual Trustee, as the case may be, shall have failed so to act within
fifteen days of such request, then and only then, subject to the next sentence
of this Section 7.11, shall any Registered Owner have the right to institute
------------
proceedings against the Mortgaged Property for the collection of all moneys due
and payable, whether for principal, interest or premium, if any, or any other
indebtedness relating to the Notes. Notwithstanding anything herein to the
contrary, no Registered Owner of a Note shall be entitled to take any judicial
action or institute any suit to initiate foreclosure proceedings without respect
to the Mortgaged Property located in the State of California or any part
thereof or to enforce, by any judicial proceeding in the State of California,
the payment of its Note or Notes, whether for principal, interest or premium, if
any, or any other indebtedness thereunder, to the
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extent that the taking of such action or the institution or prosecution of any
such suit or the entry of judgment therein would under applicable law result in
a surrender, impairment, waiver or loss of the lien of this Indenture upon the
Mortgaged Property located in the State of California, or any part thereof, as
security for Notes held by any other Registered Owner of a Note.
Section 7.12. Waiver of Certain Rights with Respect to Sale of the
----------------------------------------------------
Security. Grantors acknowledge that all or any part of the Obligations may
--------
become secured by certain other deeds of trust and security agreements covering
property in addition to the Mortgaged Property covered by this Indenture. Said
additional property shall, collectively with the Mortgaged Property covered by
this Indenture, hereinafter be referred to as the "Security".
(a) Marshalling. Grantors hereby waive any marshalling equity or other
-----------
right to inhibit, delay or restrict any sale or other disposition of the
Security or any part thereof or to direct the order of such sale or sales or
other disposition.
(b) Notice of Sale. Any power of sale granted to the Trustees or
--------------
Beneficiaries in this Indenture may be exercised, pursuant to a single notice of
trustee's sale, separately with respect to each and every item or parcel of
Security or with respect to groups and assemblages of Security, in the Trustees'
or the Beneficiaries' sole discretion, and may be exercised on separate days or
at separate times or in separate places; the exercise of such power of sale
shall not be an action for purposes of any law or statute pertaining to actions
to enforce secured transactions.
(c) Redemption and Valuation. As and to the fullest extent permitted by
------------------------
law, Grantors waive any statutory right of redemption following any sale or
other disposition of Security by the Trustees or Beneficiaries and any right to
have Security which is sold or otherwise disposed of valued after such sale or
disposition, so that the total deficiency then remaining may be bid in any order
and in any part by the Trustees or Beneficiaries at any other sale until the
debt is satisfied in full or the final deficiency then remaining shall be
reducible to judgment against the Company by any court of competent
jurisdiction; provided that, notwithstanding anything to the contrary contained
in this Indenture or any other deed of trust or security agreement covering any
of the Security, the value of the Security sold or otherwise disposed of shall,
to the extent required by the law of the jurisdiction in which such Security is
located, be taken into account before entering a deficiency judgment against the
Company.
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(d) Defenses. Any defense available to the Company with respect to or as a
--------
result of a sale or other disposition of any Security pursuant to this section
within one state shall not be available to the Company with respect to any
Security located in any other state.
(e) Sale of Security. The Trustees or Beneficiaries shall be entitled to
----------------
sell or dispose of any Security or any part thereof pursuant to this Indenture
or any other deed of trust or security agreement in any order and in any state
or states, whether privately or by court proceeding for foreclosure, seizure,
appointment of receiver or otherwise, without regard to any substantive or
procedural defense, pleading bar, sanction or other remedy which would otherwise
be available to the Company affecting Trustees' or Beneficiaries' sole
discretion to sell or dispose of the Security or any part thereof in one action
rather than in multiple actions, en masse rather than by parcel, or in
satisfaction of all the indebtedness then secured by such Security rather than
of any part of the indebtedness designated by Trustees' or Beneficiaries in
their sole discretion, and for that purpose, and as and to the extent required
to make the remaining waivers, representations and agreements Bet forth in this
section and permitted by law, Grantors hereby disclaim any right and waive any
defense under (i) California Code of Civil Procedure Section 580d, concerning
the bar against rendition of a deficiency judgment after foreclosure under a
power of sale, (ii) California Code of Civil Procedure Section 726, concerning
the form of foreclosure proceedings with respect to real property security
located in California, (iii) California Civil Code Section 1479, concerning the
application of general performance under several obligations to one creditor,
(iv) California Civil Code Section 2924g(b), concerning the conduct of trustee's
sales, and (v) California Civil Code Section 3433, concerning the relative
rights of different creditors interested in the same property. Trustees or
Beneficiaries shall be entitled to direct the manner of sale of all or any part
of the Security at foreclosure such that payment in cash or other immediately
available funds is received at the completion of said foreclosure, and Grantors
hereby waive any claim to require said sale to be conducted on any other basis
as to the timing and manner of payment of the purchase price.
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ARTICLE 8
THE TRUSTEES
Section 8.1. Rights and Obligations of Trustees. The Trustees accept the
-----------------------------------
trusts hereby created and agree to perform their duties herein for the benefit
of the Beneficiaries upon the following terms and conditions:
(a) The Trustees shall have the full power and authority to do all things
not inconsistent with the provisions of this Indenture or applicable law in
order to enforce this Indenture or to take any action with respect to an Event
of Default, or to institute, appear in or defend any suit or other proceeding
with respect thereto, or to protect the interests of the Beneficiaries. Not in
limitation of the foregoing, the Trustees shall have all of the rights and
powers set forth in (i) Sections 2924 et seq. of the California Civil Code in
-------
relation to the portion of the Mortgaged Property located in the State of
California, (ii) Sections 45-1502 et seq. of the Idaho Code in relation to the
-------
portion of Mortgaged Property located in the State of Idaho, and Sections
107.020 et seq. of the Nevada Revised Statutes in relation to the portion of
-------
Mortgaged Property located in the State of Nevada. The Trustees shall not be
answerable or accountable except for their own willful misconduct or gross
negligence, and the Company agrees to indemnify and save harmless the Trustees
from any liability and damages which they may incur or sustain in the exercise
and performance of their powers and duties hereunder, nor shall the Trustees be
accountable for the use of any proceeds from the sale of the Notes. The
Indenture Trustee shall be obligated to timely make all required refilings of
any financing statements referred to in Section 3.3 hereof (unless such
-----------
refilings relate to original filings of which the Indenture Trustee has no
knowledge), and upon request of any of the Beneficiaries, any other security
documents necessary or appropriate to preserve the liens created hereby but
shall have no obligation to take any action to protect, preserve or enforce any
rights or interests in the Mortgaged Property or towards the execution or
enforcement of the trusts hereby created which, in its opinion, shall be likely
to involve expense or liability, unless the Beneficiaries shall furnish
reasonable indemnity against such liability and expense to the Indenture
Trustee. In accepting the trusts hereunder and the Mortgaged Property, the
Trustees are acting solely as trustees hereunder and not in their individual
capacities and all Persons, other than the Beneficiaries, having any claim
against the Trustees arising by reason
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hereof (other than claims in respect of the gross negligence or willful
misconduct of the Indenture Trustee or the Individual Trustee) shall look only
to the Mortgaged Property for payment or satisfaction thereof. Unless and until
an Event of Default shall have occurred and be continuing, the Trustees shall
not be obligated to take any action under this Indenture or any document
included in the Mortgaged Property except for the performance of such duties as
are specifically set forth herein or therein and except as may be requested from
time to time in writing by the Required Holders. If and so long as an Event of
Default (of which the Trustees shall be deemed to have knowledge, as hereinafter
provided) shall have occurred and be continuing, the Trustees shall exercise
such rights, powers and remedies (whether vested in them by this Indenture or by
law or in equity or by statute or otherwise) for the protection and enforcement
of their rights under this Indenture and in respect of the Mortgaged
Property as the Trustees (in the absence of written instructions from the
Beneficiaries pursuant to Section 7.10) may determine, and shall use the same
------------
degree of care and skill in such exercise as a prudent person would use under
the circumstances in the conduct of such person's own affairs.
(b) The Trustees shall be entitled to receive the compensation from the
Company for all services rendered by them hereunder prior to an Event of
Default, and to be reimbursed for all proper disbursements incurred by them
hereunder prior to an Event of Default, provided that no commissions shall be
paid for the collection of moneys pursuant to the terms hereof. The Trustees
shall be entitled to reasonable compensation for their services and
reimbursement for all proper disbursements incurred by them upon or after an
Event of Default, or instituting, appearing in or defending any suit or
proceeding with respect thereto. All sums payable pursuant to this
Section 8.1(b) shall be secured by the lien of this Indenture.
--------------
(c) The Trustees shall incur no liability in acting upon any signature,
notice, request, consent, instrument, certificate, opinion, or other instrument
reasonably believed by them in good faith to be genuine. In administering the
trusts, the Trustees may execute any of the trusts or powers hereof directly or
through their agents or attorneys and may consult with counsel, accountants and
other skilled persons to be selected and employed by them, and the reasonable
expenses thereof shall be paid by the Company, and the Trustees shall not be
liable for anything done, suffered or omitted in good
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faith by them in accordance with the advice of any such person.
(d) The recitals and statements (other than express covenants of the
Trustees) in this Indenture, the Note Purchase Agreement and the Notes (except
for the Indenture Trustee's certificate of authentication endorsed on the Notes)
shall not be considered as made by, or as imposing any obligation or liability
upon, the Trustees. The Trustees make no covenant or representation as to the
rights of the holders of the Notes, the title or interest of the Company in or
to, or the condition of, the Mortgaged Property or the sufficiency of the
security for the Notes or of this Indenture, except that the Trustees represent
and warrant that this Indenture is valid, binding and enforceable in and with
respect to the Trustees in accordance with its terms.
(e) The Trustees shall have no duty to see to any recording, filing or
registration of this Indenture, any instrument of further assurance, any
instrument constituting part of the Mortgaged Property, or any amendments or
supplements to any of said instruments, other than those refilings referred to
in Section 8.1(a) above, or to see the payment of any fees, charges or taxes
--------------
in connection therewith (and the Trustees may act with respect to the Notes and
pay out deposited moneys without regard thereto), or to give any notice thereof,
or to see to the payment of or be under any duty in respect of any tax,
assessment or other governmental charge which may be levied or assessed on the
Mortgaged Property or any part thereof or against the Company.
(f) Whenever in administering the trust, the Trustees shall deem it
necessary or desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate or other instrument
purporting to be signed by a Responsible Officer of the Company and delivered to
the Trustees, and such certificate or other instrument shall be full warrant to
the Trustees for any action taken, suffered or omitted by them on the faith
thereof, but in their discretion the Trustees may in lieu thereof accept other
evidence of such fact or matter or may require such further or additional
evidence as may seem reasonable to them.
(g) The Trustees shall have no obligation to see to the payment or
discharge of any Liens (other than the lien of this Indenture and then only to
the extent herein
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or therein provided, and Liens, if any, arising by reasons of their acts or
omissions unrelated to the discharge of their duties as Trustees hereunder) upon
the property included in the Mortgaged Property, or to see to the payment of the
principal of, premium or interest on any obligation secured thereby or to the
delivery or transfer to any person of any property released from any such Lien,
or to give notice to or make demand upon any mortgagor, mortgagee or other
Person for the delivery or transfer of any such property.
(h) The Trustees shall have no duty to confirm or verify any schedules
setting forth the interest and principal payments to be made on the Notes or any
financial or other statements or reports or certificates furnished pursuant to
any provision hereof, and, except as otherwise provided hereby they shall be
under no other duty in respect of the same, except to retain the same in their
files, and permit the inspection thereof at reasonable times by any of the
Beneficiaries. The Trustees shall have no duty to exercise any right or perform
any obligation, as assignee of the Company, under any Material Contract.
(i) The Trustees shall not be concerned with or accountable to any Person
for the use or application of any deposited moneys; which shall be released or
withdrawn in accordance with the provisions hereof or of any property or
securities or the proceeds thereof which shall be released from the lien of this
Indenture in accordance with the provisions hereof.
(j) The Trustees shall not be required to ascertain or inquire as to the
performance or observance of any of the covenants or agreements herein
contained, or contained in any other instruments, pledged or assigned to the
Trustees hereunder, to be performed or observed by the Company or any party to
any such other instruments. The Trustees shall not be required to take notice or
be deemed to have notice or knowledge of any Default or Event of Default (except
default in the payment of moneys to the Trustees which are required to be paid
to the Trustees on or before a specified date or within a specified time after
receipt by the Trustees of a notice or certificate which was in fact received
and except default in the delivery of any certificate, opinion or other document
expressly required to be delivered to the Trustees by any provision hereof),
unless (i) the Trustees shall receive from the Company or any of the
Beneficiaries written notice stating that a Default or Event of Default has
occurred and specifying the same, or (ii) the Individual Trustee or a
responsible officer
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in the corporate trust department of the Indenture Trustee shall otherwise
obtain actual knowledge thereof and in the absence of such notice or such actual
knowledge, the Trustees may conclusively assume that there is no such Default or
Event of Default, except as aforesaid. As soon as practicable after receiving
knowledge thereof, the Indenture Trustee shall notify all Beneficiaries and the
Company of any Event of Default, and if such Event of Default is subsequently
wholly cured or waived, the Indenture Trustee shall give notice to such effect
to the Beneficiaries and the Company.
(i) The Indenture Trustee shall forward to each of the Beneficiaries a copy
of any financial report, certificate or communication submitted to the Trustees
pursuant to this Indenture unless the Indenture Trustee has determined that said
Person has actually received the same.
Section 8.2. The Individual Trustee. The Individual Trustee shall be
----------------------
subject to the following terms and conditions:
(a) Subject to the provisions of Section 8.6, all rights, powers, duties
-----------
and obligations conferred or imposed upon the Trustees shall be conferred or
imposed solely upon and solely exercised and performed by the Indenture Trustee,
except as expressly provided otherwise in this Indenture and except to the
extent that under any law of any jurisdiction in which any particular act is to
be performed the Indenture Trustee shall be incompetent or unqualified to
perform such act, in which event such rights, powers, duties and obligations
shall be exercised and performed by the Individual Trustee.
(b) Any power granted by this Indenture to or which this Indenture provides
may be exercised by the Individual Trustee shall not be exercised by him except
jointly with, or with the written consent of, the Indenture Trustee.
(c) The Individual Trustee may, at any time by an instrument in writing,
constitute the Indenture Trustee or its successor in trust hereunder his agent
or attorney-in-fact, with full power and authority, to the extent which may be
permitted by law, to do any and all acts and things and exercise any and all
discretion which he is authorized or permitted to do or exercise, for and in his
behalf and in his name.
Section 8.3. Resignation of Indenture Trustee. The Indenture Trustee may
--------------------------------
resign and be discharged of the trusts by giving notice thereof to each of the
Beneficiaries and the Company
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(or any subsequent owner of the Company's interest in any property included in
the Mortgaged Property), specifying the date (not less than sixty days after
such-notice) when such resignation shall take effect. Notwithstanding the
foregoing, no such resignation Shall take effect until the appointment and
acceptance of a successor trustee pursuant to Section 8.4.
Section 8.4. Successor Indenture Trustee. (a) The Indenture Trustee may be
----------------------------
removed at any time by notice from the Required Holders. If the Indenture
Trustee shall have given notice of its intention to resign, shall resign, be
removed or otherwise be incapable of acting, or if the Indenture Trustee shall
be taken under the control of any public officer or a receiver appointed by a
court, or be adjudged a bankrupt or insolvent, then a successor may be appointed
by the Required Holders; provided, however, that the Company may appoint a
successor trustee to act until such successor shall be so appointed. The
Company shall notify the Beneficiaries of any such appointment by the Company,
but any successor trustee so appointed by the Company shall immediately and
without further act be superseded by a successor trustee appointed by the
Beneficiaries as above provided.
(b) Any successor to the Indenture Trustee shall execute, acknowledge and
deliver to its predecessor and the Company (or any subsequent owner of the
Company's interest in the property included in the Mortgaged Property), an
instrument accepting such appointment, and thereupon such successor, without any
further act, deed or conveyance, unless otherwise required by applicable state
law, shall become vested with all the estate, properties, rights, powers, duties
and trusts of its predecessor in the trusts hereunder with like effect as if
originally named as trustee herein; provided, however, that on the written
request of the Company, any of the Beneficiaries or the successor trustee, such
predecessor shall execute and deliver an instrument transferring to such
successor, upon the trust expressed in this Indenture, such estate, properties,
rights, powers, duties and trusts and shall duly assign, transfer, deliver and
pay over to such successor, any property and moneys subject to the lien of this
Indenture and held by such predecessor. The successor Indenture Trustee shall
deliver to each of the Beneficiaries and to the Company (or any subsequent owner
of the Company's interest in the property included in the Mortgaged Property) a
copy of any such instrument accepting appointment promptly after its execution
thereof.
(c) Any successor to the Indenture Trustee shall always be a bank or trust
company organized under the laws of the United States of America or a State
thereof licensed, chartered or regulated by the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the Federal Savings and
Loan Insurance Corporation, the Federal Home Loan Bank Board, the Farm Credit
Administration or the Bureau of Federal Credit Unions or any successor thereof,
having a combined capital, surplus and undivided
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profits (as shown by its most recent financial statement published to its
shareholders) aggregating at least $100,000,000 and a principal office in one of
the forty-eight contiguous United States, in which it is duly authorized to act
as a trustee.
(d) Subject to the preceding subsection (c) any corporation into which the
Indenture Trustee may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation or conversion to which it
shall be a party, shall be the successor to the Indenture Trustee without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
Section 8.5. Resignation and Removal of Individual Trustee. (a) The
---------------------------------------------
Individual Trustee may resign and be discharged of the trusts by notice thereof
to the Beneficiaries, the Company (or any subsequent owner of the Company's
interest in the property included in the Mortgaged Property) and the Indenture
Trustee specifying the date (which shall be not less than thirty days after the
date of such notice) when Such resignation shall take effect. Notwithstanding
the foregoing, no such resignation shall take effect until the appointment of a
successor Individual Trustee as hereinafter provided.
(b) The Individual Trustee may be removed at any time by the Required
Holders, by delivery of a notice of such removal to the Individual Trustee and
the Indenture Trustee, or by the Indenture Trustee, by delivery of a notice of
such removal to the Individual Trustee and the Beneficiaries.
(c) If at any time the Individual Trustee shall die, resign or be removed
or otherwise become incapable of acting, or if for any reason the office of
Individual Trustee shall become vacant, a successor shall forthwith be appointed
by the Indenture Trustee or, if the Indenture Trustee shall fail to make such
appointment within sixty days after such occurrence, by the Required Holders.
(d) Any successor to the Individual Trustee Shall execute, acknowledge and
deliver to his predecessor, the Indenture Trustee and the Company (or any
subsequent owner of the Company's interest in the property included in the
Mortgaged Property), an instrument accepting such appointment, and thereupon
such Person, without any further act or instrument unless otherwise required
under applicable state law, Shall become vested with all the estates,
properties, rights, powers, duties and trusts of his predecessor in the trusts
hereunder with like effect as if originally named as Individual Trustee herein;
provided, however, that on written request of any of the Beneficiaries, the
Company, the Indenture Trustee or such successor, such predecessor shall execute
and deliver an instrument transferring to such successor, upon the trusts herein
expressed, such estates, properties, rights,
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powers, duties and trusts, and shall duly assign, transfer, deliver and pay over
to such successor, any property and money subject to the lien hereof held by
such predecessor. The Indenture Trustee shall deliver to each of the
Beneficiaries and the Company a copy of any such instrument accepting
appointment promptly after the execution thereof by any successor to the
Individual Trustee.
Section 8.6. Separate and Co-Trustees. (a) If it deems such to be necessary
-------------------------
or prudent, the Indenture Trustee shall have the power to, and upon the written
request of the Required Holders shall, appoint one or more Persons to act as
separate trustees or co-trustees, jointly with the Indenture Trustee, of any of
the property subject to the lien hereof, and any such Person shall be such
separate trustee or co-trustee, with such powers and duties as shall be
specified in such instrument.
(b) Every separate trustee and co-trustee shall, to the extent not
prohibited by law, be subject to the following terms and conditions:
(1) the rights, powers, duties and obligations conferred or imposed
upon such separate or co-trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate or co-trustee,
as shall be set forth in the instrument appointing him or it; provided, however,
that such separate or co-trustee Shall take no action without the consent of the
Indenture Trustee (unless the requirement for such consent shall be forbidden by
law as to any particular application of such requirement);
(2) all powers, duties, obligations and rights conferred upon the
Indenture Trustee, in respect of the custody of all cash deposited hereunder,
shall be exercised solely by the Indenture Trustee; and
(3) the Indenture Trustee may at any time by written instrument accept
the resignation of or, acting on behalf and direction of the Beneficiaries,
remove any such separate trustee or co-trustee, and upon the request of the
Indenture Trustee, the Company shall join with the Indenture Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to make effective such resignation, but the Indenture Trustee shall
have the power to accept such resignation or to make Such removal without making
such request. A successor to a separate trustee or co-trustee so resigning or
removed may be appointed in the manner provided in this Section.
(c) Such separate trustee or co-trustee, upon acceptance of such trust,
shall be vested with the estates or property specified in such instrument,
either jointly with the Trustees, or separately, as may be provided therein,
subject to all the trusts,
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conditions and provisions of this Indenture; and every such instrument shall be
filed with the Indenture Trustee. Any separate trustee or co-trustee may, at any
time, by written instrument constitute the Indenture Trustee his agent or
attorney-in-fact with full power and authority, to the extent permitted by law,
to do all acts and things and exercise all discretion authorized or permitted
by him, for and in behalf of him and his name. If any separate trustee or co-
trustee shall be dissolved, become incapable of acting, resign, be removed or
die, all the estates, property, rights, powers, trusts, duties and obligations
of said separate trustee or co-trustee, so far as permitted by law, shall vest
in and be exercised by the Indenture Trustee, without the appointment of a
successor to said separate trustee or co-trustee, until the appointment of a
successor to said separate trustee or co-trustee is necessary as provided in
Section 8.6(a).
--------------
(d) Any notice, request or other writing, by or on behalf of the holders of
the Notes delivered to the Indenture Trustee shall be deemed to have been
delivered to the Individual Trustee, and all separate trustees and co-trustees.
Section 8.7. Liability of Trustees. No trustee hereunder shall be
---------------------
personally liable by reason of any act or omission of any other trustee
hereunder.
Section 8.8. Segregation of Moneys. All moneys received by the Trustees
---------------------
pursuant to this Indenture shall be held in trust for the purposes for which
they were paid, but, except as otherwise provided herein and to the extent
required by law, need not be segregated from any other moneys, and may be
deposited by the Indenture Trustee under such general conditions as may be
prescribed by law in the general banking department of the Indenture Trustee,
and the Indenture Trustee shall not be liable for any interest thereon, except
as otherwise provided herein.
Section 8.9. Illegal Acts. No provision of this Indenture or any amendment
------------
or supplement hereto shall be deemed to impose any duty or obligation on the
Trustees to perform any act in the execution of the trust or to exercise any
right, power, duty or obligation conferred or imposed on them, which under any
present or future law shall be unlawful, or which shall be beyond the corporate
powers, authorization or qualification of the Trustees, but any such act and any
such exercise shall be performed and exercised by any separate trustee or co-
trustee appointed as provided in Section 8.6, provided, that the same shall not
-----------
be unlawful or beyond his or its powers, authorization or qualification.
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ARTICLE 9
SUPPLEMENTAL INDENTURES; WAIVERS
Section 9.1. General. The Company and the Trustees may enter into
-------
indentures supplemental hereto or may waive (either generally or in a particular
instance and either retroactively or prospectively) any provision of this
Indenture or the Notes, as provided in this Article 9. The Trustees may, in
---------
their discretion, decline to enter into any supplemental indenture, or to
execute any such instrument of waiver, if the Trustees' own rights, duties or
immunities would be adversely affected. Whenever the consent of any of the
Beneficiaries shall be required for the execution of a supplemental indenture,
or instrument of waiver, it shall be sufficient if the substance of the
supplemental indenture or instrument of waiver, is consented to, not its
particular form. The Company and the Trustees agree to enter into a
supplemental indenture at any time a Person not theretofore a Beneficiary under
this Indenture becomes such as a result of the transfer of any Note pursuant
hereto, upon the request of such new Beneficiary.
Section 9.2. Without Consent of Beneficiaries. Indentures supplemental
--------------------------------
hereto may be entered into without the consent of any of the Beneficiaries for
any of the following purposes:
(a) to correct or amplify the description of any property subject or
intended to be subject to the lien of this Indenture;
(b) to add property to the Mortgaged Property or to Grant additional
property to the Trustees;
(c) to increase obligations or duties owing to the Trustees, or to
surrender any of the Company's rights hereunder; and
(d) to reflect the identity of any new Beneficiary hereunder.
Section 9.3. Consent of All Beneficiaries. Without the consent of all of
----------------------------
the Beneficiaries, no indenture supplemental hereto or instrument of waiver in
respect hereof shall:
(a) impair the right of any of the Beneficiaries to receive the payments
and prepayments of principal, premium and interest on the Notes as now provided
therein or herein;
(b) change the rate or the time of payment of interest on any of the Notes,
change the maturity of any of the Notes or affect the premium payable on any
prepayment of a Note,
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without the consent of the Registered Owner of each Note so affected;
(c) modify any of the provisions of this Indenture with respect to the
payment or prepayment of any Note, or reduce the percentage of the principal
amount of the Notes the Registered Owners of which are required to approve any
such modification or effectuate any such modification or effectuate any such
waiver, without the consent of the Registered Owners of all the Notes then
outstanding;
(d) permit the creation of any Lien on the property included in the
Mortgaged Property except Permitted Liens or as otherwise permitted hereunder,
or deprive any of the Beneficiaries of the benefit of the lien of this Indenture
on the Mortgaged Property, provided in Section 4.6 above and except that any
-----------
indenture supplemental hereto which Grants additional property to the Trustees
may Grant such property subject to Permitted Liens; or
(e) modify any of the percentages of the unpaid principal amounts of the
Notes the consent of the Registered Owners of which are required for any consent
or direction hereunder.
Section 9.4. Consent of Less Than All Beneficiaries. Except as otherwise
---------------------------------------
provided in Section 9.2 and 9.3, indentures supplemental hereto or instruments
----------- ---
of waiver with respect hereto may be entered into for any purposes with the
consent of the Required Holders.
Section 9.5. Exchange; Legend or Notation; Effect. (a) The Company or the
-------------------------------------
Indenture Trustee may require that the Notes bear a legend or other notation as
to any matter provided for in any indenture supplemental hereto or instrument of
waiver in respect hereof, or that new Notes be issued in exchange for the Notes,
as provided in Article 2, but modified to conform to any modification effected
---------
by such supplemental indenture or waiver. Any such legend, notation or exchange
shall, if requested by the Company, be at the cost and expense of the Company,
and all legends, notations and modifications shall be in form approved by the
Indenture Trustee.
(b) The Indenture Trustee may require presentation of the Notes (on at
least forty-five days' notice) at the Corporate Trust Office for the purpose of
stamping, typing or printing any such legend or notation thereon, or may send
stickers bearing such legend or notation to the Beneficiaries. The
Beneficiaries shall affix such stickers to the Notes held by them.
(c) Upon the execution of any indenture supplemental hereto this Indenture
shall be modified in accordance therewith,
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and such supplemental indenture shall form a part of this Indenture for all
purposes; and every Registered Owner of a Note theretofore or thereafter issued
and delivered hereunder shall be bound thereby.
Section 9.6. Consents in Writing. Any consent of the Beneficiaries
-------------------
provided for in this Article 9 shall be embodied in or evidenced by one or any
---------
number of concurrent instruments of substantially similar tenor and any such
consent Shall become effective when such instrument or instruments are delivered
to the Indenture Trustee.
Section 9.7. Delivery of Supplements. Promptly after the execution of any
-----------------------
indenture supplemental hereto the Company shall mail, first class postage
prepaid, a conformed copy of such supplement to the Registered Owner of each
Note at the address of such Registered Owner appearing on the Register. Any
failure of the Company to give such notice, or any defect therein, Shall not,
however, in any way impair or affect the validity of such supplement.
ARTICLE 10
GENERAL
Section 10.1. Costs and Expenses. The Company agrees to indemnify, defend
------------------
and hold harmless the Trustees and the Beneficiaries and each of their
respective officers, directors, employees and agents from and against all loss,
claims, damage, liabilities and expense, including without limitation attorneys
fees, costs and disbursements, incurred in connection with any action of
whatever kind taken in connection with this Indenture or any supplement or
amendment hereto or waiver hereunder or any suit or proceeding in or to which
the Trustees and the Beneficiaries may be made or become a party, including
without limitation suits for the purpose of protecting or perfecting the lien or
priority of this Indenture.
Section 10.2. Operative Documents. The Company covenants that it will
-------------------
timely and fully perform and satisfy all the terms, covenants and conditions
applicable to it of any and all Operative Documents.
Section 10.3. Security Agreement; Fixture Filing. This Indenture, to the
----------------------------------
extent that it conveys or otherwise deals with personal property or with items
of personal property which are or may become fixtures, shall also be construed
as a security agreement under the Uniform Commercial Code as in effect in each
state in which the Facilities are located, and this Indenture constitutes a
financing statement filed as a fixture filing in the Official Records of the
County Recorder of the Counties in which such
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Facilities are located with respect to any and all fixtures included within the
term "Mortgaged Property" as used herein and with respect to any Equipment or
other personal property that may now be or hereafter become Such fixtures. If
any item of Mortgaged Property hereunder also constitutes collateral granted to
the Trustees or the Beneficiaries under any other mortgage, agreement, document,
or instrument, in the event of any conflict between the provisions of this
Indenture and the provisions of such other mortgage, agreement, document, or
instrument relating to such collateral, the provision or provisions Selected by
the Trustees shall control with respect to such collateral.
Section 10.4. Reconveyance. Upon full payment of all indebtedness secured
------------
hereby and satisfaction of all the Obligations in accordance with their
respective terms and at the time and in the manner provided, this conveyance
shall be null and void, and thereafter, upon demand therefor, an appropriate
instrument of reconveyance or release shall promptly be made, at the expense of
the Company, by the Trustees to the Company.
Section 10.5. Notices. All communications, notices and consents provided
-------
for herein shall be in writing and be given in person or by overnight delivery
service or by means of telex, facsimile or other wire transmission made before
5:00 P.M., recipient's time, on a Business Day and promptly confirmed by mail
(with request for assurance of receipt in a manner typical with respect to
communications of that type) or by mail, and shall become effective (w) on
delivery if given in person, (x) on the date of transmission if sent by
facsimile transmission, (y) the next Business Day if delivered by overnight
delivery service, or (z) three Business Days after being deposited in the United
States mail, registered or certified mail, return receipt requested, with proper
postage prepaid. Notices shall be addressed as follows:
If to the Company:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, CO 80111
Attention: Chief Financial Officer
Facsimile: (303) 790-0225
With a copy to the Company's General Counsel at the Company's address.
If to the Trustees:
The Bank of Cherry Creek, N.A.
3033 East First Avenue
Denver, Colorado 80206
Attention: Corporate Trust Department
Facsimile: (303) 329-9629
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<PAGE>
or at such other address as any party hereto may from time to designate by
notice duly given in accordance with the provisions of this Section to the other
parties hereto.
Section 10.6. Successors; Gender. All provisions hereof shall bind the
------------------
Company, the Trustees, the Beneficiaries and their respective successors,
vendees and assigns and shall inure to the benefit of the Trustees and the
Beneficiaries and their respective successors and assigns, and the Company and
its permitted successors and assigns. Except as expressly provided herein, the
Company hall have no right to assign any of its rights hereunder or in any of
the Mortgaged Property. Wherever used, the singular number shall include the
plural, the plural the singular, and the use of any gender shall be
applicable to all genders.
Section 10.7. Care by the Beneficiaries or the Trustees. The Beneficiaries
-----------------------------------------
or the Trustees shall be deemed to have exercised reasonable care in the custody
and preservation of any of the Mortgaged Property in their possession if any of
them take such action for that purpose as the Company requests in writing, but
failure of the Beneficiaries or the Trustees to comply with any such request
shall not be deemed to be (or to be evidence of) a failure to exercise
reasonable care, and no failure of the Beneficiaries or the Trustees to preserve
or protect any rights with respect to such Mortgaged Property against prior
parties, or to do any act with respect to the preservation of such Mortgaged
Property not so requested by the Company, shall be deemed a failure to exercise
reasonable care in the custody or preservation of such Mortgaged Property.
Section 10.8. No Obligation on the Beneficiaries or the Trustees. This
--------------------------------------------------
Indenture is intended only as security for the Obligations. Anything herein to
the contrary notwithstanding, (i) the Company shall be and remain liable
hereunder and with respect to the Mortgaged Property to perform all of the
obligations assumed by the Company under this Indenture or with respect to each
thereof, (ii) neither the Beneficiaries nor the Trustees shall have any
obligation or liability hereunder or with respect to the Mortgaged Property by
reason or arising out of this Indenture other than the obligation of the
Trustees to act with respect to the Mortgaged Property as herein provided, and
(iii) neither the Beneficiaries nor the Trustees shall be required or obligated
in any manner to perform or fulfill any of the obligations of the Company,
under, pursuant to or with respect to any of the Mortgaged Property.
Section 10.9. No Waiver; Writing. No delay on the part of the Trustees or
------------------
the Beneficiaries in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by the Trustees or the
Beneficiaries of any right or remedy shall preclude other or further exercise
thereof or the
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exercise of any other right or remedy. The granting or withholding of consent
by the Trustees or the Beneficiaries to any transaction as required by the terms
hereof shall not be deemed a waiver of the right to require consent to future or
successive transactions.
Section 10.10. GOVERNING LAW; SEVERABILITY. THIS INDENTURE AND THE NOTES
--------------------------- ----------------------------
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE
-----------------------------------------------------------------------------
STATE OF COLORADO; PROVIDED, HOWEVER, THAT THE PROVISIONS FOR THE CREATION,
---------------------------------------------------------------------------
PERFECTION AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST CREATED BY THIS
----------------------------------------------------------------------------
INDENTURE IN RESPECT OF ANY FACILITY AND THE FORECLOSURE OR POWER OF SALE
-------------------------------------------------------------------------
PROCEDURES SET FORTH IN THIS INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
----------------------------------------------------------------------------
ACCORDANCE WITH THE INTERNAL LAW OF THE STATE WHERE THE APPLICABLE FACILITY IS
------------------------------------------------------------------------------
LOCATED. Whenever possible, each provision of this Indenture shall be
-------
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Indenture shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Indenture.
Section 10.11. Waiver. The Company, on behalf of the Company, and all
------
Persons now or hereafter interested in any of the Facilities or the Mortgaged
Property, to the full extent permitted by applicable law, hereby waives all
rights under all appraisement, homestead, moratorium, valuation, exemption,
stay, extension, and redemption statutes, laws or equities now or hereafter
existing, and hereby further waives the pleading of any statute or limitations
as a defense to any and all Obligations secured by this Indenture, and the
Company agrees that no defense, claim or right based on any thereof will be
asserted, or may be enforced, in any action enforcing or relating to this
Indenture or any of the Mortgaged Property. Without limiting the generality of
the preceding sentence, the Company, on the Company's own behalf and on behalf
of each and every Person acquiring any interest in or title to any Facility
subsequent to the date of this Indenture, hereby irrevocably waives any and all
rights of redemption from sale under any order or decree of foreclosure of this
Indenture or under any power contained herein or therein or under any sale
pursuant to any statute, order, decree or judgment of any court. The Company,
for itself, and for all Persons hereafter claiming through or under it or who
may at any time hereafter become holders of liens junior to the lien of this
Indenture, hereby expressly waives and releases all right to direct the order in
which any of the Mortgaged Property shall be sold in the event of any sale or
sales pursuant hereto and to have any of the Mortgaged Property and/or any other
property now or thereafter constituting security for any of the indebtedness
secured hereby marshalled upon any foreclosure of this Indenture or of any other
security for any of said indebtedness.
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Section 10.12. No Merger. It being the desire and intention of the parties
---------
hereto that this Indenture and the lien hereof do not merge in fee simple title
to the Facilities, it is hereby understood and agreed that should the Trustees
or any of the Beneficiaries acquire an additional or other interests in or to
the Facilities or the ownership thereof, then, unless a contrary intent is
manifested by the Trustees as evidenced by an express statement to that effect
in an appropriate document duly recorded, this Indenture and the liens hereof
shall not merge in the fee simple title, toward the end of this Indenture may be
foreclosed as if owned by a stranger to the fee simple title.
Section 10.13. Beneficiaries or Trustees Not Joint Venturers or Partners.
---------------------------------------------------------
The Company and the Trustees acknowledge and agree that in no event shall the
Trustees or any of the Beneficiaries be deemed to be a partner or joint venturer
with the Company. Without limitation of the foregoing, none of the Trustees or
any of the Beneficiaries shall be deemed to be such a partner or joint venturer
on account of its becoming a mortgagee in possession or exercising any rights
pursuant to this Indenture or pursuant to any other instrument or document
evidencing or securing any of the Obligations secured hereby, or otherwise.
Section 10.14. No Third Party Benefits. This Indenture, the Notes and
-----------------------
the other Operative Documents included in the Mortgaged Property are made for
the sole benefit of the parties thereto, and the Registered Owners of the Notes,
and subject to the provisions of Section 10.6, their successors and assigns, and
------------
no other party shall have any legal interest of any kind under or by reason of
any of the foregoing. Whether or not the Trustees elect to employ any or all
the rights, powers or remedies available to them under any of the foregoing, the
Trustees shall have no obligation or liability of any kind to any third party by
reason of any of the foregoing or any of the Trustees' actions or omissions
pursuant thereto or otherwise in connection with this transaction.
Section 10.15. Counterparts. This Indenture may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same instrument.
Section 10.16. Table of Contents; Headings. The table of contents
---------------------------
contained herein and the headings of the various Articles, Sections and
Schedules herein have been inserted for reference only and shall not to any
extent have the effect of modifying or amending the express terms and provisions
hereof.
Section 10.17. No Impairment. The Company agrees that no other security,
-------------
now existing or hereafter taken, for the Obligations shall be impaired or
affected in any manner by the execution of this Indenture; no security
subsequently taken to
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secure any of the Obligations shall impair or affect in any manner the security
given by this Indenture; all security for the payment of the Obligations shall
be taken, considered, and held as cumulative; and the taking of additional
security shall at no time release or impair any security by endorsement or
otherwise previously given. The Company further agrees that any part of the
security herein described may be released without in anyway altering, varying,
or diminishing the force, effect, or lien of this Indenture or of any renewal or
extension of said lien, and that this Indenture shall continue as a first lien,
assignment, and security interest on all the Mortgaged Property not expressly
released until all Obligations are fully discharged and paid.
Section 10.18. Maximum Interest Payable. No provision of this Indenture or
------------------------
of the Notes shall require the payment or permit the collection of interest in
excess of the maximum permitted by applicable law. If any excess of interest in
such respect is herein or in the Notes provided for, or shall be adjudicated to
be so provided for herein or in the Notes, the Company shall not be obligated to
pay such interest in excess of the amount permitted by applicable law, and the
right to demand the payment of any such excess shall be and hereby is waived,
and this provision shall control any other provision of this Indenture and the
Notes.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Indenture as of the day and year first above written.
TRUSTEES
THE BANK CHERRY CREEK, N.A. (SEAL)
(Indenture Trustee)
By: /s/Douglas R. Dix Attest: /s/Kenneth B. Buckius
------------------------------- ------------------------------
Name: Douglas R. Dix Kenneth B. Buckius
Title: Vice President Ass't Secretary
/s/Douglas R. Dix
----------------------------------
(Individual Trustee)
Name: Douglas R. Dix
-70-
<PAGE>
BIG O TIRES, INC.
By:/s/John B. Adams
-------------------------------
Name: John B. Adams
Title: Executive Vice President
BIG O DEVELOPMENT, INC.
By:/s/John B. Adams
-------------------------------
Name: John B. Adams
Title: Vice President
BIG O TIRE OF IDAHO, INC.
By:/s/John B. Adams
-------------------------------
Name: John B. Adams
Title: Vice President
STATE OF COLORADO)
)SS.
COUNTY OF Denver )
--------
On this 27th day of April, 1994, before me, the undersigned, a Notary Public in
----
and for said County and State, personally appeared Douglas R. Dix and Kenneth B.
Buckius, to me personally known, who, being by me duly sworn did say that they
are the Vice President and Assistant Secretary, respectively, of the national
association executing the foregoing instrument; that the seal affixed to the
said instrument is the seal 0 f the said national association; that said
instrument was signed and sealed on behalf of said national association by
authority of its Board of Directors; and that the said Douglas R. Dix and
Kenneth B. Buckius, as such officers, acknowledged the execution of said
instrument to be the voluntary act and deed of the corporation and of the
fiduciary, by it, by them and as the fiduciary voluntarily executed.
/S/Nicole J. Rice
-----------------------------------
Notary Public
My Comm. Expires 10/12/97
-71-
<PAGE>
STATE OF COLORADO)
)SS.
COUNTY OF Denver )
-------
On this 27th day of April, 1994, before me, the undersigned, a Notary
----
Public in and for the said County and State, personally appeared DOUGLAS R. DIX,
to me known to be the identical person named in and who executed the foregoing
instrument, and acknowledged that the person, as the fiduciary, executed the
instrument as the voluntary act and deed of the person and of the fiduciary.
/s/Nicole J. Rice
-----------------------------------
Notary Public
My Comm. Expires 10/12/97
STATE OF COLORADO )
) SS.
COUNTY OF Arapahoe)
--------
On this 27th day of April, 1994, before me, the undersigned, a Notary
----
Public in and for said County and State, personally appeared John B. Adams to me
personally known, who, being by me duly sworn did say that he is the Executive
Vice President of BIG 0 TIRES, INC.; that the seal affixed to the said
instrument is the seal of the said corporation; that said instrument was signed
and sealed on behalf of said corporation by authority of its Board of Directors;
and that the said John B. Adams, as such officer, acknowledged the execution of
said instrument to be the voluntary act and deed of said corporation, by him
voluntarily executed.
/s/Beth R. Hayne
-----------------------------------
Notary Public
STATE OF COLORADO )
)SS.
COUNTY OF Arapahoe)
--------
On 27th day of April, 1994, before me, the undersigned, a Notary Public in
----
and for said County and State, personally appeared John B. Adams to me
personally known, who, being by me duly sworn did say that he is the Vice
President of BIG 0 DEVELOPMENT, INC.; that the seal affixed to the said
instrument is the seal of the said corporation; that said instrument was signed
and sealed on behalf of said corporation by authority of its Board of Directors;
and that the said John B. Adams, as such officer, acknowledged the execution of
said instrument to be the voluntary act and deed of said corporation, by him
voluntarily executed.
/s/Beth R. Hayne
-----------------------------------
Notary Public
-72-
<PAGE>
STATE OF COLORADO )
)SS.
COUNTY OF Arapahoe)
--------
On this 27th day of April, 1994, before me, the undersigned, a Notary
----
Public in and for said County and State, personally appeared John B. Adams to me
personally known, who, being by me duly sworn did say that he is the Vice
President of BIG O TIRE OF IDAHO, INC.; that the seal affixed to the said
instrument is the seal of the said corporation; that said instrument was signed
and sealed on behalf of said corporation by authority of its Board of Directors;
and that the said John B. Adams, as such officer, acknowledged the execution of
said instrument to be the voluntary act and deed of said corporation, by him
voluntarily executed.
/s/ Beth R. Hayne
-----------------------------------
Notary Public
-73-
<PAGE>
STATE OF COLORADO )
)SS.
COUNTY OF ARAPAHOE)
On April 27, 1994, before me Robyn S. Brinkley, personally appeared John B.
-----------------
Adams known to me (or proved to me on the basis of satisfactory evidence) to be
the person whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Robyn S. Brinkley (Seal)
----------------------------
STATE OF COLORADO)
)SS.
COUNTY OF Denver )
-------
On April 27, 1994, before me Nicole J. Rice, personally appeared Douglas R.
--------------
Dix known to me (or proved to me on the basis of satisfactory evidence) to be
the person whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Nicole J. Rice (Seal)
----------------------------
My Comm. Expires 10/12/97
STATE OF COLORADO)
)SS.
County of Denver )
-------
On April 27, 1994, before me Nicole J. Rice, personally appeared Kenneth B.
--------------
Buckius known to me (or proved to me on the basis of satisfactory evidence) to
be the person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Nicole J. Rice (Seal)
----------------------------
My Comm. Expires 10/12/97
-73A-
<PAGE>
SCHEDULE A-1
DESCRIPTION OF VACAVILLE SITE
<PAGE>
ALL THAT REAL PROPERTY SITUATE IN THE CITY OF VACAVILLE, COUNTY OF SOLANO,
STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
PARCEL ONE:
PARCEL C, AS SHOWN ON PARCEL MAP FILED 24 NOVEMBER 1981 IN BOOK 22 OF PARCEL
MAPS, PAGE 97, SOLANO COUNTY RECORDS.
CERTIFICATE OF CORRECTION FOR PARCEL MAP RECORDED JULY 17, 1986 IN BOOK 1986 AT
PAGE 75316 AS INSTRUMENT NO. 36974.
EXCEPTING AND: SERVING TO GRANTOR HEREIN, ITS SUCCESSORS AND ASSIGNS, ALL OIL,
GAS AND OTHER HYDROCARBONS, GEOTHERMAL RESOURCES AS DEFINED IN SECTION 6903 OF
THE CALIFORNIA PUBLIC RESOURCES CODE AND ALL OTHER MINERALS, WHETHER SIMILAR TO
THOSE HEREIN SPECIFIED OR NOT, WITHIN OR THAT MAY BE PRODUCED FROM SAID REAL
PROPERTY, AND FURTHER EXCEPTING TO THE GRANTOR, ITS SUCCESSORS AND ASSIGNS, THE
SOLE AND EXCLUSIVE RIGHT FROM TIME TO TIME TO DRILL AND MAINTAIN WELLS OR OTHER
WORKS INTO OR THROUGH SAID REAL PROPERTY AND THE ADJOINING STREETS, ROADS AND
HIGHWAYS BELOW A DEPTH OF FIVE HUNDRED (500) FEET AND TO PRODUCE, INJECT, STORE
AND REMOVE FROM AND THROUGH SUCH WELLS OR WORKS, OIL, GAS, WATER AND OTHER
SUBSTANCES OF WHATEVER NATURE, INCLUDING THE RIGHT TO PERFORM BELOW SAID DEPTH
BY GRANTOR NECESSARY OR CONVENIENT FOR THE RIGHTS HEREINABOVE EXCEPTED AND
RESERVED TO NOT EXCEPT OR RESERVE TO GRANTOR ANY RIGHT OF SAID REAL PROPERTY OR
THE FIRST FIVE HUNDRED (500) CONDUCT ANY OPERATIONS THEREON OR THEREIN, AS
FEBRUARY 9, 1983 IN BOOK 1983, PAGE 9188, ANY AND ALL OPERATIONS DEEMED EXERCISE
OF SUCH RIGHTS. THE GRANTOR 00 NOT INCLUDE AND 00 GRANTOR TO USE THE SURFACE OF
FEET BELOW SAID SURFACE OR TO EXCEPTED IN THE DEED RECORDED INSTRUMENT NO. 5020.
APN 133-020-540
SCHEDULE A-1
<PAGE>
SCHEDULE A-2
DESCRIPTION OF BOISE, IDAHO SITE
<PAGE>
THE LAND REFERRED TO IN THIS COMMITMENT IS LOCATED IN THE COUNTY OF ADA STATE OF
IDAHO AND DESCRIBED AS FOLLOWS:
LOT 2, BLOCK 1 OF BROADWAY PLACE SUBDIVISION, ACCORDING TO THE PLAT THEREOF
FILED IN BOOK 55 OF PLATS AT PAGES 5009 AND 5010, RECORDS OF ADA COUNTY, IDAHO,
AND AS ADJUSTED BY LOT LINE ADJUSTMENT SURVEY RECORDED JANUARY 26, 1989 IN BOOK
G OF SURVEYS AT PAGE 1391 UNDER INSTRUMENT NO. 8903690.
SCHEDULE A-2
<PAGE>
SCHEDULE A-3
DESCRIPTION OF LAS VEGAS SITE
<PAGE>
DESCRIPTION: THE LAND REFERRED TO HEREIN IS SITUATED IN THE
COUNTY OF CLARK, STATE OF NEVADA AND IS DESCRIBED AS FOLLOWS:
Being a portion of the SOUTHWEST (SW 1/4) of Section 11, and the NORTHWEST
QUARTER (NW 1/4) of Section 14, Township 22 South, Range 62 East, M.D.S. & M.,
described as follows:
COMMENCING AT THE SOUTHWEST CORNER OF LOT 5 OF GIBSON/WARM SPRINGS, A
COMMERCIAL SUBDIVISION, THE PLAT OF SAID SUBDIVISION BEING ON FILE IN THE CLARK
COUNTY RECORDER'S OFFICE AS BOOK 58, PAGE 82 OF PLATS, SAID POINT ALSO BEING A
POINT IN THE WESTERLY RIGHT-OF-WAY LINE OF U.S. HIGHWAY 95; THENCE SOUTH 14 DEG
54'06" EAST ALONG SAID WESTERLY RIGHT-OF-WAY LINE, 1257.00 FEET; THENCE SOUTH 75
DEG. 05'54" WEST, 109.50 FEET TO THE POINT OF BEGINNING; THENCE ALONG A LINE
BEING PARALLEL WITH AND 109.50 FEET WESTERLY FROM THE AFOREMENTIONED WESTERLY
RIGHT-OF-WAY LINE OF U.S. HIGHWAY 95 THE FOLLOWING TWO (2) COURSES: SOUTH 14 DEG
54'06" EAST, 586.20 FEET; THENCE CURVING TO THE LEFT ALONG THE ARC OF A 3309.50
FOOT RADIUS CURVE CONCAVE NORTHEASTERLY, THROUGH A CENTRAL ANGLE OF 05 DEG
52'33", AN ARC LENGTH OF 339.39 FEET TO A POINT OF NON-TANGENCY TO WHICH A
RADIAL LINE BEARS SOUTH 69 DEG 13'21" WEST; THENCE SOUTH 75 DEG 05'54" WEST,
622.38 FEET; THENCE NORTH 14 DEG 54'06" WEST, 955.00 FEET TO A POINT IN THE
FUTURE SOUTHERLY RIGHT-OF-WAY LINE OF AMERICAN PACIFIC DRIVE (PROPOSED 60.00
FEET WIDE); THENCE ALONG SAID PROPOSED SOUTHERNLY RIGHT-OF-WAY LINE THE
FOLLOWING TWO (2) COURSES: NORTH 75 DEG 05'54" EAST, 575.00 FEET; THENCE CURVING
TO THE RIGHT ALONG THE ARC OF A 30.00 FOOT RADIUS CURVE CONCAVE SOUTHWESTERLY,
THROUGH A CENTRAL ANGLE OF 90 DEG. 00'00", AN ARC LENGTH OF 47.12 FEET TO THE
POINT OF BEGINNING.
SCHEDULE A-3
<PAGE>
SCHEDULE B-1
PERMITTED LIENS - VACAVILLE
<PAGE>
1. GENERAL AND SPECIAL COUNTY AND CITY TAXES FOR THE FISCAL YEAR 1994-95 A
LIEN NOT YET DUE OR PAYABLE.
2. GENERAL AND SPECIAL COUNTY AND CITY TAXES FOR THE FISCAL YEAR 1993-4
FIRST INSTALLMENT: $27,243.98 PAID
SECOND INSTALLMENT: $27,243.98 PAID
CODE AREA: 6064
PARCEL NO.: 133-020-540
ASSESSED VALUES:
LAND: $434,203.00
IMPROVEMENTS: $3,523,019
EXEMPTIONS: $NONE
TAXPAYER'S NAME: N/A
ADDRESS: N/A
THE ABOVE INSTALLMENTS INCLUDE THE ANNUAL AMOUNT OF $2,329.14 FOR VV IND
PARK SS LANDSCAPE.
THE ABOVE INSTALLMENTS INCLUDE THE ANNUAL AMOUNT OF $159.10 FOR VV AND PK
DET BASIN.
THE ABOVE INSTALLMENTS INCLUDE THE ANNUAL AMOUNT OF $9,693.16 FOR VACA
VALLEY INDUSTRIAL PARK.
3. AN ASSESSMENT UNDER THE IMPROVEMENT BOND ACT OF 1915, INSTALLMENTS OF WHICH
ARE COLLECTED WITH REGULAR COUNTY TAXES:
FOR: FEES
DISTRICT NAME: VACA VALLEY INDUSTRIAL PARK
BOND NO.: 8613
ASSESSOR PARCEL NO.: 133-020-540
ORIGINAL PRINCIPAL: $93,835.90
4. THE LIEN OF SUPPLEMENTAL TAXES, IF ANY, ASSESSED PURSUANT TO THE PROVISIONS
OF CHAPTER 3.5, COMMENCING WITH SECTION 75 OF THE REVENUE AND TAXATION CODE
OF THE STATE OF CALIFORNIA.
5. THE HEREIN DESCRIBED LAND IS WITHIN THE BOUNDS OF THE SOLANO IRRIGATION
DISTRICT AS ESTABLISHED BY THE BOARD OF SUPERVISORS OF SOLANO COUNTY,
CALIFORNIA ON MARCH 8, 1948 AND IS SUBJECT TO ALL TAXES, ASSESSMENTS,
OBLIGATIONS AND EASEMENTS, THEREOF, IF ANY.
6. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS SET
FORTH IN A DOCUMENT
GRANTED TO: PACIFIC GAS AND ELECTRIC COMPANY
PURPOSE: ELECTRIC TRANSMISSION LINES
RECORDED: MAY 20, 1946 IN BOOK 342 PAGE 277, AS INSTRUMENT NO. 7184,
OFFICIAL RECORDS
AFFECTS: THE EASTERLY 4 FEET
SCHEDULE B-1
<PAGE>
7. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: PACIFIC GAS AND ELECTRIC COMPANY, A CALIFORNIA CORPORATION
PURPOSE: ELECTRIC TRANSMISSION POLE LINE PURPOSES
RECORDED: MAY 20, 1946 IN BOOK 342 PAGE 281, AS INSTRUMENT NO. 7187,
OFFICIAL RECORDS
AFFECTS: THE WESTERLY 6 FEET
8. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: JAMES W. MAIZE AND ROBERT K. MAIZE
PURPOSE: INGRESS AND EGRESS AND FOR RAILWAY LINE
RECORDED: MARCH 2, 1978 IN BOOK 1978 PAGE 15893, AS INSTRUMENT NO.
9389, OFFICIAL RECORDS
AFFECTS: THE NORTHERLY 40 FEET OF PARCEL ONE
9. LANDSCAPE AND MAINTENANCE AGREEMENT, UPON THE TER.MS AND CONDITIONS
CONTAINED THEREIN
DATED: NOT SHOWN
EXECUTED BY AND BETWEEN: CHEVRON LAND & DEVELOPMENT COMPANY, A DELAWARE
CORPORATION AND THE CITY OF VACAVILLE
RECORDED: SEPTEMBER 8, 1980
BOOK: 1980 PAGE 62221
INSTRUMENT NO.: 38230 OFFICIAL RECORDS
10.COVENANTS, CONDITIONS AND RESTRICTIONS (BUT DELETING RESTRICTIONS, IF ANY,
BASED UPON RACE, COLOR, RELIGION OR NATIONAL ORIGIN) IN THE DECLARATION OF
RESTRICTIONS
EXECUTED BY: CHEVRON LAND AND DEVELOPMENT COMPANY
RECORDED: JULY 31, 1980
BOOK: 1980 PAGE 51986
INSTRUMENT NO.: 32051, OFFICIAL RECORDS
WHICH PROVIDE THAT A VIOLATION THEREOF SHALL NOT DEFEAT OR RENDER INVALID THE
LIEN OF ANY MORTGAGE OR DEED OF TRUST MADE IN GOOD FAITH AND FOR VALUE. DOES
NOT PROVIDE FOR REVERSION OF TITLE IN THE EVENT OF A BREACH THEREOF.
<PAGE>
11.AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SHOWN OR AS OFFERED FOR DEDICATION ON THE RECORDED MAP SHOWN BELOW.
MAP OF: VACA VALLEY INDUSTRIAL PARK
RECORDED: NOVEMBER 24, 1981 IN BOOK 22 OF PARCEL MAPS AT PAGE
97, OFFICIAL RECORDS
EASEMENT PURPOSE: PUBLIC UTILITIES
AFFECTS: THE EASTERLY 10 FEET, THE NORTHEASTERLY 6 FEET, THE
NORTHERLY 15 FEET AND THE SOUTHWESTERLY 15 FEET
12.AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: CITY OF VACAVILLE
PURPOSE: STORM DRAIN PIPE, PUBLIC UTILITIES, EASEMENTS FOR ROADS &
UTILITIES
RECORDED: MARCH 20, 1981 IN BOOK 1981 PAGE 19689, AS INSTRUMENT NO.
11434, OFFICIAL RECORDS
AFFECTS: THE WESTERLY 20 FEET
13.A LEASE, FOR OCCUPANCY ONLY, TO SIMPSON-DURAVENT, INC.
<PAGE>
SCHEDULE B-2
PERMITTED LIENS - BOISE
<PAGE>
1. GENERAL TAXES FOR THE YEAR 1993, WHICH ARE LIENS, IN THE ORIGINAL SUM OF $
44,881.66, OF WHICH THE FIRST HALF HAS BEEN PAID. THE SECOND HALF OF WHICH
WILL NOT BECOME DELINQUENT UNTIL JUNE 20TH. PARCEL NO. 01 R1088640130
GENERAL TAXES FOR THE YEAR 1993, WHICH ARE LIENS, IN THE ORIGINAL SUM OF
$58.67, OF WHICH THE FIRST HALF HAS BEEN PAID. THE SECOND HALF OF WHICH
WILL NOT BECOME DELINQUENT UNTIL JUNE 20TH. PARCEL NO. 01 P7PBCRED774 SAID
TAXES AFFECT PERSONAL PROPERTY TAXES ONLY.
2. GENERAL TAXES FOR THE YEAR 1994, WHICH ARE LIENS, ARE NOT YET DUE AND
PAYABLE.
3. SEWERAGE CHARGES AND SPECIAL ASSESSMENT POWERS OF THE CITY OF BOISE. NO
SPECIAL ASSESSMENTS NOW SHOW OF RECORD.
4. LIENS AND ASSESSMENTS OF THE FOLLOWING DISTRICT AND THE RIGHTS AND POWERS
THEREOF AS PROVIDED BY LAW. NO DELINQUENCIES APPEAR IN THE COUNTY
RECORDER'S OFFICE.
DISTRICT: NEW YORK IRRIGATION DISTRICT
5. COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS CONTAINED IN DEED TO THE
STATE OF IDAHO, CONVEYING A PORTION OF THE PROPERTY ADJOINING.
RECORDED: MAY 12,1964
INSTRUMENT NO.: 583302
AS FOLLOWS: GRANTORS AGREE THAT NO BUILDING OR STRUCTURES, EXCEPT
IRRIGATION OR DRAINAGE STRUCTURES, WILL BE PERMITTED TO BE CONSTRUCTED
WITHIN 20 FEET OF THE REAL PROPERTY ABOVE DESCRIBED.
"GRANTORS FURTHER AGREE THAT NO BILLBOARDS OR OTHER ADVERTISING SIGNS WILL
BE PERMITTED CLOSER THAN 100 FEET FROM THE REAL PROPERTY ABOVE DESCRIBED,
EXCEPTING SIGNS PERTAINING TO BUSINESS ESTABLISHED ON LANDS ADJACENT TO THE
DESCRIBED REAL PROPERTY.
"AS A PART OF THE CONSIDERATION HEREINABOVE STATED, THE GRANTORS, BARGAIN,
SELL, CONVEY AND RELINQUISH TO THE GRANTEE ALL EXISTING, FUTURE, OR
POTENTIAL COMMON LAW OR STATUTORY EASEMENTS OF ACCESS BETWEEN THE RIGHT OF
WAY OF THE PUBLIC WAY IDENTIFIED AS F-FG-3022(17), AND ALL OF THE
CONTIGUOUS REMAINING REAL PROPERTY OF THE GRANTORS WHETHER ACQUIRING BY
SEPARATE CONVEYANCES OR OTHERWISE, OF WHICH THE REAL PROPERTY COVERED BY
THIS INSTRUMENT IS A PART, WHERE SAID REMAINING REAL PROPERTY ABUTS ON BOTH
SIDES OF THE SAID PUBLIC WAY.
"IT IS EXPRESSLY INTENDED THAT THESE COVENANTS, BURDENS AND RESTRICTIONS
SHALL RUN WITH THE LAND AND SHALL FOREVER BIND THE GRANTORS, THEIR HEIRS
AND ASSIGNS."
AFFECTS: THAT PORTION ADJOINING BROADWAY AVE.
6. COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS CONTAINED IN DEED TO THE
STATE OF IDAHO, CONVEYING A PORTION OF THE PROPERTY ADJOINING.
RECORDED: SEPTEMBER 16,195_
INSTRUMENT NO.: 621450
AS FOLLOWS: GRANTORS AGREE THAT NO BUILDING OR STRUCTURES, EXCEPT
IRRIGATION OR DRAINAGE STRUCTURES, WILL BE PERMITTED TO BE CONSTRUCTED
WITHIN 20 FEET OF THE REAL PROPERTY ABOVE DESCRIBED.
"GRANTORS FURTHER AGREE THAT NO BILLBOARDS OR OTHER ADVERTISING SIGNS WILL
BE PERMITTED CLOSER THAN 100 FEET FROM THE REAL PROPERTY ABOVE DESCRIBED,
EXCEPTING SIGNS PERTAINING TO BUSINESS ESTABLISHED ON LANDS ADJACENT TO THE
DESCRIBED REAL PROPERTY.
SCHEDULE B-2
<PAGE>
"AS A PART OF THE CONSIDERATION HEREINABOVE STATED, THE GRANTORS, BARGAIN,
SELL, CONVEY AND RELINQUISH TO THE GRANTEE ALL EXISTING, FUTURE, OR
POTENTIAL COMMON LAW OR STATUTORY EASEMENTS OF ACCESS BETWEEN THE RIGHT OF
WAY OF THE PUBLIC WAY IDENTIFIED AS F-FG-3022(17), AND ALL OF THE
CONTIGUOUS REMAINING REAL PROPERTY OF THE GRANTORS WHETHER ACQUIRING BY
SEPARATE CONVEYANCES OR OTHERWISE, OF WHICH THE REAL PROPERTY COVERED BY
THIS INSTRUMENT IS A PART, WHERE SAID REMAINING REAL PROPERTY ABUTS ON BOTH
SIDES OF THE SAID PUBLIC WAY.
"IT IS EXPRESSLY INTENDED THAT THESE COVENANTS, BURDENS AND RESTRICTIONS
SHALL RUN WITH THE LAND AND SHALL FOREVER BIND THE GRANTORS, THEIR HEIRS
AND ASSIGNS." AFFECTS: THAT PORTION ADJOINING BROADWAY AVE.
7. COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS CONTAINED IN DEED TO THE
STATE OF IDAHO, CONVEYING A PORTION OF THE PROPERTY ADJOINING.
RECORDED: MAY 23,1967
INSTRUMENT NO.: 664763
AS FOLLOWS: GRANTORS AGREE THAT NO BUILDINGS OR STRUCTURES, EXCEPT
IRRIGATION OR DRAINAGE STRUCTURES, WILL BE PERMITTED TO BE CONSTRUCTED
WITHIN 20 FEET OF THE RIGHT OF WAY OF SAID PROJECT, EXCEPT FOR ACCESS ROAD
NO. 2 BETWEEN STATIONS 0 +60 AND 5 + 87.28.
GRANTORS CONVEYS UNTO THE STATE THE RIGHT TO PROHIBIT JUNKYARDS ON ANY CF
THEIR REMAINING LAND WITHIN 1000 FEET OF THE RIGHT OF WAY OF THE SAID
PROJECT, AND THE RIGHT TO PROHIBIT ADVERTISING SIGNS, DISPLAYS AND DEVICES
WITHIN 660 FEET THEREOF; PROVIDED THAT ADVERTISING RELATING TO BUSINESS
CONDUCTED ON ANY OF THE GRANTORS REMAINING LAND BE PERMITTED NOT CLOSER
THAN 20 FEET THEREFROM, BUT ONLY ON LAND UTILIZED EXCLUSIVELY FOR SAID
BUSINESS. THE 20 FOOT SIGN RESTRICTION DOES NOT APPLY TO ACCESS ROAD NO. 2.
SOUTH OF STATION 0+60.
AFFECTS: PORTION OF SAID PLAT LYING WITHIN 1000 FEET OF FEDERAL WAY
8. AN EASEMENT CONTAINING CERTAIN TERMS, CONDITIONS AND PROVISIONS AFFECTING A
PORTION OF SAID PREMISES AND FOR THE PURPOSES STATED HEREIN.
FOR: RIGHT TO CONSTRUCT, OPERATE, MAINTAIN AND REPAIR, SUCH E3BURIED CABLE,
UNDERGROUND CONDUIT AND ASSOCIATED FACILITIES FOR THE PROVISION OF
COMMUNICATION SERVICES.
IN FAVOR OF: THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY RECORDED:
APRIL 13,1988
INSTRUMENT NO.: 8817203
AFFECTS: THE EASTERLY TEN (10) FEET OF LOTS 1, 2 AND 3, BLOCK 1: THE
NORTHERLY TEN (10) FEET OF LOTS 4 AND 5, BLOCK 1 AND THE NORTHWESTERLY TEN
(10) FEET OF LOT 6, BLOCK 1
9. COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS AS SET FORTH ON THE FACE
OF THE PLAT.
<PAGE>
SCHEDULE B-3
PERMITTED LIENS - LAS VEGAS
<PAGE>
AT THE DATE HEREOF, EXCEPTIONS TO COVERAGE IN ADDITION TO THE PRINTED EXCEPTIONS
AND EXCLUSIONS CONTAINED IN SAID POLICY OR POLICIES WOULD BE AS FOLLOWS:
1. State, County and City Taxes for the fiscal period of 1993 to 1994, a lien
now due and payable in the total amount of $2,148.88
Parcel No. 210-160-005
First installment of $537.88 PD.
Second installment of $537.00 PD.
Third installment of $537.00 unpaid delinquent first Monday in January.
Fourth installment of $537.000 unpaid delinquent first Monday in March
(WITH OTHER PROPERTY)
State, County and City Taxes for the fiscal period of 1993 to 1994, a lien now
due and payable in the total amount of $3,527.79
Parcel No. 210-330-003
First installment of $884.79 PD.
Second installment of $881.00 PD.
Third installment of $881.00 unpaid delinquent first Monday in January.
Fourth installment of $881.00 unpaid delinquent first Monday in March.
(WITH OTHER PROPERTY)
1A. The lien of supplemental taxes, if any, assessed pursuant to the provisions
of Chapter 361.260 of the NEVADA REVISED STATUTES.
2. PATENT: Mineral rights, reservations, easements and exclusions in the
patient from the State of Nevada recorded OCTOBER 15, 1941, in Book 29 of Deeds,
pages 90-91 as Document No. 122036 of Official Records.
3. PATENT: Mineral rights, reservations, easements and exclusions in the
patient from the State of Nevada recorded OCTOBER 15, 1941, in Book 29 of Deeds,
pages 96-97 as Document No. 122045 of Official Records.
4. FINANCING STATEMENT: The effect of a Financing statement to secure an
indebtedness of the amount stated herein and any other amounts as may become due
under the terms and subject to the terms, covenants, conditions and requirements
as contained and imposed therein.
Debtor: PIONEER CHLOR ALKALI COMPANY, INC.
SCHEDULE B-3
<PAGE>
Secured Party : NEDERLANDSCHE MIDDENSTANDSBANK
Amount : $NOT DISCLOSED
Recorded : OCTOBER 13, 1988
Book No. : 881013
Document No. : 00393, Official Records.
ASSIGNMENT: The Beneficial interest of record under said
FINANCING STATEMENT was assigned
To : TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Recorded : OCTOBER 13, 1988
Book No. : 881013
Document No. : 00393, Official Records.
AND RE-RECORDED DECEMBER 4, 1990 IN BOOK 901204 AS DOCUMENT NO.
00959, OFFICIAL RECORDS.
(WITH OTHER PROPERTY)
5. DEED OF TRUST: A Deed of Trust to secure an indebtedness of
the amount stated herein, and any other amounts payable under
the terms thereof.
Dated : OCTOBER 25, 1988
Amount : $47,000,000.00
Trustor : PIONEER CHLOR ALKALI COMPANY, INC., A DELAWARE
CORPORATION
Trustee : LAWYERS TITLE INSURANCE CORPORATION
Beneficiary : NEDERLANDSCHE MIDDENSTANDSBANK
Recorded : OCTOBER 28, 1988
Book : 881028
Document No. : 01504, Official Records.
(WITH OTHER PROPERTY)
MODIFICATION: An instrument purports to modify the terms of
said Deed of Trust as therein provided.
Dated : MARCH 29, 1990
Recorded : APRIL 5, 1990
Book : 900405
as Document No. 00292, Official Records.
MODIFICATION: An instrument purports to modify the terms of
said Deed or Trust as therein provided.
Dated : OCTOBER 19, 1990
Recorded : OCTOBER 25, 1990
Book : 901025
as Document No. 00348, Official Records.
MODIFICATION: An instrument purports to modify the terms of
said Deed of Trust as therein provided.
Dated : AUGUST 28, 1992
Recorded : AUGUST 31, 1992
Book : 920831
<PAGE>
as Document No. 01355, Official Records.
AND RE-RECORDED MARCH 2, 1993 IN BOOK 930302 AS DOCUMENT NO.
00698, OFFICIAL RECORDS.
REQUEST FOR NOTICE: A request that copy of any Notice of
Default under the terms of the Deed of Trust recorded as
Document No. 01504
Mail To : BECKLEY, SINGLETON, DELANOY, JEMISON AND LIST
Address : 530 S. LAS VEGAS BLVD.
LAS VEGAS, NV 89101
ATTN: BRUCE LESLIE
Recorded : NOVEMBER 23, 1992
Book : 921123
Document No. : 00259, of Official Records.
REQUEST FOR NOTICE: A request that copy of any Notice of
Default under the terms of the Deed of Trust recorded as
Document No. 01504
Mail To : SAGUARO POWER COMPANY
Address : 18101 VON KARMAN AVENUE, #1700
IRVINE, CA 92715
ATTN: MS. MARIA P. LITOS
Recorded : JANUARY 19, 1993
Book : 930119
Document No. : 01087, of Official Records.
6. FINANCING STATEMENT: The effect of a Financing statement to
secure an indebtedness of the amount stated herein and any
other amounts as may become due under the terms and subject to
the terms, covenants, conditions and requirements as contained
and imposed therein.
Debtor : PIONEER CHLOR ALKALI COMPANY, INC.
Secured Party : NEDERLANDSCHE MIDDENSTANDSBANK
Amount : $NOT DISCLOSED
Recorded : OCTOBER 28, 1988
Book No. : 881028
Document No. : 01505, Official Records.
ASSIGNMENT: The Beneficial interest of record under said
FINANCING STATEMENT was assigned
To : TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Recorded : DECEMBER 4, 1990
Book No. : 901204
Document No. : 00936, Official Records.
7. EASEMENT: An easement affecting the portion of said land,
and for the purposes stated herein, and incidental purposes.
In Favor Of : COUNTY OF CLARK
For : PERPETUAL AVIGATION
<PAGE>
Recorded : MARCH 20, 1989
Book No. : 890320
Document No. : 00553, Official Records.
8. SURVEY: The effect of the following Record of Survey:
Performed By : NELSON E. MYER
File : 51
Page No. : 86
Recorded : JUNE 16, 1989
Book No. : 890616
Document No. : 00582, Official Records.
9. SURVEY: The effect of the following Record of Survey:
Performed By : NELSON E. MYER
File : 52
Page No. : 9
Recorded : JULY 26, 1989
Book No. : 890726
Document No. : 00701, Official Records.
10. DEED OF TRUST: A Deed of Trust to secure an indebtedness of
the amount stated herein, and any other amounts payable under
the terms thereof.
Dated : OCTOBER 19, 1990
Amount : $15,000,000.00
Trustor : PIONEER CHLOR ALKALI COMPANY, INC., A DELAWARE CORPORATION
Trustee : LAWYERS TITLE INSURANCE CORPORATION
Beneficiary : NMB POSTBANK GROEP NV, NEW YORK BRANCH
Recorded : OCTOBER 22, 1990
Book : 901022
Document No. : 00407, Official Records.
LEASE: An unrecorded lease affecting the premises therein
stated, executed by and between the parties named herein, for
the terms and upon and subject to all of the terms, covenants,
and provisions contained therein;
Dated : AUGUST 28, 1992
Lessor : PIONEER CHLOR ALKALI COMPANY, INC., A DELAWARE CORPORATION
Lessee : SAGUARO POWER COMPANY, A LIMITED PARTNERSHIP, A CALIFORNIA
LIMITED PARTNERSHIP
Term : NOT DISCLOSED
Disclosed By: : NON-DISTURBANCE AND ATTORNMENT AGREEMENT
Recorded : AUGUST 31, 1992
Book : 920831
Document No. : 01356, Official Records.
THE ABOVE UNRECORDED LEASE PURPORTS TO AFFECT PROPERTY OTHER
THAN THE PROPERTY IN QUESTION CONTAINED HEREIN.
<PAGE>
REQUEST FOR NOTICE: A request that copy of any Notice of
Default under the terms of the Deed of Trust recorded as
Document No. 00407
Mail To : BECKLEY, SINGLETON, DELAONY, JEMISON & LIST
Address : 530 S. LAS VEGAS BLVD.
LAS VEGAS, NV 89101
ATTN: BRUCE LESLIE
Recorded : NOVEMBER 23, 1992
Book : 921123
Document No. : 00260, of Official Records.
REQUEST FOR NOTICE: A request that copy of any Notice of
Default under the terms of the Deed of Trust recorded as
Document No. 00407
Mail To : SAGUARO POWER COMPANY
Address : 18101 VAN KARMAN AVENUE, #1700
IRVINE, CA 92715
ATTN: MS. MARIA P. LITOS
Recorded : JANUARY 19, 1993
Book : 930119
Document No. : 01086, of Official Records.
11. FINANCING STATEMENT: The effect of a Financing statement to
secure an indebtedness of the amount stated herein and any
other amounts as may become due under the terms and subject to
the terms, covenants, conditions and requirements as contained
and imposed therein.
Debtor : PIONEER CHLOR ALKALI COMPANY, INC.
Secured Party : NMB POSTBANK GROEP, NV, NEW YORK BRANCH
Amount : $NOT DISCLOSED
Recorded : OCTOBER 22, 1990
Book No. : 901022
Document No. : 00408, Official Records.
MODIFICATION: An instrument purports to modify the terms of
said FINANCING STATEMENT as therein provided.
Recorded : DECEMBER 12, 1990
Book : 901212
as Document No. 00899, Official Records.
12. FINANCING STATEMENT: The effect of a Financing statement to
secure an indebtedness of the amount stated herein and any
other amounts as may become due under the terms and subject to
the terms, covenants, conditions and requirements as contained
and imposed therein.
Debtor : PIONEER CHLOR ALKALI COMPANY, INC.
Secured Party : TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Amount : $NOT SET OUT
Recorded : DECEMBER 17, 1990
<PAGE>
Book No. : 901217
Document No. : 00198, Official Records.
13. DECLARATION OF RESTRICTIONS: Covenants, conditions and
restrictions (but deleting restrictions, if any, based upon
race, color, religion, or national origin) as contained in a
Declaration of Restrictions recorded OCTOBER 20, 1992, in Book
921020, as Document No. 01050, Official Records.
THE ABOVE COVENANTS, CONDITIONS AND RESTRICTIONS WERE EXECUTED
BY BASIC MANAGEMENT, INC.
EASEMENT: An easement affecting the portion of said land, and
for the purposes stated herein, and incidental purposes.
In Favor Or : NEVADA POWER COMPANY
For : POWER LINES
Recorded : TO BE DETERMINED
Affects : NORTHWEST 50 FEET AND EASTERLY 50 FEET
<PAGE>
SCHEDULE C
FORM OF NOTE
<PAGE>
SCHEDULE C
----------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED ABSENT REGISTRATION UNDER THE
ACT OR AN EXEMPTION THEREFROM.
BIG O TIRES, INC.
8.71% SENIOR SECURED NOTE DUE 2004
No. R-________________
$ ____________________ April 29, 1994
PPN___________________
BIG O TIRES, INC., a Nevada corporation (the "Company"), for value
received, hereby promises to pay to ________________________________________,
or its registered assigns, the principal sum of ____________ DOLLARS ($______)
(or so much thereof as shall not have been prepaid) in accordance with the
Indenture and to pay interest on the unpaid principal amount hereof from the
date hereof at the rate of 8.71% per annum (the "Note Rate"), such interest
payable quarterly on August first, November first, February first and May first
in each year until such principal amount shall have become due and payable
(whether at maturity, upon notice of prepayment or otherwise), and to pay
interest on any overdue principal and premium, if any, and (to the extent not
prohibited by applicable law) on interest at the Overdue Rate, as below defined,
in each case computed on the basis of a 360-day year of twelve 30-day months.
The "Overdue Rate" shall be the rate per annum equal to the lesser of (a) 4.0%
per annum above the Note Rate; and (b) the maximum non-usurious rate from time
to time permitted by applicable law to be contracted for, or charged to, or
received from the Person involved. Such principal, premium, if any, and interest
shall be payable upon presentation of this Note (except as provided in Section
2.2 of the Indenture referred to below, such payment to be made as therein
provided) at the corporate trust office of The Bank of Cherry Creek, N.A., or of
the office of its successor as Indenture Trustee under the Indenture referred to
below, in lawful money of the United States of America.
This Note is one of the Company's 8.71% Senior Secured Notes due 2004 (the
"Notes"), all issued pursuant to and equally and ratably secured by the
Indenture, Mortgage, Deed of Trust, Security Agreement, and Financing Statement
(Fixture Filing) dated as of April 27, 1994 (together with all amendments and
supplements thereto, the "Indenture"), from the Company to The Bank of Cherry
Creek, N.A., as Indenture Trustee, and Douglas R. Dix, as Individual Trustee
(together the "Trustees"). Reference is hereby made to the Indenture for a
description of the Mortgaged Property thereby pledged and assigned, the nature
and extent of the security for the Notes, the rights of the registered owners
of the Notes and
<PAGE>
the Trustees, in respect of and the terms upon which the Notes are authenticated
and delivered.
The principal of this Note is subject to mandatory prepayment from time to
time, in the manner and under the circumstances set forth in the Indenture. The
Company may at its election prepay this Note in whole or in part and the
maturity hereof may be accelerated following an Event of Default, all as
provided in the Indenture, to which reference IB made for the terms and
conditions of such provisions as to prepayment and acceleration, including
without limitation the payment of a make whole premium amount in connection
therewith.
This Note is issuable only as a fully registered Note. The Company and the
Trustees shall deem and treat the person in whose name this Note is registered
on the Register (as defined in the Indenture) as the absolute owner hereof
(whether or not this Note shall be overdue) for the purpose of receiving
payments of principal, premium and interest and for all other purposes, and
neither the Company nor the Trustees shall be affected by any notice to the
contrary. In accordance with the provisions of the Indenture, this Note may be
transferred on the Register at the Registry Office (as defined in the
Indenture), and exchanged for a Note or Notes of other denominations in
accordance therewith.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceeding or should this Note be placed in the hands of attorneys for
collection after default, the Company agrees to pay, in addition to the
principal, premium, if any, and interest due and payable hereon, and to the
extent permitted by applicable law, all costs of collecting or attempting to
collect this Note, including reasonable attorneys, fees and expenses (including
those incurred in connection with any appeal).
This Note shall be governed by and construed in accordance with the laws of the
State of Colorado.
This Note shall not be valid until the Certificate of Authentication hereon
shall have been signed by The Bank of Cherry Creek, N.A., as Indenture Trustee.
------------------------------
IN WITNESS WHEREOF, the Company has caused this note to be duly executed.
BIG O TIRES, INC.
By -----------------------------
Name: John B. Adams
Title: Executive Vice President
-2-
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Note is one of-the 8.71% Senior Secured Notes due 2004 described in
the within-mentioned Indenture.
The Bank of Cherry Creek, N.A.
as Indenture Trustee
By------------------------------
Douglas R. Dix, Vice President
-3-
<PAGE>
EXHIBIT B
Form of Subsidiary Guaranty
<PAGE>
EXHIBIT B
[FORM OF SUBSIDIARY GUARANTY]
GUARANTY dated as of April 27, 1994, made by the Subsidiaries listed on the
signature pages hereof (each a "Guarantor" and collectively the "Guarantors"),
--------- ----------
in favor of the original purchasers of the Notes referred to below and the
holders from time to time of said Notes and the Trustees under the Indenture
referred to below (collectively the "Obligees").
--------
WHEREAS, Big O Tires, Inc. (the "Company") has entered into a Note
-------
Purchase Agreement dated as of April 27, 1994 (as amended or otherwise modified
from time to time, the "Note Purchase Agreement") with the institutional
-----------------------
purchasers listed in Schedule I thereto, providing for the sale by the Company
of $8,000,000 aggregate principal amount of its 8.71% Senior Secured Notes due
2004 (the "Notes"); and
WHEREAS, the Notes are being issued under and secured by an Indenture,
Mortgage, Deed of Trust, Security Agreement and Financing Statement (Fixture
Filing) dated as of April 27, 1994, made by the Company to The Bank of Cherry
Creek, N.A., as Indenture Trustee, and Douglas R. Dix, as individual trustee (as
amended or otherwise modified from time to time, the "Indenture", and terms
---------
defined in the Indenture and not otherwise defined herein are being used herein
as so defined); and
WHEREAS, it is a condition precedent to the purchase of Notes by such
purchasers under the Note Purchase Agreement that each Guarantor shall have
executed and delivered this Guaranty; and
WHEREAS, this Guaranty is secured by the Indenture.
NOW, THEREFORE, in consideration of the premises each
Guarantor hereby agrees as follows:
SECTION 1. Guaranty. Each Guarantor, jointly and severally,
--------
unconditionally and irrevocably guarantees the punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all obligations of
the Company arising under the Notes, the Note Purchase Agreement and the
Indenture, including all extensions, modifications, substitutions, amendments
and renewals thereof, whether for principal, interest (including, without
limitation, interest accruing or becoming owing both prior to and subsequent to
the commencement of any proceeding against or with respect to the Company under
any chapter of the Bankruptcy Code of 1978, 11 U.S.C. (Section) 101 et seq.),
make-whole premium amount, fees, expenses, indemnification or otherwise (all
such obligations are called the "Guaranteed Obligations"); provided, however,
----------------------
that the aggregate liability of each Guarantor hereunder in respect of the
Guaranteed
<PAGE>
Obligations shall not exceed at any time the Maximum Amount (as hereinafter
defined) for such Guarantor. As used herein, the term "Maximum Amount" means,
--------------
for each Guarantor, the lesser of (a) the amount of the Guaranteed Obligations
and (b) the maximum amount for which such Guarantor is liable under this
Guaranty without such liability being deemed a fraudulent transfer under
applicable Debtor Relief Laws (as hereinafter defined), as determined by a court
of competent jurisdiction As used herein, the term "Debtor Relief Laws" means
------------------
any applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, insolvency, reorganization or similar debtor relief laws
affecting the rights of creditors generally from time to time in effect.
Each Guarantor, jointly and severally, also agrees to pay, in addition to
the amount stated above, any and all expenses (including reasonable counsel fees
and expenses) incurred by any Obligee in enforcing any rights under this
Guaranty.
SECTION 2. Guaranty Absolute. Each Guarantor guarantees that the
-----------------
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Notes, the Note Purchase Agreement and the Indenture, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of any Obligee with respect thereto. The
obligations of the Guarantors under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Company or any other Guarantor or any
other Person liable for the Guaranteed Obligations or whether the Company or any
other Guarantor or any other such Person is joined in any such action or
actions. The liability of each Guarantor under this Guaranty shall be absolute,
irrevocable, and unconditional irrespective of:
A. any lack of validity or enforceability of any Guaranteed
Obligation, any Note, the Note Purchase Agreement, the Indenture or any
agreement or instrument relating thereto;
B. any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Note, the Note
Purchase Agreement or the Indenture;
C. any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure by any Guarantor or other Person liable, or from any other guaranty,
for all or any of the Guaranteed Obligations;
-2-
<PAGE>
D. any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral or any other assets of the Company or any of its
Subsidiaries;
E. any change, restructuring or termination of the corporate
structure or existence of the Company or any of its Subsidiaries; or
F. any other circumstance (including, without limitation, any
statute of limitations) that might otherwise constitute a defense, offset or
counterclaim available to, or a discharge of, the Company or a Guarantor.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Obligee, or any other Person upon
the insolvency, bankruptcy or reorganization of the Company or otherwise, all as
though such payment had not been made.
Should any Guarantor become insolvent, fail to pay its debts generally as
they become due, voluntarily seek, consent to, or acquiesce in the benefits of
any Debtor Relief Law or become a party to or be made the subject of any
proceeding provided for by any Debtor Relief Law (other than as a creditor or
claimant) that could suspend or otherwise adversely affect the rights of any
Obligee hereunder, then, the Guaranteed Obligations shall be, as between such
Guarantor and the obligees, a fully matured, due, and payable obligation of such
Guarantor to the Obligees (without regard to whether the Company is then in
default under the Indenture), payable in full by such Guarantor to the Obligees
upon demand, which shall be the estimated amount owing in respect of the
contingent claim created hereunder.
SECTION 3. Waivers. Each Guarantor hereby irrevocably waives, to the
-------
extent permitted by applicable law:
A. promptness, diligence, presentment, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations an this Guaranty;
B. any requirement that, any Obligee, or any other Person protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against the Company, any other Guarantor or any
other Person or any collateral;
-3-
<PAGE>
C. all right to trial by jury in any action, proceeding or
counterclaim arising out of or relating to any of the Notes, the Note Purchase
Agreement, the Indenture or the transactions contemplated thereby;
D. any defense, offset or counterclaim arising by reason of any
claim or defense based upon any action by any Obligee;
E. any duty on the part of any Obligee to disclose to such
Guarantor any matter, fact or thing relating to the business, operation or
condition of any Person and its assets now known or hereafter known by such
Person; and
F. any rights by which it might be entitled to require suit on an
accrued right of action in respect of any of the Guaranteed Obligations or
require suit against the Company or any Guarantor or any other Person.
SECTION 4. Subordination of Subrogation. Each Guarantor, irrevocably,
----------------------------
unconditionally and whether or not the Guaranteed Obligations have been
indefeasibly paid in full, hereby agrees that all rights it may have to be
subrogated to the rights of any Obligee or any other Beneficiary against the
Company, and all other remedies that it may have against the Company, any other
Guarantor, or any obligor on the Guaranteed Obligations or any other security,
in respect of which any payment is made under the Notes, the Note Purchase
Agreement or the Indenture including all extensions, modifications,
substitutions, amendments and renewals thereof, or under this Guaranty (the
"Guarantor Subrogation Rights") shall be and hereby are subordinated in right of
payment to all other obligations of the Company to all other persons, whether
now existing or created hereafter. If any such amount shall be paid to a
Guarantor on the account of any Guarantor Subrogation Rights, notwithstanding
the subordination provisions hereof, such amount shall be received in trust for
the benefit of the Obligees and shall be forthwith paid to the Trustees to be
credited and applied upon the Guaranteed Obligations, whether matured or
unmatured, in accordance with the terms of the Indenture. The provisions of
this Section 4 shall survive the termination of this Guaranty, and any
satisfaction and discharge of the Company by virtue of any payment, court order,
or law.
SECTION 5. Representations and Warranties. Each Guarantor hereby severally
------------------------------
represents and warrants as to itself as follows:
A. Such Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the state of its organization. The
execution, delivery and performance of this Guaranty have been duly authorized
by all necessary action on the part of such Guarantor.
-4-
<PAGE>
B. The execution, delivery and performance by such Guarantor of this
Guaranty will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of such Guarantor under any indenture, mortgage, deed of trust, bank loan or
credit agreement, corporate charter or by-laws, or any other agreement or
instrument to which such Guarantor is a party or by which such Guarantor or any
of its properties may be bound or affected, (ii) conflict with or result in a
breach of any of the terms, conditions or provisions of any Order of any court,
arbitrator or Governmental Body applicable to such Guarantor or (iii) violate
any provision of any Statute or any rule or regulation of any Governmental Body
applicable to such Guarantor.
C. Such Guarantor is, individually and together with its
Subsidiaries, solvent.
D. Such Guarantor and the Company are members of the same
consolidated group of companies and are engaged in related businesses and such
Guarantor will derive substantial direct and indirect benefit from the execution
and delivery of this Guaranty.
As used in this Guaranty, the term "Governmental Body" includes any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign; and the term "Order"
includes any order, writ, injunction, decree, judgment, award, determination,
direction or demand.
SECTION 6. Amendments, Etc. No amendment or waiver of any provision of
---------------
this Guaranty and no consent to any departure by any Guarantor therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Required Holders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all Obligees, (i) limit the liability of, or release, any Guarantor
hereunder, (ii) postpone any date fixed for, or change the amount of, any
payment hereunder or (iii) change the percentage of Notes the holders of which
are, or the number of Obligees, required to take any action hereunder.
SECTION 7. Addresses for Notices. All notices and other communications
---------------------
provided for hereunder shall be in writing and shall be sent by confirmed
facsimile transmission (with hard copy sent by first class mail) or delivered by
hand or sent by a reputable overnight courier service prepaid (with confirmation
of receipt), if to any Guarantor addressed to it at the address of such
-5-
<PAGE>
Guarantor set forth below their name on the signature page of this Guaranty, if
to any Noteholder, addressed to it at the address of such Noteholder specified
in Schedule I to the Note Agreement, or as to each party at such other address
as shall be designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section. Any notice or other
communication herein provided to be given to the holders of all outstanding
Notes shall be deemed to have been duly given if sent as aforesaid to each of
the registered holders of the Notes at the time outstanding at the address for
such purpose of such holder as it appears on the Note Register.
SECTION 8. No Waiver; Remedies. No failure on the part of any Obligee to
-------------------
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 9. Continuing Guaranty, Etc. This Guaranty is a continuing
------------------------
guaranty of payment and performance and shall (A) remain in full force and
effect until payment in full of the Guaranteed Obligations and all other amounts
payable under this Guaranty, (B) be binding upon each Guarantor, its successors
and assigns and (C) inure to the benefit of and be enforceable by Obligees, and
their successors, transferees and assigns. No Guarantor may assign its rights,
obligations or duties hereunder without the prior written consent of all of the
Obligees.
SECTION 10. Subordination of the Obligations of the Company to the
------------------------------------------------------
Guarantors. Each Guarantor hereby expressly covenants and agrees for the
----------
benefit of each Obligee that all obligations and liabilities of the Company to
such Guarantor of whatsoever description, including, without limitation, all
intercompany receivables of such Guarantor from the Company (collectively, the
"Subordinated Debt"), shall be subordinated and junior in right of payment to
-----------------
the Guaranteed Obligations. Following the occurrence of an Event of Default, no
payment shall be made with respect to the Subordinated Debt unless and until the
Guaranteed Obligations shall have been paid in full; provided, however, if,
notwithstanding such prohibition of payment after the occurrence of an Event of
Default payments with respect to the Subordinated Debt are collected and
received by such Guarantor, such payments shall be received in trust for the
Obligees, and shall be forthwith paid over to the Indenture Trustee on account
of the Guaranteed obligations but without reducing or affecting in any manner
the liability of such Guarantor under this Guaranty.
SECTION 11. Counterparts. This Guaranty may be executed in any number of
------------
counterparts, all of which taken together shall
-6-
<PAGE>
constitute one and the same instrument, but in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
SECTION 12. Governing Law. This Guaranty shall be governed by and
-------------
construed in accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered as of the date first above written.
BIG O DEVELOPMENT, INC.
By:_____________________________
Name: John B. Adams
Title: Vice President
Address for Notices:
11755 East Peakview Avenue
Englewood, Colorado 80111
BIG O TIRE OF IDAHO, INC.
By:______________________________
Name: John B. Adams
Title: Vice President
Address for Notices:
11755 East Peakview Avenue
Englewood, Colorado 80111
-7-
<PAGE>
EXHIBIT C
Form of Opinion of Counsel to the Company
<PAGE>
[Form of Opinion of Counsel
to the Company and Guarantors]
April 29, 1994
To the several Purchasers listed
on Schedule I to the Note Purchase
Agreement referred to below
Re: Big O Tires, Inc.
8.71% Senior Secured Notes due 2004
Ladies and Gentlemen:
We have acted as counsel for Big O Tires, Inc. (the "Company") and for its
subsidiaries Big O Development, Inc., and Big O Tire of Idaho, Inc. (together,
the "Guarantors") in respect of the sale by the Company of $8,000,000 aggregate
principal amount of its 8.71% Senior Secured Notes due 2004 (the "Notes") under
the Note Purchase Agreement dated as of April 27, 1994 between you and the
Company (the "Note Purchase Agreement"). The Notes are being issued under and
secured by an Indenture, Mortgage, Deed of Trust, Security Agreement and
Financing Statement (Fixture Filing) (the "Indenture"), made by the Company as
of April 27, 1994 to The Bank of Cherry Creek, N.A., as Indenture Trustee, and
Douglas R. Dix, as Individual Trustee (collectively, the "Trustees"). Terms
defined in the Indenture are used herein as so defined except as otherwise
defined herein.
In our capacity as such counsel, we have reviewed the following documents:
A. The Note Purchase Agreement dated April 27, 1994;
B. The Indenture dated April 27, 1994;
C. The Notes dated April 29, 1994;
D. The Subsidiary Guaranty dated April 27, 1994; and
E. The UCC-1 Financing Statements naming the Company and the
Guarantors as Debtor and the Indenture Trustee as Secured Party.
All of the above-referenced documents shall hereinafter be collectively referred
to as the "Loan Documents."
<PAGE>
In all such reviews, we have assumed the genuineness of all signatures on the
Loan Documents (other than those of the Company and the Guarantors), the
authenticity of all documents submitted to us as originals, and the conformity
to originals of all documents submitted to us as copies thereof.
When reference is made in this opinion to "the best of our knowledge", or words
of similar effect, it means the actual present knowledge of those partners and
associates presently with our firm who have represented the Company and the
Guarantors in this transaction. Our opinions set forth below as to
enforceability of certain of the Loan Documents are subject to the effect of
bankruptcy, reorganization, insolvency, fraudulent conveyance, and other laws of
general application relating to or affecting the enforcement of creditors,
rights, and (ii) principles of equity.
On the basis of our review of the Loan Documents, and such other matters as we
deem relevant, and as a result of our consideration Of Such questions of law as
we deem relevant, and Subject to the qualifications set forth herein, we are of
the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the corporate power
and authority to own the property it purports to own or hold under lease and to
carry on its business as now conducted and as proposed to be conducted
immediately after giving effect to the consummation of the transactions
contemplated by the Loan Documents, to enter into such transactions and to
execute and deliver the Loan Documents to which it is a party and to observe and
perform the provisions thereof.
2. Each of the Guarantors is a corporation duly organized, validly
existing and in good standing under the laws of the state of its organization
and has the corporate power and authority to own the property it purports to own
or hold under lease and to carry on its business as now conducted and as
proposed to be conducted.
3. The Company is duly qualified as a foreign corporation and authorized
to do business in the States of Colorado, Idaho, Nevada and California and in
each other jurisdiction in which the character of the properties owned or held
under lease by the Company or the nature of the business conducted by the
Company requires such qualification.
4. The Note Purchase Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors and constitutes a legal, valid and
binding agreement of each of the Company and the Guarantors, enforceable against
the Company and the Guarantors in accordance with its terms.
-2-
<PAGE>
5. The Indenture has been duly authorized, executed and delivered by the
Company and the Guarantors and constitutes a legal, valid and binding agreement
of the Company and the Guarantors, enforceable against the Company and the
Guarantors in accordance with its terms.
6. The Notes have been duly authorized, executed and delivered by the
Company, and constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms; and the Notes
are entitled to the benefits and security afforded by the Indenture and the
Subsidiary Guaranty in accordance with their terms and the terms of the
Indenture and the Subsidiary Guaranty.
7. The Subsidiary Guaranty has been duly authorized, executed and
delivered by each of the Guarantors and constitutes a legal, valid and
binding agreement of each of such guarantors, enforceable against each of such
Guarantors in accordance with its terms.
8. No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Body is required for the validity of the
execution and delivery or the performance by the Company or the Guarantors of
any of the Loan Documents.
9. The use of the proceeds from the sale of the Notes will not be used,
directly or indirectly, for the purpose of buying or carrying any margin stock
within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve the Company in a
violation of Regulation X Of Said Board (12 CFR 224) or any broker or dealer in
a violation of Regulation T of said Board (12 CFR 220).
10. Under existing law, the Notes are not subject to the registration
requirements under the Securities Act of 1993, as amended, and the Company is
not required to qualify an indenture under the Trust Indenture Act of 1939, as
amended.
11. Neither the execution and delivery of the Note Purchase Agreement, the
Indenture, the Subsidiary Guaranty or the Notes delivered to you today, the
consummation of the transactions contemplated thereby, nor compliance with the
terms and conditions thereof, will (a) conflict with or result in a breach of,
or constitute a default under, any of the terms, obligations, covenants,
conditions or provisions or any indenture, mortgage, deed of trust, bank loan or
credit agreement, corporate charter or bylaw or any other agreement or
instrument to which the Company or any of its Subsidiaries is a party, or result
in the creation or imposition of any Lien (other than the Liens created by the
-3-
<PAGE>
Indenture) upon any property or asset of the Company or any of its Subsidiaries
under the terms or provisions of any of the foregoing, or (b) to the best of our
knowledge, violate any law, rule or regulation or order of any court, arbitrator
or Governmental Body applicable to the Company or either of the Guarantors.
12. To the best of our knowledge, (a) there are no actions, suits or
proceedings (including counterclaims) pending against or affecting the Company
or the Guarantors in any court or before any arbitrator, or any property of the
Company or the Guarantors, or before or by any Governmental Body, except
actions, suits or proceedings identified on Schedule I hereto; and (b) none of
such actions, suits or proceedings challenges the validity of the Loan Documents
or the Notes.
This opinion may not be used or relied upon by any person or entity other than
(i) you and your counsel, (ii) the Trustees (and their successors), and (iii)
transferees of the Notes, or in any other connection, and is not to be quoted in
whole or in part in any letter or document without our prior written consent
except in connection with court proceedings related to this transaction where
relevant to such proceeding.
Respectfully Submitted,
-4-
<PAGE>
EXHIBIT D
Form of Opinion of Special Nevada, California, Idaho Counsel
for the Company
<PAGE>
[Form of Opinion of Special Counsel
to the Company and Guarantors (Idaho, Calif., Nevada)]
April 29, 1994
To Each of the Purchasers Listed
on Schedule I of the Note
Purchase Agreement described below
Re: BIG O TIRES, INC. (the "Company")
8.71% Senior Secured Notes Due 2004
Ladies and Gentlemen:
We have acted as counsel in the State of [Idaho; California; Nevada) (the
"State") to Big O Tires, Inc. (the "Company"), Big O Development, Inc. and Big O
Tire of Idaho, Inc. (together, the "Guarantors") in connection with your
purchase of various 8.71% senior secured promissory notes (the "Notes"), in the
aggregate principal amount of $8,000,000.00, executed by the Company pursuant to
a certain Note Purchase Agreement between you and the Company dated as of April
27, 1994 (the "Note Purchase Agreement"). The Notes are being issued under and
secured by a certain Indenture, Mortgage, Deed of Trust, Security Agreement and
Financing Statement (Fixture Filing), executed by the Company as of April 27,
1994 (the "Indenture"), to The Bank of Cherry Creek, N.A., as the "Indenture
Trustee" and Douglas R. Dix, as the "Individual Trustee" (the "Trustees"). This
opinion is being rendered pursuant to Section 4.G. of the Note Purchase
Agreement. Capitalized terms used in this opinion and not otherwise defined
shall have the meanings set forth in the Note Purchase Agreement.
We have reviewed the Notes, the Indenture, the Subsidiary Guaranty to be
executed by the Guarantors (the "Subsidiary Guaranty") and the UCC-1 Financing
Statement naming each of the Company and the Guarantors as Debtor and the
Trustees as Secured Party (the "UCC-1 Financing Statements").
In rendering this opinion, we have assumed the genuineness of all
signatures on original documents, the authenticity of all documents submitted to
us as originals and the conformity to original documents of all copies submitted
to us.
It is our opinion, with respect to the laws of the State, that:
<PAGE>
1. The Indenture is a legal, valid and binding agreement constituting a
valid lien on, and security interest with respect to, the Mortgaged Property (as
defined in the Indenture) located within the State.
2. The Indenture is enforceable in accordance with its terms, except as
such enforcement may be limited or qualified by (i) bankruptcy, reorganization,
insolvency, fraudulent conveyance and other laws of general application relating
to or affecting the enforcement of creditors, rights, (ii) principles of equity,
and (iii) other applicable laws of the State, none of which laws will materially
interfere with the practical realization of the benefits and the security
purported to be provided by the Indenture.
3. (a) The Indenture must be recorded in the following public offices
in the State in order to perfect and preserve the liens and security interests
in real property and fixtures purported to be created thereby: [_____________].
(b) Except as set forth in paragraph 3 (a) above, no other documents
need to be recorded, registered or filed in order to publish notice and to
protect the validity of the Indenture.
(c) It is not necessary, prior to the maturity of the Notes, to
re-record, re-register or refile the Indenture, in order to maintain such liens
of record.
4. The Indenture is in satisfactory form to record, register or file the
Indenture in any office referred to in paragraph 3(a) above, and need not bear a
scrivener's statement or be accompanied by affidavits, county clerk
certificates, certified resolutions or other certificates. The form of
acknowledgement that is attached to the Indenture is in form acceptable for
recording in the State.
5. There will be only nominal filing fees payable upon the recording,
registration or filing of the Indenture in the State.
6. It is necessary to file the UCC-1 Financing Statement in the Office of
the Secretary of State of the State under the provisions of the Uniform
Commercial Code in effect in the State in order to perfect a security interest
in any tangible personality which does not constitute a fixture. The security
interest granted in the Indenture in personal property which security interest
may be perfected by the filing of a financing statement in the State, will be
perfected upon the filing of the UCC-1 Financing Statements with the Secretary
of State of the State.
-2-
<PAGE>
7. It is not necessary to obtain the consent, authorization or approval of
any governmental authority of the State in connection with the execution and
delivery of, or performance under the Indenture (subject to compliance with
applicable zoning ordinances, building codes and similar laws affecting real
estate ownership).
8. (a) The Indenture Trustee need not qualify to do business as a foreign
corporation in the State solely because of its service as Indenture Trustee
under the Indenture and will not incur tax liability in the State solely as the
result of the transactions contemplated in the Indenture.
(b) You need not qualify to do business in the State solely because of
your status as Purchasers under the Note Purchase Agreement and will not incur
tax liability in the State solely as the result of the transactions contemplated
in the Indenture (i.e., other than in the event of a foreclosure under the
Indenture).
9. The choice of law provisions in the Note Purchase Agreement and the
Indenture will be given effect in the State.
Respectfully submitted,
-3-
<PAGE>
EXHIBIT 10.80
BIG O TIRES, INC.
FRANCHISE AGREEMENT
Copyright 1994
Big O Tires, Inc.
<PAGE>
BIG O TIRES, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY PAGES..................................................... i
GLOSSARY.......................................................... iii
1. PARTIES AND RECITALS.......................................... 1
2. GRANT OF FRANCHISE............................................ 1
2.01 Grant of Franchise.................................. 1
2.02 Trade Area.......................................... 1
3. FIRST OPTION RIGHTS........................................... 1
3.01 First Option Rights................................. 1
3.02 Notification by Big O............................... 2
3.03 Multiple First Option Rights........................ 2
3.04 Notification of Qualification....................... 2
3.05 Exercise of Option by Franchisee.................... 2
3.06 Transfer of First Option Rights..................... 2
3.07 Limitation on First Option Rights................... 2
3.08 Expiration of First Option Rights................... 2
4. TERM.......................................................... 2
4.01 Term................................................ 2
5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS........................ 3
5.01 Grant of Successor Franchise Rights................. 3
5.02 Conditions to Grant of Successor Franchise.......... 3
5.03 Notification of Non-Renewal......................... 3
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS.......................... 3
6.01 Financing Approval.................................. 3
6.02 Site Selection...................................... 3
6.03 Equipment and Signage............................... 4
6.04 Conditions to Opening............................... 4
6.05 Commencement of Business............................ 4
7. PRE-OPENING AND ONGOING ASSISTANCE............................ 4
7.01 Pre-Opening Assistance.............................. 4
7.02 On-Going Assistance................................. 5
8. FEES.......................................................... 6
8.01 Initial Franchise Fee............................... 6
8.02 Royalty Fee......................................... 6
8.03 Late Fees........................................... 6
8.04 Taxes............................................... 6
8.05 Allocation of Payments.............................. 6
9. LICENSED MARKS................................................ 6
9.01 Licensed Marks...................................... 6
9.02 Limitation on Use................................... 7
9.03 Infringement........................................ 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
9.04 Franchisee's Business Name...................... 7
9.05 Change of Licensed Marks........................ 7
10. STANDARDS OF OPERATION.................................... 7
10.01 Standards of Operations........................ 7
11. STORE MANAGEMENT.......................................... 8
11.01 Store Management............................... 8
11.02 Completion of Training by Operator or Manager.. 8
11.03 Operation of Store by Big O.................... 9
12. QUALITY CONTROL........................................... 9
12.01 Inspections.................................... 9
13. MANUAL: NEW PROCESSES.................................... 9
13.01 Manual......................................... 9
13.02 Confidentiality of Information................. 9
13.03 Revisions to Manual............................ 10
13.04 Improvements to System......................... 10
14. PRODUCTS AND SERVICES..................................... 10
14.01 Products and Services.......................... 10
14.02 Approval of Products and Services.............. 10
14.03 Inventory...................................... 11
14.04 Warranties and Guaranties...................... 11
14.05 Open Account Financing......................... 11
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS.............. 11
15.01 Initial Advertising............................ 11
15.02 National Advertising Fund...................... 12
15.03 Local Fund..................................... 13
15.04 Approval of Advertising........................ 13
16. STATEMENTS AND RECORDS.................................... 13
16.01 Invoices....................................... 13
16.02 Audit.......................................... 13
16.03 Monthly Reports................................ 13
16.04 Financial Statements........................... 13
16.05 Management System.............................. 14
16.06 Regional Accounting Center..................... 14
17. COVENANTS................................................. 14
17.01 Noncompetition During Term..................... 14
17.02 Confidentiality................................ 14
17.03 No Interference with Business.................. 14
17.04 Post Termination Covenant Not to Compete....... 14
17.05 Survivability of Covenants..................... 15
17.06 Modification of Covenants...................... 15
18. TRANSFER AND ASSIGNMENT................................... 15
18.01 Assignment by Big O............................ 15
18.02 Right of First Refusal......................... 15
18.03 Transfer Legend................................ 15
18.04 Pre-Conditions to Franchisee's Assignment...... 16
18.05 Death of Franchisee............................ 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
18.06 No Waiver...................................... 18
18.07 Excepted Transfers............................. 18
19. DEFAULT AND TERMINATION................................... 18
19.01 Termination by Big O........................... 18
19.02 Governing State Law............................ 20
19.03 Termination by Franchisee...................... 20
19.04 Force Majeure.................................. 20
20. POST TERMINATION OBLIGATIONS.............................. 20
20.01 Post-Termination Obligations................... 20
20.02 Right to Repurchase............................ 22
20.03 Right of First Refusal......................... 22
20.04 De-Identification of Assets Upon Sale.......... 22
21. INSURANCE................................................. 22
21.01 Insurance Coverage............................. 22
21.02 Proof of Insurance............................. 23
21.03 Survival of Indemnification.................... 24
22. TAXES, PERMITS AND INDEBTEDNESS........................... 24
22.01 Payment of Taxes............................... 24
22.02 Compliance with Laws........................... 24
22.03 Payment of Debts............................... 24
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS......... 24
23.01 Indemnification................................ 24
23.02 Independent Contractor......................... 24
24. WRITTEN APPROVALS, WAIVERS AND AMENDMENT.................. 25
24.01 Written Approval............................... 25
24.02 Waiver......................................... 25
24.03 Modification................................... 25
25. DEALER PLANNING BOARD..................................... 25
25.01 Dealer Planning Board.......................... 25
25.02 Special Interest Issues........................ 25
25.03 Disapproval of Management Proposal............. 25
25.04 Compliance with Modification................... 26
26. RIGHT OF OFFSET........................................... 26
26.01 Right of Offset................................ 26
27. ENFORCEMENT............................................... 26
27.01 Declaratory and Injunctive Relief.............. 26
27.02 Costs of Enforcement........................... 26
28. NOTICES................................................... 26
28.01 Notices........................................ 26
29. GOVERNING LAW.............................................. 26
29.01 Governing Law................................... 26
29.02 Jurisdiction.................................... 27
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
30. SEVERABILITY AND CONSTRUCTION.............................. 27
30.01 Severability.................................... 27
30.02 Counterparts.................................... 27
30.03 Construction.................................... 27
31. ACKNOWLEDGEMENTS........................................... 27
</TABLE>
Schedule 1 - Premises and Trade Area
Schedule 2 - Corporate Verification
Schedule 3 - Guaranty
Schedule 4 - Lease Rider and Modification
Schedule 5 - Farm Class Rider
Schedule 6 - Renewal Rider
Schedule 7 - Trademarks
Schedule 8 - Convertor Rider
<PAGE>
BIG O TIRES, INC. FRANCHISE AGREEMENT
SUMMARY PAGES
-------------
These pages summarize the attached Franchise Agreement, the details of which
shall control in the event of any conflict.
1. FRANCHISEE: OK TIRES, INC., a Utah corporation
---------- -------------------------------------------
2. INITIAL FRANCHISE FEE:
---------------------
Amount Due:
-with Application: $3,500.00
------------------------
-upon signing Agreement:
------------------
Total: $3,500.00
------------------------------------
3. ROYALTY FEE Two percent (2%) of Gross Sales
-----------
4. LOCAL ADVERTISING Minimum of four percent (4%) of Gross Sales
-----------------
CONTRIBUTION:
-------------
5. NATIONAL ADVERTISING See sections 15 and 25
--------------------
CONTRIBUTION:
-------------
6. INITIAL ADVERTISING REQUIREMENT:
------------------------------- --------------------
7. STORE LOCATION:
-----------------------------------------------------
2830 West 3500 South
-----------------------------------------------------
Street and Number
West Valley City, Utah 84119
-----------------------------------------------------
City, State and Zip Code
(801) 967-7166
-----------------------------------------------------
Phone Number
8. Franchisee's Operator:
------------------------------------
9. Franchisee's Manager: Terry Larsen/Michael Hartson
------------------------------------
10. Franchisee's Agent For Service of Process:
Name: Terry Larsen
-----------------------------------------------------
Address: 3378 South 5530 West
--------------------------------------------------
Salt Lake City, Utah 84120
----------------------------------------------------------
----------------------------------------------------------
11. Big O's Agent for Service of Process:
Name: CT Corporation
-----------------------------------------------------
Address: 1675 Broadway, Suite 1200
--------------------------------------------------
Denver, Colorado 80290
----------------------------------------------------------
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<PAGE>
12. Effective Date:
--------------------------------------------
13. Commencement Date: October 7, 1994
-----------------------------------------
14. Expiration Date: October 7, 2004
-------------------------------------------
15. Franchisee's Advisor:
--------------------------------------
16. Send Notices to Big O to:
Name: Philip J. Teigen (Legal Department)
------------------------------------------------------
Address: Big O Tires, Inc.
---------------------------------------------------
11755 E. Peakview Avenue
---------------------------------------------------
Englewood, Colorado 80111
---------------------------------------------------
17. Send Notices to Franchisee to:
Name: Big O Tires
------------------------------------------------------
Address: 2830 West 3500 South
---------------------------------------------------
West Valley City, Utah 84119
---------------------------------------------------
18. Business not subject to Section 17 (a)
Name:
------------------------------------------------------
Address:
---------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
19. Farm Class Franchise:
Yes
-------------------------------------------------------
No X
-------------------------------------------------------
20. First Option Holder:
Name: N/A
--------------------------------------------------
Address:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
-ii-
<PAGE>
GLOSSARY (in alphabetical order)
Advertising - The advertising, promotional programs, public relations programs
and marketing programs approved or administered by Big O utilizing the resources
of the National Advertising Fund or local franchisee cooperatives or franchisee
associations.
Agreement - This contract, the Summary Pages and all Riders and Schedules
hereto, as interpreted through the Manual.
Big O - Big O Tires, Inc.
Big O Store or Store - A retail tire store operated pursuant to the Big O
System.
Big O System or System - The plan and system developed by Big O relating to the
complete operation of Stores which are authorized to sell Products and Services
and offer other authorized tire and automotive services at retail, which include
some or all of the following: site selection as required, site approval, Store
layout and design, product selection and display, purchasing and inventory
control methods, accounting methods, merchandising, advertising, sales and
promotional ideas, franchisee training, personnel training, and other matters
relating to the efficient operation and supervision of Stores and the
maintenance of uniform standards of retail merchandising.
Blue II - See the definition of "Manual".
Commencement Date - The date upon which the Store opens for business or, in the
event of transfer, or conversion, the date designated by Big O Tires, Inc.
Convertor - A person who converts a retail tire store it owns to a Big O Store
pursuant to this Agreement.
Dealer Planning Board - The group of franchisee representatives elected from
each Local Group which meets periodically with Big O's management to develop Big
O's strategic plans and to discuss issues of concern to franchisees. The
functions of the Dealer Planning Board are described in Section 25 of this
Agreement.
Development Agreement - An agreement between Big O and a person to which the
person ("Developer") agrees that within a defined territory to open and commence
operating an agreed number of Big O Stores pursuant to a development schedule.
Developers must execute Franchise Agreements prior to commencing business at any
Store developed pursuant to a Development Agreement.
Due Date - The fifteenth day of each month: the date by which all royalty fees
and advertising contributions must be postmarked and mailed to Big O.
Effective Date - The date upon which the Franchise Agreement has been executed
in full by both the Franchisee and Big O.
Expiration Date - The date on which the initial term of the Agreement expires.
Farm Class Store - A Store with twenty-five percent (25%) or more of its average
Gross Sales during any twelve (12) month period arising directly from the sale
of Farm Class Tires.
Farm Class Tires - Farm tires, off road tires, large double bead truck tires and
similar select tires, as may be more specifically defined from time to time by
Big O.
-iii-
<PAGE>
First Option - Franchisee's right to acquire a franchise for a new Store planned
for development within a five (5) mile radius of Franchisee's Premises. The
First Option and method of exercising it are described in Section 3 of this
Agreement.
Franchise - The rights granted by the Franchise Agreement.
Franchised Business - The business operated pursuant to a license granted by Big
O which utilizes the Licensed Marks and the Big O System.
Franchisee - The individual(s), corporation or other entity to which the
Franchise is granted. Depending on the context of this Agreement, the term
Franchisee may include the shareholders or guarantors of a corporate Franchisee.
Gross Sales - The aggregate gross amount of all revenues from whatever source
derived whether in form of cash, credit, agreements to pay or other
consideration including the actual retail value of any goods or services traded,
bartered, or otherwise received by Franchisee in exchange for any form of non-
monetary consideration, (whether or not payment is received at the time of sale
or any such amount is proved uncollectible) from or derived by Franchisee or any
other person from business conducted or which originated in, on, from or through
the Premises, whether such business is conducted in compliance with or in
violation of the terms of the Franchise Agreement. Gross Sales includes sums
paid for claims made on business interruption insurance policies, Federal Excise
Taxes collected, as well as payments received from employees of Franchisee for
products purchased at a discounted price. However, Gross Sales does not
include: (i) sales or use taxes collected by Franchisee; (ii) the amount of any
refunds or allowances made on Products and Services returned by customers; (iii)
returns to shippers, vendors and manufacturers; (iv) proceeds derived from the
sale of equipment or supplies used by Franchisee in the operation of the Store
and not acquired for resale; (v) sales of Products and Services to other Big O
Stores; (vi) tire disposal fees so long as the fees charged do not exceed the
highest fee recommended by any applicable governmental agency; and (vii) sums
received in settlement of claims for loss or damage to fixtures, equipment or
leasehold improvements, other than sums received from business interruption
insurance.
Information - The contents of the Manual or any other manual, computer software,
materials, goods, training module and any other proprietary information and
information created or used by Big O designated for confidential use within the
Big O System, and the information contained therein.
Initial Advertising - Advertising conducted within sixty (60) days of the
Commencement Date to promote the opening of the Store.
Licensed Marks - Trademarks and trade names, service marks and associated logos
and symbols owned or sublicensed by Big O, including those enumerated on
Schedule 7 and such other marks, logos and names as Big O may designate.
Local Fund - The fund, which may be a trust fund, corporation or other entity,
derived from contributions by Big O franchisees who are members of a Local Group
which shall be maintained by the Local Group for Advertising pursuant to such
guidelines as Big O may approve or prescribe.
Local Group - A cooperative or association of Big O franchisees formed and
operating in their marketing area pursuant to a structure approved or prescribed
by Big O for the purpose of promoting Big O Stores and their Products and
Services, and providing Management Systems and related services to its members
to the extent approved by Big O. Big O will assign a Franchisee to a Local
Group and Franchisee must become a member of that Local Group and be bound by
any decisions it makes to the extent they are approved by Big O.
-iv-
<PAGE>
Management Systems - Computer hardware, software, cash registers, bookkeeping
and accounting services or systems and other systems designed to provide
information for the management of Big O Stores, including but not limited
Boss/2/.
Manager - An individual other than the Operator who is responsible for the day-
to-day operation of a Store.
Manager Incentive Contract - An agreement pursuant to which certain Managers may
earn purchase credits based upon their performance so that they can acquire Big
O franchises from their employer, whether the employer is Big O or a Big O
franchisee.
Manual - The various written, audio and video instructions and manuals,
including amendments thereto relating to the operation of the Franchised
Business which are provided to Franchisee by Big O and identified as such,
including but not limited to A Blueprint For Success, also known as "Blue II",
Big O's Confidential Operating Manual, any training module or any other
proprietary information.
National Advertising Fund - The fund derived from contributions by Big O
franchisees which shall be exclusively maintained and administered by Big O for
national Advertising in cooperation with the Dealer Planning Board.
National Fund - Big O Tires, Inc. National Advertising Fund.
Operator - The individual approved by Big O who shall be responsible for the
operation of the Franchised Business. The Operator may be the Franchisee if the
Franchisee is an individual.
Option - Big O's right to purchase the interest being offered by the Franchisee
or any Shareholder by matching the bona fide monetary purchase price and payment
schedule terms of the proposed Transfer, less any brokerage commission (without
having to match any other non-monetary terms).
Pioneer - A person who owned at least twenty-five percent (25%) equity interest
in a Big O franchisee on March 1, 1987, provided such ownership interest
appeared on Big O's records as of July 1, 1987. A Pioneer is entitled to
acquire Big O franchises for one-third of the applicable initial franchise fee,
provided the Pioneer satisfies Big O's other requirements.
Premises - The site from which a Franchised Business will be operated at the
Store Location described on the Summary Pages, or where applicable, on Schedule
1 to the Franchise Agreement.
Products and Services - All tires (including but not limited to Big O's private
brand lines of tires), products and services produced, organized or distributed
under a license granted by Big O, which are designated by Big O for sale or
lease in Stores.
Regional Accounting Center - A cooperative or association which provides
accounting, payroll, tax and related services for the purpose of providing such
services at a lower cost and providing the financial reporting Big O requires.
Shareholder - Any person possessing a legal or beneficial interest or holding a
share of stock of any kind or nature in the Franchisee, including partners in a
Franchisee which is a partnership.
Survivor - A surviving spouse or heir of estate of any deceased person owning
stock or any other interest in the Franchisee.
Termination Date - The date upon which the Franchise Agreement is cancelled or
ended by Big O or the Franchisee.
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Trade Area - The area described on Schedule 1 to the Agreement within which,
subject to certain conditions, Big O agrees to limit the number of Stores to one
(1) for every fifty thousand (50,000) persons residing therein. Big O may, from
time to time, redefine Franchisee's Trade Area.
Trade Dress - Any shop or architectural designs, fixtures, improvements, signs,
color schemes or other elements of the appearance of the Store which in any
manner suggest affiliation of the Store or Premises with Big O, or the System.
Transfer - To give away, sell, assign, pledge, lease, sublease, devise, or
otherwise transfer, either directly or by operation of law or in any other
manner, the Agreement, any of Franchisee's rights or obligations hereunder, or
any interest or shares of stock or partnership interest of any kind or nature in
Franchisee or the Premises. The merger or consolidation or issuance of
additional securities representing an ownership interest in Franchisee shall
also be deemed to be a "Transfer" for purposes of this Agreement.
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BIG O TIRES, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") is made by and between Big O Tires,
Inc. ("Big O"), a Nevada corporation, with its principal place of business at
11755 East Peakview Avenue, Englewood, Colorado 80111, and OK TIRES, INC.
("Franchisee"), a(n) Utah corporation with a place of business at 2830 West 3500
South, West Valley City, Utah 84119.
1. PARTIES AND RECITALS
1.01 Big O was established to provide franchisees with access to Products
and Services and a System for marketing and servicing such Products and
Services. Since its inception, Big O has added to the Product and Services and
System to enhance the competitive posture of its franchisees. Big O has
developed and owns certain Licensed Marks which are licensed to franchisees for
use in the Big O Stores. In connection therewith, Big O has developed the Big O
System relating to the operation of Stores which are authorized to offer and
sell Big O tires as part of the Products and Services offered to retail
customers.
1.02 Franchisee desires, upon the terms and conditions set forth herein, to
obtain a license to operate a Franchised Business and to offer and sell Big O
Products and Services. Franchisee acknowledges that it is essential to the
preservation of the integrity of the Licensed Marks, and the goodwill of Big O
and the Big O System, that each franchisee in the System maintain and adhere to
certain standards, procedures and policies described hereinafter and in the
Manual.
1.03 Big O is willing, upon the terms and conditions set forth herein, to
license Franchisee to operate a Franchised Business which will utilize the
Licensed Marks and the Big O System.
2. GRANT OF FRANCHISE
2.01 Grant of Franchise. Subject to all of the terms and conditions
herein, including but not limited to, the condition that Franchisee or its
Shareholders or some of them, personally guarantee the obligations of Franchisee
to Big O under this Agreement as set forth in Schedule 3 to this Agreement, Big
O grants to Franchisee the non-exclusive license to use the Licensed Marks and
the exclusive right to operate a Franchised Business solely at the Premises set
forth in Schedule 1 to this Agreement. If, at the time of execution of this
Agreement, the Premises cannot be designated as a specific address because a
location has not been selected by Franchisee and approved by Big O, then
Franchisee shall promptly take steps to choose and acquire a location for its
Big O Store within the following city, county or other geographical area: West
Valley City, Utah ("Designated Area"). In such circumstances, Franchisee shall
select and submit to Big O for approval a specific location for the Premises,
which shall hereinafter be set forth in Schedule 1.
2.02 Trade Area. During the term of this Agreement, Big O agrees not to
operate itself or grant to any other person the right to operate any more than
one (1) Store for every fifty thousand (50,000) persons residing in the Trade
Area described on Schedule 1. Big O may, from time to time, redefine the Trade
Area. Absent Franchisee's prior approval, Big O shall not permit the
establishment or operation of another Store within a two (2) mile radius of
Franchisee's Store. Big O shall offer Products and Services bearing the
Licensed Marks at retail only through Big O Stores.
3. FIRST OPTION RIGHTS
3.01 First Option Rights. Subject to the conditions described below, if
Big O or any prospective Big O franchisee should propose to open a Store
within a five (5) mile radius of Franchisee's Store, Franchisee shall be
notified of its First Option to acquire a Franchise for an additional Store
within the five (5) mile radius of its Store. Franchisee may only exercise
the First Option if:
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(a) at the time Big O notifies Franchisee of the proposal for the new
Store, Franchisee is in full compliance with all the terms of this Agreement
and any other agreements it has with Big O;
(b) Franchisee meets Big O's then current criteria for new franchisees;
and
(c) There are not two (2) or more Big O franchises with Stores within a
five (5) mile radius of the site of a proposed new Store.
3.02 Notification by Big O. When notifying Franchisee of a proposal to
establish a new Store in accordance with Franchisee's First Option, Big O may
notify Franchisee of the proposal to establish the new Store within the general
vicinity of Franchisee's Store without identifying a specific site or sites.
3.03 Multiple First Option Rights. If two (2) or more Big O franchisees
have Stores within a five (5) mile radius of the site of a proposed new Store,
the Franchisee and all such franchisees will be invited simultaneously by
written notice from Big O to exercise their First Option rights; but if two (2)
or more such franchisees apply for the same franchise, it shall be awarded to
the qualified franchisee which has a Store that is closest to the site of the
proposed new Store or, if two qualified franchisees have Stores that are
equidistant from such site, it shall be awarded to the qualified franchisee
which owns the franchised Big O Store which was first licensed as a Big O Store
by the current or a previous owner.
3.04 Notification of Qualification. If Franchisee qualifies for the First
Option pursuant to this Section 3, Big O will provide Franchisee with written
notice that it has thirty (30) days within which to submit an application for
the franchise in the manner prescribed by Big O in the notice. Franchisee must
submit the application within the prescribed time along with the standard
franchise deposit then required by Big O. Upon approval of the application by
Big O, Franchisee must execute Big O's then current standard Franchise Agreement
and pay the remainder of any initial fee due.
3.05 Exercise of Option by Franchisee. If Franchisee is a corporation or
partnership, the First Option may be exercised only by the corporation or
partnership itself, or by the individual designated as First Option holder on
the Summary Pages.
3.06 Transfer of First Option Rights. The First Option is not transferable
without Big O's prior written approval, which may be withheld for any reason, in
Big O's sole discretion.
3.07 Limitation on First Option Rights. The First Option rights described
above are void and unenforceable with respect to a site proposed for development
in an area which is at the time of the proposal subject to a Development
Agreement between Big O and Developer.
3.08 Expiration of First Option Rights. If a Franchisee has failed to
qualify for or otherwise submit an application for a Franchise pursuant to this
Section 3 for a proposed franchise to be granted within the area in which
Franchisee holds First Option rights, Franchisee's First Option rights for that
proposed franchise shall lapse regardless of whether the site actually selected
for development by Big O is different from the site which was initially proposed
for development.
4. TERM
4.01 Term. This Agreement shall take effect upon the earlier of the
Effective Date or of the Commencement Date and, unless previously terminated
pursuant to Section 19 hereof, its term shall extend until the earlier of the
tenth anniversary of the Commencement Date or such other Expiration Date as is
stated on the Summary Pages.
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5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS
5.01 Grant of Successor Franchise Rights. If Franchisee is not in default
under this Agreement and has complied with all of its provisions during the
initial term, and has cooperated with Big O, its Local Group and other Big O
franchisees in programs and suggestions developed by Big O, upon its expiration
Big O will offer a successor franchise agreement with Franchisee, provided the
parties mutually agree to the terms of a successor franchise at least one
hundred eighty (180) days before the Expiration Date.
5.02 Conditions to Grant of Successor Franchise. Big O will only offer to
execute a new franchise agreement in accordance with its then current terms and
conditions for granting successor franchises, which may include any or all of
the following:
(a) Execution of a new and modified franchise agreement which may
include, among other matters, a different fee structure, increased fees, a
modified Trade Area and different purchase requirements;
(b) A requirement that Franchisee refurbish the Premises or relocate the
Premises to conform to Big O's then current standards for similar Stores;
(c) Payment of Big O's renewal administration fee of One Thousand Five
Hundred Dollars ($1,500); and
(d) Execution of a general release in favor of Big O and its
representatives.
5.03 Notification of Non-Renewal. If Big O is willing to execute a new
franchise agreement with Franchisee, at least one (1) year before the Expiration
Date, Big O shall notify Franchisee of the Expiration Date and the terms and
conditions upon which Big O is willing to execute a new franchise agreement with
Franchisee. Franchisee must execute a successor franchise agreement within
sixty (60) days of its receipt. The Franchise Agreement will expire on the
Expiration Date and the franchise relationship will terminate unless Franchisee
and Big O have executed a successor franchise agreement at least one hundred
eighty (180) days prior to the Expiration Date, and Franchisee has satisfied all
other terms and conditions agreed upon as a prerequisite to renewal. If Big O
intends not to offer Franchisee a successor franchise agreement, Big O shall
give Franchisee at least one hundred eighty (180) days notice of nonrenewal
prior to the Expiration Date. If Big O has not given Franchisee at least one
hundred eighty (180) days notice of nonrenewal prior to the Expiration Date, the
term of this Agreement will automatically be extended by the amount of time
necessary to give Franchisee one hundred eighty (180) days notice of nonrenewal.
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS
6.01 Financing Approval. Unless otherwise agreed to by Big O, Franchisee
shall obtain a letter of commitment for the provision of financing through a
lender approved by Big O and with minimum credit terms, also approved by Big O,
no later than one hundred twenty (120) days from the Effective Date of this
Agreement.
6.02 Site Selection. Franchisee shall obtain the written approval of Big O
of the site for the Store within one hundred twenty (120) days from the
Effective Date of this Agreement. Franchisee shall propose sites for approval
by Big O on forms and in the manner designated from time to time by Big O. A
proposed site shall only be submitted to Big O for approval after Franchisee has
evaluated the site and determined that it meets Big O's then current criteria
for sites which Big O has communicated to Franchisee. Franchisee shall be
responsible for obtaining Big O's then current site criteria prior to submitting
a site approval application. Big O shall review the site approval application
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and within thirty (30) days of Big O's receipt thereof, Big O shall approve or
reject the proposed site. Unless otherwise agreed to in writing by Big O, final
site approval will be conditioned upon Big O's receipt of evidence of
Franchisee's ownership, lease or control of the property in such form as Big O,
in its sole discretion shall deem to be acceptable, including, without
limitation, a deed to the property, an executed contract to purchase the
property, a lease with a duration of not less than ten (10) years, or an option
to purchase the property. Franchisee acknowledges and agrees that Big O's
approval of a site or provision of criteria regarding the site do not constitute
a representation or warranty of any kind, express or implied, as to the
suitability of the site for a Big O Store or for any other purpose. Big O's
approval of the site indicates only that Big O believes that a site falls within
the acceptable criteria established by Big O as of that time. In the case of a
Convertor, execution of this Agreement shall be deemed approval of the Store
Location by Big O, unless additional obligations to convert or upgrade the
premises are described in Schedule 8 to this Agreement.
6.03 Equipment and Signage. Franchisee agrees to purchase, lease or
otherwise use in the establishment and operation of the Big O Store only those
fixtures, equipment, signs and hardware and/or software that Big O has approved
as meeting its specifications and standards for quality, design, appearance,
function and performance. Franchisee shall purchase or lease approved brands,
types or models of fixtures, equipment, and signs only from suppliers designated
or approved by Big O. Franchisee agrees to place or display at the Premises
only such signs, logos and display materials that Big O approves from time to
time.
6.04 Conditions to Opening. Franchisee agrees, at its sole expense, to do
or cause to be done the following prior to opening the Big O Store for business:
(i) secure all required financing; (ii) obtain all required permits and
licenses; (iii) construct all required improvements and decorate the Store in
compliance with approved plans and specifications; (iv) purchase and install all
required fixtures,equipment and signs required for the Big O Store; (v) purchase
an opening inventory of tires and supplies; (vi) provide Big O with copies of
all required insurance policies, or such other evidence of coverage and payment
as Big O requests; and (vii) provide Big O with any other documents as may be
required by Big O, including but not limited to financing statements.
6.05 Commencement of Business. Franchisee agrees to open the Big O Store
for business within fourteen (14) days after Big O notifies Franchisee that the
conditions set forth in this Section 6 have been satisfied. Unless otherwise
agreed in writing by Big O and Franchisee, Franchisee has sixteen (16) months
from the Effective Date of this Agreement within which to have its Big O Store
opened and operating ("Development Period"). Big O will extend the Development
Period for a reasonable period of time in the event that factors beyond
Franchisee's reasonable control prevent Franchisee from meeting this Development
Period, so long as Franchisee has made reasonable and continuing effort to
comply with such development obligations and Franchisee requests, in writing, an
extension of time in which to have its Big O Store open and operating before the
Development Period lapses.
7. PRE-OPENING AND ONGOING ASSISTANCE
7.01 Pre-Opening Assistance. Prior to Franchisee's Commencement Date, Big
O shall provide Franchisee with such of the following and on the same basis as
it will from time to time provide to similarly situated franchisees of Big O:
(a) Assistance to Franchisee related to approval of a site for the Store,
although Franchisee acknowledges that Big O shall have no obligation to
select or acquire a site on behalf of Franchisee. Big O's assistance will
consist of the provision of criteria for a satisfactory site, an on-site
inspection and determination of whether a proposed site fulfills the
requisite criteria, prior to formal approval of a site selected by
Franchisee. At Big O's option, Big O may,
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without fee or expense to Franchisee and review the proposed Store lease.
The final decision about whether to acquire a given approved site or whether
to execute any particular lease shall be the sole decision of Franchisee.
Big O disclaims all liability for the consequences of approving a given
site. Big O's participation in site selection in no way is meant to
constitute a warranty or guaranty that the Franchised Business will be
profitable or otherwise successful. Big O's written approval of the
Premises and Store must be obtained by Franchisee before the Store may be
opened or relocated. Big O may condition its approval of a Store lease upon
Franchisee's execution of a conditional lease assignment in a form which is
the same as or similar to the one found on Schedule 4.
(b) A prototype floor plan, elevation and equipment layout for the Store,
if requested by Franchisee. The plans must be modified by Franchisee's
architect or contractor to adapt them to conditions at the Premises and to
satisfy all local code requirements. Revisions or modifications to the
plans must be approved by Big O.
(c) Five consecutive (5) weeks of training for one person in the
operation of the Franchised Business at Big O's training facility located in
Mesa, Arizona, or another location designated by Big O. Unless Big O waives
the training requirement, the Manager of the Franchisee's Store, provided he
or she has been approved by Big O, and Franchisee's Operator must attend and
successfully complete such training. Franchisee shall pay for its own
transportation, lodging, and living expenses which are incurred while
attending the initial training program, except that Big O will pay lodging
and transportation for the first person to attend the training program. In
the event that, in Big O's sole discretion, Franchisee's Operator fails to
successfully complete the initial training program, Big O may, in its sole
discretion, require Franchisee's Operator to attend and successfully
complete another training program or terminate this Agreement and, upon
receipt from Franchisee of a general release in a form approved by Big O,
refund the initial franchise fee paid by Franchisee, less any amounts
necessary to reimburse Big O for the costs it incurred in approving
Franchisee and in training Franchisee's Operator and Manager.
(d) One (1) copy of Big O's Confidential Operating Manual and Operations
Manual, known as "Blue II"or other such proprietary information.
(e) Assistance in selecting Franchisee's initial inventory.
7.02 On-Going Assistance. Big O agrees to make available to Franchisee the
following ongoing assistance for which Big O may charge the Franchisee a fee:
(a) To the extent available to Big O, a source of Big O private brand
tires;
(b) Ongoing research and development into new tires and other lines of
Products and Services and ways to enhance the competitive posture of Big O
Stores;
(c) Additional training for the Operator or other personnel of
Franchisee, for which Big O may charge the Franchisee a fee;
(d) Suggested prices for Big O brands sold at the Franchisee's Store,
provided that Franchisee will not be required to sell at any particular
price if such a requirement would be unlawful;
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(e) A warranty or replacement program for Big O private brand tires and
related automotive Products and Services;
(f) Regional training provided by Big O personnel and field assistance,
inspections and advice pertaining to the Franchisee's Store provided by Big
O area managers;
(g) Point of sale advertising materials and wearables utilizing Big O
marks will be purchased through Big O's subsidiary, O Advertising, Inc., or
such other licensee as designated by Big O; and from time to time, local
advertising plans and materials, special promotions and similar advertising,
for which Big O may charge the Franchisee a fee;
(h) At the request of Franchisee's Local Group, Big O will supply
Franchisee with newspaper mats and radio and television commercial tapes,
for which Big O may charge Franchisee or the Local Group a fee.
8. FEES
8.01 Initial Franchise Fee. In consideration of the execution of this
Agreement, Franchisee agrees to pay Big O an initial franchise fee in the amount
and at the times specified on the Summary Pages. Except as described in Section
7.01(c) above, the initial franchise fee is not refundable.
8.02 Royalty Fee. After the Commencement Date, Franchisee shall pay to Big
O a monthly royalty fee equal to two percent (2%) of the prior month's Gross
Sales. The royalty fee must be postmarked and mailed to Big O by no later than
the Due Date.
8.03 Late Fees. If any fee or any other amount due under this Agreement,
including payments for Products and Services, is not received within ten (10)
days after such payment is due, Franchisee shall pay Big O interest equal to the
lesser of the daily equivalent of eighteen percent (18%) per annum of such
overdue amount per year, or the highest rate then permitted by applicable law,
for each day such amount is past due.
8.04 Taxes. If any federal, state, or local tax other than an income tax
is imposed upon royalty fees paid by Franchisee to Big O which Big O cannot
offset against taxes it is required to pay under the laws of the United States
or the state of its domicile, Franchisee agrees to compensate Big O in the
manner prescribed by Big O so that the net amount or net rate received by Big O
is no less than that which has been established by this Agreement and which was
due Big O on the Effective Date of this Agreement.
8.05 Allocation of Payments. Unless other written instructions accompany a
specific payment, all payments made by Franchisee pursuant to this Agreement
shall be applied in such order as Big O may designate from time to time. Big O
shall comply with any written instructions for allocation specified by
Franchisee to the extent, in Big O's opinion, it is reasonable to do so.
9. LICENSED MARKS
9.01 Licensed Marks. Franchisee expressly acknowledges that Big O is the
sole and exclusive licensor of the Licensed Marks. Franchisee agrees not to
represent in any manner that Franchisee has acquired any ownership rights in the
Licensed Marks. Franchisee agrees not to use any of the Licensed Marks or any
marks, names, or indicia which are or may be confusingly similar in its own
corporate or business name except as authorized in this Agreement. Franchisee
further acknowledges and agrees that any and all goodwill associated with the
Big O System and identified by the Licensed Marks shall inure directly and
exclusively to the benefit of Big O and that, upon the
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expiration or termination of this Agreement for any reason, no monetary amount
shall be assigned as attributable to any goodwill associated with Franchisee's
use of Licensed Marks.
9.02 Limitations on Use. Franchisee understands and agrees that any use of
the Licensed Marks other than as expressly authorized by this Agreement, without
Big O's prior written consent, is an infringement of Big O's rights therein and
that the right to use the Licensed Marks granted herein does not extend beyond
the termination or expiration of this Agreement. Franchisee expressly covenants
that, during the term of this Agreement and thereafter, Franchisee shall not,
directly or indirectly, commit any act of infringement or contest or aid others
in contesting the validity of Big O's right to use the Licensed Marks or take
any other action in derogation thereof.
9.03 Infringement. Franchisee acknowledges Big O's right to regulate the
use of the Licensed Marks and Trade Dress of the Big O System. Franchisee shall
promptly notify Big O if it becomes aware of any use or any attempt by any
person or legal entity to use the Licensed Marks or Trade Dress of the Big O
System, any colorable variation thereof, or any other mark, name, or indicia in
which Big O has or claims a proprietary interest. Franchisee shall assist Big
O, upon request and at Big O's expense, in taking such action, if any, as Big O
may deem appropriate to halt such activities, but shall take no action nor incur
any expenses on Big O's behalf without Big O's prior written approval.
9.04 Franchisee's Business Name. Franchisee further agrees and covenants
to operate and advertise only under the name or names from time to time
designated by Big O for use by similar Big O System franchisees; to refrain
from using the Licensed Marks to perform any activity or to incur any obligation
or indebtedness in such a manner as may, in a way, subject to Big O to liability
therefor; to observe all laws with respect to the registration of trade names
and assumed or fictitious names; to include in any application for the above a
statement that Franchisee's use of the Licensed Marks is limited by the terms of
this Agreement, and to provide Big O with a copy of any such application and
other registration document(s); and to observe such requirements with respect to
trademark and service mark registrations, copyright notices, and other notices
as Big O may, from time to time, require.
9.05 Change of Licensed Marks. Subject to the requirements of Section 25
of this Agreement, Big O reserves the right, in its sole discretion, to
designate one or more new, modified, or replacement Licensed Marks or trade
names for use by franchisees and to require the use by Franchisee of any such
new, modified, or replacement Licensed Marks or trade names in addition to or in
lieu of any previously designated Licensed Marks. Any expenses or costs
associated with the use by Franchisee of any such new, modified, or replacement
Licensed Marks shall be the sole responsibility of Franchisee.
10. STANDARDS OF OPERATION
10.01 Standards of Operations. Big O shall establish and Franchisee shall
maintain high standards of quality, appearance and operation for the Franchised
Business. For the purpose of enhancing the public image and reputation of the
businesses operating under the System and for the purpose of increasing the
demand for Products and Services provided by Franchisee and Big O, the parties
agree as follows:
(a) Franchisee shall not open the Store for business until Big O has
provided Franchisee with written authorization to do so;
(b) Franchisee shall comply in good faith with all published Big O System
rules, regulations, policies, and standards, including, without limitation,
those contained in the Manual. Franchisee shall
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operate and maintain the Franchised Business solely in the manner and pursuant
to the standards prescribed herein, in the Manual and in other materials
provided by Big O to Franchisee, and shall make such modifications thereto as
Big O may require;
(c) Franchisee shall at all times operate the Store diligently and in a
manner which is consistent with sound business practices so as to maximize the
revenues therefrom;
(d) Franchisee shall at all times maintain working capital and a net worth
which is sufficient, in Big O's opinion, to enable Franchisee to fulfill
properly all of Franchisee's responsibilities under this Agreement;
(e) Franchisee shall at all times maintain its Store in the image of and
according to the standards of Big O as prescribed in the Manual. Moreover,
Franchisee agrees to cooperate with Big O at its expense, to the extent building
and site limitations permit, in the implementation of new programs, including
those which may require the addition of new equipment or fixtures for the Store.
In its sole discretion, Big O may waive some or all of any of its franchisees'
obligations to comply with such programs.
(f) Prior to opening, Franchisee shall provide Big O with written
certificates or documentary evidence from an insurance company or companies that
Franchisee has obtained the insurance coverage prescribed by Section 21;
(g) If Franchisee maintains a customer list, such lists or parts thereof
shall be disclosed to no one other than Franchisee's employees or Big O without
Big O's prior written consent; and
(h) Franchisee shall participate in and be bound by the decisions of any
Local Group established and operated pursuant to standards and within the
guidelines prescribed or approved by Big O. Franchisee shall not be subject to
any agreement to fix prices, or allocate customers or territories which would
violate any applicable laws. Nor will Franchisee be subject to any capital
investment requirements or other standards which are inconsistent with this
Agreement or which have not been approved or prescribed by Big O.
11. STORE MANAGEMENT
11.01 Store Management. Franchisee's Store shall only be operated by the
Operator or a Manager employed by the Franchisee who has previously been
approved by Big O. All initial and subsequent Operators or Managers must be
approved by Big O. Big O's approval will be conditioned upon the Operator's or
Manager's successful completion of any training required by Big O. Big O may
waive some or all of its initial training requirements for Operators or Managers
who have already received such training as a result of their affiliation with
another Store or Big O franchisee. If Franchisee or Franchisee's Operator has
not already successfully completed such training, he shall be required to
successfully complete the training described in Section 7.01 (c) above.
11.02 Completion of Training by Operator or Manager. Franchisee's Operator
or Manager and such of its managerial personnel or Shareholders as are
designated by Big O, shall complete, to Big O's reasonable satisfaction, any and
all training programs Big O may reasonably require or provide at such time as
Big O may reasonably prescribe. All expenses incurred by persons receiving such
training, including, without limitation, costs of travel, room and board, as
well as wages of the person(s) receiving such training shall be borne by the
Franchisee except that the transportation and lodging costs for the first person
receiving such training shall be paid by Big O.
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11.03 Operation of Store by Big O. Under the circumstances described
below, upon Franchisee's request, Big O has the option, but not the duty, to
replace or substitute for Franchisee's Operator, Manager, or both, its own
employees or agents, to operate the Franchisee's Store for the benefit of
Franchisee with complete discretion over all matters relating to its operation.
Franchisee shall pay Big O's then current Store management fee as well as the
out-of-pocket expenses Big O incurs for travel, food and lodging in the course
of providing such services. Big O may operate Franchisee's Store if:
(a) Franchisee's Operator or Manager has failed to satisfactorily
complete any training required by this Section 11; or
(b) Franchisee's Operator or Manager becomes physically or mentally
incapable of operating the Franchised Business; or
(c) Franchisee's Operator or Manager dies and a new Operator or Manager
has not completed initial training.
12. QUALITY CONTROL
12.01 Inspections. Franchisee hereby grants to Big O and its authorized
agents the right to enter the Premises during regular business hours:
(a) To conduct inspections and, upon Big O's request, Franchisee agrees to
render such assistance as may reasonably be requested and to take such steps as
may be necessary immediately to correct any deficiencies in the operation of its
Franchised Business pursuant to this Agreement which are detected during such an
inspection; and
(b) To remove from the Premises, certain samples of any Products and
Services, supplies or goods, in amounts reasonably necessary for testing or
examination by Big O or an independent laboratory, to determine whether such
samples meet Big O's then current standards and specifications. Big O will
grant Franchisee a credit equivalent to the cost of any approved Products and
Services or supplies damaged or removed by it.
13. MANUAL; NEW PROCESSES
13.01 Manual. To protect the reputation and goodwill of the businesses
operating under the System and to maintain high standards of operation under the
Licensed Marks, Franchisee shall conduct the Franchised Business strictly in
accordance with the Manual, which Franchisee acknowledges belongs solely to Big
O and shall be on loan from Big O during the term of this Agreement. Franchisee
agrees to pay Big O up to Five Thousand Dollars ($5,000) for the failure to
return the Confidential Operating Manual, Big O's Blueprint for Success,
otherwise known as Blue II, any training module or any other proprietary
information to Big O within five (5) days of the Expiration Date or Termination
Date of this Agreement, or the date upon which controlling interest in the
Franchisee, the Franchised Business or its assets is transferred. However, Big
O will waive the payment if Franchisee notifies Big O that it has lost or
mislaid all or part of the Manual at any time prior to six (6) months before the
date upon which the Franchise is transferred, terminates, or expires.
13.02 Confidentiality of Information. Franchisee shall at all times use
its best efforts to keep Big O's Information confidential and shall limit access
to the Information to employees and independent contractors of Franchisee on a
need-to-know basis. Franchisee acknowledges that the unauthorized use or
disclosure of Big O's Information will cause irreparable injury to Big O and
that
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damages are not adequate remedy. Franchisee accordingly covenants that it
shall not at any time, without Big O's prior written consent, disclose, use,
permit the use thereof (except as may be required by applicable law or
authorized by this Agreement), copy, duplicate, record, transfer, transmit, or
otherwise reproduce such Information, in any form or by any means, in whole or
in part, or otherwise make the same available to any unauthorized person or
source. Any and all Information, knowledge, and know-how not generally known
about the System and Big O's Products and Services, standards, procedures,
techniques, and such other Information or material as Big O may designate as
confidential shall be deemed confidential for purposes of this Agreement, except
Information which Franchisee can demonstrate lawfully came to its attention
prior to disclosure by Big O, or which legally is or has become a part of the
public domain by publication or communication by others.
13.03 Revisions to Manual. Franchisee understands and acknowledges that
subject to the requirements of Section 25, Big O may, from time to time, revise
the contents of the Manual to implement new or different requirements for the
operation of the Franchised Business, and Franchisee expressly agrees to comply
with all such changed requirements which are by their terms mandatory, provided,
that such requirements apply in a reasonably nondiscriminatory manner to
comparable Big O franchisees. The implementation of such requirements may
require the expenditure of reasonable sums of money by Franchisee. Big O will
not alter the basic rights and obligations of the parties arising under this
Agreement through changes to the Manual.
13.04 Improvements to System. If Franchisee develops any concept, process,
service, or improvement in the operation or promotion of the Store, Big O may
itself use or disclose it to other Big O franchisees without any obligation to
compensate Franchisee therefor. If the concept, process, service, or
improvement is adopted for use by the majority of Big O Stores, such concept,
process, service, or improvement shall become the property of Big O and Big O
may itself use or disclose it to other Big O franchisees without any obligation
to compensate Franchisee therefor.
14. PRODUCTS AND SERVICES
14.01 Products and Services. Franchisee acknowledges that its principal
interest in acquiring a Big O Franchise is to sell Big O private brand tires and
related merchandise and benefit from Big O's Products and Services selection,
purchasing programs including programs for the purchase of major brand tires,
and marketing expertise. The consuming public expects Big O Stores to offer the
full line of Big O Products and Services and advertised warranty services.
Accordingly, Franchisee shall at all times have in stock on the Premises a
complete representative line of Big O private brand tires, shock absorbers,
related merchandise, and other Products and Services in such quantities as Big O
may prescribe from time to time.
14.02 Approval of Products and Services. Prior to commencing business at
the Premises, Franchisee shall stock the Store with Products and Services and
supplies of such variety and in such amounts as Big O may select. Franchisee
may not sell any product or service which has not been selected, manufactured,
or approved by Big O. Big O is not obliged to approve any product, service, or
merchandise selected by the Franchisee. Big O will exercise its right of
approval of suppliers selected by the Franchisee which are not at the time
approved by Big O for use by the Franchisee in accordance with the following
procedure:
(a) The Franchisee must submit a written request to Big O for approval of
the supplier;
(b) The Franchisee must demonstrate to Big O the existence of a need for
the product;
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(c) The supplier must demonstrate to Big O's reasonable satisfaction,
that it is able to supply a commodity to the Franchisee meeting Big O's
specifications for such commodity and that it is able to do so on a timely
basis;
(d) The supplier must demonstrate to Big O's reasonable satisfaction that
the supplier is of good standing in the business community with respect to
its financial soundness and reliability of its product and service;
(e) The supplier must agree to indemnify and hold Big O and the
Franchisee harmless from and against any claim or liability by reason of the
supplier's products, including without limitation, defects in materials and
workmanship and supplier must provide to Big O certificates or other
evidences of insurance coverage with coverage limits sufficient to cover the
risks and an endorsement reflecting that Big O and Franchisee are named as
additional insureds under the supplier's insurance policies; and
(f) Big O must be reasonably satisfied that the commodity is priced
competitively.
Big O's current practice is to notify the Franchisee of its approval or
disapproval in writing as soon as practicable.
14.03 Inventory. Franchisee shall at all times maintain an inventory of
Products and Services in such amounts and of such variety as Big O may
reasonably require, and shall offer all services which Big O may require.
14.04 Warranties and Guaranties. Franchisee agrees to issue and honor
warranties and guarantees written on certain Products and Services sold to
consumers in accordance with the terms and procedures prescribed in the Manual.
Any such warranty or guaranty will be offered through all Big O Tire Stores on a
nondiscriminatory basis. Only warranties or guarantees sponsored or approved by
Big O may be offered or honored by Franchisee (other than those required by
law). Franchisee and Big O shall only honor warranties and guaranties on
Products and Services which have been sold to and returned by consumers in
accordance with the terms and procedures prescribed in the Manual. Franchisee
acknowledges that it will honor any and all warranties and guarantees sponsored
or approved by Big O, regardless of where or by whom they were issued.
Franchisee shall make no charge to a customer for honoring such a warranty or
guaranty unless the charge is permitted by the express terms of the warranty or
guaranty or the then current Manual. Big O agrees not to change or revoke any
warranty or guaranty without giving Franchisee at least thirty (30) days prior
written notice. Warranties or guarantees issued prior to any such revocation or
modification shall be honored according to their terms as interpreted in the
Manual.
14.05 Open Account Financing. In its sole discretion, Big O may provide
Franchisee with open account financing for some or all of the Products and
Services it sells Franchisee. Whether or not such credit is offered, Franchisee
will be required to execute a security agreement and comply with all other
requirements of Big O to secure Franchisee's obligations to Big O under the
Franchise Agreement and perfect its security interest therein. If such credit
is offered, Franchisee will be required to execute a credit agreement and
security agreement and comply with all other requirements of Big O to secure
such payments and perfect its security interest therein. Franchisee's failure
to comply with any credit terms set forth above shall constitute an event of
default of this Agreement.
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS
15.01 Initial Advertising. Recognizing the value of standardized
Advertising programs to the furtherance of the goodwill and public image of the
Big O System, the parties agree that within the
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first year of business, Franchisee is required to spend on Initial Advertising,
in addition to the required four percent (4%), the amount specified on the
Summary Pages. The exact amount to be spent on Initial Advertising shall be
determined by the Franchisee's Local Group and will depend, in part, on Big O's
then current presence in the market place, reputation and name recognition. The
amount and manner of the Initial Advertising must be approved in advance by Big
O. If no Local Group exists for the region where Franchisee's Store is located,
then the amount of the Initial Advertising shall be agreed upon by Big O and
Franchisee.
15.02 National Advertising Fund. Big O has established a National
Advertising Fund which Big O, in its sole discretion, may decide to terminate at
any time. If Big O does terminate the National Advertising Fund, Big O, in its
sole discretion, may re-establish it at any time. Big O shall notify
Franchisee as to the manner in which it shall function and the amount of
contribution required of Franchisee.
(a) Not later than the Due Date, Big O or its designee must have received
from Franchisee such amount as Big O shall designate, but not more than one
percent (1%) of its previous month's Gross Sales, as a contribution to the
National Advertising Fund which shall be maintained or approved by Big O for
Big O National Advertising. Big O shall limit any increase in Franchisee's
contribution to the National Advertising Fund from any amount then currently
being charged to one-tenth of one percent (.001%) in any twelve (12)
consecutive month period and an additional one-tenth of one percent (.001%)
for each twelve (12) consecutive months thereafter until the one percent
(1%) limitation is reached. Such incremental increases shall not be
cumulative so that if Big O fails to adopt an additional incremental
increase after any twelve (12) consecutive month period, the next one-tenth
of one percent (.001%) incremental increase will not accrue until actually
adopted by Big O and shall constitute the maximum for the next consecutive
twelve (12) months; provided, however, in the event Big O shall determine,
in its sole judgment and discretion, that a special advertising circumstance
or opportunity is available to Big O and/or its franchisees, Big O may
propose to the Dealer Planning Board a greater increase during any
consecutive twelve (12) month period (up to one percent (1%) limit), and if
a majority of the members of the Dealer Planning Board agree to such
increase, it shall be implemented by Big O, not withstanding Big O's
limitation as to the phasing in of any increases.
(b) Big O shall, following consultation with the Dealer Planning Board,
direct all National Advertising which is provided through the National
Advertising Fund with sole discretion over the concepts, materials, and
media used therein. All National Advertising Fund contributions paid by
Franchisee and other similarly situated Big O System franchisees to Big O
shall be part of the National Advertising Fund.
(c) Franchisee understands and acknowledges that the National Advertising
Fund is intended to maximize general public recognition and acceptance of
the Licensed Marks for the benefit of the System as a whole and that Big O
undertakes no obligation in administering the National Advertising Fund to
insure that any particular franchisee benefits directly or pro rata from the
national Advertising. Franchisee agrees that the National Advertising Fund
may otherwise be used to meet any and all costs incident to such
Advertising; provided that no part thereof shall be used by Big O to defray
its general operating expenses other than (i) those reasonably allocable to
such Advertising, or (ii) other activities reasonably related to the
administration or direction of the National Advertising Fund and its related
programs. No refund of contributions to the National Fund shall be due
Franchisee upon termination or nonrenewal of this Agreement.
(d) Any part of the National Advertising Fund contributions paid to Big
O, but not spent by Big O during Big O's fiscal year, which Big O may change
in its sole discretion, shall remain in the National Advertising Fund. Any
taxes imposed on the National Advertising Fund shall be paid from the
National Advertising Fund.
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(e) The Dealer Planning Board shall have the right to review all
expenditures of the National Advertising Fund on a regular basis.
15.03 Local Fund. Franchisee shall also contribute by the Due Date a
minimum of four percent (4%) of its Store's Gross Sales for the previous month
either to Big O or, if a Local Fund has been established in Franchisee's
marketing area, to the Local Fund formed for the purpose of local advertising
and operated pursuant to such structure and guidelines as Big O may prescribe or
approve. Franchisee agrees to be bound by the decisions of either Big O or its
Local Group, if one has been established in Franchisee's marketing area,
pertaining to Local Advertising, provided such decisions have been approved by
Big O and do not violate any applicable laws. From time to time, the Local
Group may agree to increase the amount Franchisee is required to spend for
Advertising, but subject to the terms of certain documents already effective on
this Agreement's Effective Date, not by more than one percent (1%) of
Franchisee's Gross Sales on an annual basis.
15.04 Approval of Advertising. Franchisee or the Local Group shall submit
(through the mail, return receipt requested) to Big O for its prior written
approval (except with respect to prices to be charged), samples of all marketing
materials and advertising to be used by Franchisee that have not been prepared
or previously approved in all respects by Big O or its designated agents.
Franchisee shall submit tear sheets, receipts, and other evidence of such
Advertising in the manner prescribed by Big O. Franchisee will not be required
to submit to Big O copies of any proposed Advertising which has been adopted for
use by the Local Group and which was previously approved by Big O for use by the
Local Group.
16. STATEMENTS AND RECORDS
16.01 Invoices. Every sale of Products and Services from the Franchisee's
Store shall be accurately recorded on a consecutively numbered invoice or in
such other format as Big O may approve. All invoices, whether voided or used,
shall be accounted for by Franchisee.
16.02 Audit. Throughout the term of this Agreement and for two (2) years
thereafter, Franchisee shall maintain for not less than three (3) years
original, full, and complete records, accounts, books, data, licenses, and
contracts which shall accurately reflect all particulars relating to the
Franchised Business and such other statistical and other information or records
as Big O may require. Big O or its designated agent shall have the right to
examine and audit such records, accounts, books, and data during regular
business hours or at reasonable times. If any such examination or audit
discloses that Franchisee has understated its Store's Gross Sales by more than
two percent (2%), Franchisee shall be obliged to reimburse Big O for the cost
and expense of such examination or audit. If Franchisee has understated any
amount due Big O or any Local Group or Local Fund, it shall tender payment of
the amount due not later than ten (10) days following receipt of the auditor's
report, plus interest calculated at a rate which is the lower of eighteen
percent (18%) per annum or the highest rate permitted by law. If Franchisee has
overpaid Big O or such Local Group or Local Fund, such amount will be credited
to Franchisee against monthly royalty fees or advertising contributions due to
Big O, the Local Group or the Local Fund beginning with the month following
receipt of the auditor's report and continuing until the credit is exhausted.
16.03 Monthly Reports. No later than the Due Date, Franchisee shall mail
to Big O all payments of royalty fees and advertising contributions and monthly
reports due Big O on forms prescribed by Big O, stating the fees or
contributions due to Big O which were incurred during the preceding month as
specified from time to time by Big O, the Gross Sales at the Premises for the
prior month, copies of all sales tax receipts or returns and such other
information as Big O may require, all signed and certified as true and correct
by Franchisee or Franchisee's Operator. Big O reserves the right to require
such reporting to be performed and submitted to Big O electronically.
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16.04 Financial Statements. Franchisee shall deliver to Big O, no later
than sixty (60) days from the end of each of Franchisee's fiscal quarters, an
unaudited profit and loss statement covering the Franchised Business for such
quarter and a balance sheet of the Franchised Business as of the end of such
quarter, all of which shall be certified by Franchisee as true and correct. All
such statements shall be prepared in a format which has been prescribed or
approved by Big O. In addition, Franchisee, as well as any guarantor(s) of this
Agreement, shall, within thirty (30) days after request from Big O, deliver to
Big O a financial statement, certified as correct and current, in a form
which is satisfactory to Big O and which fairly represents the total assets and
liabilities of Franchisee and any such guarantor(s).
16.05 Management System. Big O has authorized Local Groups to recommend to
Big O that certain Management Systems be obtained and used by all their member
franchisees. If Franchisee's Local Group persuades Big O that the acquisition
of a Management System by all its member Franchisees is necessary to the
efficient functioning of a program which is consistent with the Big O System,
Franchisee shall, at its sole expense acquire such Management System and place
it in service within such time periods as are recommended by the Local Group and
approved by Big O. Once a particular Management System or accounting software
has been adopted by a Local Group pursuant to the criteria described herein,
Franchisee may utilize a different Management System at Franchisee's Store only
with Big O's prior written approval.
16.06 Regional Accounting Center. The Franchisee is required to use some
or all of the services provided by a Regional Accounting Center operating within
the Franchisee's marketing area.
17. COVENANTS
17.01 Noncompetition During Term. Except for any businesses already
operating and identified on the Summary Pages, during the term of this
Agreement, Franchisee and any guarantor(s) hereof covenant, individually, not to
engage in or open any business, other than as a Franchisee of the Big O System,
which offers or sells tires, wheels, shock absorbers, automotive services, or
other products or services which compete with Big O Products and Services. The
purpose of this covenant is to encourage Franchisee and any guarantor(s) hereof
to use their best efforts to promote the Big O System, its Products and
Services, to protect its Information and trade secrets, and to generate a
successful business at the Store.
17.02 Confidentiality. During the term of this Agreement and thereafter,
Franchisee covenants not to communicate directly or indirectly, divulge to or
use for its benefit or the benefit of any other person or legal entity, any
trade secrets which are proprietary to Big O or any Information, knowledge, or
know-how deemed confidential under Section 13 hereof, except as permitted by Big
O. The protection granted hereunder shall be in addition to and not in lieu of
all other protections for such trade secrets and confidential Information as may
otherwise be afforded in law or in equity.
17.03 No Interference with Business. Franchisee agrees that during the
term of this Agreement that it shall not divert or attempt to divert any
business of or any actual customers of the Big O System to any competitive
business, by direct or indirect inducement or otherwise.
17.04 Post Termination Covenant Not to Compete. If Franchisee terminates
this Agreement other than in a manner prescribed by Section 19.03 or if this
Agreement is terminated for "good cause" as defined in Section 19.01, Franchisee
and its guarantors covenant that they shall not directly or indirectly, for a
period of two (2) years after the Termination Date of this Agreement, engage in
any business, other than as a Franchisee of the Big O System, which offers or
sells tires, wheels, shock absorbers, automotive services, or other products or
services which compete with Big
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O Products and Services within a ten (10) mile radius of the Premises or within
a ten (10) mile radius of any other Big O Store which was operational or under
construction on the Termination Date.
If a former Franchisee or guarantor commits a breach of this Section 17.04, the
two year period shall start on the date that the former Franchisee or guarantor
is enjoined from competing or stops competing, whichever is later.
17.05 Survivability of Covenants. The parties agree that each of the
foregoing covenants shall be construed as independent of any other covenant or
provision of this Agreement. If all or any portion of a covenant in this Section
17 is held unenforceable by a court or agency having valid jurisdiction in an
unappealed final decision to which Big O is a party, Franchisee expressly agrees
to be bound by any lesser covenant imposing the maximum duty permitted by law
that is subsumed within the terms of the covenant, as if the resulting covenant
were separately stated in and made a part of this Section 17. Franchisee further
expressly agrees that the existence of any claim it may have against Big O,
whether or not arising from this Agreement, shall not constitute a defense to
the enforcement by Big O of the covenants in this Section 17. The covenants in
this Section 17 shall survive the Termination Date or Expiration Date of this
Agreement.
17.06 Modification of Covenants. Franchisee understands and acknowledges
that Big O shall have the right, in its sole discretion, to reduce the scope of
any covenant set forth in this Section 17 or any portion hereof, without
Franchisee's consent, effective immediately upon receipt by Franchisee of
written notice thereof; and Franchisee agrees that it shall comply immediately
with any covenant as so modified.
18. TRANSFER AND ASSIGNMENT
18.01 Assignment by Big O. This Agreement and all rights and duties
hereunder may be freely assigned or transferred by Big O and shall be binding
upon and inure to the benefit of Big O's successors and assigns.
18.02 Right of First Refusal. Because Big O or someone known to Big O may
be interested in purchasing Franchisee's Franchised Business, the Premises, or
an interest in either, if Franchisee decides to make a Transfer, Franchisee
agrees to offer in writing to make the Transfer to Big O, and describe the terms
under which Franchisee offers to make such a Transfer. If Big O has not offered
to purchase what the Franchisee has offered to Transfer to Big O within thirty
(30) days after Big O receives the notice from Franchisee, Franchisee may then
offer to make the Transfer to third parties on the same or not more favorable
terms and conditions as were offered to Big O. If Franchisee does not
consummate the Transfer within six months after Franchisee gives notice of the
Transfer to Big O, Franchisee shall not make the Transfer without again first
offering to make the Transfer to Big O.
18.03 Transfer Legend. Franchisee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Franchisee and
that Big O has granted the Franchise in reliance on Franchisee's personal
background, business skills, experience, and financial capacity. It is
important to Big O that Franchisee be known to Big O and always meet Big O's
standards and requirements. Accordingly, neither Franchisee nor any Shareholder
shall be permitted or have the power, without the prior written consent of Big
O, to make a Transfer. To assure compliance by Franchisee with the transfer
restrictions contained in this Section 18, all share or stock certificates of
Franchisee shall at all times contain a legend sufficient under applicable law
to constitute notice of the restrictions on such stock contained in this
Agreement and to allow such restrictions to be enforceable. Such legend shall
appear in substantially the following form:
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"The sale, transfer, pledge, or hypothecation of this stock is
restricted pursuant to the terms of Section 18 of a Franchise Agreement
dated _____________________ between Big O Tires, Inc, and the issuer
of these shares."
Any Transfer which does not comply with the terms of this Section 18 shall be
null and void.
18.04 Pre-Conditions to Franchisee's Assignment. If Franchisee or any
Shareholder desires to make a Transfer, such person or entity must comply with
the following terms, conditions, and procedures to effectuate a valid Transfer:
(a) If any proposed assignment of any rights under this Agreement, or if
any other Transfer which, when aggregated with all previous Transfers, would
in the reasonable opinion of Big O, result in the transfer of effective
control over the ownership and/or operation of the Premises or Franchisee or
the Franchised Business:
(i) The transferee must apply for a Big O franchise and must meet
all of Big O's then current standards and requirements for becoming a
Big O franchisee (which standards and requirements need not be
written); and
(ii) The transferee shall execute the then current form of
Franchise Agreement generally issued by Big O with respect to
comparable Big O franchisees. Such agreement shall generally provide
for a new term equal to the term of the standard Big O franchise
agreement then being offered, and may include, without limitation,
different fee structures, modified Trade Areas and/or increased fees;
(b) Regardless of the degree of control which would be affected by a
proposed Transfer:
(i) Franchisee shall first notify Big O in writing of any bona
fide proposed Transfer and set forth a complete description of all
terms and fees of the proposed Transfer in the manner prescribed by
Big O, including the prospective transferee's name, address,
financial qualifications, and previous five (5) years business
experience;
(ii) Big O or its assignee may, within thirty (30) days after
receipt of such notice, exercise the Option to purchase the interest
being offered by Franchisee or any Shareholder;
(iii) If Big O or its assignee fails to exercise the Option to
purchase the interest, Big O shall, within thirty (30) days after
receipt of the notice of the Option, notify Franchisee in writing of
its approval or disapproval of the prospective transferee. Big O's
approval will be granted only if the prospective transferee, its
Shareholders, partners, and/or Operator: meets Big O's then current
standards for new franchisees, which standards need not be in
writing; demonstrates to Big O's satisfaction that it or its Operator
meets Big O's managerial, business, and technical standards;
possesses a good moral character, business reputation, and
satisfactory credit rating; and has the aptitude, ability, and
financial capacity to operate the Franchised Business (as may be
evidenced by prior related business experience or otherwise). Big O
reserves the right to disallow a transfer of the Premises (without a
transfer of the Franchised Business) to a person which would operate
a business from the Premises which sells or offers for sale products
or services which are the same as or similar to those offered for
sale through the Franchised Business;
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(iv) If Big O approves the proposed transferee, Franchisee or the
Shareholder may transfer the interest to the proposed transferee at a
price and under terms and conditions which are not more favorable
than the terms offered to Big O. Big O's approval is conditioned
upon the proposed transferee or its Operator having completed (to the
satisfaction of Big O) the training program then currently required
of Big O franchisees or Operators;
(v) Prior to the consummation of any such Transfer, Franchisee
shall pay all amounts due to Big O and cure all other breaches of
this Agreement and any other agreement or loan document it may have
with Big O;
(vi) Big O will, as a condition of any Transfer involving a change
in control of Franchisee, the Store or its Assets, require Franchisee
or Transferee to pay a transfer fee (but no initial franchise fee) to
reimburse Big O for any expenses which may be incurred in its review,
analysis, and preparation of any documentation relating to the
Transfer, including legal and accounting fees, any required training
and additional assistance as may be requested by the Franchisee
related to the Franchisee's resale of the Store. The transfer fee
will range between $4,500 and the amount of the then current initial
franchise fee, the exact amount within that range to be based on Big
O's actual costs incurred. Big O shall be the sole arbiter of
whether a change of control occurred as a result of a single Transfer
or a group of Transfers;
For any transfer of less than fifty percent (50%) of Franchisee's
ownership, Big O will, as a condition of any Transfer involving less
than fifty percent (50%) of Franchisee's ownership in the Franchise,
the store or its assets, require the Franchisee or the transferee to
pay a transfer fee (but no initial franchise fee) to reimburse Big O
for any expenses which may be incurred in its review, analysis and
preparation of any documentation relating to the Transfer, including
legal and accounting fees and additional assistance as may be
requested by the Franchisee related to the resale of the Store. The
transfer fee will be $500. However, if such Transfer consumes an
inordinate amount of time (in excess of ten (10) hours of cumulative
Big O personnel time) the Franchisee or the Transferee may be billed
the then current billable hour rate, which is currently in addition
to the $500 fee. The transferee will be charged no other initial
franchise fee. Big O shall be the sole arbiter of whether a change
of control will occur as a result of a single Transfer or a group of
Transfers.
(vii) Big O may require any transferor of any partnership
interest, shares of stock, or any other interest of any kind or
nature in Franchisee to guarantee the obligations of Transferee under
this Agreement or under any new Franchise Agreement entered into
between transferee and Big O;
(viii) Prior to approving a Transfer of the controlling interest in
Franchisee, the Franchised Business, or the Premises, Big O may
inspect Franchisee's Store and as a result of such inspection, Big O
may prepare a "Punch List" setting forth the necessary repairs,
maintenance, or other upgrading of the Store which will become a
condition of Big O's approval of the Transfer; and
(ix) If the Franchisee acquired its interest in the Franchise as a
Pioneer, Converter, or pursuant to a Development Agreement or Manager
Incentive Contract, and the Franchisee makes a Transfer of its
interest within two (2) years of the Effective Date of this
Agreement, the Franchisee must pay Big O as a condition of
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such Transfer the difference between the initial franchise fee paid
by Franchisee and twenty-one thousand dollars ($21,000.00), the
standard initial franchisee fee charged by Big O for new franchises
when Franchisee executed this Agreement.
(x) Franchisee shall comply with all other applicable transfer
requirements as designated in the Confidential Operating Manual or
otherwise in writing.
18.05 Death of Franchisee. Notwithstanding any other provision in this
Section 18, if a Survivor desires to acquire or retain the interest of a
decedent of a Franchisee or in a Franchisee and continues to operate the
Franchised Business pursuant to the System, the Survivor may do so under the
terms of this Agreement subject only to:
(a) The Survivor's execution and delivery to Big O of a written agreement
to be bound:
(i) By the terms of this Agreement; and
(ii) By the terms of any guaranty of this Agreement;
(b) Satisfactory completion of initial training by the Survivor,
Survivor's Operator, or Manager and such other managerial personnel as Big O
may designate within the time periods prescribed by Big O; and
(c) The Survivor's payment of all travel, lodging, food, and similar
expenses incurred by it or its Operator or managerial personnel in attending
the training prescribed by Section 11.02. If the Survivor does not desire
to acquire or retain such interest, then the Survivor shall have a
reasonable period of time, but no more than six (6) months, to make a
Transfer to a transferee acceptable to Big O subject to compliance with the
procedures set forth in this Section 18, provided, the Survivor throughout
such period fulfills all duties of Franchisee under this Agreement.
18.06 No Waiver. Big O's consent to a Transfer hereunder shall not
constitute a waiver of any claims Big O may have against Franchisee or the
transferring party or Big O's right to demand exact compliance with any
provision of this Agreement.
18.07 Excepted Transfers. The provisions of Section 18.02 and 18.04(b)(ii)
shall not apply to: (a) any Transfer to a spouse, parent, child, or sibling of
Franchisee or any Shareholder; (b) a Transfer to Franchisee's Operator or
Manager pursuant to the terms of a Manager Incentive Contract which complies in
all respects with the standards approved or prescribed by Big O; or (c) a
Transfer to a spouse, parent, child, or sibling of Franchisee or any Shareholder
which, in the aggregate, amounts to a Transfer of less than a controlling
interest in Franchisee, the Franchised Business, or the Premises.
19. DEFAULT AND TERMINATION
19.01 Termination by Big O. Big O may terminate this Agreement for good
cause, without prejudice to the enforcement of any legal or equitable right or
remedy, immediately upon giving written notice of such termination and the
reason or cause for the termination, and, except as hereinafter provided,
without providing Franchisee an opportunity to cure the default. Without in any
way limiting the generality of the meaning of the term "good cause", the
following occurrences shall constitute sufficient basis for Big O to terminate
the Agreement:
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(a) If Franchisee fails to pay any financial obligation pursuant to this
Agreement including, but not limited to, payments to Big O or any other
supplier for Products and Services, and fails to cure such failure to pay
within five (5) days after Big O gives Franchisee a written notice of
default;
(b) If Franchisee fails to perform or breaches any covenant, obligation,
term, condition, warranty, or certification herein and fails to cure such
non-compliance within thirty (30) days after Big O gives Franchisee written
notice of default;
(c) If Franchisee fails to open the Store and commence business within
eighteen (18) months of the Effective Date of this Agreement, or if
Franchisee fails to commence business on such other Commencement Date as the
parties hereto may have agreed;
(d) If Franchisee makes, or has made, any materially false statement or
report to Big O in connection with this Agreement or the application
therefor;
(e) If Franchisee operates the Franchised Business in a manner contrary
to or inconsistent with the Licensed Marks or as specified by Big O in the
Manual, and Franchisee fails to cure such deficiency within thirty (30) days
after Big O gives a written notice of default;
(f) If Franchisee, a Shareholder, guarantor, or transferee violates any
transfer and assignment provision contained in Section 18 of this Agreement;
(g) If Franchisee receives from Big O more than three (3) valid notices
of default of this Agreement in the same twelve (12) month period,
regardless of whether previous defaults have been cured;
(h) If Franchisee fails to operate or keep the Franchised Business open
for more than five (5) consecutive business days without Big O's express
written approval, or if Franchisee ceases to operate all or any part of the
Franchised Business conducted under this Agreement or defaults under any
loan, lending agreement, mortgage, deed of trust or lease with any party
covering the Premises, and such party treats such act or omission as a
default, and Franchisee fails to cure such default to the satisfaction of
such party within any applicable cure period granted Franchisee by such
party;
(i) If Franchisee or any person owning an interest in Franchisee is
convicted of any felony or crime of moral turpitude regardless of the nature
thereof, or any other crime or offense relating to the operation of the
Franchised Business, or if Franchisee engages in any conduct which reflects
materially and unfavorably upon the operation of the Franchised Business;
(j) If Franchisee becomes insolvent or makes a general assignment for the
benefit of creditors, or if a petition in bankruptcy is filed by Franchisee,
or such a petition is filed against and consented to by Franchisee, or if a
bill in equity or other proceeding for the appointment of a receiver of
Franchisee or other custodian for Franchisee's business or assets is filed
and consented to by Franchisee, or if a receiver or other custodian
(permanent or temporary) of Franchisee's assets or property, or any part
thereof, other than as described in Section 18.05, is appointed;
(k) If Franchisee or any guarantor(s) hereof defaults in any other
agreement or loan document with Big O or if Franchisee defaults under the
terms of any lease of the Premises or if Franchisee fails to comply with the
requirements of any Local Group operating pursuant to standards prescribed
or approved by Big O including, but not limited to, any requirement to pay
dues or make advertising contributions, and such default is not cured in
accordance
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with the terms of such other agreement, loan document, or lease,
or the by-laws of the Local Group;
(l) If Franchisee fails, for a period of ten (10) days after notification
of non-compliance, to comply with any law or regulation applicable to the
operation of the Franchised Business;
(m) If Franchisee sells, offers for sale, or gives away at the Premises
any products or services which have not been previously approved by Big O in
writing, or which have been subsequently disapproved;
(n) If Franchisee shall have understated its Gross Sales to Big O by more
than two percent (2%) on two (2) or more occasions; or
(o) If a court of competent jurisdiction or an arbitration tribunal in a
final and unappealed judgment determines that any significant amount of the
payments or compensation which Franchisee has agreed to pay Big O pursuant
to the terms hereof is unlawful, or that all or a significant part of
Franchisee's payment obligations hereunder are void or voidable by
Franchisee.
If a different notice or cure period or good cause standard is prescribed by
applicable law, it shall apply to a termination of the Franchise Agreement.
Remedies to Big O. If the Franchisee is in default and has failed to cure
such default in a manner prescribed by the Franchise Agreement, in addition
to the rights Big O has to terminate the agreement, the Franchisee agrees to
pay to Big O, among the many remedies available to Big O, royalties and any
lost gross profits.
19.02 Governing State Law. If a different notice or cure period or good
cause standard is prescribed by applicable law, it shall apply to a termination
of this Agreement.
19.03 Termination by Franchisee. Franchisee may only terminate this
Agreement if Big O has committed a material breach of any of Big O's obligations
under this Agreement and has failed to cure such breach within thirty (30) days
after Franchisee has given written notice to Big O of such breach.
19.04 Force Majeure. Notwithstanding anything contained in this Agreement
to the contrary, neither party shall be in default hereunder by reason of its
delay in performance of, or failure to perform, any of its obligations
hereunder, if such delay or failure is caused by:
(a) strikes or other labor disturbance;
(b) acts of God, or the public enemy, riots or other civil disturbances,
fire, or flood;
(c) interference by civil or military authorities;
(d) compliance with governmental laws, rules, or regulations which were
not in effect and could not be reasonably anticipated as of the date of this
Agreement;
(e) delays in transportation, failure of delivery by suppliers, or
inability to secure necessary governmental priorities for materials; or
(f) any other fault beyond its control or without its fault or
negligence. In any such event, the time required for performance of such
obligation shall be the duration of the unavoidable delay.
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20. POST TERMINATION OBLIGATIONS
20.01 Post-Termination Obligations. Upon the expiration or termination of
this Agreement by any means or for any reason, Franchisee shall immediately:
(a) Cease to be a Franchisee of Big O and cease to operate the former
Franchised Business under the Big O System. Franchisee shall not
thereafter, directly or indirectly, represent to the public that the former
Franchised Business is or was operated or in any way connected with the Big
O System or hold itself out as a present or former Franchisee of Big O;
(b) Pay all sums owing to Big O. Upon termination for any default by
Franchisee, such sums shall include actual and consequential damages, costs,
and expenses incurred by Big O as a result of the default;
(c) Return to Big O the (i) Confidential Operating Manual, Blue II, any
training modules or other proprietary information and supplements thereto
and all trade secrets and confidential materials owned or licensed by Big O
and all copies thereof other than Franchisee's copy of the Franchise
Agreement, copies of any correspondence between the parties, and any other
document which Franchisee reasonably needs for compliance with any
applicable law; (ii) return or discontinue use of all forms, advertising
matter, marks, devises, insignias, slogans, designs, signs, any computer
systems including BOSS/2/ software and/or hardware; and (iii) discontinue
the use of all copyrights, Licensed Marks, tradenames and patents now or
hereafter applied for or granted in connection with the operation of the
Franchise.
(d) Provide Big O, upon its request, with a complete list of any
outstanding obligations Franchisee may have to any third parties including
outstanding customer orders. Big O shall have the right, but not the
obligation, to fill any such outstanding customer orders generated by
Franchisee and in such event, Franchisee shall immediately reimburse Big O
for any costs or expenses incurred by Big O in doing so. In addition, Big O
shall have the right to cancel any orders placed by Franchisee for which
delivery has not been made;
(e) Take such action as may be required by Big O to transfer and assign
to Big O or its designee all telephone numbers, white and yellow page
telephone references and advertisements, and all trade and similar name
registrations and business licenses, and to cancel any interest which
Franchisee may have in the same. The Franchisor is hereby appointed as the
Franchisee's attorney-in-fact for such purpose and such power, being coupled
with an interest, shall be irrevocable;
(f) Cease to use in Advertising, or in any manner whatsoever, any
methods, procedures, or techniques associated with the Big O System in which
Big O has a proprietary right, title, or interest; cease to use the
Licensed Marks, and any other marks and indicia of operation associated with
the Big O System and remove or change all Trade Dress, Products and
Services, and other indicia of operation under the Big O System from the
Premises, at Franchisee's expense and in a manner satisfactory to Big O.
Unless otherwise approved in writing by Big O, Franchisee shall return to
Big O all copies of materials bearing the Licensed Marks; and
(g) If during the term of Franchisee's Franchise Agreement, the
Franchisee has made available to its customers, the ability to purchase
Products and Services from Franchisee's Store by the use of the Big O credit
card with American General Finance, upon termination the Franchisee shall
cease accepting such card from any future customers.
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(h) Franchisee shall immediately make available to Big O all customer
lists as such was developed while a Franchisee.
(i) Strictly comply with all other provisions of this Agreement
pertaining to post-termination obligations, including, without limitation,
those contained in Sections 13 and 17.
(j) Any tire adjustments existing as of the Termination Date shall be
referred to other existing LSCs, RSCs or other Stores for processing.
Franchisee shall receive no allowance for tire adjustments upon termination.
20.02 Right to Repurchase. Big O shall have the right, but not the
obligation, to purchase:
(a) Some or all of the Products and Services and supplies at the Store
and the equipment, furnishings, fixtures, or signs at the Premises which
bear the Licensed Marks for a mutually agreed upon price within thirty (30)
days of the Termination Date or the Expiration Date.
(b) If Big O elects to exercise such a right, it may offset the purchase
price against any other amounts owed by Franchisee to Big O pursuant to this
or any agreement or loan document. Before exercising any such rights, Big O
shall have the right to enter upon the Premises during reasonable hours to
take an inventory of the Franchised Business.
20.03 Right of First Refusal. Upon receipt by Franchisee of an offer to
purchase Franchisee's Products and Services, equipment, supplies, fixtures or
signs at the Premises, Franchisee hereby grants Big O a right of first refusal
to purchase any of such items by matching the bona fide monetary purchase price
and payment schedule terms, less any brokerage commission without having to
match any other non-monetary terms of the proposed purchase by Franchisee's
buyer(s). Franchisee must give Big O written notice of any such bona fide
offer. If within thirty (30) days after receipt of such notice, Big O has
neither exercised its right of first refusal nor notified Franchisee of its
rejection thereof, Franchisee may sell such items as were covered by the offer
at the expiration of the thirty (30) day period.
20.04 De-Identification of Assets Upon Sale. If Big O determines not to
exercise its option to repurchase any such items, Franchisee may continue to
sell its remaining Products and Services, equipment, supplies, and fixtures, but
may not identify itself as a Big O Franchisee. Franchisee shall otherwise abide
by the terms of this Section 20.
21. INSURANCE
21.01 Insurance Coverage. Franchisee shall, at its expense and no later
than upon the Commencement Date, procure and maintain in full force and effect
throughout the term of this Agreement either the approved Big O Dealers National
Insurance Program ("Program") then in effect or the types of insurance
enumerated in this Agreement, which shall be in such coverages, limits and
amounts as may from time to time be required by Big O, and which shall designate
Big O, its directors, officers, employees, agents and other Big O designees as
additional named insured(s). Unless otherwise agreed to by Big O, Franchisee
shall procure and maintain whichever limits and coverages are greater in a
comparison of the insurance enumerated in the Manual and the insurance
enumerated in the Program. If the Franchisee chooses not to procure insurance
pursuant to the Program, Franchisee shall procure the following insurance
coverages, limits and amounts:
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(a) Workers' Compensation insurance with statutory limits for Coverage A
as prescribed by the statutes of the state of the Franchised Business;
including Coverage B, Employers Liability, with limits not less than or
equivalent to $500,000 each person, $500,000 each occurrence, and $500,000
annual aggregate;
(b) Comprehensive or Commercial General Liability insurance covering all
operations and premises of the Franchised Business, including but not
limited to Product Liability, Completed Operations Liability, Personal
Injury Protection, Advertisers Liability, Fire Legal Liability, Medical
Payments, and Contractual Liability, with limits not less than the
equivalent of $2,000,000 per occurrence combined single limit for bodily
injury and property damage;
(c) Vehicular/Automobile Liability insurance, including Uninsured
Motorist and Medical Payments, covering owned, non-owned, hired, leased or
other vehicles associated, directly or indirectly, with the Franchised
Business, with limits of not less than the equivalent of $1,000,000 per
occurrence combined single limit for bodily injury and property damage;
(d) "All Risk" Property insurance covering risk of loss to real and
personal property; including but not limited to, Accounts Receivable,
Valuable Papers, Glass, Signs, Employees' Tools, Loss of Rents, and other
building contents - including flood and earthquake coverage if appropriate
for the location of the specific Franchised Business-for repair/replacement
coverage and valuation of all assets. This coverage will include Business
Income/Extra Expense insurance for extra expenses incurred and/or profits
lost due to a covered, "All Risk" peril (Business Interruption Valuation
Worksheets will be submitted by Franchisee to Big O annually for evaluation
and approval). Any coinsurance provisions should apply only to values
reported and should have no adverse impact on claim settlement (an Agreed
Amount Endorsement should be obtained, if possible);
(e) Inland Marine insurance covering all signs, tools and equipment, and
cargo being transported by rail, motortruck, or other common carrier
conveyances where the Franchised Business has title or responsibility for
transported goods, with limits of no less than $10,000 per any one
conveyance;
(f) Garage Liability and Garagekeepers Legal Liability insurance covering
all vehicle storage, garage premises and other operations arising out of the
Franchised Business and non-owned use and/or operation of vehicles, with
Garage Liability limits of not less than the equivalent of $2,000,000 per
occurrence combined single limit for bodily injury and property damage and
Garagekeepers Legal Liability of not less than the equivalent of $100,000
per location;
(g) Boiler and Machinery insurance covering all real and personal
property; including, but not limited to, pressure vessels, machinery,
piping, tubing and other high and low pressurized items at the Franchised
Business for the repair/replacement valuation of all assets. This coverage
shall include Business Income/Extra Expenses insurance for additional
expenses incurred and/or profits lost;
(h) Comprehensive Fidelity/Crime insurance covering Employee Dishonesty
with limits no less than $25,000; Forgery with limits no less than $10,000;
Money and Securities Inside Premises with limits no less than $10,000; and
Money and Securities Outside Premises with limits no less than $10,000; and
(i) Commercial Umbrella Liability insurance covering all underlying
liability insurance coverages enumerated in this section, with no gaps
between underlying and umbrella limits or coverage with excess and primary
limits of no less than the equivalent of $3,000,000 per occurrence combined
single limit for bodily injury and property damage.
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21.02 Proof of Insurance. Prior to the Commencement Date, Franchisee shall
make timely delivery of a signed original certificate or certificates of all
required insurance coverages to Big O, which shall contain the authorized
agent's business name, address and phone number, together with a statement by
the insurer that the policy will not be cancelled or materially changed without
at least thirty (30) days prior written notice to Big O that the alteration or
cancellation is being made. All insurance coverages will be underwritten by a
company acceptable to Big O, with a Best's Rating of no less than "A-" or a
financial statement of the insurer approved by Big O. If Franchisee fails to
purchase required insurance conforming to the standards prescribed by Big O, Big
O may obtain such insurance for Franchisee, and Franchisee shall pay Big O the
cost of such insurance plus a ten percent (10%) administrative surcharge.
21.03 Survival of Indemnification. The procurement and maintenance of the
greater of the prescribed insurance coverages set forth in the Manual or those
set forth in the Program shall not relieve Franchisee of any liability to Big O
assumed under any indemnification requirement of this Agreement.
If Big O deems it appropriate, the Franchisee shall, upon Big O's request,
provide to Big O a true, complete certified copy of all, or a part of the
Franchisee's insurance policies within 10 days of receiving such request. In
addition, upon Big O's request, the Franchisee shall provide to Big O renewal
certificates of insurance, or certified insurance binders, for all required
coverages no fewer than 10 days before the indicated anniversary date(s) of such
insurance coverages.
22. TAXES, PERMITS, AND INDEBTEDNESS
22.01 Payment of Taxes. Franchisee shall promptly pay when due any and all
federal, state, and local taxes including without limitation, unemployment and
sales taxes, levied or assessed with respect to any Products and Services
distributed or sold pursuant to this Agreement and all accounts or other
indebtedness of every kind incurred by Franchisee in the operation of the
Franchised Business.
22.02 Compliance with Laws. Franchisee shall comply with all applicable
federal, state, and local laws, rules and regulations, including, without
limitation, environmental laws related to tire disposal. Franchisee shall
obtain any and all permits, certificates, and licenses required for the full and
proper conduct of the Franchised Business.
22.03 Payment of Debts. Franchisee hereby expressly covenants and agrees
to accept full and sole responsibility for any and all debts and obligations
incurred in the operation of the Franchised Business.
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS
23.01 Indemnification. Franchisee agrees to protect, defend, indemnify,
and hold Big O and its affiliates, their directors, officers, shareholders,
employees and agents jointly and severally, harmless from and against all
claims, actions, proceedings, damages, costs, expenses and other losses
(including death) and liabilities, consequently, directly or indirectly incurred
(including, without limitation, attorneys', accountants' and other related fees)
as a result of, arising out of, or connected with the operation of the
Franchised Business, including, without limitation, the failure of Franchisee to
comply with any relevant environmental and tire disposal laws. Franchisee shall
not, however, be liable for claims arising exclusively as a result of Big O's
intentional or fraudulent acts or omissions or sole negligence.
23.02 Independent Contractor. In all dealings with third parties,
including, without limitation, customers, employees, and suppliers, Franchisee
shall disclose in an appropriate manner acceptable
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to Big O that it is an independent entity operating under a franchise granted by
Big O. Franchisee shall submit all applications and enter into all contracts in
its designated corporate name or such other fictitious names which have been
approved by Big O, but not in the name "Big O Tires" or in any other name which
includes the name "Big O". Nothing in this Agreement is intended by the parties
hereto to create a fiduciary relationship between them nor to constitute
Franchisee or Franchisee's employees or contractors as an agent, legal
representative, subsidiary, joint venturer, partner, employee, or servant of Big
O for any purpose whatsoever. It is understood and agreed that Franchisee is an
independent contractor and is in no way authorized to make any contract,
warranty, or representation or to create or imply any obligation on behalf of
Big O.
24. WRITTEN APPROVALS, WAIVERS, AND AMENDMENT
24.01 Written Approval. Whenever this Agreement requires Big O's prior
approval, Franchisee shall make a timely written request. Unless a different
time period is specified in this Agreement, Big O shall respond with its
approval or disapproval within fifteen (15) business days.
24.02 Waiver. No failure of Big O to exercise any power reserved to it by
this Agreement and no custom or practice of the parties at variance with the
terms hereof shall constitute a waiver of Big O's right to demand exact
compliance with any of the terms herein. A waiver or approval by Big O of any
particular default by Franchisee or any other Big O franchisee or acceptance by
Big O of any payments due hereunder shall not be considered a waiver or approval
by Big O of any preceding or subsequent breach by Franchisee of any term,
covenant, or condition of this Agreement. Big O shall not be deemed to have
waived any of its rights under this Agreement, including any right to receive
payment in full for any Product or Service provided, nor shall Franchisee be
deemed to have been excused from performance of any of its obligations pursuant
to this Agreement, unless such waiver or excuse is written and executed by an
authorized representative of Big O and Franchisee.
24.03 Modification. No amendment, change, or variance from this Agreement
shall be binding upon either Big O or Franchisee except by mutual written
agreement. If an amendment of this Agreement is executed at Franchisee's
request, any legal fees or costs of preparation of such amendment and any
amendment of a franchise registration arising in connection therewith shall be
paid by Franchisee.
25. DEALER PLANNING BOARD
25.01 Dealer Planning Board. Big O has established a Dealer Planning Board
("DPB"), consisting of franchisee representatives, which is designed to assist
Big O's management in the development of its strategic business plan and to
advise Big O's management on issues of concern to Big O franchisees. Through a
representative elected from Franchisee's Local Group, Franchisee shall be
represented on the DPB.
25.02 Special Interest Issues. Big O has granted the DPB the authority to
participate with Big O's management in making policy decisions relating to
issues in which the DPB is deemed to have a special interest. The issues of
"Special Interest" include:
(a) advertising policies and the creation of a National Advertising Fund;
(b) standards of operation; and the implementation of new programs which
may require the addition of new equipment and fixtures for the store;
(c) selection of Products and Services offered at Big O Stores; and
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(d) changes in the Licensed Marks anticipated to require the majority of
franchisees to expend more than five thousand dollars ($5,000.00) per Store.
25.03 Disapproval of Management Proposal. With respect to those issues in
which the DPB has a Special Interest, the DPB may, after consulting with the
members of the Local Groups, vote to disapprove a proposal of Big O's
management. If, pursuant to established procedures which have been approved by
Big O, the DPB shall disapprove a proposal of Big O's management, the proposal
may only become effective if, following a presentation to the Big O board of
directors by a representative of the DPB, Big O's board of directors votes to
adopt management's proposal.
25.04 Compliance with Modification. Franchisee agrees to comply with any
and all modifications to Big O's standards of operation, procedures, or other
requirements adopted pursuant to the procedures described in this Section 25.
26. RIGHT OF OFFSET
26.01 Right of Offset. Big O shall have the right at any time before or
after termination of this Agreement, without notice to Franchisee, to offset any
amounts or liabilities that may be owed by the Franchisee to Big O against any
amounts or liabilities that may be owed by Big O to Franchisee under this
Agreement or any other agreement, loan, transaction or relationship between the
parties.
27. ENFORCEMENT
27.01 Declaratory and Injunctive Relief. Big O or its designee shall be
entitled to obtain without bond, declarations, temporary and permanent
injunctions, and orders of specific performance:
(a) To enforce the provisions of this Agreement relating to: (i)
Franchisee's use of the Licensed Marks; (ii) the obligations of Franchisee
upon termination or expiration of this Agreement; or (iii) the Transfer
and Assignment requirements of Section 18; or
(b) to prohibit any act or omission by Franchisee or its employees that:
(i) constitutes a violation of any applicable law or regulation; (ii) is
dishonest or misleading to prospective or current customers or clients of
businesses operated under the System; (iii) constitutes a danger to other
Big O franchisees, their employees, customers, clients or the public; or
(iv) may impair the goodwill associated with the Licensed Marks.
27.02 Costs of Enforcement. If Big O secures any declaration, injunction
or order of specific performance pursuant to Section 27.01 hereof, if any
provision of this Agreement is enforced at any time by Big O or if any amounts
due from Franchisee to Big O are, at any time, collected by or through an
attorney at law or collection agency, Franchisee shall be liable to Big O for
all costs and expenses of enforcement and collection including, but not limited
to, court costs and reasonable attorneys' fees, including the fair market value
of any time expended by legal counsel employed by Big O.
28. NOTICES
28.01 Notices. Any notice required to be given hereunder shall be in
writing and shall be mailed by registered or certified mail. Notices to
Franchisee and Big O shall be addressed to them at their addresses as listed on
the Summary Pages or to such other addresses as the parties may hereafter
prescribe. A copy of each notice to Big O shall be addressed to Franchisee's
designated regional representative. Any notice complying with the provisions
hereof shall be deemed to be given on the date of mailing.
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29. GOVERNING LAW
29.01 Governing Law. This Agreement is accepted by Big O in the State of
Colorado and shall be governed by and interpreted in accordance with Colorado
law, which law shall prevail in the event of any conflict of law. Big O and
Franchisee consent to personal and subject matter jurisdiction and venue in
Denver, Colorado.
29.02 Jurisdiction. The parties hereto agree that it is in their best
interest to resolve disputes between them in an orderly fashion and in a
consistent manner. Therefore, the parties consent to the exclusive jurisdiction
of either Colorado state courts or the United States Federal District Court for
the District of Colorado for any litigation relating to this Agreement or the
operation of the Franchised Business thereunder. Franchisor and Franchisee
irrevocably constitute and appoint the persons designated on paragraphs 10 and
11 of the Summary Pages to be their true and lawful agents, to receive service
of any lawful process in any civil litigation or proceeding arising under this
Agreement, and service upon such agent shall have the same force and validity as
if personal service had been obtained on the other party; provided that notice
of service and a copy of any process served shall be sent by registered or
certified mail, addressed to the other party at the address specified herein.
30. SEVERABILITY AND CONSTRUCTION
30.01 Severability. Subject to Section 19.01(o), should any part of this
Agreement, for any reason, be declared invalid by a court of competent
jurisdiction, such decision or determination shall not affect the validity of
any remaining portion and such remaining portion shall remain in force and
effect as if this Agreement had been executed with the invalid portion
eliminated; provided, however, that in the event of a declaration of
invalidity, the provision declared invalid shall not be invalidated in its
entirety, but shall be observed and performed by the parties to the extent such
provision is valid and enforceable. The parties hereby agree that any such
provision shall be deemed to be altered and amended to the extent necessary to
effect such validity and enforceability.
30.02 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute one and the same
instrument.
30.03 Construction. The headings and captions contained herein are for the
purpose of convenience and reference only and are not to be construed as part of
this Agreement. All terms and words used herein shall be construed to include
the number and gender as the context of this Agreement may require. The parties
agree that each section of this Agreement shall be construed independently of
any other section or provision of this Agreement.
31. ACKNOWLEDGEMENTS
(a) Big O acknowledges that Franchisee's principal interest in obtaining
the Franchise granted herein is to obtain Big O private brand tires and a
competitive source of supply for Products and Services. Big O acknowledges its
obligation to seek to attempt, with no obligation, to maintain a competitive
source of supply for the benefit of its franchisees and to aid in the promotion
of Big O Products and Services.
(b) Franchisee understands and acknowledges that the business licensed
under this Agreement involves business risks and that Franchisee's volume,
profit, income and success is dependent primarily upon Franchisee's ability as
an independent business operator.
-27-
<PAGE>
(c) Big O expressly disclaims the making of, and Franchisee acknowledges
that it has not received from any representative of Big O, any warranty or
guaranty, express or implied, as to the obligation of Big O to provide
Franchisee with any specific or sufficient amount of Products and Services or as
to the potential volume, profit, income or success of the Franchised Business.
(d) Franchisee acknowledges that Big O or its agent has provided Franchisee
with a Franchise Offering Circular not later than the earlier of the first
personal meeting held to discuss the sale of the Franchise, ten (10) business
days before the execution of this Agreement, or ten (10) business days before
any payment of any consideration connected to the purchase of this Franchise.
Franchisee further acknowledges that Franchisee has read such Franchise Offering
Circular and understands its contents.
(e) Franchisee acknowledges that Big O has provided Franchisee with a copy
of this Agreement and all related documents, fully completed, for at least five
(5) business days prior to Franchisee's execution hereof.
(f) Franchisee acknowledges that Big O has advised it to consult with its
own attorneys, accountants, or other advisers, that Franchisee has had ample
opportunity to do so, and that the attorneys for Big O have not advised or
represented Franchisee with respect to this Agreement or the relationship hereby
created. The name and address of Franchisee's adviser, if any, is set forth on
the Summary Pages.
(g) Franchisee acknowledges that this Agreement, the documents referred to
herein, the attachments hereto, and other agreements signed concurrently with
this Agreement, if any, constitute the entire, full and complete Agreement
between Big O and Franchisee concerning the subject matter hereof. This
Agreement terminates and supersedes any prior agreement between the parties
concerning the same subject matter, and any oral or written representations
which are inconsistent with the terms of this instrument and its accompanying
Franchise Offering Circular.
(h) Franchisee acknowledges and recognizes that different terms and
conditions, including different fee structure and investment requirements may
pertain to different Big O franchises offered in the past, contemporaneously
herewith, or in the future, and that Big O does not represent that all franchise
agreements are or will be identical.
(i) Franchisee acknowledges that except as is specifically set forth in
this Agreement, it is not nor is it intended to be a third party beneficiary of
this Agreement or any other agreement or contractual relationship to which Big O
is a party.
-28-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to
become effective on the date it is executed by the last of Franchisee or Big O.
FRANCHISEE: OK TIRES, INC., a Utah corporation
By: /s/ Terry H. Larsen
--------------------------------------------------------------
Terry H. Larsen, President/Treasurer
Date:
------------------------------------------------------------
Home Address: 3378 South 5530 West
----------------------------------------------------
Salt Lake City, Utah 84120
-----------------------------------------------------------------
Home Phone Number: (801) 967-1251
-----------------------------------------------
Office Address: 2830 West 3500 South
------------------------------------------------
West Valley City, Utah 84119
---------------------------------------------------------------
Office Phone Number: (801) 967-7166
-------------------------------------------
Title:
---------------------------------------------------------
Attest:
--------------------------------------------------------
Title:
---------------------------------------------------------
(Affix Corporate Seal)
FRANCHISEE: OK TIRES, INC., a Utah corporation
By: /s/ Michael H. Hartson,
------------------------------------------------------------
Michael H. Hartson, Vice President/Secretary
Date:
----------------------------------------------------------
Home Address: 7863 S. Harvel Dr.
--------------------------------------------------
Sandy, Utah 84070
---------------------------------------------------------------
Home Phone Number: (801) 566-8488
---------------------------------------------
Office Address: 2830 West 3500 South
------------------------------------------------
West Valley City, Utah 84119
---------------------------------------------------------------
Office Phone Number: (801) 967-7166
-------------------------------------------
Title:
------------------------------------------------------
Attest:
------------------------------------------------------
Title:
------------------------------------------------------
(Affix Corporate Seal)
-29-
<PAGE>
BIG O TIRES, INC.
By: /s/ Ronald H. Lautzenheiser
--------------------------------------------------------------
Ronald H. Lautzenheiser, Vice President, Business Development
Date: 10/10/94
------------------------------------------------------------
Attest: /s/ Philip J. Teigen
----------------------------------------------------------
Philip J. Teigen, General Counsel & Secretary
Date: 10/10/94
------------------------------------------------------------
(4/1/94)
-30-
<PAGE>
SCHEDULE 1
----------
TO
--
FRANCHISE AGREEMENT
-------------------
BETWEEN BIG O TIRES, INC. AND
-----------------------------
OK TIRES, INC., a Utah corporation
----------------------------------
1. The Premises of referred to in Section 2.01 of the Franchise Agreement shall
be:
2830 West 3500 South
----------------------------------------------------------------------------
West Valley City, Utah 84119
----------------------------------------------------------------------------
2. Legal Description of Premises: Beginning at a point 660 West and 53 feet
North from the Southeast corner of the Southwest quarter of Section 28,
Township 1 South, Range 1 West, Salt Lake Meridian, thence West 90 Feet;
thence North 241.80 feet; thence East 90 feet; thence South 241.80 feet to
the point of BEGINNING.
3. Names(s) and address(es) of holder(s) of record fee title to Premises (the
landlord):
Name: Akbar Pack
------------------------------------------------------------------
Address: 4141 South 500 West
---------------------------------------------------------------
Murray, Utah 84123
---------------------------------------------------------------
Name:
------------------------------------------------------------------
Address:
---------------------------------------------------------------
-----------------------------------------------------------------------
Name:
------------------------------------------------------------------
Address:
---------------------------------------------------------------
-----------------------------------------------------------------------
4. Description of Trade Area:
The trade area shall consist of Salt Lake County as defined by the State of
Utah as of October 7, 1994.
Schedule 1 Franchise Agreement
Page 1
<PAGE>
SCHEDULE 2
----------
OWNERSHIP VERIFICATION
----------------------
1. Name(s) and address(es) of person(s) owning interest in Franchisee and
percentage of said person(s) interest:
Name: Terry H. and Betty P. Larsen 25%
------------------------------------------------------------------
Address: 3378 South 5530 West
---------------------------------------------------------------
Salt Lake City, Utah 84120
-----------------------------------------------------------------------
Name: Michael H. and Linda R. Hartson 25%
------------------------------------------------------------------
Address: 7863 S. Harvel Dr.
---------------------------------------------------------------
Sandy, Utah 84070
-----------------------------------------------------------------------
Name: Steven P. and Elaine Cloward 25%
------------------------------------------------------------------
Address: 7732 S. Glencoe Ct.
---------------------------------------------------------------
Littleton, Colorado 80122
-----------------------------------------------------------------------
Name: Thomas L. Lynda M. Staker 25%
------------------------------------------------------------------
Address: 6196 N. Ponderosa Way
---------------------------------------------------------------
Parker, Colorado 80134
-----------------------------------------------------------------------
STATE OF Utah )
---------------
)
COUNTY OF Salt Lake )
--------------
Terry H. Larsen and Michael H. Hartson, being first duly sworn, says that
they are respectively, the President and Secretary of OK TIRES, INC., the above-
named corporation, and execute this instrument for and in its behalf, by
authority of its shareholders and that they have read the foregoing Agreement
and all Exhibits attached thereto.
/s/ Terry H. Larsen
------------------------------
Terry H. Larsen, President
/s/ Michael H. Hartson
------------------------------
Michael H. Hartson, Secretary
Subscribed and sworn to before
me this _________________ day of
________________________, 19 __.
----------------------------------
Notary Public
My Commission Expires:
------------
Schedule 2 Franchise Agreement
Page 1
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Terry H. Larsen
------------------------------------
Signature
------------------------------------
Date
TERRY H. LARSEN
------------------------------------
Printed Name
Schedule 3 to Franchise Agreement
Page 1
<PAGE>
3378 South 5530 West
-----------------------------
Salt Lake City, Utah 84120
-----------------------------
Home Address
(801) 967-1251
-----------------------------
Home Telephone
2830 West 3500 South
-----------------------------
West Valley City, Utah 84119
-----------------------------
Business Address
(801) 967-7166
-----------------------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Betty P. Larsen
________________________________________
Signature
________________________________________
Date
BETTY P. LARSEN
________________________________________
Printed Name
Schedule 3 to Franchise Agreement
Page 3
<PAGE>
3378 South 5530 West
-----------------------------
Salt Lake City, Utah 84120
-----------------------------
Home Address
(801) 967-1251
-----------------------------
Home Telephone
2830 West 3500 South
-----------------------------
West Valley City, Utah 84119
-----------------------------
Business Address
(801) 967-7166
-----------------------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 4
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Michael H. Hartson
----------------------------------
Signature
----------------------------------
Date
MICHAEL H. HARTSON
----------------------------------
Printed Name
Schedule 3 to Franchise Agreement
Page 5
<PAGE>
7863 S. Harvel Dr.
-----------------------------
Sandy, Utah 84070
-----------------------------
Home Address
(801) 566-8488
-----------------------------
Home Telephone
2830 West 3500 South
-----------------------------
West Valley City, Utah 84119
-----------------------------
Business Address
(801) 967-7166
-----------------------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 6
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Linda R. Hartson
--------------------------------
Signature
--------------------------------
Date
LINDA R. HARTSON
--------------------------------
Printed Name
Schedule 3 to Franchise Agreement
Page 7
<PAGE>
7863 S. Harvel Dr.
---------------------------------------
Sandy, Utah 84070
---------------------------------------
Home Address
(801) 566-8488
---------------------------------------
Home Telephone
2830 West 3500 South
---------------------------------------
West Valley City, Utah 84119
---------------------------------------
Business Address
(801) 967-7166
---------------------------------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 8
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Steven P. Cloward
----------------------------------------
Signature
6/7/94
----------------------------------------
Date
STEVEN P. CLOWARD
----------------------------------------
Printed Name
Schedule 3 to Franchise Agreement
Page 9
<PAGE>
7732 S. Glencoe Ct.
---------------------------------------
Littleton, Colorado 80122
---------------------------------------
Home Address
(303) 770-8145
---------------------------------------
Home Telephone
2830 West 3500 South
---------------------------------------
West Valley City, Utah 84119
---------------------------------------
Business Address
(801) 967-7166
---------------------------------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 10
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Elaine Cloward
------------------------------------
Signature
10/7/94
------------------------------------
Date
ELAINE CLOWARD
------------------------------------
Printed Name
Schedule 3 to Franchise Agreement
Page 11
<PAGE>
7732 S. Glencoe Ct.
-------------------
Littleton, Colorado 80122
--------------------------
Home Address
(303) 770-8145
--------------
Home Telephone
2830 West 3500 South
--------------------
West Valley City, Utah 84119
-----------------------------
Business Address
(801) 967-7166
--------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 12
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Thomas L. Staker, Jr.
---------------------------------------
Signature
10/7/94
---------------------------------------
Date
THOMAS L. STAKER, JR.
---------------------------------------
Printed Name
Schedule 3 to Franchise Agreement
Page 13
<PAGE>
6196 N. Ponderosa Way
---------------------
Parker, Colorado 80134
-----------------------
Home Address
(303) 841-3212
--------------
Home Telephone
2830 West 3500 South
--------------------
West Valley City, Utah 84119
-----------------------------
Business Address
(801) 967-7166
--------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 14
<PAGE>
SCHEDULE 3
----------
GUARANTY OF FRANCHISEE'S AGREEMENT
----------------------------------
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that OK TIRES, INC., a Utah corporation
("Franchisee") will perform during the term of the Franchise Agreement each and
every covenant, payment, agreement and undertaking on the part of Franchisee
contained and set forth in or arising out of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without notice to
the undersigned (a) resort to the undersigned for payment of any of the
liabilities of the Franchisee to Big O, whether or not Big O or its successors
have resorted to any property securing any of the liabilities or proceeded
against any of the undersigned or any party primarily or secondarily liable on
any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Lynda M. Staker
---------------------------------------
Signature
10-7-94
---------------------------------------
Date
LYNDA M. STAKER
---------------------------------------
Printed Name
Schedule 3 to Franchise Agreement
Page 15
<PAGE>
6196 N. Ponderosa Way
---------------------
Parker, Colorado 80134
-----------------------
Home Address
(303) 841-3212
--------------
Home Telephone
2830 West 3500 South
--------------------
West Valley City, Utah 84119
-----------------------------
Business Address
(801) 967-7166
--------------
Business Telephone
Schedule 3 to Franchise Agreement
Page 16
<PAGE>
SCHEDULE 5
FARM CLASS RIDER
----------------
Franchisee represents that it reasonably anticipates that at least twenty-
five percent (25%) of its Store's Gross Sales on an annual basis will be derived
directly from the sale of Farm Class Tires. In reliance on Franchisee's
representations, and its consideration for Franchisee to become or remain a Big
O franchisee, Big O has offered Franchisee the opportunity to execute this Farm
Class Rider.
1. So long as at least twenty-five percent (25%) of Franchisee's Gross
Sales on an annual basis are derived directly from Farm Class Tires, Big O
agrees to exercise its best efforts to provide Franchisee with access to a
supply of Farm Class Tires. Franchisee acknowledges that production and
distribution problems occasionally cause supplies to be limited, and that so
long as Big O acts in good faith and in a commercially reasonably and lawful
manner to obtain access to Farm Class Tires that it shall be deemed in
compliance with its obligations hereunder.
2. If Big O fails to comply with its obligations pursuant to Section 1 of
this Farm Class Rider and cannot or will not provide Franchisee with access to
Farm Class Tires for sixty (60) days following written notice of such failure
from Franchisee, as its sole and exclusive remedy, Franchisee shall be relieved
of its obligation to pay Big O monthly royalty fees on that portion of its Gross
Sales derived directly from the sale of Farm Class Tires. Any services provided
by Franchisee in connection with the sale of Farm Class Tires, and any other
Products and Services sold by Franchisee in a transaction involving the sale of
Farm Class Tires shall be included in the portion of Franchisee's Gross Sales
upon which monthly royalty fees are payable. Big O may require Franchisee to
provide it with documentation to support any exclusion claimed by Franchisee.
3. Big O may terminate Franchisee's rights under this Farm Class Rider
without in any way affecting Franchisee's obligations under the Franchise
Agreement if the Store's sales of Farm Class Tires during any twelve (12) month
period have been less than twenty-five percent (25%) of its Gross Sales.
IN WITNESS WHEREOF, the parties have set forth their signatures below.
FRANCHISEE:
By:
-------------------------------------
Date:
-----------------------------------
Home Address:
---------------------------
----------------------------------------
Home Phone Number:
----------------------
Office Address:
-------------------------
----------------------------------------
Office Phone Number:
---------------------
Title:
----------------------------------
Attest:
---------------------------------
Title:
----------------------------------
(Affix Corporate Seal)
Schedule 5 to Franchise Agreement
Page 1
<PAGE>
FRANCHISEE:
By:
-------------------------------------
Date:
-----------------------------------
Home Address:
---------------------------
----------------------------------------
Home Phone Number:
----------------------
Office Address:
-------------------------
----------------------------------------
Office Phone Number:
--------------------
----------------------------------------
Title:
----------------------------------
Attest:
---------------------------------
Title:
----------------------------------
(Affix Corporate Seal)
Schedule 5 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 6
RIDER FOR EXISTING FRANCHISEES EXECUTING THE
--------------------------------------------
FRANCHISE AGREEMENT PRIOR TO THE EXPIRATION
-------------------------------------------
OF THEIR PRE-EXISTING FRANCHISE AGREEMENT
-----------------------------------------
Franchisee is the owner of a Store which is the subject of a franchise
agreement which has not yet expired.
Franchisee's execution of the attached Franchise Agreement is subject to the
following:
1. Unless otherwise provided herein, the attached Franchise Agreement shall
expire on the tenth anniversary of the Effective Date of Franchisee's attached
Franchise Agreement, to wit:
_______________________________________.
2. Prior to the expiration of the Franchisee's present franchise agreement,
to wit _____________, the monthly continuing services fees (or their functional
equivalent) provided in the present franchise agreement shall continue to be the
only such fees due to Big O. In all other respects the terms of the attached
Franchise Agreement shall be applicable as of the Effective Date of this
Franchise Agreement.
In Witness Whereof, the parties have set forth their signature below.
BIG O TIRES, INC.
By:
-------------------------------------
Date:
-----------------------------------
Title:
----------------------------------
Attest:
---------------------------------
Title:
----------------------------------
(Affix Corporate Seal)
FRANCHISEE:
By:
-------------------------------------
Date:
-----------------------------------
Home Address:
---------------------------
----------------------------------------
Home Phone Number:
----------------------
Office Address:
-------------------------
Office Phone Number:
--------------------
Schedule 6 to Franchise Agreement
Page 1
<PAGE>
Title:
----------------------------------
Attest:
---------------------------------
Title:
----------------------------------
(Affix Corporate Seal)
FRANCHISEE:
By:
-------------------------------------
Date:
-----------------------------------
Home Address:
---------------------------
----------------------------------------
Home Phone Number:
----------------------
Office Address:
-------------------------
----------------------------------------
Office Phone Number:
--------------------
Title:
----------------------------------
Attest:
---------------------------------
Title:
----------------------------------
(Affix Corporate Seal)
Schedule 6 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 7
TRADEMARKS
----------
Big O is the sole and exclusive owner of the following trademarks and
service marks:
<TABLE>
<CAPTION>
Trademark, Service Mark, Trade Where Registration
Name or Logotype Registered Number Registration Date
<S> <C> <C> <C>
Sonic Principal 805,575 03/15/66
Sonic Commercial Principal 805,578 03/15/66
Super Sonic Principal 805,574 03/15/66
Ultra Sonic Principal 805,577 03/15/66
Winter Sonic Principal 805,581 03/15/66
Sun Valley Principal 871,318 06/17/69
Sonic & Design Principal 890,380 05/05/70
Sonic Principal 891,936 06/02/70
Maxima Principal 926,329 12/28/71
Golden Sonic Power Principal 962,580 07/03/73
Super S Principal 981,992 04/09/74
Saxon Principal 982,828 04/30/74
Big O Principal 993,415 09/24/74
Big O Principal 994,466 10/01/74
Sonic Vagabond Principal 996,459 10/22/74
Big Ride Principal 1,009,148 04/22/75
Big Steel Principal 1,012,897 06/10/75
Sonic Sahara Principal 1,013,509 06/17/75
Big Trak Principal 1,016,826 07/29/75
Big Haul Principal 1,018,800 08/26/75
Protectors of Safety Saxon and Principal 1,024,138 11/04/75
Design
Design of Human Likeness
"Sebastian Treadmore" Principal 1,044,068 07/20/76
Big Foot 70 Principal 1,102,059 09/12/78
Big Foot 60 Principal 1,102,058 09/12/78
Big Sur Principal 1,219,035 12/07/82
Extra Care and Design Principal 1,417,730 11/18/86
Legacy Principal 1,393,967 05/20/86
Aspen Principal 1,508,041 10/11/88
Exotic Principal 1,511,711 11/08/88
</TABLE>
Schedule 7 to Franchise Agreement
Page 1
<PAGE>
<TABLE>
<CAPTION>
Trademark, Service Mark, Trade Where Registration
Name or Logotype Registered Number Registration Date
<S> <C> <C> <C>
Sonic Principal 805,575 03/15/66
Big O Tires and Design Principal 1,559,725 10/10/89
Sun Valley III Principal 1,588,734 03/27/90
Big O Tires and Design Principal 1,611,160 08/28/90
Optima Principal 74/198,278 Pending
Procomp & Design Principal 74/298,320 Pending
Vail Principal 74/310,463 Pending
Arapahoe Principal 74/271,501 Pending
Alpine Principal 74/310,467 Pending
Aztec Principal 74/310,465 Pending
Hydro-Trac Principal 74/357,214 Pending
A Reputation You Can Ride On Principal 74/360,838 Pending
Big Foot Principal 74/389,931 Pending
STATE REGISTRATIONS
Big O Texas 40,967 11/01/82
Big O Texas 40,704 09/02/82
Boss Colorado T28335 04/23/85
Legacy Colorado T29645 10/28/85
Extra Care Colorado T30670 04/22/86
</TABLE>
Schedule 7 to Franchise Agreement
Page 2
<PAGE>
SCHEDULE 8
CONVERTOR RIDER
---------------
AMENDMENT TO BIG O
FRANCHISE AGREEMENT
(CONVERSION)
Big O TIRES, INC. ("Big O") and ___________________________________________
("Franchisee") entered into a certain Big O Franchise Agreement ("Agreement") on
_____________, 19_____ and desire to supplement and amend certain terms and
conditions of such Agreement in consideration of Franchisee's conversion of a
currently operating tire store to a Big O Store. The parties therefore agree as
follows:
1. The following paragraph is hereby added to 6.03:
Notwithstanding any provision herein to the contrary,
Franchisee's obligation to comply with Big O's standards and
specifications as are set forth in the Manual shall be phased in for a
period of six months from the Commencement Date of the Agreement in
accordance with Schedule A, attached hereto and by this reference
incorporated herein. Franchisee will be permitted to use Big O's
trademarks, service marks, logos and other identifying symbols or
names, in its signage, advertising and otherwise, in conjunction with
any other previous signage or identifying symbols or names for sixty
(60) days from the Commencement Date of this Agreement, in a manner
which shall be approved by Big O, which approval shall not be
unreasonably withheld. Upon expiration of such sixty day period,
Franchisee must use Big O's signage exclusively and remove all other
previous signage.
2. Section 6.05 is deleted in its entirety and the following is inserted in
its place:
6.05 Commencement of Business. The Big O Store shall be
considered to have commenced operation as of the Commencement Date of
this Agreement. All modifications required to bring the premises into
compliance with the standards and specifications of Big O must be
completed within six (6) months of the Commencement Date.
3. Section 7.01(a) is hereby deleted in its entirety and the following is
inserted in its place:
(a) Franchisee acknowledges that Big O is under no obligation to
provide site selection assistance and Big O does not guarantee the
success or profitability of the Franchisee's current site in any manner
whatsoever. If Franchisee leases the Premises upon which the Store is
to be operated, Franchisee agrees to use its best efforts to negotiate
with its landlord for execution of a conditional lease assignment in a
form which is the same as or similar to the one found on Schedule 4.
4. The following language shall be added to Section 7.01(b):
Big O will provide Franchisee with sample blueprints for
modification of the interior and exterior of Franchisee's premises, if
applicable, but makes no representations or guarantees regarding the
suitability of such blueprints for required modification of
Franchisee's premises.
5. Franchisee agrees to convert all other tire stores owned or controlled
by it into Big O Stores, in the manner prescribed in Schedule B, attached hereto
and by this reference incorporated herein.
Schedule 8 to Franchise Agreement
Page 1
<PAGE>
6. The terms and conditions of this Conversion Amendment are in addition to
or in explanation of the existing terms and conditions of the Agreement and
shall prevail over and supersede any inconsistent terms and conditions thereof.
Effective this _____ day of ________________, 199___.
BIG O TIRES, INC. FRANCHISEE:
------------------------------------
(Print Name)
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
Schedule 8 to Franchise Agreement
Page 2
<PAGE>
EXHIBIT 10.81
Copy Franchise Agreement #93031
BIG O TIRES, INC.
FRANCHISE AGREEMENT
Copyright 1993
Big O Tires, Inc.
<PAGE>
BIG O TIRES, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY PAGES......................................... i
GLOSSARY.............................................. iii
1. PARTIES AND RECITALS.............................. 1
2. GRANT OF FRANCHISE................................ 1
2.01 Grant of Franchise.......................... 1
2.02 Trade Area.................................. 1
3. FIRST OPTION RIGHTS............................... 1
3.01 First Option Rights......................... 1
3.02 Notification by Big O....................... 2
3.03 Multiple First Option Rights................ 2
3.04 Notification of Qualification............... 2
3.05 Exercise of Option by Franchisee............ 2
3.06 Transfer of First Option Rights............. 2
3.07 Limitation on First Option Rights........... 2
3.08 Expiration of First Option Rights........... 2
4. TERM.............................................. 2
4.01 Term........................................ 2
5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS............ 3
5.01 Grant of Successor Franchise Rights......... 3
5.02 Conditions to Grant of Successor Franchise.. 3
5.03 Notification of Non-Renewal................. 3
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS.............. 3
6.01 Financing Approval.......................... 3
6.02 Site Selection.............................. 3
6.03 Equipment and Signage....................... 4
6.04 Conditions to Opening....................... 4
6.05 Commencement of Business.................... 4
7. PRE-OPENING AND ONGOING ASSISTANCE................ 4
7.01 Pre-Opening Assistance...................... 4
7.02 On-Going Assistance......................... 5
8. FEES.............................................. 6
8.01 Initial Franchise Fee....................... 6
8.02 Service Fee................................. 6
8.03 Late Fees................................... 6
8.04 Taxes....................................... 6
8.05 Allocation of Payments...................... 6
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9. LICENSED MARKS........................................ 6
9.01 Licensed Marks.................................. 6
9.02 Limitation on Use............................... 7
9.03 Infringement.................................... 7
9.04 Franchisee's Business Name...................... 7
9.05 Change of Licensed Marks........................ 7
10. STANDARDS OF OPERATION................................ 7
10.01 Standards of Operations........................ 7
11. STORE MANAGEMENT...................................... 8
11.01 Store Management............................... 8
11.02 Completion of Training by Operator or Manager.. 8
11.03 Operation of Store by Big O.................... 8
12. QUALITY CONTROL....................................... 9
12.01 Inspections.................................... 9
13. MANUAL: NEW PROCESSES................................ 9
13.01 Manual......................................... 9
13.02 Confidentiality of Information................. 9
13.03 Revisions to Manual............................ 10
13.04 Improvements to System......................... 10
14. PRODUCTS AND SERVICES................................. 10
14.01 Products and Services.......................... 10
14.02 Approval of Products and Services.............. 10
14.03 Inventory...................................... 11
14.04 Warranties and Guaranties...................... 11
14.05 Open Account Financing......................... 11
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS.......... 11
15.01 Initial Advertising............................ 11
15.02 National Advertising Fund...................... 11
15.03 Local Fund..................................... 12
15.04 Approval of Advertising........................ 13
16. STATEMENTS AND RECORDS................................ 13
16.01 Invoices....................................... 13
16.02 Audit.......................................... 13
16.03 Monthly Reports................................ 13
16.04 Financial Statements........................... 13
16.05 Management System.............................. 14
17. COVENANTS............................................. 14
17.01 Noncompetition During Term..................... 14
17.02 Confidentiality................................ 14
17.03 No Interference with Business.................. 14
17.04 Post Termination Covenant Not to Compete....... 14
17.05 Survivability of Covenants..................... 14
17.06 Modification of Covenants...................... 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
18. TRANSFER AND ASSIGNMENT............................ 15
18.01 Assignment by Big O......................... 15
18.02 Right of First Refusal...................... 15
18.03 Transfer Legend............................. 15
18.04 Pre-Conditions to Franchisee's Assignment... 15
18.05 Death of Franchisee......................... 17
18.06 No Waiver................................... 17
18.07 Excepted Transfers.......................... 18
19. DEFAULT AND TERMINATION............................ 18
19.01 Termination by Big O........................ 18
19.02 Governing State Law......................... 19
19.03 Termination by Franchisee................... 19
19.04 Force Majeure............................... 19
20. POST TERMINATION OBLIGATIONS....................... 20
20.01 Post-Termination Obligations................ 20
20.02 Right to Repurchase......................... 21
20.03 Right of First Refusal...................... 21
20.04 De-Identification of Assets Upon Sale....... 21
21. INSURANCE.......................................... 21
21.01 Insurance Coverage.......................... 21
21.02 Proof of Insurance.......................... 22
21.03 Survival of Indemnification................. 23
22. TAXES, PERMITS AND INDEBTEDNESS.................... 23
22.01 Payment of Taxes............................ 23
22.02 Compliance with Laws........................ 23
22.03 Payment of Debts............................ 23
23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS.. 23
23.01 Indemnification............................. 23
23.02 Independent Contractor...................... 23
24. WRITTEN APPROVALS, WAIVERS AND AMENDMENT........... 24
24.01 Written Approval............................ 24
24.02 Waiver...................................... 24
24.03 Modification................................ 24
25. DEALER PLANNING BOARD.............................. 24
25.01 Dealer Planning Board....................... 24
25.02 Special Interest Issues..................... 24
25.03 Disapproval of Management Proposal.......... 24
25.04 Compliance with Modification................ 25
26. RIGHT OF OFFSET.................................... 25
26.01 Right of Offset............................. 25
27. ENFORCEMENT........................................ 25
27.01 Declaratory and Injunctive Relief........... 25
27.02 Costs of Enforcement........................ 25
</TABLE>
<PAGE>
<TABLE>
<S> <C>
28. NOTICES............................................ 25
28.01 Notices..................................... 25
29. GOVERNING LAW...................................... 25
29.01 Governing Law............................... 25
29.02 Jurisdiction................................ 25
30. SEVERABILITY AND CONSTRUCTION...................... 26
30.01 Severability................................ 26
30.02 Counterparts................................ 26
30.03 Construction................................ 26
31. ACKNOWLEDGEMENTS................................... 26
Schedule 1 - Premises and Trade Area
Schedule 2 - Corporate Verification
Schedule 3 - Guaranty
Schedule 4 - Lease Rider and Modification
Schedule 5 - Farm Class Rider
Schedule 6 - Renewal Rider
Schedule 7 - Trademarks
Schedule 8 - Convertor Rider
</TABLE>
<PAGE>
BIG O TIRES, INC. FRANCHISE AGREEMENT
SUMMARY PAGES
These pages summarize the attached Franchise Agreement, the details of which
shall control in the event of any conflict.
1. FRANCHISEE: CAPS TIRE LIMITED LIABILITY COMPANY
2. INITIAL FRANCHISE FEE: Amount Due:
-with Application: $ 6,000.00
----------
-upon signing Agreement: $12,000.00
----------
Total: $18,000.00
----------
3. SERVICE FEE: Two percent (2%) of Gross Sales
4. LOCAL ADVERTISING Minimum of four percent (4%) of Gross Sales
CONTRIBUTION:
5. NATIONAL ADVERTISING See sections 15 and 25
CONTRIBUTION:
6. INITIAL ADVERTISING REQUIREMENT:
7. STORE LOCATION:
8151 E. Arapahoe Road
Street and Number
Englewood, Colorado 80112
City, State and Zip Code
(303) 267-0055
Phone Number
8. Franchisee's Operator:
9. Franchisee's Manager: Robert Collaer
10. Franchisee's Agent For Service of Process:
Name: John Adams
Address: 2925 Geddes Pl.
Littleton, Colorado 80122
11. Big O's Agent for Service of Process:
Name: CT Corporation
Address: 1600 Broadway
Denver, CO 80290
i
<PAGE>
12. Effective Date:
13. Commencement Date: November 26, 1993
14. Expiration Date: November 26, 2003
15. Franchisee's Advisor:
16. Send Notices to Big O to:
Name: Philip J. Teigen (Legal Department)
Address: Big O Tires, Inc.
11755 E. Peakview Avenue
Englewood, Colorado 80111
17. Send Notices to Franchisee to:
Name: Big O Tire Store
Address: 8151 E. Arapahoe Road
Englewood, Colorado 80112
18. Business not subject to Section 17 (a)
Name:
Address:
19. Farm Class Franchise:
Yes
No X
20. First Option Holder:
Name: N/A
Address:
ii
<PAGE>
GLOSSARY (in alphabetical order)
Advertising - The advertising, promotional programs, public relations programs
and marketing programs approved or administered by Big O utilizing the resources
of the National Advertising Fund or local franchisee cooperatives or franchisee
associations.
Agreement - This contract, the Summary Pages and all Riders and Schedules
hereto, as interpreted through the Manual.
Big O - Big O Tires, Inc.
Big O Store or Store - A retail tire store operated pursuant to the Big O
System.
Big O System or System - The plan and system developed by Big O relating to the
complete operation of Stores which are authorized to sell Products and Services
and offer other authorized tire and automotive services at retail, which include
some or all of the following: site selection as required, site approval, Store
layout and design, product selection and display, purchasing and inventory
control methods, accounting methods, merchandising, advertising, sales and
promotional ideas, franchisee training, personnel training, and other matters
relating to the efficient operation and supervision of Stores and the
maintenance of uniform standards of retail merchandising.
Blue II - See the definition of "Manual".
Commencement Date - The date upon which the Store opens for business or, in the
event of transfer, or conversion, the date designated by Big O Tires, Inc.
Convertor - A person who converts a retail tire store it owns to a Big O Store
pursuant to this Agreement.
Dealer Planning Board - The group of franchisee representatives elected from
each Local Group which meets periodically with Big O's management to develop Big
O's strategic plans and to discuss issues of concern to franchisees. The
functions of the Dealer Planning Board are described in Section 25 of this
Agreement.
Development Agreement - An agreement between Big O and a person to which the
person ("Developer") agrees that within a defined territory to open and commence
operating an agreed number of Big O Stores pursuant to a development schedule.
Developers must execute Franchise Agreements prior to commencing business at any
Store developed pursuant to a Development Agreement.
Due Date - The fifteenth day of each month: the date by which all service fees
and advertising contributions must be postmarked and mailed to Big O.
Effective Date - The date upon which the Franchise Agreement has been executed
in full by both the Franchisee and Big O.
Expiration Date - The date on which the initial term of the Agreement expires.
Farm Class Store - A Store with twenty-five percent (25%) or more of its average
Gross Sales during any twelve (12) month period arising directly from the sale
of Farm Class Tires.
Farm Class Tires - Farm tires, off road tires, large double bead truck tires and
similar select tires, as may be more specifically defined from time to time by
Big O.
iii
<PAGE>
First Option - Franchisee's right to acquire a franchise for a new Store planned
for development within a five (5) mile radius of Franchisee's Premises. The
First Option and method of exercising it are described in Section 3 of this
Agreement.
Franchise - The rights granted by the Franchise Agreement.
Franchised Business - The business operated pursuant to a license granted by Big
O which utilizes the Licensed Marks and the Big O System.
Franchisee - The individual(s), corporation or other entity to which the
Franchise is granted. Depending on the context of this Agreement, the term
Franchisee may include the shareholders or guarantors of a corporate Franchisee.
Gross Sales - The aggregate gross amount of all revenues from whatever source
derived whether in form of cash, credit, agreements to pay or other
consideration including the actual retail value of any goods or services traded,
bartered, or otherwise received by Franchisee in exchange for any form of non-
monetary consideration, (whether or not payment is received at the time of sale
or any such amount is proved uncollectible) from or derived by Franchisee or any
other person from business conducted or which originated in, on, from or through
the Premises, whether such business is conducted in compliance with or in
violation of the terms of the Franchise Agreement. Gross Sales includes sums
paid for claims made on business interruption insurance policies, Federal Excise
Taxes collected, as well as payments received from employees of Franchisee for
products purchased at a discounted price. However, Gross Sales does not
include: (i) sales or use taxes collected by Franchisee; (ii) the amount of any
refunds or allowances made on Products and Services returned by customers; (iii)
returns to shippers, vendors and manufacturers; (iv) proceeds derived from the
sale of equipment or supplies used by Franchisee in the operation of the Store
and not acquired for resale; (v) sales of Products and Services to other Big O
Stores; (vi) tire disposal fees so long as the fees charged do not exceed the
highest fee recommended by any applicable governmental agency; and (vii) sums
received in settlement of claims for loss or damage to fixtures, equipment or
leasehold improvements, other than sums received from business interruption
insurance.
Information - The contents of the Manual or any other manual, computer software,
materials, goods, and information created or used by Big O designated for
confidential use within the Big O System, and the information contained therein.
Initial Advertising - Advertising conducted within sixty (60) days of the
Commencement Date to promote the opening of the Store.
Licensed Marks - Trademarks and trade names, service marks and associated logos
and symbols owned or sublicensed by Big O, including those enumerated on
Schedule 7 and such other marks, logos and names as Big O may designate.
Local Fund - The fund, which may be a trust fund, corporation or other entity,
derived from contributions by Big O franchisees who are members of a Local Group
which shall be maintained by the Local Group for Advertising pursuant to such
guidelines as Big O may approve or prescribe.
Local Group - A cooperative or association of Big O franchisees formed and
operating in their marketing area pursuant to a structure approved or prescribed
by Big O for the purpose of promoting Big O Stores and their Products and
Services, and providing Management Systems and related services to its members
to the extent approved by Big O. Big O will assign a Franchisee to a Local
Group and Franchisee must become a member of that Local Group and be bound by
any decisions it makes to the extent they are approved by Big O.
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Management Systems - Computer hardware, software, cash registers, bookkeeping
and accounting services or systems and other systems designed to provide
information for the management of Big O Stores.
Manager - An individual other than the Operator who is responsible for the day-
to-day operation of a Store.
Manager Incentive Contract - An agreement pursuant to which certain Managers may
earn purchase credits based upon their performance so that they can acquire Big
O franchises from their employer, whether the employer is Big O or a Big O
franchisee.
Manual - The various written, audio and video instructions and manuals,
including amendments thereto relating to the operation of the Franchised
Business which are provided to Franchisee by Big O and identified as such,
including but not limited to A Blueprint For Success, also known as "Blue II".
National Advertising Fund - The fund derived from contributions by Big O
franchisees which shall be exclusively maintained and administered by Big O for
national Advertising in cooperation with the Dealer Planning Board.
National Fund - Big O Tires, Inc. National Advertising Fund.
Operator - The individual approved by Big O who shall be responsible for the
operation of the Franchised Business. The Operator may be the Franchisee if the
Franchisee is an individual.
Option - Big O's right to purchase the interest being offered by the Franchisee
or any Shareholder by matching the bona fide monetary purchase price and payment
schedule terms of the proposed Transfer, less any brokerage commission (without
having to match any other non-monetary terms).
Pioneer - A person who owned at least twenty-five percent (25%) equity interest
in a Big O franchisee on March 1, 1987, provided such ownership interest
appeared on Big O's records as of July 1, 1987. A Pioneer is entitled to
acquire Big O franchises for one-third of the applicable initial franchise fee,
provided the Pioneer satisfies Big O's other requirements.
Premises - The site from which a Franchised Business will be operated at the
Store Location described on the Summary Pages, or where applicable, on Schedule
1 to the Franchise Agreement.
Products and Services - All tires (including but not limited to Big O's private
brand lines of tires), products and services produced, organized or distributed
under a license granted by Big O, which are designated by Big O for sale or
lease in Stores.
Shareholder - Any person possessing a legal or beneficial interest or holding a
share of stock of any kind or nature in the Franchisee, including partners in a
Franchisee which is a partnership.
Survivor - A surviving spouse or heir of estate of any deceased person owning
stock or any other interest in the Franchisee.
Termination Date - The date upon which the Franchise Agreement is cancelled or
ended by Big O or the Franchisee.
Trade Area - The area described on Schedule 1 to the Agreement within which,
subject to certain conditions, Big O agrees to limit the number of Stores to one
(1) for every fifty thousand (50,000) persons residing therein. Big O may, from
time to time, redefine Franchisee's Trade Area.
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Trade Dress - Any shop or architectural designs, fixtures, improvements, signs,
color schemes or other elements of the appearance of the Store which in any
manner suggest affiliation of the Store or Premises with Big O, or the System.
Transfer - To give away, sell, assign, pledge, lease, sublease, devise, or
otherwise transfer, either directly or by operation of law or in any other
manner, the Agreement, any of Franchisee's rights or obligations hereunder, or
any interest or shares of stock or partnership interest of any kind or nature in
Franchisee or the Premises. The merger or consolidation or issuance of
additional securities representing an ownership interest in Franchisee shall
also be deemed to be a "Transfer" for purposes of this Agreement.
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BIG O TIRES, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") is made by and between Big O Tires,
Inc. ("Big O"), a Nevada corporation, with its principal place of business at
11755 East Peakview Avenue, P.O. Box 3206, Englewood, Colorado 80111, and CAPS
TIRE LIMITED LIABILITY COMPANY ("Franchisee"), a(n) Colorado limited liability
company with a place of business at 8151 E. Arapahoe Road, Englewood, Colorado
80112.
1. PARTIES AND RECITALS
1.01 Big O was established to provide franchisees with access to Products
and Services and a System for marketing and servicing such Products and
Services. Since its inception, Big O has added to the Product and Services and
System to enhance the competitive posture of its franchisees. Big O has
developed and owns certain Licensed Marks which are licensed to franchisees for
use in the Big O Stores. In connection therewith, Big O has developed the Big O
System relating to the operation of Stores which are authorized to offer and
sell Big O tires as part of the Products and Services offered to retail
customers.
1.02 Franchisee desires, upon the terms and conditions set forth herein, to
obtain a license to operate a Franchised Business and to offer and sell Big O
Products and Services. Franchisee acknowledges that it is essential to the
preservation of the integrity of the Licensed Marks, and the goodwill of Big O
and the Big O System, that each franchisee in the System maintain and adhere to
certain standards, procedures and policies described hereinafter and in the
Manual.
1.03 Big O is willing, upon the terms and conditions set forth herein, to
license Franchisee to operate a Franchised Business which will utilize the
Licensed Marks and the Big O System.
2. GRANT OF FRANCHISE
2.01 Grant of Franchise. Subject to all of the terms and conditions
herein, including but not limited to, the condition that Franchisee or its
Shareholders or some of them, personally guarantee the obligations of Franchisee
to Big O under this Agreement as set forth in Schedule 3 to this Agreement, Big
O grants to Franchisee the non-exclusive license to use the Licensed Marks and
the exclusive right to operate a Franchised Business solely at the Premises set
forth in Schedule 1 to this Agreement. If, at the time of execution of this
Agreement, the Premises cannot be designated as a specific address because a
location has not been selected by Franchisee and approved by Big O, then
Franchisee shall promptly take steps to choose and acquire a location for its
Big O Store within the following city, county or other geographical area:
Englewood, Colorado ("Designated Area"). In such circumstances, Franchisee
shall select and submit to Big O for approval a specific location for the
Premises, which shall hereinafter be set forth in Schedule 1.
2.02 Trade Area. During the term of this Agreement, Big O agrees not to
operate itself or grant to any other person the right to operate any more than
one (1) Store for every fifty thousand (50,000) persons residing in the Trade
Area described on Schedule 1. Big O may, from time to time, redefine the Trade
Area. Absent Franchisee's prior approval, Big O shall not permit the
establishment or operation of another Store within a two (2) mile radius of
Franchisee's Store. Big O shall offer Products and Services bearing the
Licensed Marks at retail only through Big O Stores.
3. FIRST OPTION RIGHTS
3.01 First Option Rights. Subject to the conditions described below, if Big
O or any prospective Big O franchisee should propose to open a Store within a
five (5) mile radius of Franchisee's Store, Franchisee shall be notified of its
First Option to acquire a Franchise for an additional Store within the five (5)
mile radius of its Store. Franchisee may only exercise the First Option if:
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(a) at the time Big O notifies Franchisee of the proposal for the new
Store, Franchisee is in full compliance with all the terms of this Agreement
and any other agreements it has with Big O;
(b) Franchisee meets Big O's then current criteria for new franchisees;
and
(c) There are not two (2) or more Big O franchises with Stores within a
five (5) mile radius of the site of a proposed new Store.
3.02 Notification by Big O. When notifying Franchisee of a proposal to
establish a new Store in accordance with Franchisee's First Option, Big O may
notify Franchisee of the proposal to establish the new Store within the general
vicinity of Franchisee's Store without identifying a specific site or sites.
3.03 Multiple First Option Rights. If two (2) or more Big O franchisees
have Stores within a five (5) mile radius of the site of a proposed new Store,
the Franchisee and all such franchisees will be invited simultaneously by
written notice from Big O to exercise their First Option rights; but if two (2)
or more such franchisees apply for the same franchise, it shall be awarded to
the qualified franchisee which has a Store that is closest to the site of the
proposed new Store or, if two qualified franchisees have Stores that are
equidistant from such site, it shall be awarded to the qualified franchisee
which owns the franchised Big O Store which was first licensed as a Big O Store
by the current or a previous owner.
3.04 Notification of Qualification. If Franchisee qualifies for the First
Option pursuant to this Section 3, Big O will provide Franchisee with written
notice that it has thirty (30) days within which to submit an application for
the franchise in the manner prescribed by Big O in the notice. Franchisee must
submit the application within the prescribed time along with the standard
franchise deposit then required by Big O. Upon approval of the application by
Big O, Franchisee must execute Big O's then current standard Franchise Agreement
and pay the remainder of any initial fee due.
3.05 Exercise of Option by Franchisee. If Franchisee is a corporation or
partnership, the First Option may be exercised only by the corporation or
partnership itself, or by the individual designated as First Option holder on
the Summary Pages.
3.06 Transfer of First Option Rights. The First Option is not transferable
without Big O's prior written approval, which may be withheld for any reason, in
Big O's sole discretion.
3.07 Limitation on First Option Rights. The First Option rights described
above are void and unenforceable with respect to a site proposed for development
in an area which is at the time of the proposal subject to a Development
Agreement between Big O and Developer.
3.08 Expiration of First Option Rights. If a Franchisee has failed to
qualify for or otherwise submit an application for a Franchise pursuant to this
Section 3 for a proposed franchise to be granted within the area in which
Franchisee holds First Option rights, Franchisee's First Option rights for that
proposed franchise shall lapse regardless of whether the site actually selected
for development by Big O is different from the site which was initially proposed
for development.
4. TERM
4.01 Term. This Agreement shall take effect upon the earlier of the
Effective Date or of the Commencement Date and, unless previously terminated
pursuant to Section 19 hereof, its term shall extend until the earlier of the
tenth anniversary of the Commencement Date or such other Expiration Date as is
stated on the Summary Pages.
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5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS
5.01 Grant of Successor Franchise Rights. If Franchisee is not in default
under this Agreement and has complied with all of its provisions during the
initial term, and has cooperated with Big O, its Local Group and other Big O
franchisees in programs and suggestions developed by Big O, upon its expiration
Big O will offer a successor franchise agreement with Franchisee, provided the
parties mutually agree to the terms of a successor franchise at least one
hundred eighty (180) days before the Expiration Date.
5.02 Conditions to Grant of Successor Franchise. Big O will only offer to
execute a new franchise agreement in accordance with its then current terms and
conditions for granting successor franchises, which may include any or all of
the following:
(a) Execution of a new and modified franchise agreement which may
include, among other matters, a different fee structure, increased fees, a
modified Trade Area and different purchase requirements;
(b) A requirement that Franchisee refurbish the Premises or relocate the
Premises to conform to Big O's then current standards for similar Stores;
(c) Payment of Big O's renewal administration fee of One Thousand Five
Hundred Dollars ($1,500); and
(d) Execution of a general release in favor of Big O and its
representatives.
5.03 Notification of Non-Renewal. If Big O is willing to execute a new
franchise agreement with Franchisee, at least one (1) year before the Expiration
Date, Big O shall notify Franchisee of the Expiration Date and the terms and
conditions upon which Big O is willing to execute a new franchise agreement with
Franchisee. Franchisee must execute a successor franchise agreement within
sixty (60) days of its receipt. The Franchise Agreement will expire on the
Expiration Date and the franchise relationship will terminate unless Franchisee
and Big O have executed a successor franchise agreement at least one hundred
eighty (180) days prior to the Expiration Date, and Franchisee has satisfied all
other terms and conditions agreed upon as a prerequisite to renewal. If Big O
intends not to offer Franchisee a successor franchise agreement, Big O shall
give Franchisee at least one hundred eighty (180) days notice of nonrenewal
prior to the Expiration Date. If Big O has not given Franchisee at least one
hundred eighty (180) days notice of nonrenewal prior to the Expiration Date, the
term of this Agreement will automatically be extended by the amount of time
necessary to give Franchisee one hundred eighty (180) days notice of nonrenewal.
6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS
6.01 Financing Approval. Unless otherwise agreed to by Big O, Franchisee
shall obtain a letter of commitment for the provision of financing through a
lender approved by Big O and with minimum credit terms, also approved by Big O,
no later than one hundred twenty (120) days from the Effective Date of this
Agreement.
6.02 Site Selection. Franchisee shall obtain the written approval of Big O
of the site for the Store within one hundred twenty (120) days from the
Effective Date of this Agreement. Franchisee shall propose sites for approval
by Big O on forms and in the manner designated from time to time by Big O. A
proposed site shall only be submitted to Big O for approval after Franchisee has
evaluated the site and determined that it meets Big O's then current criteria
for sites which Big O has communicated to Franchisee. Franchisee shall be
responsible for obtaining Big O's then current site criteria prior to submitting
a site approval application. Big O shall review the site approval application
and within thirty
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(30) days of Big O's receipt thereof, Big O shall approve or reject the proposed
site. Unless otherwise agreed to in writing by Big O, final site approval will
be conditioned upon Big O's receipt of evidence of Franchisee's ownership, lease
or control of the property in such form as Big O, in its sole discretion shall
deem to be acceptable, including, without limitation, a deed to the property, an
executed contract to purchase the property, a lease with a duration of not less
than ten (10) years, or an option to purchase the property. Franchisee
acknowledges and agrees that Big O's approval of a site or provision of criteria
regarding the site do not constitute a representation or warranty of any kind,
express or implied, as to the suitability of the site for a Big O Store or for
any other purpose. Big O's approval of the site indicates only that Big O
believes that a site falls within the acceptable criteria established by Big O
as of that time. In the case of a Convertor, execution of this Agreement shall
be deemed approval of the Store Location by Big O, unless additional obligations
to convert or upgrade the premises are described in Schedule 8 to this
Agreement.
6.03 Equipment and Signage. Franchisee agrees to purchase, lease or
otherwise use in the establishment and operation of the Big O Store only those
fixtures, equipment and signs that Big O has approved as meeting its
specifications and standards for quality, design, appearance, function and
performance. Franchisee shall purchase or lease approved brands, types or
models of fixtures, equipment, and signs only from suppliers designated or
approved by Big O. Franchisee agrees to place or display at the Premises only
such signs, logos and display materials that Big O approves from time to time.
6.04 Conditions to Opening. Franchisee agrees, at its sole expense, to do
or cause to be done the following prior to opening the Big O Store for business:
(i) secure all required financing; (ii) obtain all required permits and
licenses; (iii) construct all required improvements and decorate the Store in
compliance with approved plans and specifications; (iv) purchase and install all
required fixtures,equipment and signs required for the Big O Store; (v) purchase
an opening inventory of tires and supplies; (vi) provide Big O with copies of
all required insurance policies, or such other evidence of coverage and payment
as Big O requests; and (vii) provide Big O with any other documents as may be
required by Big O, including but not limited to financing statements.
6.05 Commencement of Business. Franchisee agrees to open the Big O Store
for business within fourteen (14) days after Big O notifies Franchisee that the
conditions set forth in this Section 6 have been satisfied. Unless otherwise
agreed in writing by Big O and Franchisee, Franchisee has sixteen (16) months
from the Effective Date of this Agreement within which to have its Big O Store
opened and operating ("Development Period"). Big O will extend the Development
Period for a reasonable period of time in the event that factors beyond
Franchisee's reasonable control prevent Franchisee from meeting this Development
Period, so long as Franchisee has made reasonable and continuing effort to
comply with such development obligations and Franchisee requests, in writing, an
extension of time in which to have its Big O Store open and operating before the
Development Period lapses.
7. PRE-OPENING AND ONGOING ASSISTANCE
7.01 Pre-Opening Assistance. Prior to Franchisee's Commencement Date, Big
O shall provide Franchisee with such of the following and on the same basis as
it will from time to time provide to similarly situated franchisees of Big O:
(a) Assistance to Franchisee related to approval of a site for the Store,
although Franchisee acknowledges that Big O shall have no obligation to
select or acquire a site on behalf of Franchisee. Big O's assistance will
consist of the provision of criteria for a satisfactory site, an on-site
inspection and determination of whether a proposed site fulfills the
requisite criteria, prior to formal approval of a site selected by
Franchisee. At Big O's option, Big O may, without fee or expense to
Franchisee and review the proposed Store lease. The final decision about
whether to
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acquire a given approved site or whether to execute any particular lease
shall be the sole decision of Franchisee. Big O disclaims all liability for
the consequences of approving a given site. Big O's participation in site
selection in no way is meant to constitute a warranty or guaranty that the
Franchised Business will be profitable or otherwise successful. Big O's
written approval of the Premises and Store must be obtained by Franchisee
before the Store may be opened or relocated. Big O may condition its
approval of a Store lease upon Franchisee's execution of a conditional lease
assignment in a form which is the same as or similar to the one found on
Schedule 4.
(b) A prototype floor plan, elevation and equipment layout for the Store,
if requested by Franchisee. The plans must be modified by Franchisee's
architect or contractor to adapt them to conditions at the Premises and to
satisfy all local code requirements. Revisions or modifications to the
plans must be approved by Big O.
(c) Up to six (6) weeks of training for two persons in the operation of
the Franchised Business at Big O's training facility located in Mesa,
Arizona, or another location designated by Big O. Unless Big O waives the
training requirement, the Manager of the Franchisee's Store, provided he or
she has been approved by Big O, and Franchisee's Operator must attend and
successfully complete such training. Franchisee shall pay for its own
transportation, lodging, and living expenses which are incurred while
attending the initial training program, except that Big O will pay lodging
and transportation for the first person to attend the training program. In
the event that, in Big O's sole discretion, Franchisee's Operator fails to
successfully complete the initial training program, Big O may, in its sole
discretion, require Franchisee's Operator to attend and successfully
complete another training program or terminate this Agreement and, upon
receipt from Franchisee of a general release in a form approved by Big O,
refund the initial franchise fee paid by Franchisee, less any amounts
necessary to reimburse Big O for the costs it incurred in approving
Franchisee and in training Franchisee's Operator and Manager.
(d) One (1) copy of Big O's Manual, known as "Blue II".
(e) Assistance in selecting Franchisee's initial inventory.
(f) Instruction in a basic bookkeeping system.
7.02 On-Going Assistance. Big O agrees to make available to Franchisee the
following ongoing assistance:
(a) To the extent available to Big O, a source of Big O private brand
tires;
(b) Ongoing research and development into new tires and other lines of
Products and Services and ways to enhance the competitive posture of Big O
Stores;
(c) Additional training for the Operator or other personnel of Franchisee;
(d) Suggested prices for the Products and Services sold at the
Franchisee's Store, provided that Franchisee will not be required to sell at
any particular price if such a requirement would be unlawful;
(e) A tire warranty or replacement program for Big O private brand tires
and related automotive Products and Services;
(f) Field assistance, inspections and advice pertaining to Franchisee's
Store;
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(g) From time to time, local Advertising plans and materials,
merchandising materials, sales aids, special promotions and similar
Advertising, for which Big O may charge Franchisee a fee; and
(h) At the request of Franchisee's Local Group, Big O will supply
Franchisee with newspaper mats and radio and television commercial tapes,
for which Big O may charge Franchisee or the Local Group a fee.
8. FEES
8.01 Initial Franchise Fee. In consideration of the execution of this
Agreement, Franchisee agrees to pay Big O an initial franchise fee in the amount
and at the times specified on the Summary Pages. Except as described in Section
7.01(c) above, the initial franchise fee is not refundable.
8.02 Service Fee. After the Commencement Date, Franchisee shall pay to Big
O a monthly service fee equal to two percent (2%) of the prior month's Gross
Sales. The service fee must be postmarked and mailed to Big O by no later than
the Due Date.
8.03 Late Fees. If any fee or any other amount due under this Agreement,
including payments for Products and Services, is not received within ten (10)
days after such payment is due, Franchisee shall pay Big O interest equal to the
lesser of the daily equivalent of eighteen percent (18%) per annum of such
overdue amount per year, or the highest rate then permitted by applicable law,
for each day such amount is past due.
8.04 Taxes. If any federal, state, or local tax other than an income tax
is imposed upon service fees paid by Franchisee to Big O which Big O cannot
offset against taxes it is required to pay under the laws of the United States
or the state of its domicile, Franchisee agrees to compensate Big O in the
manner prescribed by Big O so that the net amount or net rate received by Big O
is no less than that which has been established by this Agreement and which was
due Big O on the Effective Date of this Agreement.
8.05 Allocation of Payments. Unless other written instructions accompany a
specific payment, all payments made by Franchisee pursuant to this Agreement
shall be applied in such order as Big O may designate from time to time. Big O
shall comply with any written instructions for allocation specified by
Franchisee to the extent, in Big O's opinion, it is reasonable to do so.
9. LICENSED MARKS
9.01 Licensed Marks. Franchisee expressly acknowledges that Big O is the
sole and exclusive licensor of the Licensed Marks. Franchisee agrees not to
represent in any manner that Franchisee has acquired any ownership rights in the
Licensed Marks. Franchisee agrees not to use any of the Licensed Marks or any
marks, names, or indicia which are or may be confusingly similar in its own
corporate or business name except as authorized in this Agreement. Franchisee
further acknowledges and agrees that any and all goodwill associated with the
Big O System and identified by the Licensed Marks shall inure directly and
exclusively to the benefit of Big O and that, upon the expiration or termination
of this Agreement for any reason, no monetary amount shall be assigned as
attributable to any goodwill associated with Franchisee's use of Licensed Marks.
9.02 Limitations on Use. Franchisee understands and agrees that any use of
the Licensed Marks other than as expressly authorized by this Agreement, without
Big O's prior written consent, is an infringement of Big O's rights therein and
that the right to use the Licensed Marks granted herein does not extend beyond
the termination or expiration of this Agreement. Franchisee expressly covenants
that, during the term of this Agreement and thereafter, Franchisee shall not,
directly or indirectly, commit any
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act of infringement or contest or aid others in contesting the validity of Big
O's right to use the Licensed Marks or take any other action in derogation
thereof.
9.03 Infringement. Franchisee acknowledges Big O's right to regulate the
use of the Licensed Marks and Trade Dress of the Big O System. Franchisee shall
promptly notify Big O if it becomes aware of any use or any attempt by any
person or legal entity to use the Licensed Marks or Trade Dress of the Big O
System, any colorable variation thereof, or any other mark, name, or indicia in
which Big O has or claims a proprietary interest. Franchisee shall assist Big
O, upon request and at Big O's expense, in taking such action, if any, as Big O
may deem appropriate to halt such activities, but shall take no action nor incur
any expenses on Big O's behalf without Big O's prior written approval.
9.04 Franchisee's Business Name. Franchisee further agrees and covenants
to operate and advertise only under the name or names from time to time
designated by Big O for use by similar Big O System franchisees; to refrain
from using the Licensed Marks to perform any activity or to incur any obligation
or indebtedness in such a manner as may, in a way, subject to Big O to liability
therefor; to observe all laws with respect to the registration of trade names
and assumed or fictitious names; to include in any application for the above a
statement that Franchisee's use of the Licensed Marks is limited by the terms of
this Agreement, and to provide Big O with a copy of any such application and
other registration document(s); and to observe such requirements with respect to
trademark and service mark registrations, copyright notices, and other notices
as Big O may, from time to time, require.
9.05 Change of Licensed Marks. Subject to the requirements of Section 25
of this Agreement, Big O reserves the right, in its sole discretion, to
designate one or more new, modified, or replacement Licensed Marks or trade
names for use by franchisees and to require the use by Franchisee of any such
new, modified, or replacement Licensed Marks or trade names in addition to or in
lieu of any previously designated Licensed Marks. Any expenses or costs
associated with the use by Franchisee of any such new, modified, or replacement
Licensed Marks shall be the sole responsibility of Franchisee.
10. STANDARDS OF OPERATION
10.01 Standards of Operations. Big O shall establish and Franchisee shall
maintain high standards of quality, appearance and operation for the Franchised
Business. For the purpose of enhancing the public image and reputation of the
businesses operating under the System and for the purpose of increasing the
demand for Products and Services provided by Franchisee and Big O, the parties
agree as follows:
(a) Franchisee shall not open the Store for business until Big O has
provided Franchisee with written authorization to do so;
(b) Franchisee shall comply in good faith with all published Big O System
rules, regulations, policies, and standards, including, without limitation,
those contained in the Manual. Franchisee shall operate and maintain the
Franchised Business solely in the manner and pursuant to the standards
prescribed herein, in the Manual and in other materials provided by Big O to
Franchisee, and shall make such modifications thereto as Big O may require;
(c) Franchisee shall at all times operate the Store diligently and in a
manner which is consistent with sound business practices so as to maximize the
revenues therefrom;
(d) Franchisee shall at all times maintain working capital and a net worth
which is sufficient, in Big O's opinion, to enable Franchisee to fulfill
properly all of Franchisee's responsibilities under this Agreement;
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(e) Franchisee shall at all times maintain its Store in the image of and
according to the standards of Big O as prescribed in the Manual. Moreover,
Franchisee agrees to cooperate with Big O at its expense, to the extent building
and site limitations permit, in the implementation of new programs, including
those which may require the addition of new equipment or fixtures for the Store.
In its sole discretion, Big O may waive some or all of any of its franchisees'
obligations to comply with such programs.
(f) Prior to opening, Franchisee shall provide Big O with written
certificates or documentary evidence from an insurance company or companies that
Franchisee has obtained the insurance coverage prescribed by Section 21;
(g) If Franchisee maintains a customer list, such lists or parts thereof
shall be disclosed to no one other than Franchisee's employees or Big O without
Big O's prior written consent; and
(h) Franchisee shall participate in and be bound by the decisions of any
Local Group established and operated pursuant to standards and within the
guidelines prescribed or approved by Big O. Franchisee shall not be subject to
any agreement to fix prices, or allocate customers or territories which would
violate any applicable laws. Nor will Franchisee be subject to any capital
investment requirements or other standards which are inconsistent with this
Agreement or which have not been approved or prescribed by Big O.
11. STORE MANAGEMENT
11.01 Store Management. Franchisee's Store shall only be operated by the
Operator or a Manager employed by the Franchisee who has previously been
approved by Big O. All initial and subsequent Operators or Managers must be
approved by Big O. Big O's approval will be conditioned upon the Operator's or
Manager's successful completion of any training required by Big O. Big O may
waive some or all of its initial training requirements for Operators or Managers
who have already received such training as a result of their affiliation with
another Store or Big O franchisee. If Franchisee or Franchisee's Operator has
not already successfully completed such training, he shall be required to
successfully complete the training described in Section 7.01 (c) above.
11.02 Completion of Training by Operator or Manager. Franchisee's Operator
or Manager and such of its managerial personnel or Shareholders as are
designated by Big O, shall complete, to Big O's reasonable satisfaction, any and
all training programs Big O may reasonably require or provide at such time as
Big O may reasonably prescribe. All expenses incurred by persons receiving such
training, including, without limitation, costs of travel, room and board, as
well as wages of the person(s) receiving such training shall be borne by
Franchisee except that the transportation and lodging costs for the first person
receiving such training shall be paid by Big O.
11.03 Operation of Store by Big O. Under the circumstances described
below, upon Franchisee's request, Big O has the option, but not the duty, to
replace or substitute for Franchisee's Operator, Manager, or both, its own
employees or agents, to operate the Franchisee's Store for the benefit of
Franchisee with complete discretion over all matters relating to its operation.
Franchisee shall pay Big O's then current Store management fee as well as the
out-of-pocket expenses Big O incurs for travel, food and lodging in the course
of providing such services. Big O may operate Franchisee's Store if:
(a) Franchisee's Operator or Manager has failed to satisfactorily
complete any training required by this Section 11; or
(b) Franchisee's Operator or Manager becomes physically or mentally
incapable of operating the Franchised Business; or
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(c) Franchisee's Operator or Manager dies and a new Operator or Manager
has not completed initial training.
12. QUALITY CONTROL
12.01 Inspections. Franchisee hereby grants to Big O and its authorized
agents the right to enter the Premises during regular business hours:
(a) To conduct inspections and, upon Big O's request, Franchisee agrees to
render such assistance as may reasonably be requested and to take such steps as
may be necessary immediately to correct any deficiencies in the operation of its
Franchised Business pursuant to this Agreement which are detected during such an
inspection; and
(b) To remove from the Premises, certain samples of any Products and
Services, supplies or goods, in amounts reasonably necessary for testing or
examination by Big O or an independent laboratory, to determine whether such
samples meet Big O's then current standards and specifications. Big O will
grant Franchisee a credit equivalent to the cost of any approved Products and
Services or supplies damaged or removed by it.
13. MANUAL; NEW PROCESSES
13.01 Manual. To protect the reputation and goodwill of the businesses
operating under the System and to maintain high standards of operation under the
Licensed Marks, Franchisee shall conduct the Franchised Business strictly in
accordance with the Manual, which Franchisee acknowledges belongs solely to Big
O and shall be on loan from Big O during the term of this Agreement. Franchisee
agrees to pay Big O up to Five Thousand Dollars ($5,000) if the Manual is not
returned to Big O within five (5) days of the Expiration Date or Termination
Date of this Agreement, or the date upon which controlling interest in the
Franchisee, the Franchised Business or its assets is transferred. However, Big
O will waive the payment if Franchisee notifies Big O that it has lost or
mislaid all or part of the Manual at any time prior to six (6) months before the
date upon which the Franchise is transferred, terminates, or expires.
13.02 Confidentiality of Information. Franchisee shall at all times use
its best efforts to keep Big O's Information confidential and shall limit access
to the Information to employees and independent contractors of Franchisee on a
need-to-know basis. Franchisee acknowledges that the unauthorized use or
disclosure of Big O's Information will cause irreparable injury to Big O and
that damages are not adequate remedy. Franchisee accordingly covenants that it
shall not at any time, without Big O's prior written consent, disclose, use,
permit the use thereof (except as may be required by applicable law or
authorized by this Agreement), copy, duplicate, record, transfer, transmit, or
otherwise reproduce such Information, in any form or by any means, in whole or
in part, or otherwise make the same available to any unauthorized person or
source. Any and all Information, knowledge, and know-how not generally known
about the System and Big O's Products and Services, standards, procedures,
techniques, and such other Information or material as Big O may designate as
confidential shall be deemed confidential for purposes of this Agreement, except
Information which Franchisee can demonstrate lawfully came to its attention
prior to disclosure by Big O, or which legally is or has become a part of the
public domain by publication or communication by others.
13.03 Revisions to Manual. Franchisee understands and acknowledges that
subject to the requirements of Section 25, Big O may, from time to time, revise
the contents of the Manual to implement new or different requirements for the
operation of the Franchised Business, and Franchisee expressly agrees to comply
with all such changed requirements which are by their terms mandatory, provided,
that such requirements apply in a reasonably nondiscriminatory manner to
comparable Big O franchisees. The implementation of such requirements may
require the expenditure of reasonable sums of money by
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Franchisee. Big O will not alter the basic rights and obligations of the
parties arising under this Agreement through changes to the Manual.
13.04 Improvements to System. If Franchisee develops any concept, process,
service, or improvement in the operation or promotion of the Store, Big O may
itself use or disclose it to other Big O franchisees without any obligation to
compensate Franchisee therefor. If the concept, process, service, or
improvement is adopted for use by the majority of Big O Stores, such concept,
process, service, or improvement shall become the property of Big O and Big O
may itself use or disclose it to other Big O franchisees without any obligation
to compensate Franchisee therefor.
14. PRODUCTS AND SERVICES
14.01 Products and Services. Franchisee acknowledges that its principal
interest in acquiring a Big O Franchise is to sell Big O private brand tires and
related merchandise and benefit from Big O's Products and Services selection,
purchasing programs including programs for the purchase of major brand tires,
and marketing expertise. The consuming public expects Big O Stores to offer the
full line of Big O Products and Services and advertised warranty services.
Accordingly, Franchisee shall at all times have in stock on the Premises a
complete representative line of Big O private brand tires, shock absorbers,
related merchandise, and other Products and Services in such quantities as Big O
may prescribe from time to time.
14.02 Approval of Products and Services. Prior to commencing business at
the Premises, Franchisee shall stock the Store with Products and Services and
supplies of such variety and in such amounts as Big O may select. Franchisee
may not sell any product or service which has not been selected, manufactured,
or approved by Big O. Big O is not obliged to approve any product, service, or
merchandise selected by the Franchisee. Big O will exercise its right of
approval of suppliers selected by the Franchisee which are not at the time
approved by Big O for use by the Franchisee in accordance with the following
procedure:
(a) The Franchisee must submit a written request to Big O for approval of
the supplier;
(b) The Franchisee must demonstrate to Big O the existence of a need for
the product;
(c) The supplier must demonstrate to Big O's reasonable satisfaction,
that it is able to supply a commodity to the Franchisee meeting Big O's
specifications for such commodity and that it is able to do so on a timely
basis;
(d) The supplier must demonstrate to Big O's reasonable satisfaction that
the supplier is of good standing in the business community with respect to
its financial soundness and reliability of its product and service;
(e) The supplier must agree to indemnify and hold Big O and the
Franchisee harmless from and against any claim or liability by reason of the
supplier's products, including without limitation, defects in materials and
workmanship and supplier must provide to Big O certificates or other
evidences of insurance coverage with coverage limits sufficient to cover the
risks and an endorsement reflecting that Big O and Franchisee are named as
additional insureds under the supplier's insurance policies; and
(f) Big O must be reasonably satisfied that the commodity is priced
competitively.
Big O's current practice is to notify the Franchisee of its approval or
disapproval in writing as soon as practicable.
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14.03 Inventory. Franchisee shall at all times maintain an inventory of
Products and Services in such amounts and of such variety as Big O may
reasonably require, and shall offer all services which Big O may require.
14.04 Warranties and Guaranties. Franchisee agrees to issue and honor
warranties and guarantees written on certain Products and Services sold to
consumers in accordance with the terms and procedures prescribed in the Manual.
Any such warranty or guaranty will be offered through all Big O Tire Stores on a
nondiscriminatory basis. Only warranties or guarantees sponsored or approved by
Big O may be offered or honored by Franchisee (other than those required by
law). Franchisee and Big O shall only honor warranties and guaranties on
Products and Services which have been sold to and returned by consumers in
accordance with the terms and procedures prescribed in the Manual. Franchisee
acknowledges that it will honor any and all warranties and guarantees sponsored
or approved by Big O, regardless of where or by whom they were issued.
Franchisee shall make no charge to a customer for honoring such a warranty or
guaranty unless the charge is permitted by the express terms of the warranty or
guaranty or the then current Manual. Big O agrees not to change or revoke any
warranty or guaranty without giving Franchisee at least thirty (30) days prior
written notice. Warranties or guarantees issued prior to any such revocation or
modification shall be honored according to their terms as interpreted in the
Manual.
14.05 Open Account Financing. In its sole discretion, Big O may provide
Franchisee with open account financing for some or all of the Products and
Services it sells Franchisee. Whether or not such credit is offered, Franchisee
will be required to execute a security agreement and comply with all other
requirements of Big O to secure Franchisee's obligations to Big O under the
Franchise Agreement and perfect its security interest therein. If such credit
is offered, Franchisee will be required to execute a credit agreement and
security agreement and comply with all other requirements of Big O to secure
such payments and perfect its security interest therein. Franchisee's failure
to comply with any credit terms set forth above shall constitute an event of
default of this Agreement.
15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS
15.01 Initial Advertising. Recognizing the value of standardized
Advertising programs to the furtherance of the goodwill and public image of the
Big O System, the parties agree that within sixty (60) days of the Commencement
Date, Franchisee is required to spend on Initial Advertising the amount
specified on the Summary Pages. The exact amount to be spent on Initial
Advertising shall be determined by the Franchisee's Local Group and will depend,
in part, on Big O's then current presence in the market place, reputation and
name recognition. The amount and manner of the Initial Advertising must be
approved in advance by Big O. If no Local Group exists for the region where
Franchisee's Store is located, then the amount of the Initial Advertising shall
be agreed upon by Big O and Franchisee.
15.02 National Advertising Fund. Big O has established a National
Advertising Fund which Big O, in its sole discretion, may decide to terminate at
any time. If Big O does terminate the National Advertising Fund, Big O, in its
sole discretion, may re-establish it at any time. Big O shall notify Franchisee
as to the manner in which it shall function and the amount of contribution
required of Franchisee.
(a) Not later than the Due Date, Big O or its designee must have received
from Franchisee such amount as Big O shall designate, but not more than one
percent (1%) of its previous month's Gross Sales, as a contribution to the
National Advertising Fund which shall be maintained or approved by Big O for
Big O National Advertising. Big O shall limit any increase in Franchisee's
contribution to the National Advertising Fund from any amount then currently
being charged to one-tenth of one percent (.001%) in any twelve (12)
consecutive month period and an additional one-tenth of one percent (.001%)
for each twelve (12) consecutive months thereafter until the one percent
(1%) limitation is reached. Such incremental increases shall not be
cumulative so that if Big O fails to adopt an additional incremental
increase after any twelve (12) consecutive month period, the next one-tenth
of one percent (.001%) incremental increase will not accrue until actually
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adopted by Big O and shall constitute the maximum for the next consecutive
twelve (12) months; provided, however, in the event Big O shall determine,
in its sole judgment and discretion, that a special advertising circumstance
or opportunity is available to Big O and/or its franchisees, Big O may
propose to the Dealer Planning Board a greater increase during any
consecutive twelve (12) month period (up to one percent (1%) limit), and if
a majority of the members of the Dealer Planning Board agree to such
increase, it shall be implemented by Big O, not withstanding Big O's
limitation as to the phasing in of any increases.
(b) Big O shall, following consultation with the Dealer Planning Board,
direct all National Advertising which is provided through the National
Advertising Fund with sole discretion over the concepts, materials, and
media used therein. All National Advertising Fund contributions paid by
Franchisee and other similarly situated Big O System franchisees to Big O
shall be part of the National Advertising Fund.
(c) Franchisee understands and acknowledges that the National Advertising
Fund is intended to maximize general public recognition and acceptance of
the Licensed Marks for the benefit of the System as a whole and that Big O
undertakes no obligation in administering the National Advertising Fund to
insure that any particular franchisee benefits directly or pro rata from the
national Advertising. Franchisee agrees that the National Advertising Fund
may otherwise be used to meet any and all costs incident to such
Advertising; provided that no part thereof shall be used by Big O to defray
its general operating expenses other than (i) those reasonably allocable to
such Advertising, or (ii) other activities reasonably related to the
administration or direction of the National Advertising Fund and its related
programs. No refund of contributions to the National Fund shall be due
Franchisee upon termination or nonrenewal of this Agreement.
(d) Any part of the National Advertising Fund contributions paid to Big
O, but not spent by Big O during Big O's fiscal year, which Big O may change
in its sole discretion, shall remain in the National Advertising Fund. Any
taxes imposed on the National Advertising Fund shall be paid from the
National Advertising Fund.
(e) The Dealer Planning Board shall have the right to review all
expenditures of the National Advertising Fund on a regular basis.
15.03 Local Fund. Franchisee shall also contribute by the Due Date a
minimum of four percent (4%) of its Store's Gross Sales for the previous month
either to Big O or, if a Local Fund has been established in Franchisee's
marketing area, to the Local Fund formed for the purpose of local advertising
and operated pursuant to such structure and guidelines as Big O may prescribe or
approve. Franchisee agrees to be bound by the decisions of either Big O or its
Local Group, if one has been established in Franchisee's marketing area,
pertaining to Local Advertising, provided such decisions have been approved by
Big O and do not violate any applicable laws. From time to time, the Local
Group may agree to increase the amount Franchisee is required to spend for
Advertising, but subject to the terms of certain documents already effective on
this Agreement's Effective Date, not by more than one percent (1%) of
Franchisee's Gross Sales on an annual basis.
15.04 Approval of Advertising. Franchisee or the Local Group shall submit
(through the mail, return receipt requested) to Big O for its prior written
approval (except with respect to prices to be charged), samples of all marketing
materials and advertising to be used by Franchisee that have not been prepared
or previously approved in all respects by Big O or its designated agents.
Franchisee shall submit tear sheets, receipts, and other evidence of such
Advertising in the manner prescribed by Big O. Franchisee will not be required
to submit to Big O copies of any proposed Advertising which has been adopted for
use by the Local Group and which was previously approved by Big O for use by the
Local Group.
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16. STATEMENTS AND RECORDS
16.01 Invoices. Every sale of Products and Services from the Franchisee's
Store shall be accurately recorded on a consecutively numbered invoice or in
such other format as Big O may approve. All invoices, whether voided or used,
shall be accounted for by Franchisee.
16.02 Audit. Throughout the term of this Agreement and for two (2) years
thereafter, Franchisee shall maintain for not less than three (3) years
original, full, and complete records, accounts, books, data, licenses, and
contracts which shall accurately reflect all particulars relating to the
Franchised Business and such other statistical and other information or records
as Big O may require. Big O or its designated agent shall have the right to
examine and audit such records, accounts, books, and data during regular
business hours or at reasonable times. If any such examination or audit
discloses that Franchisee has understated its Store's Gross Sales by more than
two percent (2%), Franchisee shall be obliged to reimburse Big O for the cost
and expense of such examination or audit. If Franchisee has understated any
amount due Big O or any Local Group or Local Fund, it shall tender payment of
the amount due not later than ten (10) days following receipt of the auditor's
report, plus interest calculated at a rate which is the lower of eighteen
percent (18%) per annum or the highest rate permitted by law. If Franchisee has
overpaid Big O or such Local Group or Local Fund, such amount will be credited
to Franchisee against monthly service fees or advertising contributions due to
Big O, the Local Group or the Local Fund beginning with the month following
receipt of the auditor's report and continuing until the credit is exhausted.
16.03 Monthly Reports. No later than the Due Date, Franchisee shall mail
to Big O all payments of service fees and advertising contributions and monthly
reports due Big O on forms prescribed by Big O, stating the fees or
contributions due to Big O which were incurred during the preceding month as
specified from time to time by Big O, the Gross Sales at the Premises for the
prior month, copies of all sales tax receipts or returns and such other
information as Big O may require, all signed and certified as true and correct
by Franchisee or Franchisee's Operator.
16.04 Financial Statements. Franchisee shall deliver to Big O, no later
than sixty (60) days from the end of each of Franchisee's fiscal quarters, an
unaudited profit and loss statement covering the Franchised Business for such
quarter and a balance sheet of the Franchised Business as of the end of such
quarter, all of which shall be certified by Franchisee as true and correct. All
such statements shall be prepared in a format which has been prescribed or
approved by Big O. In addition, Franchisee, as well as any guarantor(s) of this
Agreement, shall, within thirty (30) days after request from Big O, deliver to
Big O a financial statement, certified as correct and current, in a form which
is satisfactory to Big O and which fairly represents the total assets and
liabilities of Franchisee and any such guarantor(s).
16.05 Management System. Big O has authorized Local Groups to recommend to
Big O that certain Management Systems be obtained and used by all their member
franchisees. If Franchisee's Local Group persuades Big O that the acquisition
of a Management System by all its member Franchisees is necessary to the
efficient functioning of a program which is consistent with the Big O System,
Franchisee shall, at its sole expense acquire such Management System and place
it in service within such time periods as are recommended by the Local Group and
approved by Big O. Once a particular Management System or accounting software
has been adopted by a Local Group pursuant to the criteria described herein,
Franchisee may utilize a different Management System at Franchisee's Store only
with Big O's prior written approval.
17. COVENANTS
17.01 Noncompetition During Term. Except for any businesses already
operating and identified on the Summary Pages, during the term of this
Agreement, Franchisee and any guarantor(s) hereof
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covenant, individually, not to engage in or open any business, other than as a
Franchisee of the Big O System, which offers or sells tires, wheels, shock
absorbers, automotive services, or other products or services which compete with
Big O Products and Services. The purpose of this covenant is to encourage
Franchisee and any guarantor(s) hereof to use their best efforts to promote the
Big O System, its Products and Services, to protect its Information and trade
secrets, and to generate a successful business at the Store.
17.02 Confidentiality. During the term of this Agreement and thereafter,
Franchisee covenants not to communicate directly or indirectly, divulge to or
use for its benefit or the benefit of any other person or legal entity, any
trade secrets which are proprietary to Big O or any Information, knowledge, or
know-how deemed confidential under Section 13 hereof, except as permitted by Big
O. The protection granted hereunder shall be in addition to and not in lieu of
all other protections for such trade secrets and confidential Information as may
otherwise be afforded in law or in equity.
17.03 No Interference with Business. Franchisee agrees that during the
term of this Agreement that it shall not divert or attempt to divert any
business of or any actual customers of the Big O System to any competitive
business, by direct or indirect inducement or otherwise.
17.04 Post Termination Covenant Not to Compete. If Franchisee terminates
this Agreement other than in a manner prescribed by Section 19.03 or if this
Agreement is terminated for "good cause" as defined in Section 19.01, Franchisee
and its guarantors covenant that they shall not directly or indirectly, for a
period of two (2) years after the Termination Date of this Agreement, engage in
any business, other than as a Franchisee of the Big O System, which offers or
sells tires, wheels, shock absorbers, automotive services, or other products or
services which compete with Big O Products and Services within a ten (10) mile
radius of the Premises or within a ten (10) mile radius of any other Big O Store
which was operational or under construction on the Termination Date.
17.05 Survivability of Covenants. The parties agree that each of the
foregoing covenants shall be construed as independent of any other covenant or
provision of this Agreement. If all or any portion of a covenant in this
Section 17 is held unenforceable by a court or agency having valid jurisdiction
in an unappealed final decision to which Big O is a party, Franchisee expressly
agrees to be bound by any lesser covenant imposing the maximum duty permitted by
law that is subsumed within the terms of the covenant, as if the resulting
covenant were separately stated in and made a part of this Section 17.
Franchisee further expressly agrees that the existence of any claim it may have
against Big O, whether or not arising from this Agreement, shall not constitute
a defense to the enforcement by Big O of the covenants in this Section 17. The
covenants in this Section 17 shall survive the Termination Date or Expiration
Date of this Agreement.
17.06 Modification of Covenants. Franchisee understands and acknowledges
that Big O shall have the right, in its sole discretion, to reduce the scope of
any covenant set forth in this Section 17 or any portion hereof, without
Franchisee's consent, effective immediately upon receipt by Franchisee of
written notice thereof; and Franchisee agrees that it shall comply immediately
with any covenant as so modified.
18. TRANSFER AND ASSIGNMENT
18.01 Assignment by Big O. This Agreement and all rights and duties
hereunder may be freely assigned or transferred by Big O and shall be binding
upon and inure to the benefit of Big O's successors and assigns.
18.02 Right of First Refusal. Because Big O or someone known to Big O may
be interested in purchasing Franchisee's Franchised Business, the Premises, or
an interest in either, if Franchisee decides to make a Transfer, Franchisee
agrees to offer in writing to make the Transfer to Big O, and describe the
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terms under which Franchisee offers to make such a Transfer. If Big O has not
offered to purchase what the Franchisee has offered to Transfer to Big O within
thirty (30) days after Big O receives the notice from Franchisee, Franchisee may
then offer to make the Transfer to third parties on the same or not more
favorable terms and conditions as were offered to Big O. If Franchisee does not
consummate the Transfer within six months after Franchisee gives notice of the
Transfer to Big O, Franchisee shall not make the Transfer without again first
offering to make the Transfer to Big O.
18.03 Transfer Legend. Franchisee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Franchisee and
that Big O has granted the Franchise in reliance on Franchisee's personal
background, business skills, experience, and financial capacity. It is
important to Big O that Franchisee be known to Big O and always meet Big O's
standards and requirements. Accordingly, neither Franchisee nor any Shareholder
shall be permitted or have the power, without the prior written consent of Big
O, to make a Transfer. To assure compliance by Franchisee with the transfer
restrictions contained in this Section 18, all share or stock certificates of
Franchisee shall at all times contain a legend sufficient under applicable law
to constitute notice of the restrictions on such stock contained in this
Agreement and to allow such restrictions to be enforceable. Such legend shall
appear in substantially the following form:
"The sale, transfer, pledge, or hypothecation of this stock
is restricted pursuant to the terms of Section 18 of a
Franchise Agreement dated _____________________ between Big O
Tires, Inc, and the issuer of these shares."
Any Transfer which does not comply with the terms of this Section 18 shall be
null and void.
18.04 Pre-Conditions to Franchisee's Assignment. If Franchisee or any
Shareholder desires to make a Transfer, such person or entity must comply with
the following terms, conditions, and procedures to effectuate a valid Transfer:
(a) If any proposed assignment of any rights under this Agreement, or if
any other Transfer which, when aggregated with all previous Transfers, would
in the reasonable opinion of Big O, result in the transfer of effective
control over the ownership and/or operation of the Premises or Franchisee or
the Franchised Business:
(i) The transferee must apply for a Big O franchise and must meet
all of Big O's then current standards and requirements for becoming a
Big O franchisee (which standards and requirements need not be
written); and
(ii) The transferee shall execute the then current form of Franchise
Agreement generally issued by Big O with respect to comparable Big O
franchisees. Such agreement shall generally provide for a new term
equal to the term of the standard Big O franchise agreement then being
offered, and may include, without limitation, different fee structures,
modified Trade Areas and/or increased fees;
(b) Regardless of the degree of control which would be affected by a
proposed Transfer:
(i) Franchisee shall first notify Big O in writing of any bona fide
proposed Transfer and set forth a complete description of all terms and
fees of the proposed Transfer in the manner prescribed by Big O,
including the prospective transferee's name, address, financial
qualifications, and previous five (5) years business experience;
(ii) Big O or its assignee may, within thirty (30) days after
receipt of such notice, exercise the Option to purchase the interest
being offered by Franchisee or any Shareholder;
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(iii) If Big O or its assignee fails to exercise the Option to
purchase the interest, Big O shall, within thirty (30) days after
receipt of the notice of the Option, notify Franchisee in writing of
its approval or disapproval of the prospective transferee. Big O's
approval will be granted only if the prospective transferee, its
Shareholders, partners, and/or Operator: meets Big O's then current
standards for new franchisees, which standards need not be in writing;
demonstrates to Big O's satisfaction that it or its Operator meets Big
O's managerial, business, and technical standards; possesses a good
moral character, business reputation, and satisfactory credit rating;
and has the aptitude, ability, and financial capacity to operate the
Franchised Business (as may be evidenced by prior related business
experience or otherwise). Big O reserves the right to disallow a
transfer of the Premises (without a transfer of the Franchised
Business) to a person which would operate a business from the Premises
which sells or offers for sale products or services which are the same
as or similar to those offered for sale through the Franchised
Business;
(iv) If Big O approves the proposed transferee, Franchisee or the
Shareholder may transfer the interest to the proposed transferee at a
price and under terms and conditions which are not more favorable than
the terms offered to Big O. Big O's approval is conditioned upon the
proposed transferee or its Operator having completed (to the
satisfaction of Big O) the training program then currently required of
Big O franchisees or Operators;
(v) Prior to the consummation of any such Transfer, Franchisee shall
pay all amounts due to Big O and cure all other breaches of this
Agreement and any other agreement or loan document it may have with Big
O;
(vi) Big O will, as a condition of any Transfer involving a change
in control of Franchisee, the Store or its Assets, require Franchisee
or Transferee to pay a transfer fee (but no initial franchise fee) to
reimburse Big O for any expenses which may be incurred in its review,
analysis, and preparation of any documentation relating to the
Transfer, including legal and accounting fees, and additional
assistance as may be requested by the Franchisee related to the
Franchisee's resale of the Store. The transfer fee will range between
$1,500 and the amount of the then current initial franchise fee, the
exact amount within that range to be based on Big O's actual costs
incurred. Big O shall be the sole arbiter of whether a change of
control will occur as a result of a single Transfer or a group of
Transfers;
(vii) Big O may require any transferor of any partnership interest,
shares of stock, or any other interest of any kind or nature in
Franchisee to guarantee the obligations of Transferee under this
Agreement or under any new Franchise Agreement entered into between
transferee and Big O;
(viii) Prior to approving a Transfer of the controlling interest in
Franchisee, the Franchised Business, or the Premises, Big O may inspect
Franchisee's Store and as a result of such inspection, Big O may
prepare a "Punch List" setting forth the necessary repairs,
maintenance, or other upgrading of the Store which will become a
condition of Big O's approval of the Transfer; and
(ix) If the Franchisee acquired its interest in the Franchise as a
Pioneer, Converter, or pursuant to a Development Agreement or Manager
Incentive Contract, and the Franchisee makes a Transfer of its interest
within two (2) years of the Effective Date of this Agreement, the
Franchisee must pay Big O as a condition of such Transfer the
difference between the initial franchise fee paid by Franchisee and
twenty-one thousand dollars
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($21,000.00), the standard initial franchisee fee charged by Big O for
new franchises when Franchisee executed this Agreement.
(x) Franchisee shall comply with all other applicable transfer
requirements as designated in the Manual or otherwise in writing.
18.05 Death of Franchisee. Notwithstanding any other provision in this
Section 18, if a Survivor desires to acquire or retain the interest of a
decedent of a Franchisee or in a Franchisee and continues to operate the
Franchised Business pursuant to the System, the Survivor may do so under the
terms of this Agreement subject only to:
(a) The Survivor's execution and delivery to Big O of a written agreement
to be bound:
(i) By the terms of this Agreement; and
(ii) By the terms of any guaranty of this Agreement;
(b) Satisfactory completion of initial training by the Survivor,
Survivor's Operator, or Manager and such other managerial personnel as Big O
may designate within the time periods prescribed by Big O; and
(c) The Survivor's payment of all travel, lodging, food, and similar
expenses incurred by it or its Operator or managerial personnel in attending
the training prescribed by Section 11.02. If the Survivor does not desire
to acquire or retain such interest, then the Survivor shall have a
reasonable period of time, but no more than six (6) months, to make a
Transfer to a transferee acceptable to Big O subject to compliance with the
procedures set forth in this Section 18, provided, the Survivor throughout
such period fulfills all duties of Franchisee under this Agreement.
18.06 No Waiver. Big O's consent to a Transfer hereunder shall not
constitute a waiver of any claims Big O may have against Franchisee or the
transferring party or Big O's right to demand exact compliance with any
provision of this Agreement.
18.07 Excepted Transfers. The provisions of Section 18.02 and 18.04(b)(ii)
shall not apply to: (a) any Transfer to a spouse, parent, child, or sibling of
Franchisee or any Shareholder; (b) a Transfer to Franchisee's Operator or
Manager pursuant to the terms of a Manager Incentive Contract which complies in
all respects with the standards approved or prescribed by Big O; or (c) a
Transfer to a spouse, parent, child, or sibling of Franchisee or any Shareholder
which, in the aggregate, amounts to a Transfer of less than a controlling
interest in Franchisee, the Franchised Business, or the Premises.
19. DEFAULT AND TERMINATION
19.01 Termination by Big O. Big O may terminate this Agreement for good
cause, without prejudice to the enforcement of any legal or equitable right or
remedy, immediately upon giving written notice of such termination and the
reason or cause for the termination, and, except as hereinafter provided,
without providing Franchisee an opportunity to cure the default. Without in any
way limiting the generality of the meaning of the term "good cause", the
following occurrences shall constitute sufficient basis for Big O to terminate
the Agreement:
(a) If Franchisee fails to pay any financial obligation pursuant to this
Agreement including, but not limited to, payments to Big O or any other
supplier for Products and Services, and fails to cure such failure to pay
within five (5) days after Big O gives Franchisee a written notice of
default;
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(b) If Franchisee fails to perform or breaches any covenant, obligation,
term, condition, warranty, or certification herein and fails to cure such
non-compliance within thirty (30) days after Big O gives Franchisee written
notice of default;
(c) If Franchisee fails to open the Store and commence business within
eighteen (18) months of the Effective Date of this Agreement, or if
Franchisee fails to commence business on such other Commencement Date as the
parties hereto may have agreed;
(d) If Franchisee makes, or has made, any materially false statement or
report to Big O in connection with this Agreement or the application
therefor;
(e) If Franchisee operates the Franchised Business in a manner contrary
to or inconsistent with the Licensed Marks or as specified by Big O in the
Manual, and Franchisee fails to cure such deficiency within thirty (30) days
after Big O gives a written notice of default;
(f) If Franchisee, a Shareholder, guarantor, or transferee violates any
transfer and assignment provision contained in Section 18 of this Agreement;
(g) If Franchisee receives from Big O more than three (3) valid notices
of default of this Agreement in the same twelve (12) month period,
regardless of whether previous defaults have been cured;
(h) If Franchisee fails to operate or keep the Franchised Business open
for more than five (5) consecutive business days without Big O's express
written approval, or if Franchisee ceases to operate all or any part of the
Franchised Business conducted under this Agreement or defaults under any
loan, lending agreement, mortgage, deed of trust or lease with any party
covering the Premises, and such party treats such act or omission as a
default, and Franchisee fails to cure such default to the satisfaction of
such party within any applicable cure period granted Franchisee by such
party;
(i) If Franchisee or any person owning an interest in Franchisee is
convicted of any felony or crime of moral turpitude regardless of the nature
thereof, or any other crime or offense relating to the operation of the
Franchised Business, or if Franchisee engages in any conduct which reflects
materially and unfavorably upon the operation of the Franchised Business;
(j) If Franchisee becomes insolvent or makes a general assignment for the
benefit of creditors, or if a petition in bankruptcy is filed by Franchisee,
or such a petition is filed against and consented to by Franchisee, or if a
bill in equity or other proceeding for the appointment of a receiver of
Franchisee or other custodian for Franchisee's business or assets is filed
and consented to by Franchisee, or if a receiver or other custodian
(permanent or temporary) of Franchisee's assets or property, or any part
thereof, other than as described in Section 18.05, is appointed;
(k) If Franchisee or any guarantor(s) hereof defaults in any other
agreement or loan document with Big O or if Franchisee defaults under the
terms of any lease of the Premises or if Franchisee fails to comply with the
requirements of any Local Group operating pursuant to standards prescribed
or approved by Big O including, but not limited to, any requirement to pay
dues or make advertising contributions, and such default is not cured in
accordance with the terms of such other agreement, loan document, or lease,
or the by-laws of the Local Group;
(l) If Franchisee fails, for a period of ten (10) days after notification
of non-compliance, to comply with any law or regulation applicable to the
operation of the Franchised Business;
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(m) If Franchisee sells, offers for sale, or gives away at the Premises
any products or services which have not been previously approved by Big O in
writing, or which have been subsequently disapproved;
(n) If Franchisee shall have understated its Gross Sales to Big O by more
than two percent (2%) on two (2) or more occasions; or
(o) If a court of competent jurisdiction or an arbitration tribunal in a
final and unappealed judgment determines that any significant amount of the
payments or compensation which Franchisee has agreed to pay Big O pursuant
to the terms hereof is unlawful, or that all or a significant part of
Franchisee's payment obligations hereunder are void or voidable by
Franchisee.
19.02 Governing State Law. If a different notice or cure period or good
cause standard is prescribed by applicable law, it shall apply to a termination
of this Agreement.
19.03 Termination by Franchisee. Franchisee may only terminate this
Agreement if Big O has committed a material breach of any of Big O's obligations
under this Agreement and has failed to cure such breach within thirty (30) days
after Franchisee has given written notice to Big O of such breach.
19.04 Force Majeure. Notwithstanding anything contained in this Agreement
to the contrary, neither party shall be in default hereunder by reason of its
delay in performance of, or failure to perform, any of its obligations
hereunder, if such delay or failure is caused by:
(a) strikes or other labor disturbance;
(b) acts of God, or the public enemy, riots or other civil disturbances,
fire, or flood;
(c) interference by civil or military authorities;
(d) compliance with governmental laws, rules, or regulations which were
not in effect and could not be reasonably anticipated as of the date of this
Agreement;
(e) delays in transportation, failure of delivery by suppliers, or
inability to secure necessary governmental priorities for materials; or
(f) any other fault beyond its control or without its fault or
negligence. In any such event, the time required for performance of such
obligation shall be the duration of the unavoidable delay.
20. POST TERMINATION OBLIGATIONS
20.01 Post-Termination Obligations. Upon the expiration or termination of
this Agreement by any means or for any reason, Franchisee shall immediately:
(a) Cease to be a Franchisee of Big O and cease to operate the former
Franchised Business under the Big O System. Franchisee shall not
thereafter, directly or indirectly, represent to the public that the former
Franchised Business is or was operated or in any way connected with the Big
O System or hold itself out as a present or former Franchisee of Big O;
(b) Pay all sums owing to Big O. Upon termination for any default by
Franchisee, such sums shall include actual and consequential damages, costs,
and expenses incurred by Big O as a result of the default;
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(c) Return to Big O the Manual and all trade secrets and confidential
materials owned or licensed by Big O and all copies thereof. Franchisee
shall retain no copy or record of any of the foregoing other than its copy
of this Agreement, any correspondence between the parties, and any other
document which Franchisee reasonably needs for compliance with any
applicable law;
(d) Provide Big O, upon its request, with a complete list of any
outstanding obligations Franchisee may have to any third parties including
outstanding customer orders. Big O shall have the right, but not the
obligation, to fill any such outstanding customer orders generated by
Franchisee and in such event, Franchisee shall immediately reimburse Big O
for any costs or expenses incurred by Big O in doing so. In addition, Big O
shall have the right to cancel any orders placed by Franchisee for which
delivery has not been made;
(e) Take such action as may be required by Big O to transfer and assign
to Big O or its designee all telephone numbers, white and yellow page
telephone references and advertisements, and all trade and similar name
registrations and business licenses, and to cancel any interest which
Franchisee may have in the same. The Franchisor is hereby appointed as the
Franchisee's attorney-in-fact for such purpose and such power, being coupled
with an interest, shall be irrevocable;
(f) Cease to use in Advertising, or in any manner whatsoever, any
methods, procedures, or techniques associated with the Big O System in which
Big O has a proprietary right, title, or interest; cease to use the
Licensed Marks, and any other marks and indicia of operation associated with
the Big O System and remove or change all Trade Dress, Products and
Services, and other indicia of operation under the Big O System from the
Premises, at Franchisee's expense and in a manner satisfactory to Big O.
Unless otherwise approved in writing by Big O, Franchisee shall return to
Big O all copies of materials bearing the Licensed Marks; and
(g) Strictly comply with all other provisions of this Agreement
pertaining to post-termination obligations, including, without limitation,
those contained in Sections 13 and 17.
20.02 Right to Repurchase. Big O shall have the right, but not the
obligation, to purchase:
(a) Some or all of the Products and Services and supplies at the Store
and the equipment, furnishings, fixtures, or signs at the Premises which
bear the Licensed Marks for a mutually agreed upon price within thirty (30)
days of the Termination Date or the Expiration Date.
(b) If Big O elects to exercise such a right, it may offset the purchase
price against any other amounts owed by Franchisee to Big O pursuant to this
or any agreement or loan document. Before exercising any such rights, Big O
shall have the right to enter upon the Premises during reasonable hours to
take an inventory of the Franchised Business.
20.03 Right of First Refusal. Upon receipt by Franchisee of an offer to
purchase Franchisee's Products and Services, equipment, supplies, fixtures or
signs at the Premises, Franchisee hereby grants Big O a right of first refusal
to purchase any of such items by matching the bona fide monetary purchase price
and payment schedule terms, less any brokerage commission without having to
match any other non-monetary terms of the proposed purchase by Franchisee's
buyer(s). Franchisee must give Big O written notice of any such bona fide
offer. If within thirty (30) days after receipt of such notice, Big O has
neither exercised its right of first refusal nor notified Franchisee of its
rejection thereof, Franchisee may sell such items as were covered by the offer
at the expiration of the thirty (30) day period.
20.04 De-Identification of Assets Upon Sale. If Big O determines not to
exercise its option to repurchase any such items, Franchisee may continue to
sell its remaining Products and Services,
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equipment, supplies, and fixtures, but may not identify itself as a Big O
Franchisee. Franchisee shall otherwise abide by the terms of this Section 20.
21. INSURANCE
21.01 Insurance Coverage. Franchisee shall, at its expense and no later
than upon the Commencement Date, procure and maintain in full force and effect
throughout the term of this Agreement either the approved Big O Dealers National
Insurance Program ("Program") then in effect or the types of insurance
enumerated in this Agreement, which shall be in such coverages, limits and
amounts as may from time to time be required by Big O, and which shall designate
Big O, its directors, officers, employees, agents and other Big O designees as
additional named insured(s). Unless otherwise agreed to by Big O, Franchisee
shall procure and maintain whichever limits and coverages are greater in a
comparison of the insurance enumerated in the Manual and the insurance
enumerated in the Program. If the Franchisee chooses not to procure insurance
pursuant to the Program, Franchisee shall procure the following insurance
coverages, limits and amounts:
(a) Workers' Compensation insurance with statutory limits for Coverage A
as prescribed by the statutes of the state of the Franchised Business;
including Coverage B, Employers Liability, with limits not less than or
equivalent to $500,000 each person, $500,000 each occurrence, and $500,000
annual aggregate;
(b) Comprehensive or Commercial General Liability insurance covering all
operations and premises of the Franchised Business, including but not
limited to Product Liability, Completed Operations Liability, Personal
Injury Protection, Advertisers Liability, Fire Legal Liability, Medical
Payments, and Contractual Liability, with limits not less than the
equivalent of $2,000,000 per occurrence combined single limit for bodily
injury and property damage;
(c) Vehicular/Automobile Liability insurance, including Uninsured
Motorist and Medical Payments, covering owned, non-owned, hired, leased or
other vehicles associated, directly or indirectly, with the Franchised
Business, with limits of not less than the equivalent of $1,000,000 per
occurrence combined single limit for bodily injury and property damage;
(d) "All Risk" Property insurance covering risk of loss to real and
personal property; including but not limited to, Accounts Receivable,
Valuable Papers, Glass, Signs, Employees' Tools, Loss of Rents, and other
building contents - including flood and earthquake coverage if appropriate
for the location of the specific Franchised Business-for repair/replacement
coverage and valuation of all assets. This coverage will include Business
Income/Extra Expense insurance for extra expenses incurred and/or profits
lost due to a covered, "All Risk" peril (Business Interruption Valuation
Worksheets will be submitted by Franchisee to Big O annually for evaluation
and approval). Any coinsurance provisions should apply only to values
reported and should have no adverse impact on claim settlement (an Agreed
Amount Endorsement should be obtained, if possible);
(e) Inland Marine insurance covering all signs, tools and equipment, and
cargo being transported by rail, motortruck, or other common carrier
conveyances where the Franchised Business has title or responsibility for
transported goods, with limits of no less than $10,000 per any one
conveyance;
(f) Garage Liability and Garagekeepers Legal Liability insurance covering
all vehicle storage, garage premises and other operations arising out of the
Franchised Business and non-owned use and/or operation of vehicles, with
Garage Liability limits of not less than the equivalent of $2,000,000 per
occurrence combined single limit for bodily injury and property damage and
Garagekeepers Legal Liability of not less than the equivalent of $100,000
per location;
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(g) Boiler and Machinery insurance covering all real and personal
property; including, but not limited to, pressure vessels, machinery,
piping, tubing and other high and low pressurized items at the Franchised
Business for the repair/replacement valuation of all assets. This coverage
shall include Business Income/Extra Expenses insurance for additional
expenses incurred and/or profits lost;
(h) Comprehensive Fidelity/Crime insurance covering Employee Dishonesty
with limits no less than $25,000; Forgery with limits no less than $10,000;
Money and Securities Inside Premises with limits no less than $10,000; and
Money and Securities Outside Premises with limits no less than $10,000; and
(i) Commercial Umbrella Liability insurance covering all underlying
liability insurance coverages enumerated in this section, with no gaps
between underlying and umbrella limits or coverage with excess and primary
limits of no less than the equivalent of $3,000,000 per occurrence combined
single limit for bodily injury and property damage.
21.02 Proof of Insurance. Prior to the Commencement Date, Franchisee shall
make timely delivery of a signed original certificate or certificates of all
required insurance coverages to Big O, which shall contain the authorized
agent's business name, address and phone number, together with a statement by
the insurer that the policy will not be cancelled or materially changed without
at least thirty (30) days prior written notice to Big O that the alteration or
cancellation is being made. All insurance coverages will be underwritten by a
company acceptable to Big O, with a Best's Rating of no less than "A-" or a
financial statement of the insurer approved by Big O. If Franchisee fails to
purchase required insurance conforming to the standards prescribed by Big O, Big
O may obtain such insurance for Franchisee, and Franchisee shall pay Big O the
cost of such insurance plus a ten percent (10%) administrative surcharge.
21.03 Survival of Indemnification. The procurement and maintenance of the
greater of the prescribed insurance coverages set forth in the Manual or those
set forth in the Program shall not relieve Franchisee of any liability to Big O
assumed under any indemnification requirement of this Agreement.
If Big O deems it appropriate, the Franchisee shall, upon Big O's request,
provide to Big O a true, complete certified copy of all, or a part of the
Franchisee's insurance policies within 10 days of receiving such request. In
addition, upon Big O's request, the Franchisee shall provide to Big O renewal
certificates of insurance, or certified insurance binders, for all required
coverages no fewer than 10 days before the indicated anniversary date(s) of such
insurance coverages.
22. TAXES, PERMITS, AND INDEBTEDNESS
22.01 Payment of Taxes. Franchisee shall promptly pay when due any and all
federal, state, and local taxes including without limitation, unemployment and
sales taxes, levied or assessed with respect to any Products and Services
distributed or sold pursuant to this Agreement and all accounts or other
indebtedness of every kind incurred by Franchisee in the operation of the
Franchised Business.
22.02 Compliance with Laws. Franchisee shall comply with all applicable
federal, state, and local laws, rules and regulations, including, without
limitation, environmental laws related to tire disposal. Franchisee shall
obtain any and all permits, certificates, and licenses required for the full and
proper conduct of the Franchised Business.
22.03 Payment of Debts. Franchisee hereby expressly covenants and agrees
to accept full and sole responsibility for any and all debts and obligations
incurred in the operation of the Franchised Business.
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23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS
23.01 Indemnification. Franchisee agrees to protect, defend, indemnify,
and hold Big O and its affiliates, their directors, officers, shareholders,
employees and agents jointly and severally, harmless from and against all
claims, actions, proceedings, damages, costs, expenses and other losses
(including death) and liabilities, consequently, directly or indirectly incurred
(including, without limitation, attorneys', accountants' and other related fees)
as a result of, arising out of, or connected with the operation of the
Franchised Business, including, without limitation, the failure of Franchisee to
comply with any relevant environmental and tire disposal laws. Franchisee shall
not, however, be liable for claims arising exclusively as a result of Big O's
intentional or fraudulent acts or omissions or sole negligence.
23.02 Independent Contractor. In all dealings with third parties,
including, without limitation, customers, employees, and suppliers, Franchisee
shall disclose in an appropriate manner acceptable to Big O that it is an
independent entity operating under a franchise granted by Big O. Franchisee
shall submit all applications and enter into all contracts in its designated
corporate name or such other fictitious names which have been approved by Big O,
but not in the name "Big O Tires" or in any other name which includes the name
"Big O". Nothing in this Agreement is intended by the parties hereto to create
a fiduciary relationship between them nor to constitute Franchisee or
Franchisee's employees or contractors as an agent, legal representative,
subsidiary, joint venturer, partner, employee, or servant of Big O for any
purpose whatsoever. It is understood and agreed that Franchisee is an
independent contractor and is in no way authorized to make any contract,
warranty, or representation or to create or imply any obligation on behalf of
Big O.
24. WRITTEN APPROVALS, WAIVERS, AND AMENDMENT
24.01 Written Approval. Whenever this Agreement requires Big O's prior
approval, Franchisee shall make a timely written request. Unless a different
time period is specified in this Agreement, Big O shall respond with its
approval or disapproval within fifteen (15) business days.
24.02 Waiver. No failure of Big O to exercise any power reserved to it by
this Agreement and no custom or practice of the parties at variance with the
terms hereof shall constitute a waiver of Big O's right to demand exact
compliance with any of the terms herein. A waiver or approval by Big O of any
particular default by Franchisee or any other Big O franchisee or acceptance by
Big O of any payments due hereunder shall not be considered a waiver or approval
by Big O of any preceding or subsequent breach by Franchisee of any term,
covenant, or condition of this Agreement. Big O shall not be deemed to have
waived any of its rights under this Agreement, including any right to receive
payment in full for any Product or Service provided, nor shall Franchisee be
deemed to have been excused from performance of any of its obligations pursuant
to this Agreement, unless such waiver or excuse is written and executed by an
authorized representative of Big O and Franchisee.
24.03 Modification. No amendment, change, or variance from this Agreement
shall be binding upon either Big O or Franchisee except by mutual written
agreement. If an amendment of this Agreement is executed at Franchisee's
request, any legal fees or costs of preparation of such amendment and any
amendment of a franchise registration arising in connection therewith shall be
paid by Franchisee.
25. DEALER PLANNING BOARD
25.01 Dealer Planning Board. Big O has established a Dealer Planning Board
("DPB"), consisting of franchisee representatives, which is designed to assist
Big O's management in the development of its strategic business plan and to
advise Big O's management on issues of concern to Big O franchisees. Through a
representative elected from Franchisee's Local Group, Franchisee shall be
represented on the DPB.
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25.02 Special Interest Issues. Big O has granted the DPB the authority to
participate with Big O's management in making policy decisions relating to
issues in which the DPB is deemed to have a special interest. The issues of
"Special Interest" include:
(a) advertising policies and the creation of a National Advertising Fund;
(b) standards of operation; and the implementation of new programs which
may require the addition of new equipment and fixtures for the store;
(c) selection of Products and Services offered at Big O Stores; and
(d) changes in the Licensed Marks anticipated to require the majority of
franchisees to expend more than five thousand dollars ($5,000.00) per Store.
25.03 Disapproval of Management Proposal. With respect to those issues in
which the DPB has a Special Interest, the DPB may, after consulting with the
members of the Local Groups, vote to disapprove a proposal of Big O's
management. If, pursuant to established procedures which have been approved by
Big O, the DPB shall disapprove a proposal of Big O's management, the proposal
may only become effective if, following a presentation to the Big O board of
directors by a representative of the DPB, Big O's board of directors votes to
adopt management's proposal.
25.04 Compliance with Modification. Franchisee agrees to comply with any
and all modifications to Big O's standards of operation, procedures, or other
requirements adopted pursuant to the procedures described in this Section 25.
26. RIGHT OF OFFSET
26.01 Right of Offset. Big O shall have the right at any time before or
after termination of this Agreement, without notice to Franchisee, to offset any
amounts or liabilities that may be owed by the Franchisee to Big O against any
amounts or liabilities that may be owed by Big O to Franchisee under this
Agreement or any other agreement, loan, transaction or relationship between the
parties.
27. ENFORCEMENT
27.01 Declaratory and Injunctive Relief. Big O or its designee shall be
entitled to obtain without bond, declarations, temporary and permanent
injunctions, and orders of specific performance:
(a) To enforce the provisions of this Agreement relating to: (i)
Franchisee's use of the Licensed Marks; (ii) the obligations of Franchisee
upon termination or expiration of this Agreement; or (iii) the Transfer
and Assignment requirements of Section 18; or
(b) to prohibit any act or omission by Franchisee or its employees that:
(i) constitutes a violation of any applicable law or regulation; (ii) is
dishonest or misleading to prospective or current customers or clients of
businesses operated under the System; (iii) constitutes a danger to other
Big O franchisees, their employees, customers, clients or the public; or
(iv) may impair the goodwill associated with the Licensed Marks.
27.02 Costs of Enforcement. If Big O secures any declaration, injunction
or order of specific performance pursuant to Section 27.01 hereof, if any
provision of this Agreement is enforced at any time by Big O or if any amounts
due from Franchisee to Big O are, at any time, collected by or through an
attorney at law or collection agency, Franchisee shall be liable to Big O for
all costs and expenses of enforcement and collection including, but not limited
to, court costs and reasonable attorneys' fees, including the fair market value
of any time expended by legal counsel employed by Big O.
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28. NOTICES
28.01 Notices. Any notice required to be given hereunder shall be in
writing and shall be mailed by registered or certified mail. Notices to
Franchisee and Big O shall be addressed to them at their addresses as listed on
the Summary Pages or to such other addresses as the parties may hereafter
prescribe. A copy of each notice to Big O shall be addressed to Franchisee's
designated regional representative. Any notice complying with the provisions
hereof shall be deemed to be given on the date of mailing.
29. GOVERNING LAW
29.01 Governing Law. This Agreement is accepted by Big O in the State of
Colorado and shall be governed by and interpreted in accordance with Colorado
law, which law shall prevail in the event of any conflict of law. Big O and
Franchisee consent to personal and subject matter jurisdiction and venue in
Denver, Colorado.
29.02 Jurisdiction. The parties hereto agree that it is in their best
interest to resolve disputes between them in an orderly fashion and in a
consistent manner. Therefore, the parties consent to the exclusive jurisdiction
of either Colorado state courts or the United States Federal District Court for
the District of Colorado for any litigation relating to this Agreement or the
operation of the Franchised Business thereunder. Franchisor and Franchisee
irrevocably constitute and appoint the persons designated on paragraphs 10 and
11 of the Summary Pages to be their true and lawful agents, to receive service
of any lawful process in any civil litigation or proceeding arising under this
Agreement, and service upon such agent shall have the same force and validity as
if personal service had been obtained on the other party; provided that notice
of service and a copy of any process served shall be sent by registered or
certified mail, addressed to the other party at the address specified herein.
30. SEVERABILITY AND CONSTRUCTION
30.01 Severability. Subject to Section 19.01(o), should any part of this
Agreement, for any reason, be declared invalid by a court of competent
jurisdiction, such decision or determination shall not affect the validity of
any remaining portion and such remaining portion shall remain in force and
effect as if this Agreement had been executed with the invalid portion
eliminated; provided, however, that in the event of a declaration of
invalidity, the provision declared invalid shall not be invalidated in its
entirety, but shall be observed and performed by the parties to the extent such
provision is valid and enforceable. The parties hereby agree that any such
provision shall be deemed to be altered and amended to the extent necessary to
effect such validity and enforceability.
30.02 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute one and the same
instrument.
30.03 Construction. The headings and captions contained herein are for the
purpose of convenience and reference only and are not to be construed as part of
this Agreement. All terms and words used herein shall be construed to include
the number and gender as the context of this Agreement may require. The parties
agree that each section of this Agreement shall be construed independently of
any other section or provision of this Agreement.
31. ACKNOWLEDGEMENTS
(a) Big O acknowledges that Franchisee's principal interest in obtaining
the Franchise granted herein is to obtain Big O private brand tires and a
competitive source of supply for Products and Services.
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Big O acknowledges its obligation to seek to attempt, with no obligation, to
maintain a competitive source of supply for the benefit of its franchisees and
to aid in the promotion of Big O Products and Services.
(b) Franchisee understands and acknowledges that the business licensed
under this Agreement involves business risks and that Franchisee's volume,
profit, income and success is dependent primarily upon Franchisee's ability as
an independent business operator.
(c) Big O expressly disclaims the making of, and Franchisee acknowledges
that it has not received from any representative of Big O, any warranty or
guaranty, express or implied, as to the obligation of Big O to provide
Franchisee with any specific or sufficient amount of Products and Services or as
to the potential volume, profit, income or success of the Franchised Business.
(d) Franchisee acknowledges that Big O or its agent has provided Franchisee
with a Franchise Offering Circular not later than the earlier of the first
personal meeting held to discuss the sale of the Franchise, ten (10) business
days before the execution of this Agreement, or ten (10) business days before
any payment of any consideration connected to the purchase of this Franchise.
Franchisee further acknowledges that Franchisee has read such Franchise Offering
Circular and understands its contents.
(e) Franchisee acknowledges that Big O has provided Franchisee with a copy
of this Agreement and all related documents, fully completed, for at least five
(5) business days prior to Franchisee's execution hereof.
(f) Franchisee acknowledges that Big O has advised it to consult with its
own attorneys, accountants, or other advisers, that Franchisee has had ample
opportunity to do so, and that the attorneys for Big O have not advised or
represented Franchisee with respect to this Agreement or the relationship hereby
created. The name and address of Franchisee's adviser, if any, is set forth on
the Summary Pages.
(g) Franchisee acknowledges that this Agreement, the documents referred to
herein, the attachments hereto, and other agreements signed concurrently with
this Agreement, if any, constitute the entire, full and complete Agreement
between Big O and Franchisee concerning the subject matter hereof. This
Agreement terminates and supersedes any prior agreement between the parties
concerning the same subject matter, and any oral or written representations
which are inconsistent with the terms of this instrument and its accompanying
Franchise Offering Circular.
(h) Franchisee acknowledges and recognizes that different terms and
conditions, including different fee structure and investment requirements may
pertain to different Big O franchises offered in the past, contemporaneously
herewith, or in the future, and that Big O does not represent that all franchise
agreements are or will be identical.
(i) Franchisee acknowledges that except as is specifically set forth in
this Agreement, it is not nor is it intended to be a third party beneficiary of
this Agreement or any other agreement or contractual relationship to which Big O
is a party.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to
become effective on the date it is executed by the last of Franchisee or Big O.
FRANCHISEE: CAPS TIRE LIMITED LIABILITY COMPANY,
a Colorado limited liability company
By: /s/ John B. Adams
John B. Adams, President
Date: 6/30/93
Home Address: 2925 Geddes Place
-----------------
Littleton, Colorado 80122
--------------------------
Home Phone Number: (303) 721-0025
---------------
Office Address: 8151 E. Arapahoe Road
---------------------
Englewood, Colorado 80112
--------------------------
Office Phone Number: (303)
------
Title:
Attest:
Title:
(Affix Corporate Seal)
FRANCHISEE: CAPS TIRE LIMITED LIABILITY COMPANY,
a Colorado limited liability company
By: /s/ Suzanne Adams
Suzanne Adams, Vice President
Date: 6/30/93
Home Address: 2925 Geddes Place
-----------------
Littleton, Colorado 80122
--------------------------
Home Phone Number: (303) 721-0025
---------------
Office Address: 8151 E. Arapahoe Road
---------------------
Englewood, Colorado 80112
--------------------------
Office Phone Number: (303)
------
Title:
Attest:
Title:
(Affix Corporate Seal)
27
<PAGE>
FRANCHISEE: CAPS TIRE LIMITED LIABILITY COMPANY,
a Colorado limited liability company
By: /s/ Robert Collaer
Robert Collaer, Vice President
Date: 6/27/93
Home Address: 522 Marjorie Avenue
-------------------
Idaho Falls, Idaho 83401
-------------------------
Home Phone Number: (208) 524-1271
---------------
Office Address: 8151 E. Arapahoe Road
---------------------
Englewood, Colorado 80112
--------------------------
Office Phone Number: (303)
------
Title:
Attest:
Title:
(Affix Corporate Seal)
FRANCHISEE: CAPS TIRE LIMITED LIABILITY COMPANY,
a Colorado limited liability company
By: /s/ Paula Collaer
Paula Collaer, Secretary/Treasurer
Date: 6/24/93
Home Address: 522 Marjorie Avenue
-------------------
Idaho Falls, Idaho 83401
-------------------------
Home Phone Number: (208) 524-1271
---------------
Office Address: 8151 E. Arapahoe Road
---------------------
Englewood, Colorado 80112
--------------------------
Office Phone Number: (303)
------
Title:
Attest:
Title:
(Affix Corporate Seal)
28
<PAGE>
FRANCHISOR: BIG O TIRES, INC.
By: /s/ Michael F. Manning
Michael F. Manning, Vice President, Franchise Development
Date: 9/22/93
Attest: /s/ Philip J. Teigen
Philip J. Teigen, General Counsel & Secretary
Date: 9/22/93
(Affix Corporate Seal)
(4/1/93)
29
<PAGE>
SCHEDULE 1
----------
TO
--
FRANCHISE AGREEMENT
-------------------
BETWEEN BIG O TIRES, INC. AND
-----------------------------
CAPS TIRE LIMITED LIABILITY COMPANY, a Colorado limited liability company
-------------------------------------------------------------------------
1. The Premises of referred to in Section 2.01 of the Franchise Agreement shall
be:
8151 E. Arapahoe Road
---------------------
Englewood, Colorado 80112 .
--------------------------
2. Legal Description of Premises: Lot 2, Greenwood Retail Plaza, Filing No. 3,
Arapahoe County, Colorado.
3. Names(s) and address(es) of holder(s) of record fee title to Premises (the
landlord):
Name: Intermountain Big O Realty
--------------------------
Address: 11755 E. Peakview Avenue
------------------------
Englewood, Colorado 80111
--------------------------
Name:
Address:
Name:
Address:
4. Description of Trade Area (a map may be attached if it is initialed by both
Franchisee and Big O):
The trade area shall consist of the city limits of Englewood, Colorado as
defined in the City records at the end of 1992.
Schedule 1 Franchise Agreement
Page 1
<PAGE>
SCHEDULE 2
OWNERSHIP VERIFICATION
1. Name(s) and address(es) of person(s) owning interest in Franchisee and
percentage of said person(s) interest:
Name: John B. and Suzanne Adams 50%
Address: 2925 Geddes Place
Littleton, Colorado 80122
Name: Robert and Paula Collaer 50%
Address: 522 Marjorie Avenue
Idaho Falls, Idaho 83401
Name:
Address:
STATE OF Colorado )
)
COUNTY OF Arapahoe )
John B. Adams and Paula Collaer, being first duly sworn, says that they are
respectively, the President and Secretary of CAPS TIRE LIMITED LIABILITY
COMPANY, the above-named corporation, and execute this instrument for and in its
behalf, by authority of its officers/shareholders and that they have read the
foregoing Agreement and all Exhibits attached thereto.
/s/ John B. Adams
John B. Adams, President
/s/ Paula Collaer
Paula Collaer, Secretary
Subscribed and sworn to before
me this _________________ day of
_________________________, 19 _____.
Notary Public
My Commission Expires:
Schedule 2 Franchise Agreement
Page 1
<PAGE>
SCHEDULE 3
GUARANTY OF FRANCHISEE'S AGREEMENT
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that CAPS TIRE LIMITED LIABILITY COMPANY, a
Colorado limited liability company ("Franchisee") will perform during the term
of the Franchise Agreement each and every covenant, payment, agreement and
undertaking on the part of Franchisee contained and set forth in or arising out
of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without
notice to the undersigned (a) resort to the undersigned for payment of any of
the liabilities of the Franchisee to Big O, whether or not Big O or its
successors have resorted to any property securing any of the liabilities or
proceeded against any of the undersigned or any party primarily or secondarily
liable on any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ John B. Collaer
Signature
6/30/93
Date
JOHN B. ADAMS
Printed Name
Schedule 3 Franchise Agreement
Page 1
<PAGE>
2925 Geddes Place
Littleton, Colorado 80122
Home Address
(303) 721-0025
Home Telephone
8151 E. Arapahoe Road
Englewood, Colorado 80112
Business Address
(303)
Business Telephone
Schedule 3 Franchise Agreement
Page 2
<PAGE>
SCHEDULE 3
GUARANTY OF FRANCHISEE'S AGREEMENT
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that CAPS TIRE LIMITED LIABILITY COMPANY, a
Colorado limited liability company ("Franchisee") will perform during the term
of the Franchise Agreement each and every covenant, payment, agreement and
undertaking on the part of Franchisee contained and set forth in or arising out
of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without
notice to the undersigned (a) resort to the undersigned for payment of any of
the liabilities of the Franchisee to Big O, whether or not Big O or its
successors have resorted to any property securing any of the liabilities or
proceeded against any of the undersigned or any party primarily or secondarily
liable on any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Suzanne Adams
Signature
6/30/93
Date
SUZANNE ADAMS
Printed Name
Schedule 3 Franchise Agreement
Page 3
<PAGE>
2925 Geddes Place
Littleton, Colorado 80122
Home Address
(303) 721-0025
Home Telephone
8151 E. Arapahoe Road
Englewood, Colorado 80112
Business Address
(303)
Business Telephone
Schedule 3 Franchise Agreement
Page 4
<PAGE>
SCHEDULE 3
GUARANTY OF FRANCHISEE'S AGREEMENT
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that CAPS TIRE LIMITED LIABILITY COMPANY, a
Colorado limited liability company ("Franchisee") will perform during the term
of the Franchise Agreement each and every covenant, payment, agreement and
undertaking on the part of Franchisee contained and set forth in or arising out
of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without
notice to the undersigned (a) resort to the undersigned for payment of any of
the liabilities of the Franchisee to Big O, whether or not Big O or its
successors have resorted to any property securing any of the liabilities or
proceeded against any of the undersigned or any party primarily or secondarily
liable on any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Robert Collaer
Signature
6/27/93
Date
ROBERT COLLAER
Printed Name
Schedule 3 Franchise Agreement
Page 5
<PAGE>
522 Marjorie Avenue
Idaho Falls, Idaho 83401
Home Address
(208) 524-1271
Home Telephone
8151 E. Arapahoe Road
Englewood, Colorado 80112
Business Address
(303)
Business Telephone
Schedule 3 Franchise Agreement
Page 6
<PAGE>
SCHEDULE 3
GUARANTY OF FRANCHISEE'S AGREEMENT
In consideration of, and as an inducement to, the execution of the foregoing
Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned
hereby guarantees unto Big O that CAPS TIRE LIMITED LIABILITY COMPANY, a
Colorado limited liability company ("Franchisee") will perform during the term
of the Franchise Agreement each and every covenant, payment, agreement and
undertaking on the part of Franchisee contained and set forth in or arising out
of such Franchise Agreement.
Big O, its successors and assigns, may from time to time, without
notice to the undersigned (a) resort to the undersigned for payment of any of
the liabilities of the Franchisee to Big O, whether or not Big O or its
successors have resorted to any property securing any of the liabilities or
proceeded against any of the undersigned or any party primarily or secondarily
liable on any of the liabilities, (b) release or compromise any liability of the
Franchisee or of any of the undersigned hereunder or any liability of any party
or parties primarily or secondarily liable on any of the liabilities, and (c)
extend, renew or credit any of the liabilities of the Franchisee to Big O for
any period (whether or not longer than the original period); alter, amend or
exchange any of the liabilities; or give any other form of indulgence, whether
under the Franchise Agreement or not.
The undersigned further waives presentment, demand, notice of dishonor,
protest, nonpayment and all other notices whatsoever, including without
limitation: notice of acceptance hereof; notice of all contracts and
commitments; notice of the existence or creation of any liabilities under the
foregoing Franchise Agreement and of the amount and terms thereof; and notice
of all defaults, disputes or controversies between Franchisee and Big O
resulting from such Franchise Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
The undersigned agrees to pay all expenses paid or incurred by Big O in
attempting to enforce the foregoing Franchise Agreement and this Guaranty
against Franchisee and against the undersigned and in attempting to collect any
amounts due thereunder and hereunder, including reasonable attorneys' fees if
such enforcement or collection is by or through an attorney-at-law. Any waiver,
extension of time or other indulgence granted from time to time by Big O or its
agents, successors or assigns, with respect to the foregoing Franchise
Agreement, shall in no way modify or amend this Guaranty, which shall be
continuing, absolute, unconditional and irrevocable.
If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the liability
of each of the undersigned hereunder shall be joint and several and primary as
sureties.
IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under
seal effective as of the date of the foregoing Franchise Agreement.
/s/ Paula Collaer
Signature
6/24/93
Date
PAULA COLLAER
Printed Name
Schedule 3 Franchise Agreement
Page 7
<PAGE>
522 Marjorie Avenue
Idaho Falls, Idaho 83401
Home Address
(208) 524-1271
Home Telephone
8151 E. Arapahoe Road
Englewood, Colorado 80112
Business Address
(303)
Business Telephone
Schedule 3 Franchise Agreement
Page 8
<PAGE>
SCHEDULE 4
LEASE RIDER AND MODIFICATION
THIS AGREEMENT is made effective _______________ by and between
Intermountain Big O Realty ("Landlord"),
affiliates, successors and assigns ("Big O").
WHEREAS, Landlord leases or will lease certain premises to Tenant at 8151 E.
Arapahoe Road, Englewood, Colorado 80112 ("Premises") under that certain lease
agreement dated ___________________________ between Landlord and Tenant
("Lease"); and
WHEREAS, Tenant will operate a Big O Tire Store at such Premises under a
Franchise Agreement ("Franchise Agreement") between Tenant and Big O; and
WHEREAS, the parties hereto desire to provide Big O with certain rights in
the event of default under the Lease, Franchise Agreement, or other franchise
agreements between Tenant and Big O, if any;
NOW, THEREFORE, in consideration of the sum of One ($1.00) Dollar, in hand
paid by Big O to Landlord and to Tenant, and other good and sufficient
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. No act, failure to act, event, condition, non-payment or other
occurrence ("Event") shall constitute a breach or default under the Lease so as
to allow to Landlord any right of acceleration of obligations thereunder,
termination, cancellation or rescission:
(a) if the Event is the non-payment of rent, unless such Event is not
cured within ten (10) days after Notice of Default (as hereinafter defined)
has been received by Big O;
(b) if the Event is anything other than the non-payment of rent,
unless such Event is not cured within twenty-five (25) days after Notice of
Default (as hereinafter defined) has been received by Big O, provided,
however, if the Event is of such nature that it cannot reasonably be cured
within such twenty-five (25) day period, then, in that case such twenty-five
(25) day period shall be extended to a period of such length as is
reasonably necessary to cure such Event, provided, however, such period
shall be extended only so long as Tenant and/or Big O diligently pursues the
cure of such Event.
2. Landlord agrees to accept from Big O any payment or performance required
under the Lease. Nothing herein shall be construed as requiring Big O to make
any payments or perform any obligation under the Lease.
3. As used herein, Notice of Default means written notice specifying the
Event claimed and specifically describing, in each instance of a claimed Event,
the particular Event and the cure Landlord requires, such Notice of Default to
be mailed to Big O at:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attention: Vice President of Franchise Development
4. In the event Landlord claims that an Event has occurred, or in the event
Big O notifies Landlord in writing that Big O is exercising a right to take over
possession of the Premises, then, at Big O's option, Landlord shall accept Big O
as substitute tenant under the Lease and will co-operate with Big O in turning
actual, immediate possession of the Premises over to Big O. In such
case, the Lease shall remain in full force and effect, but with Big O as the
tenant thereunder. Big O's option, hereinabove granted, may be exercised only
if Big O agrees to assume the obligations of the
Schedule 4 Franchise Agreement
Page 1
<PAGE>
Tenant to Landlord under the Lease as of the date Franchisor or its affiliate or
successor is given actual possession of the Premises.
5. Landlord agrees that Big O, or its affiliate or successor may sublet or
assign the Premises to a new Big O Franchisee on the same terms and conditions
as are contained in the Lease.
6. Tenant agrees that if Landlord claims that an Event has occurred, or if
any material breach occurs under any Franchise Agreement between Tenant and Big
O (whether for the Premises or not), then, Big O shall have the right to:
(a) immediate and actual possession of the Premises, and all equipment
and inventory therein, which such possession Tenant agrees to give
peaceably, and which may be otherwise obtained by Big O by warrant,
injunction, temporary restraining order, summary process or such other
immediate legal, summary or equitable proceeding or action as Big O may
choose. Tenant hereby waives any right to a jury in any such proceeding or
action.
(b) become the Tenant under the Lease to the exclusion of the Tenant.
7. Tenant agrees that any default under the Lease shall constitute a
material breach under all Franchise Agreements between Tenant and Big O, or its
affiliates or successors.
8. Tenant and Landlord understand that Big O is entering into or has
entered into a Franchise Agreement with Tenant for a Big O Tire Store at the
Premises in reliance on the agreements of Tenant and Landlord as herein
contained and that Big O, in this instance, would not have otherwise entered
into such Franchise Agreement.
IN WITNESS WHEREOF, the parties hereto have duly execute and delivered this
agreement as of the date first above-listed.
LANDLORD: Intermountain Big O Realty
By:
Witness
Attest:
(CORPORATE SEAL)
TENANT:
By:
Unofficial Witness
Attest:
Notary Public
(CORPORATE SEAL)
BIG O TIRES, INC.:
By:
Unofficial Witness
(CORPORATE SEAL)
Notary Public
Schedule 4 Franchise Agreement
Page 2
<PAGE>
SCHEDULE 5
FARM CLASS RIDER
Franchisee represents that it reasonably anticipates that at least twenty-
five percent (25%) of its Store's Gross Sales on an annual basis will be derived
directly from the sale of Farm Class Tires. In reliance on Franchisee's
representations, and its consideration for Franchisee to become or remain a Big
O franchisee, Big O has offered Franchisee the opportunity to execute this Farm
Class Rider.
1. So long as at least twenty-five percent (25%) of Franchisee's Gross
Sales on an annual basis are derived directly from Farm Class Tires, Big O
agrees to exercise its best efforts to provide Franchisee with access to a
supply of Farm Class Tires. Franchisee acknowledges that production and
distribution problems occasionally cause supplies to be limited, and that so
long as Big O acts in good faith and in a commercially reasonably and lawful
manner to obtain access to Farm Class Tires that it shall be deemed in
compliance with its obligations hereunder.
2. If Big O fails to comply with its obligations pursuant to Section 1 of
this Farm Class Rider and cannot or will not provide Franchisee with access to
Farm Class Tires for sixty (60) days following written notice of such failure
from Franchisee, as its sole and exclusive remedy, Franchisee shall be relieved
of its obligation to pay Big O monthly service fees on that portion of its Gross
Sales derived directly from the sale of Farm Class Tires. Any services provided
by Franchisee in connection with the sale of Farm Class Tires, and any other
Products and Services sold by Franchisee in a transaction involving the sale of
Farm Class Tires shall be included in the portion of Franchisee's Gross Sales
upon which monthly service fees are payable. Big O may require Franchisee to
provide it with documentation to support any exclusion claimed by Franchisee.
3. Big O may terminate Franchisee's rights under this Farm Class Rider
without in any way affecting Franchisee's obligations under the Franchise
Agreement if the Store's sales of Farm Class Tires during any twelve (12) month
period have been less than twenty-five percent (25%) of its Gross Sales.
IN WITNESS WHEREOF, the parties have set forth their signatures below.
FRANCHISEE:
By:
Date:
Home Address:
Home Phone Number:
Office Address:
Office Phone Number:
Title:
Attest:
Title:
(Affix Corporate Seal)
Schedule 5 Franchise Agreement
Page 1
<PAGE>
FRANCHISEE:
By:
Date:
Home Address:
Home Phone Number:
Office Address:
Office Phone Number:
Title:
Attest:
Title:
(Affix Corporate Seal)
Schedule 5 Franchise Agreement
Page 2
<PAGE>
SCHEDULE 6
RIDER FOR EXISTING FRANCHISEES EXECUTING THE
FRANCHISE AGREEMENT PRIOR TO THE EXPIRATION
OF THEIR PRE-EXISTING FRANCHISE AGREEMENT
Franchisee is the owner of a Store which is the subject of a franchise
agreement which has not yet expired.
Franchisee's execution of the attached Franchise Agreement is subject to the
following:
1. Unless otherwise provided herein, the attached Franchise Agreement shall
expire on the tenth anniversary of the Effective Date of Franchisee's attached
Franchise Agreement, to wit:
2. Prior to the expiration of the Franchisee's present franchise agreement,
to wit _____________, the monthly continuing services fees (or their functional
equivalent) provided in the present franchise agreement shall continue to be the
only such fees due to Big O. In all other respects the terms of the attached
Franchise Agreement shall be applicable as of the Effective Date of this
Franchise Agreement.
In Witness Whereof, the parties have set forth their signature below.
BIG O TIRES, INC.
By:
Date:
Title:
Attest:
Title:
(Affix Corporate Seal)
FRANCHISEE:
By:
Date:
Home Address:
Schedule 6 Franchise Agreement
Page 1
<PAGE>
Home Phone Number:
Office Address:
Office Phone Number:
Title:
Attest:
Title:
(Affix Corporate Seal)
FRANCHISEE:
By:
Date:
Home Address:
Home Phone Number:
Office Address:
Office Phone Number:
Title:
Attest:
Title:
(Affix Corporate Seal)
Schedule 6 Franchise Agreement
Page 2
<PAGE>
SCHEDULE 7
TRADEMARKS
Big O is the sole and exclusive owner of the following trademarks and
service marks:
<TABLE>
<CAPTION>
Trademark, Service Mark, Where Registration Registration
Trade Name or Logotype Registered Number Date
-------------------------- ---------- ------------ ------------
<S> <C> <C> <C>
SUN VALLEY Principal 871,318 06/17/69
BIG O Principal 993,415 09/24/74
BIG O Principal 994,466 10/01/74
BIG RIDE Principal 1,009,148 04/22/75
BIG STEEL Principal 1,012,897 06/10/75
BIG TRAK Principal 1,016,826 07/29/75
BIG HAUL Principal 1,018,800 08/26/75
DESIGN OF HUMAN Principal 1,044,068 07/20/76
LIKENESS "SEBASTIAN
TREADMORE"
BIG FOOT 70 Principal 1,102,059 09/12/78
BIG FOOT 60 Principal 1,102,058 09/12/78
BIG SUR Principal 1,219,035 12/07/82
EXTRA CARE AND DESIGN Principal 1,417,730 11/18/86
LEGACY Principal 1,393,967 05/20/86
ASPEN Principal 1,508,041 10/11/88
BIG O TIRES AND DESIGN Principal 1,559,725 10/01/89
SUN VALLEY III Principal 1,588,734 03/27/90
BIG O TIRES Principal 1,611,160 08/28/90
</TABLE>
STATE REGISTRATIONS
<TABLE>
<CAPTION>
Mark State Number Date
------------ -------- ------ --------
<S> <C> <C> <C>
BIG O Texas 40967 11/01/82
BIG O Texas 40704 09/02/82
Boss Colorado T28355 04/23/85
Legacy Colorado T29645 10/28/85
Extra Care Colorado T30670 04/22/86
</TABLE>
Schedule 7 Franchise Agreement
Page 1
<PAGE>
CANADIAN REGISTRATIONS
<TABLE>
<CAPTION>
Mark Number Date
---------------------- ------- --------
<S> <C> <C>
BIG FOOT 602,897 03/13/92
BIG O TIRES 361,490 10/27/89
BIG O TIRES & DESIGN 259,938 06/12/81
LEGACY 602,896 Pending
</TABLE>
Schedule 7 Franchise Agreement
Page 2
<PAGE>
SCHEDULE 8
CONVERTOR RIDER
AMENDMENT TO BIG O
FRANCHISE AGREEMENT
(CONVERSION)
Big O TIRES, INC. ("Big O") and __________________________________
("Franchisee") entered into a certain Big O Franchise Agreement ("Agreement") on
_____________, 19__ and desire to supplement and amend certain terms and
conditions of such Agreement in consideration of Franchisee's conversion of a
currently operating tire store to a Big O Store. The parties therefore agree as
follows:
1. The following paragraph is hereby added to 6.03:
Notwithstanding any provision herein to the contrary,
Franchisee's obligation to comply with Big O's standards and
specifications as are set forth in the Manual shall be phased in for a
period of six months from the Commencement Date of the Agreement in
accordance with Schedule A, attached hereto and by this reference
incorporated herein. Franchisee will be permitted to use Big O's
trademarks, service marks, logos and other identifying symbols or
names, in its signage, advertising and otherwise, in conjunction with
any other previous signage or identifying symbols or names for sixty
(60) days from the Commencement Date of this Agreement, in a manner
which shall be approved by Big O, which approval shall not be
unreasonably withheld. Upon expiration of such sixty day period,
Franchisee must use Big O's signage exclusively and remove all other
previous signage.
2. Section 6.05 is deleted in its entirety and the following is inserted in
its place:
6.05 Commencement of Business. The Big O Store shall be
considered to have commenced operation as of the Commencement Date of
this Agreement. All modifications required to bring the premises into
compliance with the standards and specifications of Big O must be
completed within six (6) months of the Commencement Date.
3. Section 7.01(a) is hereby deleted in its entirety and the following is
inserted in its place:
(a) Franchisee acknowledges that Big O is under no obligation to
provide site selection assistance and Big O does not guarantee the
success or profitability of the Franchisee's current site in any manner
whatsoever. If Franchisee leases the Premises upon which the Store is
to be operated, Franchisee agrees to use its best efforts to negotiate
with its landlord for execution of a conditional lease assignment in a
form which is the same as or similar to the one found on Schedule 4.
4. The following language shall be added to Section 7.01(b):
Big O will provide Franchisee with sample blueprints for
modification of the interior and exterior of Franchisee's premises, if
applicable, but makes no representations or guarantees regarding the
suitability of such blueprints for required modification of
Franchisee's premises.
Schedule 8 Franchise Agreement
Page 1
<PAGE>
5. Franchisee agrees to convert all other tire stores owned or controlled
by it into Big O Stores, in the manner prescribed in Schedule B, attached hereto
and by this reference incorporated herein.
6. The terms and conditions of this Conversion Amendment are in addition to
or in explanation of the existing terms and conditions of the Agreement and
shall prevail over and supersede any inconsistent terms and conditions thereof.
Effective this _____ day of ________________, 19__.
BIG O TIRES, INC. FRANCHISEE:
(Print Name)
By: By:
Title: Title:
Schedule 8 Franchise Agreement
Page 2
<PAGE>
Big O Tires, Inc.
11755 E. Peakview Ave.
Englewood, CO 80111
Telephone: (303) 790-2800
FAX: (303) 790-0225
EXHIBIT 10.82
October 19, 1994
Mr.
Confidential
------------
Dear _________:
In order to allow you to evaluate the possible acquisition (the "Proposed
Acquisition") of Big 0 Tires, Inc. (the "Company"), you have received certain
information about various inquiries and expressions of interest by third parties
in the possible purchase of the Company. All information about the Company
furnished by us or our affiliates, or our respective directors, officers,
employees, agents or controlling persons (such affiliates and other persons
collectively referred to herein as "Representatives"), whether furnished before
or after the date hereof, and regardless of the manner in which it is furnished,
is referred to in this letter agreement as "Proprietary Information."
Proprietary Information does not include, however, information which (a) is or
becomes generally available to the public other than as a result of a disclosure
by you or your Representatives, (b) was available to you on a non-confidential
basis prior to its disclosure by us or (c) becomes available to you on a non-
confidential basis from a person other than us or our Representatives who is not
otherwise bound by a confidentiality agreement with us or our Representatives,
or is not otherwise prohibited from transmitting the information to you. As
used in this letter, the term "person" shall be broadly interpreted to include,
without limitation, any corporation, company, partnership and individual.
Unless otherwise agreed to in writing to us, you agree (a), except as
required by law, to keep all Proprietary Information confidential and not to
disclose or reveal any Proprietary Information to any person other than those
employed by you or on your behalf who are actively and directly participating in
the evaluation of the Proposed Acquisition or who otherwise need to know the
Proprietary Information for the purpose of evaluating the Proposed Acquisition
and to cause those persons to observe the terms of this agreement and (b) not to
use Proprietary Information for any purpose other than in connection with the
consummation of the Proposed Acquisition in a manner which we have approved. In
the event that you are requested pursuant to, or required by, applicable law or
regulation or by legal process to disclose any Proprietary Information, you
agree that you will provide us with prompt notice of such request(s) to enable
us to seek an appropriate protective order.
You hereby acknowledge that you are aware, and that you will advise each of
your Representatives who are informed as to the matters which are the subject of
this letter, that the United States securities laws prohibit any person who has
received from an issuer material, non-public information concerning the matters
which are the subject of this letter from purchasing or selling securities of
such issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
Unless otherwise required by law, neither you nor your Representatives
will, without our prior written consent, disclose to any person (other than
those actively and directly participating in the Proposed Acquisition) any
information about the Proposed Acquisition, or the terms, conditions or other
<PAGE>
facts relating thereto, including the fact that discussions are taking place
with respect thereto or the status thereof, or the fact that the Proprietary
Information has been made available to you.
In consideration of our furnishing you with Proprietary Information, you
also agree that for a period of three years from the date of this letter
agreement, neither you nor any of your Representatives will, without the prior
written consent of the Company or its Board of Directors:
(a) acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or direct or indirect rights
to acquire any voting securities of the Company or any subsidiary thereof,
or of any successor to or person in control of the Company, or any assets
of the Company or any subsidiary or division thereof or of any such
successor or controlling person;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" or "proxies" to vote (as such terms are used in the rules of
the Securities and Exchange Commission), or seek to advise or influence any
person or entity with respect to the voting of any voting securities of the
Company;
(c) make any public announcement with respect to, or submit a proposal for, or
offer of (with or without conditions) any extraordinary transaction
involving the Company or its securities or assets;
(d) seek or propose to influence or control the Company's management or
policies (or request permission to do so);
(e) solicit, encourage or induce any person employed by the Company to leave
the Company's employ; or
(f) form, join in or in any way participate in a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), in connection with any of the foregoing.
You will promptly advise the Company of any inquiry or proposal made to you
with respect to any of the foregoing. You also agree that the Company will be
entitled to equitable relief, including injunction, in the event of any breach
of the provisions of this paragraph.
If you determine that you do not wish to proceed with the Proposed
Acquisition, you will promptly advise us of that decision. In that case, or in
the event that the Proposed Acquisition is not consummated by you, you will,
upon our request, promptly deliver to us all of the Proprietary Information,
including all copies, reproductions, summaries, analyses or extracts thereof or
based thereon in your possession or in the possession of any of your
Representatives.
Although the Proprietary Information contains information which we believe
to be relevant for the purpose of your evaluation of the Proposed Acquisition,
we do not make any representation or warranty as to the accuracy or completeness
of the Proprietary Information. neither we, our affiliates, nor any of our
respective officers, directors, employees, agents or controlling persons within
the meaning of Section 20 of the Exchange Act shall have any liability to you or
any of your Representatives relating to or arising from the use of the
Proprietary Information.
Without prejudice to the rights and remedies otherwise available to us, we
shall be entitled to equitable relief by way of injunction if you or any of your
Representatives breach or threaten to breach any of the provisions of this
letter agreement.
<PAGE>
It is further understood and agreed that no failure or delay by us in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder.
Please confirm your agreement with the foregoing by signing and returning to the
undersigned the enclosed duplicate copy of this letter.
Big 0 Tires, Inc.
By:__________________________________
Accepted and Agreed
as of the date
first written above:
By:___________________________
<PAGE>
EXHIBIT 10.83
________________, 19__
Big O Tires, Inc.
------------------------------------
Dealer
11755 E. Peakview Avenue
------------------------------------
Address
Englewood, CO 80111
------------------------------------
City, State & Zip Code
Re: Ultimate Net Loss Dealer Agreement
With Portfolio Purchase: Overall Percentage
Blocked by Year
Gentlemen:
You have advised us that you wish to offer for sale to us a "Portfolio" (as
hereinafter defined) and certain other "Paper" (as hereinafter defined) from
time to time, and we have indicated our willingness to purchase the Portfolio
and to consider purchasing other Paper, subject to the terms of this Agreement.
In furtherance thereof, we agree as follows:
1. DEFINITIONS.
For the purpose of this Agreement:
(a) "Agreement" shall mean this Agreement between CIT and the Company, as the
same may be amended, modified or supplemented from time to time.
(b) "CIT" shall mean The CIT Group/Equipment Financing, Inc., a New York
corporation.
(c) "Company" shall mean Big O Tires, Inc., a Nevada corporation.
(d) "Customer" shall mean the lessee or debtor, as the case may be, under any
item of Paper.
(e) "Disbursement Letter" shall mean a letter which sets forth the Purchase
Price of Paper, the method of calculation thereof, and other information
relating thereto, if any, which shall be deemed to be agreed to by the
Company and CIT upon the Company's acceptance of the Purchase Price, paid
by CIT.
(f) "Equipment" shall mean the machinery and equipment, accounts receivable,
fixtures, inventory, other personal property and proceeds thereof covered
by any Paper.
(g) "Fiscal Year" shall initially mean the period beginning on the date
of this Agreement and ending December 31, 1994, and thereafter each
calendar year, or uncompleted portion thereof, during the term of this
Agreement.
(h) "Paper" shall mean all chattel paper (as defined in the Uniform Commercial
Code), now existing or hereafter arising out of the sale or lease by the
Company of any Equipment to any Customer, including without limitation,
equipment leases, conditional sale contracts, and loan and security
agreements.
(i) "Portfolio" shall mean the Paper which is specifically described on
Schedule A annexed hereto.
(j) "Portfolio Purchase Price" and "Purchase Price" shall have the meanings set
forth in Paragraph 4 of this Agreement.
(k) "Related Documents" shall mean, with respect to any Paper, related
instruments, guaranties, security agreements, representations and
warranties, letters of credit, financing statements, recourse agreements,
certificates of title, and other documents.
(l) "Repurchase Price" shall mean, the Unpaid Balance (as defined herein) of
any item of Paper, plus any and all out-of-pocket expenses, and the amount
(if any) by which the Portfolio Purchase Price or Purchase Price paid for
such Paper exceeds the Unpaid Balance (as of the date of purchase)
discounted to present value using the discount rate used to compute its
Portfolio Purchase Price or Purchase Price, and less unearned interest or
finance charges computed as CIT customarily computes such rebates. The
unearned interest or finance charges shall be computed on the basis of
actual days elapsed using a 360-day year. The term "out-of-pocket expenses"
shall include (without limitation) the cost of repossession of Equipment,
storage and sale of Equipment, compliance with applicable legal
requirements, reasonable attorneys' fees and court costs, and like expenses
incurred by CIT in connection with such Paper.
(m) "Unpaid Balance" shall mean the aggregate unpaid balance of any item of
Paper (including interest or finance charges) or the aggregate unpaid
rentals thereunder, as the case may be, including (without limitation) the
amount of any purchase option price, renewal option, or put option price
(e.g., price payable by a Customer under a purchase agreement upon demand
by Company) to the extent included in the computation of the Purchase Price
for such Paper.
<PAGE>
2. SALE OF PAPER.
Subject to the terms and provisions of this Agreement the Company hereby:
(a) sells, assigns and transfers to CIT all of the right, title and interest of
the Company in and to the Portfolio; and
(b) offers to sell to CIT all Paper as may be created from time to time
("Future Paper") and CIT shall have the right to purchase such of the
Future Paper as is acceptable to CIT on mutually agreeable terms and
conditions. Any sale or purchase of Paper shall include all of the right,
title, and interest of the Company in and to all:
(i) Related Documents;
(ii) Equipment, wherever located;
(iii) rentals, installments and other payments due and to become due
thereunder including, without limitation, all amounts payable by
Customers upon the exercise of any renewal options or purchase options
or for any put option price (to the extent included in the computation
of the Purchase Price as reflected in a Disbursement Letter) and all
rights to the proceeds of insurance covering the Equipment under any
paper together with all of the rights and remedies of the Company
thereunder and under any Related Documents, including the right to take
in the Company's name, any and all proceedings legal, equitable or
otherwise, that the Company might otherwise take save for this
assignment; and
(iv) proceeds thereof.
CIT shall have, in addition to all other rights hereunder, the right to:
(1) receive and retain any and all payments and rights thereto under any
item of Paper;
(2) use or sell and dispose of Equipment and any of the Company's rights
thereto; and
(3) apply and use such payments, rights, Equipment and proceeds to satisfy
any and all obligations of the Company hereunder.
CIT does not assume any of the obligations of the Company under any Paper and
shall have no duties in respect thereof.
3. TIME AND PLACE OF CLOSING.
The closing for the purchase of the Portfolio under this Agreement shall be held
at 3:00 p.m. on November, 30, 1994 (the Portfolio Closing Date) at 11755 E.
Peakview Avenue, Englewood, CO and the subsequent sale of any Paper shall be
held from time to time at such time and place as the Company and CIT may
mutually designate.
4. PURCHASE PRICE - PORTFOLIO AND FUTURE PAPER.
(a) In consideration of the sale by the Company to CIT of the Portfolio
pursuant to this Agreement, CIT hereby agrees to pay to the Company the
sum of $________________ (the "Portfolio Purchase Price") which is based
on the method of calculation described in Paragraph 5 hereof. The Company
warrants and represents that all statements made and balances shown on
Schedule A and in any related Disbursement Letter of the Company to CIT
are true and correct as at the Portfolio Closing Date and acknowledges
that the determination of the Portfolio Purchase Price has been made in
reliance upon the accuracy of such information.
(b) For each item of Future Paper which is acceptable to CIT, CIT hereby agrees
to pay to the Company the purchase price for such item of Paper (the
"Purchase Price"), which is based upon the manner of calculation described
in Paragraph 5 hereof.
(c) On the Portfolio Closing Date and the closing date for any Future Paper,
CIT shall deliver its check to the order of the Company (or make payment in
such other place or manner as the Company and CIT may agree) in the amount
of the Portfolio Purchase or the Purchase Price.
5. COMPUTATION OF PORTFOLIO PURCHASE PRICE AND PURCHASE PRICE FOR FUTURE
PAPER.
(a) PORTFOLIO PURCHASE PRICE
The sum of all present values of the items of Paper set forth on Schedule A
and in any related Disbursement Letter as at the Portfolio Closing Date
shall be the Portfolio Purchase Price and, in making the computation
thereof, the Company warrants that all such present values have been
determined by the Company as at the Portfolio Closing Date (assuming
installment payments becoming due prior to the Portfolio Closing Date shall
be retained by the Company) using a discount rate per year sufficient to
yield an interest return on CIT's investment in the Portfolio (i.e., the
Portfolio Purchase Price) equal prime rate of Chemical Bank plus 50 basis
points plus 2% and; to an actuarial rate of 10 (10%) percent per annum; and
prime rate of Chemical Bank plus 2%.
(b) PURCHASE PRICE
The Purchase Price for each item of Future Paper which is acceptable to
CIT, shall be the discounted present value thereof, using a discount rate
per year sufficient to yield an interest return on CIT's investment in the
Future Paper equal to an actuarial rate to be mutually agreed upon by the
Company and CIT in each case, the "Purchase Price," and shall be set forth
in a Disbursement Letter.
<PAGE>
6. DELIVERY OF PAPER AND OTHER DOCUMENTS TO CIT.
Concurrently with the payment pursuant to Paragraph 4 of this Agreement of the
Portfolio Purchase Price for the Portfolio or the Purchase Price for Future
Paper, the Company shall deliver to CIT:
(a) the original counterparts of all items of the Paper;
(b) all original copies of Related Documents, except for executed copies
retained by lessee or debtor;
(c) the acknowledgment copies of Uniform Commercial Code financing statements
filed by the Company against each Customer in all appropriate jurisdictions
covering the Equipment which is described in such Paper, and duly assigned
to CIT, in form and substance satisfactory to CIT;
(d) copies of the purchase orders, invoices and executed bills of lading with
respect to such Equipment if the Paper represents the financing of the
purchase thereof;
(e) evidence of insurance coverage on such Equipment, insuring CIT's interest
therein and otherwise in form and substance satisfactory to CIT; and
(f) such other documents and instruments as CIT may request duly executed by
the Company to further implement and effectuate the purposes of this
Agreement.
7. WARRANTIES ON PAPER; DOCUMENTATION.
(a) As to each item of Paper now or hereafter assigned by the Company to CIT,
the Company warrants, represents and guarantees that:
(1) such Paper will be paid and performed in accordance with its terms
thereunder, subject however to the provisions of Paragraph 13 hereof;
(2) it is the owner of the Equipment described in the Paper or has a
perfected first security interest or lien thereon effective against all
persons and free from all security interests, liens and encumbrances,
except for the rights of the Customer under the particular item of Paper,
and any security interests or liens in favor of CIT;
(3) it has accomplished any filing, recordation or any other action
(including registration on a certificate of title, if applicable) which
is required to perfect the first security interest in the Equipment;
(4) such Paper and all accompanying guaranties, waivers and other instruments
are true, valid, genuine, binding and enforceable in accordance with
their respective terms;
(5) such Paper is the only paper with respect to the Equipment described
therein;
(6) such Paper is and will continue to be free from defenses, setoffs and
counterclaims of any kind and no suit or any legal action or proceeding,
administrative, judicial or otherwise has been brought or threatened to
be brought by or against the Company in connection therewith;
(7) all signatures, names, addresses, amounts and other statements of fact
contained therein are true and correct;
(8) the Equipment has been delivered (where applicable) to the Customers
under such Paper and has been unconditionally accepted by and is
presently in the actual possession of and being used by such Customers in
their respective business operations and is in good operating condition;
(9) it has no knowledge of any denial or liability or the assertion of any
claim of invalidity or other defense by any Customer on any such Paper;
(10) any discounts or adjustments to which it has agreed are written and
apparent on the face of such Paper;
(11) it shall comply with all its warranties and other obligations with
respect to the Equipment covered by such Paper;
(12) such Paper conforms to all applicable laws and regulations;
(13) it has not sold, assigned or encumbered any such Paper or the Equipment
covered thereby to others or done any act to impair the validity or
enforceability of any such Paper;
(14) the substance and form of any document used by the Company is and will be
legally sufficient and enforceable and in full compliance with any and
all applicable Federal, State or local laws, regulations and rules;
(15) the Customer under each such item of Paper shall have taken all necessary
corporate or other action and shall have obtained all necessary permits
or authorizations with respect to its execution and delivery of such
Paper and its performance thereof;
(16) the computation of all interest, fees and other charges, if any, under
any item of Paper has been accurately made and charged and is in full
conformity with all applicable laws and regulations;
(17) the Company's records pertaining to the Paper are accurate in all
material respects;
(18) the transaction giving rise to such Paper and the sale and delivery of
the Equipment to the Customer conform with all applicable laws, rules or
regulations;
(19) no payments have been made on such Paper by the Company, any affiliate or
by a merchant who referred the Customer to the Company; except that
payments have been made on accounts #851, #873 and #926, #927 and #931,
#941.
<PAGE>
7. WARRANTIES ON PAPER; DOCUMENTATION (CONTINUED)
(20) no Customer or any endorser or guarantor thereof is the subject of any
bankruptcy or insolvency proceeding;
(21) any insurance policies, certificates and coverages relating thereto
conform with all applicable laws and regulations;
(22) as of the date of purchase of the Paper, any Equipment covered thereby
has not been destroyed, repossessed, sold or substantially damaged; and
(23) the Equipment described in the Paper is adequately covered by enforceable
casualty insurance.
All additional assignments, schedules and other documentation with respect to
the transfer of Paper to CIT shall be in form and substance acceptable to CIT.
(b) The Company shall not, without the prior written consent of CIT waive,
modify, extend, renew, release, or discharge the terms of any Paper, or
release any Equipment covered thereby, repossess Equipment or consent to
the return thereof, or accept collections payable thereunder (except
payments due under any item of Paper prior to the closing date on which it
was sold by the Company to CIT).
(c) In purchasing any item of Paper under this Agreement, the Company
acknowledges that CIT shall be relying upon the warranties of the Company
as to such item of Paper, and agrees that the knowledge of CIT of any
breach of any such warranties at the time of its purchase of any item of
Paper or the failure of CIT to call any such breach to the attention of the
Company, shall not impair, limit or constitute any waiver of any such
warranties or of the obligations of the Company with respect to such Paper,
and that the Company shall remain fully liable for any such breach.
Furthermore, the review of any such Paper by CIT and the furnishing of any
comments in respect thereof to the Company, or the failure to do so in any
case, shall not impair, limit, or constitute any waiver of any of the
obligations or warranties of the Company with respect to such Paper.
(d) In the event any filing or recording of any financing statements or
documents are made by CIT, or any such financing statements or documents
are prepared by or the execution thereof are supervised by CIT in respect
of any Paper, it shall be solely for the convenience of the Company and
shall in no way impair, limit or constitute any waiver of the obligations
or warranties of the Company with respect to its obligation to assure due
compliance with any filing requirements; except to the extent that CIT
fails to make any such filings or recordings, and to prepare and supervise
the execution of any such financing statements and documents in accordance
with its usual practices with respect to financing arrangements of that
type or to adhere to the same standards of conduct as would be the case if
it were making such financing arrangements directly with the Customer.
8. WAIVERS; NOTIFICATION OF CUSTOMERS.
The Company hereby waives presentment, demand, notice of nonpayment, notice of
dishonor, and protest as to all Paper sold to CIT hereunder. The Company shall
notify all Customers under Paper which is now or hereafter purchased by CIT to
make all future payments directly to CIT at such address as CIT shall specify.
The Company shall transmit and deliver to CIT, immediately upon receipt thereof,
all payments on account of any Paper which the Company may receive subsequent to
CIT's purchase thereof. The Company agrees that CIT may endorse in the
Company's name, all remittances received and all notes or other instruments (if
any) evidencing obligations under the Paper and any assignments thereof. CIT
shall, in the ordinary course of business, provide the Company with periodic
notices of payment defaults under Paper, in accordance with its usual practices,
provided, however, that the failure of CIT to provide such notice in any case
shall not affect the Company's obligations under this Agreement or impose any
liability upon CIT. The Company agrees that so long as CIT in good faith
believes such action to be appropriate under the circumstances, CIT may take any
of the following actions with respect to any Paper or any Related Documents, and
any Customer or other party obligated thereunder, without impairing, limiting or
otherwise affecting the obligation of the Company under this Agreement:
(a) make changes, modifications, amendments or alterations, by operation of law
or otherwise;
(b) grant releases or discharges on terms satisfactory to CIT, or by operation
of law; except that CIT excpressly agrees not to release any franchise
right of the Company.
(c) settle, compromise or adjust any rights, claims or liabilities;
(d) grant renewals and extensions of time, for payment or otherwise; and
(e) permit the substitution of a Customer or any other party obligated
thereunder.
9. ADDITIONAL WARRANTIES BY THE COMPANY.
The Company represents, covenants and warrants to CIT that:
(a) the Company is duly organized, validly existing and in good standing under
laws of its state of incorporation and the Company is duly qualified as a
foreign corporation to do business in each state in which the leasing or
ownership of property or the nature of the business of the Company requires
such qualification;
(b) the Company has good and marketable title to all properties and assets,
whether real or personal, shown on the latest balance sheets of the Company
furnished to CIT prior to the execution of this Agreement, subject to no
mortgage, security interest, pledge, lien or encumbrance except as are
shown on said balance sheets and except for current taxes not now in
default, and since the date of the latest of such balance sheets there has
been no material adverse change in the condition, financial or otherwise,
of the Company from that shown on said balance sheets;
<PAGE>
9. ADDITIONAL WARRANTIES BY THE COMPANY (CONTINUED)
(c) at the date of such balance sheets, the Company has no material
(individually or in the aggregate) liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise, due or to
become due, other than as reflected or reserved against in said balance
sheets, and there have been no material changes since such date, and the
Company has no material liability for federal or state income taxes other
than as shown on said balance sheets and except for taxes relating to
operations since the date of said balance sheets and no federal or state
tax deficiency assessment has been made or threatened against the Company
and there is no pending claim of deficiency or recommendation of the
assessment of any deficiency against the Company;
(d) the execution and delivery of this Agreement and the performance thereof by
the Company are not in violation of any provisions of the Company's
Certificate of Incorporation or By-laws or any indenture or mortgage or
other Agreement to which the Company is a party or under which it may be
bound;
(e) all Paper sold or assigned to CIT hereunder at the time of sale or
assignment thereof is owned by the Company free and clear of all security
interests, liens, encumbrances and claims in favor of others;
(f) the Company has taken all necessary corporate action to authorize its
execution, delivery and performance of this Agreement; and
(g) during the term of this Agreement, it will furnish CIT:
(i) within 95 days after the end of each Fiscal Year, a balance sheet and
statements of profit and loss and surplus of the Company as at the end of
such Fiscal Year, all prepared in accordance with generally accepted
principles and practices of accounting consistently applied, and
certified by independent certified public accountants selected by the
Company and approved by CIT, such approval not to be unreasonably
withheld;
(ii) within 50 days after the end of each of the first three quarters of each
Fiscal Year, a balance sheet of the Company and statements of profit and
loss and surplus as at the end of such quarter, all prepared in
accordance with generally accepted principles and practices of accounting
consistently applied and certified by the chief financial officer of the
Company; and
(iii) from time to time, such further information regarding the business
affairs and financial condition of the Company as CIT may reasonably
require.
10. REPURCHASE OF PAPER.
In the event that CIT reasonably determines that:
(a) there has been or may be any breach of any warranty,representation,
covenant or other obligation of the Company made herein; or
(b) the Equipment covered by any Paper shall have been surrendered, damaged
beyond repair, destroyed or abandoned by the Customer or repossessed; or
(c) as to any item of Paper, the Customer thereunder shall have defaulted in
the payment of its obligations thereunder and such default shall have
continued uncured by such Customer for 61 days or more, it shall be the
obligation of the Company, upon demand by CIT promptly to repurchase the
Paper and pay the Repurchase Price for any paper affected by such breach,
failure or default. However, in the case of Subparagraph 10(c), provided
that none of the events described in Subparagraphs 10(a) or 10(b) have
occurred, the Company shall have 30 days after CIT's demand to repurchase
such Paper.
The Repurchase Price shall be an amount computed as set forth in Paragraph 1(l),
less any insurance proceeds previously received by CIT attributable to Equipment
covered by the Paper by reason of events referred to in Subparagraph 10(b)
above. In the event of any failure by the Company to repurchase any item of
Paper, CIT may (but shall not be required to) liquidate such Paper, including
the repossession and disposition of Equipment, and the Company shall be liable
for any resulting deficiencies and all reasonable expenses incurred in
connection therewith. Any repossessed Equipment may be sold for cash or on
credit and the net sale proceeds received by CIT shall be considered in
computing the deficiency obligation owed by the Company.
If an event described in Subparagraph 10(a) or 10(b) above shall occur, the
repurchase of Paper and payment of the Repurchase Price resulting therefrom
shall be made whether or not the Customer is in default under the Paper. The
repurchase of any Paper and the payment of any Repurchase Price hereunder shall
not limit or restrict CIT's right to recover any other damages or expenses
resulting from breach of this Agreement or to be indemnified as hereinafter set
forth.
11. DEFAULT BY THE COMPANY.
In the event:
(a) the Company shall fail to repurchase and pay for any item of Paper from
CIT, as provided in Paragraph 10; or
(b) the Company defaults in any other payment obligations, or in the
performance or observance of any other covenant, agreement, warranty,
representation, or provision contained in this Agreement, or any other
agreement with CIT, and such default shall have continued for a period of
20 days after notice thereof to the Company from CIT, or if the default is
curable but cannot, in CIT's judgment, be cured within said 20-day period,
then within an additional 20 days if the Company commences promptly to cure
such default and pursues its best efforts to cure same with continuity and
diligence; or
<PAGE>
11. DEFAULT BY THE COMPANY (Continued)
(c) the Company defaults in the payment of any indebtedness of the Company or
under any agreement or instrument under or pursuant to which any such
indebtedness may have been issued, created, assumed, or guaranteed by the
Company and such default shall continue for more than the period of grace,
if any, therein specified, and such indebtedness be declared due and
payable; or
(d) the Company shall cease to do business as a going concern; admit in writing
its inability to pay its debts generally as they become due; make an
assignment for the benefit of its creditors; commence a proceeding for the
appointment of a receiver, trustee, liquidator or conservator of itself or
of the whole or any substantial part of its property; or a complaint or
petition or answer seeking reorganization or arrangement or any similar
relief under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state is filed by the
Company or against the Company and not dismissed within 60 days; or a court
of competent jurisdiction shall enter an order, judgment or decree
appointing a receiver, trustee, liquidator or conservator (or shall
otherwise assume custody or control) of the Company or of the whole or any
substantial part of its assets; or
(e) any information furnished by or on behalf of the Company to CIT relating to
the sale of any Paper or the financial condition or business affairs of the
Company is determined by CIT to be false or misleading in any material
respect;
then, if such default shall be continuing, the Company shall, at the option of
CIT, without requiring any tender of Paper, promptly repurchase on demand all of
the Paper then held by CIT for the aggregate Repurchase Price thereof. Until
payment therefor, CIT may (but shall not be required to) liquidate said Paper,
including the repossession and disposition of Equipment, and the Company shall
be liable for any resulting deficiencies and all reasonable expenses incurred in
connection therewith. Any repossessed Equipment may be disposed of for cash or
on credit and the net proceeds received by CIT shall be considered in computing
the deficiency obligation owed by the Company. Upon the Company's failure within
10 days after demand to repurchase Paper pursuant to this Paragraph, CIT shall
have all of the rights and remedies of a secured party under the Uniform
Commercial Code and may at any time sell or otherwise dispose of such Paper or
any part thereof in a commercially reasonable manner at public or private sale,
on at least 10 days' notice to the Company. The Company shall be liable for any
difference between its aggregate repurchase obligations on Paper sold to CIT and
the net proceeds to CIT of any said sale or disposition, after deducting all
costs, charges and expenses incurred in connection therewith, including
reasonable attorneys' fees, and other legal expenses. CIT may also institute an
action against the Company in a court of competent jurisdiction for a judgment
in the amount of the aggregate Repurchase Price of the Paper then held by it,
plus any attorneys' fees, costs and expenses incurred by it in enforcing its
rights and remedies. All rights and remedies of CIT under this Agreement or any
applicable law shall be cumulative.
12. REASSIGNMENT.
Concurrently with the payment by the Company of the Repurchase Price pursuant to
Paragraphs 10 or 11 for any item of Paper, CIT shall reassign such item of
Paper to the Company, without recourse and without representation or warranty
except that CIT shall warrant that it has title to the Paper free and clear of
liens and encumbrances created by or through CIT. At the request of the
Company, CIT shall provide the Company with copies of appropriate documents or
computerized material relating to repurchased Paper showing CIT's payment
records in respect thereof. All financing statements relating to the subject
Paper shall be reassigned to the Company and CIT shall deliver to the Company
such original copies of the Paper and Related Documents as may have been
previously delivered to CIT by the Company. Prior to the repurchase by the
Company, CIT shall file UCC continuation statements, if appropriate, with
respect to Paper assigned to it by the Company under this Agreement; however,
any failure of CIT to file any such continuation statements shall not be a
defense to any repurchase of the related item of Paper by the Company if any
lapse in filing is subsequently cured by a new filing without any intervening
security interest or lien, or if any such lapse in filing would not otherwise
have caused a loss to the Company in respect of such Paper, or if there is such
a lapse which results in any intervening security interest or lien, then only to
the extent of the actual loss proximately resulting therefrom.
13. ULTIMATE NET LOSS.
(a) Except as otherwise provided in Subparagraph 13(i) and as long as the
Company shall not be in default hereunder, the Ultimate Net Loss of the
Company arising out of its obligation to repurchase Paper under this
Agreement, with respect to Paper purchased by CIT, shall not exceed
fifty percent ( 50 %) percent of the aggregate Unpaid
Balances of all such Paper purchased by CIT, computed as at the date of
such purchase.
(b) "Ultimate Net Loss," as used herein, shall mean with respect to Paper
purchased hereunder, the sum of:
(i) all payments made by the Company to CIT upon its repurchase of such
Paper; and
(ii) the reasonable out-of-pocket expenses incurred by the Company in
connection with any recoveries made in the liquidation by it of such
Paper and the Equipment covered thereby; but less
(iii) the total amount realized by the Company from all sources upon the
liquidation of such Paper and the Equipment covered thereby (including
any resale of Equipment as to which the Company or any affiliate of the
Company has acquired title in default proceedings under the Paper or in
satisfaction of the Customer's obligations thereunder) repurchased by the
Company from CIT, including recoveries from any party liable on such
Paper or any Related Documents and from the sale, lease, or other
disposition of Equipment under such Paper.
(c) The amount actually received by CIT in cash on any claim in any bankruptcy,
receivership, arrangement, or similar proceeding of the Company shall be
deemed an amount paid by the Company to CIT under Subparagraph 13(b)(i)
above in computing any Ultimate Net Loss hereunder.
<PAGE>
13. ULTIMATE NET LOSS (Continued)
(d) The Company agrees to take all necessary and appropriate action to recover
as much as possible from all parties liable on Paper repurchased by it
pursuant to Paragraph 10 of this Agreement and from the Equipment covered
thereby. In computing the Ultimate Net Loss sustained by the Company, if
the Paper was repurchased pursuant to Paragraph 10 of this Agreement:
(i) there shall not be included as a loss any portion of the amount paid to
CIT in the repurchase of any item of Paper, unless and until the
Company shall have made a bona fide sale of the Equipment covered by
such Paper and shall have used its best efforts to recover any amounts
owing thereon from all parties liable therefor; and
(ii) it shall be deemed that no loss has been suffered by the Company on any
such item of repurchased Paper, if the Company fails, within 120 days
after the date on which its repurchase of any such item of Paper shall
have been demanded by CIT, to both establish its net loss with respect
thereto and to notify CIT in writing of such net loss.
(e) The Company shall continue to fulfill its obligations under Paragraph 10
hereof with respect to all Paper purchased hereunder or during a particular
Fiscal Year, as the case may be, until the Company has incurred the
Ultimate Net Loss applicable thereto, determined as set forth in
Subparagraph 13(a) hereof. Thereafter, the Company shall not be required to
make any payments to CIT with respect to the Paper purchased hereunder or
during that Fiscal Year, as the case may be, which is subject to such
Ultimate Net Loss provisions, and CIT shall, within 30 days of its receipt
of written notice from the Company, repay to the Company the amount of the
excess, if any, of the net loss of the Company on such Paper over its
Ultimate Net Loss, theretofor paid by the Company to CIT.
(f) The Company shall keep separate records with respect to Paper purchased by
CIT during each Fiscal Year of all amounts realized by it from the
liquidation of Paper repurchased pursuant to Paragraph 10 of this
Agreement, including all amounts recovered from those liable on such Paper
and all amounts realized from the Equipment covered by such Paper. Upon
request, the Company will furnish a written report to CIT, within 30 days
of any such request, showing the amount of out-of-pocket expenses incurred
in connection with any recoveries made by the Company in the liquidation of
such Paper and the amounts realized by the Company from all sources upon
the liquidation of such Paper and with respect to any Fiscal Year. CIT
shall have the right, at all reasonable times, to audit the records of the
Company with respect to such out-of-pocket expenses incurred, recoveries
made and amounts realized in respect of such Paper.
(g) If and when the Company shall have incurred 50% of the Ultimate Net Loss
with respect to the Paper purchased by CIT in a particular Fiscal Year, it
shall not thereafter, with respect only to such Paper, without the prior
written consent of CIT:
(i) sell any Equipment covered by any Paper repurchased by the Company for
a price less than the Repurchase Price of such Paper; or
(ii) compromise or settle the amount owing on any repurchased Paper for an
amount less than the Repurchase Price of such Paper.
If CIT fails to so consent within 5 days after its receipt of a written
request from the Company to:
(i) the sale of Equipment covered by such Paper at an offered price less
than the amount of the applicable Repurchase Price; or
(ii) acceptance of an offer from a Customer under such Paper to pay, in
compromise or settlement, an amount less than such Repurchase Price
(each such offer being herein referred to as "close-out offer");
thereafter, either CIT or the Company (with prior written consent of CIT) within
90 days after such written request, are unable to sell such Equipment for a
price, or obtain a settlement or compromise from the Customer in an amount, at
least equal to such close-out offer, CIT shall pay to the Company for such
Equipment and for all of the Company's right, title and interest in the related
Paper, an amount equal to such close-out offer. The payment by CIT to the
Company of such close-out offer shall be deemed to be a recovery by the Company
under clause (iii) of Subparagraph 13(b) hereof.
(h) The Ultimate Net Loss limitations under this Paragraph 13 shall be reviewed
from time to time upon request of the Company but, any change in such
limitations shall be subject to the absolute discretion of CIT and
evidenced by the prior written consent and approval of CIT, in each
instance.
(i) Notwithstanding anything in the foregoing that may be to the contrary, the
provisions of this Paragraph 13 for an Ultimate Net Loss by the Company
shall in no way impair, limit, or otherwise affect the Company's liability
to CIT for:
(i) any Paper the Company is required to repurchase from CIT pursuant to
Paragraph 10(a) or by reason of any breach by the Company of any
warranty (other than a warranty of payment) in respect of said Paper
under any assignment or endorsement thereof or under this Agreement or
any other agreement as to such Paper;
(ii) any Paper which the Company is required to repurchase from CIT pursuant
to Paragraph 11 hereof by reason of the occurrence of a default by the
Company;
(iii) any Paper which the Company shall have purchased from CIT without any
prior request or demand by CIT for such repurchase;
(iv) any Paper which the Company is required to repurchase pursuant to
Subparagraph 10(b) hereof; and
(v) any Paper which the Company shall have failed to repurchase in
accordance with Paragraph 10(c) hereof.
<PAGE>
14. INDEMNIFICATION.
The Company shall indemnify and hold CIT harmless from any liability, loss,
injury or damage, including without limitation, all incidental and
consequential damages, together with all reasonable out-of-pocket costs and
expenses relating thereto, including legal and accounting fees and expenses
arising out of or resulting directly or indirectly from any breach of any of the
representations, warranties, covenants, agreements or any other obligation of
the Company hereunder or under the Paper or Related Documents.
15. TERM OF AGREEMENT.
This Agreement shall become effective upon acceptance by CIT at its office in
1620 W. Fountainhead Parkway, #600, Tempe, AZ 85282 and shall continue in
effect so long as any Paper shall be outstanding (including Paper in liquidation
as provided under Subparagraph 13(d) hereof), which was now or hereafter
purchased by CIT from the Company, or any other obligations hereunder are
outstanding.
16. MODIFICATION AND WAIVER.
No modification or waiver of any provision of this Agreement shall be effective
unless such modification or waiver shall be in writing and signed by a duly
authorized officer of CIT and the same shall then be effective only for the
period and on the conditions and for the specific instances and purposes
specified in such writing.
17. RIGHT TO REPURCHASE.
The Company shall have the right to repurchase any item or paper if the Company
informs CIT that the customer and the Company have a dispute arising out of the
Franchise Agreement.
18. NOTICES; CHOICE OF LAW; SUCCESSORS AND ASSIGNS.
All notices, offers, demands or replies by any party to this Agreement to any
other party shall be in writing and (unless otherwise specified) shall be sent
by certified mail, return receipt requested, postage prepaid, or by hand
delivery, addressed, as the case may be, to CIT at:
P.O. Box 27248
-------------------------------------------
Address
Tempe, AZ 85285-7248
-------------------------------------------
City State Zip Code
Attention: Business Center Manager
or to the Company at:
11755 East Peakview Avenue
--------------------------
Address
Englewood, CO 80111
--------------------------------------------
City State Zip Code
or to such other person or address as any party shall designate in writing to
the other parties from time to time sent or delivered in like manner, and shall
be effective when sent unless otherwise provided in this Agreement.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. This Agreement shall be binding upon and inure to the
benefit of the Company and CIT and their respective successors and assigns, but
nothing herein shall give the Company the right to assign this Agreement or its
rights hereunder without the express prior written consent of CIT.
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By _________________________ Title ___________________
Accepted and Agreed October 21, 1994
BIG O TIRES, INC.
By: /s/ John B. Adams, Executive Vice President
Attest: /s/ Philip J. Teigen, Secretary
Corporate Seal
<PAGE>
[LOGO]
THE KELLY SPRINGFIELD TIRE COMPANY
12501 WILLOW BROOK ROAD CUMBERLAND, MARYLAND
(301) 777-6000 21502-2599
FAX (301) 777-6008 TELEX: 86211 KST-CUM
September 30, 1994 Exhibit 10.84
Big O Tires, Inc.
Box 3206
Englewood, CO 80155-3206
Gentlemen:
We are sending you a Demand Note dated September 30, 1994 for $4,700,338.67.
This note will replace the note given to you June 15, 1993. This Demand Note
will have terms and conditions according to the Inventory Financing Agreement,
dated September 30, 1994.
It is mutually understood and agreed that if our Sales Agreement is cancelled by
either party, or if any payment hereunder is not made when due, or if you should
be in default in any other obligation to us, demand will be made for immediate
payment in cash for the total of the aforesaid note.
Your acceptance of this letter with proper attesting, both in the space
provided, together with the note, constitutes the full agreement between us
as to the Financing Agreement.
Very truly yours,
/s/ G. L. Sutherland
G. L. Sutherland
Vice President and CFO Attested: /s/ D.E. Taylor
___________________________
Secretary, K/S
Accepted:
BIG O TIRES, INC.
By: /s/ Steven P. Cloward (seal) Attested: /s/ John B. Adams
_______________________ ___________________________
President Assistant Secretary, Big O Tires, Inc.
October 7 , 1994
____________________
<PAGE>
DEMAND NOTE
-----------
$4,700,338.67 September 30, 1994
------------- ------------------
The undersigned promises to pay to the order of THE KELLY-SPRINGFIELD TIRE
COMPANY, Willowbrook Road, Cumberland, MD. 21502-2599
Four million seven hundred thousand, three hundred thirty eight and -----------
-------------------------------------------------------------------------------
--- 67/100 DOLLARS
with interest thereon as per the Inventory Financing Agreement dated September
30, 1994.
It is agreed by the maker, guarantors and endorsers that if the note is not paid
in accordance with its tenor, all of said payments then unpaid shall, at the
option of the holder, immediately become due and payable. No person is
authorized to receive a payment upon or make collection of this note unless the
note is presented and the amount paid duly endorsed hereon at the time. The
makers, guarantors and endorsers hereof severally waive presentment for payment,
protest and notice of protest, and nonpayment of this note. In the event of
default in the payment of principal, when due, and if action is instituted
thereon, the undersigned promises to pay reasonable attorneys' fees and costs of
any such action.
This instrument and the indebtedness evidenced hereby is subordinated in the
manner and to the extent set forth in an agreement (the "Agreement") dated as of
September 30, 1994 by the maker and the payee of this instrument in favor of
Barclays Business Credit, Inc. (the "Lender") to all indebtedness (including
interest) at any time owed by the maker of this inst t to er, and each holder of
this instrument, by its acceptance hereof, shall be bound by the Agreement.
BIG O TIRES, INC. BIG O TIRES OF IDAHO, INC.
By: /s/ John B. Adams (seal) By: /s/ John B. Adams (seal)
/s/ John B. Adams /s/ John B. Adams
------------------------------- ---------------------------------
Title: Executive Vice President Title: Vice President
------------------------ ---------------------------
BIG O RETAIL ENTERPRISES, INC.
By: /s/ John B. Adams (seal)
----------------------------
/s/ John B. Adams
--------------------------------
Title: Vice President
------------------------
<PAGE>
INVENTORY FINANCING AGREEMENT
-----------------------------
This Agreement is dated September 30, 1994, between The Kelly-Springfield Tire
Company, a Maryland corporation (K/S), and Big O Tires, Inc., a Nevada
corporation (Account), and/or Big O Tire of Idaho, Inc. an Idaho corporation,
and/or Big O Tire Retail Enterprises, Inc., a Colorado corporation, to assist
Account in financing merchandise inventory supplied by K/S, all as provided
herein.
1. FINANCED AMOUNT
K/S hereby agrees, in consideration of Account's promises and undertakings, to
allow Account to finance up to the sum of $4,700,338.67. (The Financed Amount).
K/S agrees to convert $4,700,338.67 of Balance outstanding on note originally
issued June 15, 1993 in the amount of $6,000,338.67 into the Financed Amount.
The Financed Amount shall be payable by Account in accordance with the terms of
this Agreement, but all other amounts due from previous purchases and future
purchases by Account while this Agreement is in effect, shall be on open account
and not subject to this Agreement except in the event of a default hereunder.
The existing Purchasing Agreement shall apply to all inventory purchased under
this Agreement and to all indebtedness created thereby, and all purchases and
indebtedness also will be subject to provisions of any Purchase Agreement
existing from time to time between the parties.
The term of this Agreement shall commence September 30, 1994, and shall
terminate on December 30, 1997.
2. PAYMENT OF FINANCED AMOUNT
a.) The Financed Amount plus accrued interest, shall be repaid in thirty-eight
(38) installments. The first payment of $115,000 plus interest shall be due
October 15, 1994 and continue for the next eleven (11) months. The second
twelve (12) payments will be for $125,000 plus interest. The remaining thirteen
(13) payments will be for $135,000 plus interest. A final payment of $65,338.67
will be due on November 15, 1997. Each payment is due on the 15th of each
month.
b.) Account shall have the right to prepay all or any part of the Financed
Amount at any time.
c.) All payments hereunder shall be made in lawful money of The United States
and paid to K/S at the address given in Paragraph eight (8).
3. INTEREST
a.) Interest shall be accrued at the rate of prime as defined as follows:
Prime interest rate is defined as the rate charged by Citibank, New York, NY, in
effect on the first day of each calendar quarter; provided always, however, that
PAGE 1
<PAGE>
notwithstanding any changes in said bank's prime lending rate, the rate of
interest thereon shall never be more than the maximum rate which may from time
to time be lawfully charged under currently existing statutes and laws.
b.) If all maturities are paid when due, all financial covenants outlined in
Section 4 are met, and open account payments are current, then certain credits
may be earned by the Account based on the attached Schedule. Any credits earned
will be rebated to the account by credit memo on the 15th of the month following
each calendar quarter.
c.) Prime interest rate as defined in paragraph 3(a) shall not exceed at anytime
a maximum of eight percent (8%) for computations required pursuant to this
Agreement.
4. COVENANTS
So long as the Agreement remains outstanding and unless K/S has specifically
waived, in writing and in advance, the obligation of Account in this section 4,
Account hereby covenants and agrees with K/S as follows:
a.) Tangible Net Worth (TNW) - Account agrees to maintain, at all times while
this Agreement is in effect, TNW in the amount of $16,000,000.00 or greater.
TNW is defined as tangible assets (excluding patents, copyrights, capitalized
research and development costs and other intangible assets) in excess of
liabilities.
b.) Cash Flow to Long-Term Debt Payments - Account shall not permit or suffer,
as of the last day of the fiscal quarter of Account, the ratio of (I) the
combined cash flow of Account (cash flow is defined as net income after tax plus
depreciation and amortization less cash dividends paid) as calculated for the
fiscal quarter then ending plus the three immediately preceding fiscal quarters,
to (II) the current portion of Long-Term Debt of Account as of the last day of
the fiscal quarter then ending, to be less than 1.7 to 1.0.
5. DEFAULT AND ACCELERATION
Any failure of Account (a) to pay a sum due hereunder by its due date (without
the requirement of notice by K/S); or (b) to complete any other performance
required of it hereunder, after thirty (30) days written notice thereof by K/S;
or (c) any default of Account under any agreement at any time in effect between
Account and K/S; or (d) failure of Account to pay any sum due K/S; at the
election of K/S may be deemed a default under this Agreement.
In the event of any default (as defined above) under this Agreement, all sums
payable hereunder immediately shall become due and payable, and upon such
payment in full this Agreement shall terminate, but in the absence of full
payment all rights and remedies of K/S under this Agreement shall continue and
shall
PAGE 2
<PAGE>
be additional to other rights and remedies which may have against Account.
Upon any such default, K/S (in addition to its right of acceleration, which
shall be automatic upon K/S's election to declare the default) shall have the
further right, at its election, to deem such default to be a default also under
any or all of the other agreements referred to above, and upon such election K/S
shall have the right to pursue any remedy under this Agreement, and-under such
other agreement or agreements, in addition to its other rights and remedies
under applicable law.
6. TERMINATION
The parties also may terminate this Agreement at any time, by their mutual
written agreement and upon such notice, if any as they may specify, but neither
party shall have the right of termination except as provided herein.
Termination shall not affect rights of K/S to collect any and all amount due it.
7. NOTICES
All notices and other communications between the parties, as provided in or
pursuant to this Agreement, shall be sent by certified mail, return receipt
requested, and addressed:
To K/S: The Kelly-Springfield Tire Company
Attn: General Credit Manager, Dept. 522
12501 Willow Brook Road, SE
Cumberland, MD 21502-2599
To Account: Big O Tires, Inc. Big O Tires, Inc.
Attn: President Attn: Chief Financial
Box 3206 Officer
Englewood, CO 80155-3206 Box 3206
303-790-0225 Englewood, CO 80155-3206
FAX 303-790-6064
and shall be deemed given upon such delivery.
8. PAYMENTS
All payments shall be sent to:
The Kelly-Springfield Tire Company
AR 870
PO Box 92603
Chicago, IL 66675-2603
9. GENERAL PROVISIONS
a.) Account shall join with K/S in the execution of any instrument reasonably
required by K/S to further the purposes of this Agreement.
b.) This Agreement shall bind and shall inure to the benefit of the successors,
heirs, representatives, and assigns of the parties, but Account shall not assign
any interest hereunder without the prior written consent of K/S, which K/S in
its sole discretion may withhold. Any modification or amendment of this
Agreement must be in writing and signed by the parties.
PAGE 3
<PAGE>
c.) No waiver by K/S, of any default shall be a waiver of any other default or
of the same default on another occasion.
d.) This Agreement shall be governed by and construed and enforced in
accordance with the Laws of Maryland.
e.) If any provision hereof is unenforceable for any reason, the remaining
provisions shall continue in effect as if such unenforceable matter were deleted
unless such deletion would tend to defeat the essential purposes of the parties.
f.) In the event of any default of Account, it shall pay all costs and expenses
(including but not limited to reasonable attorney's fees) incurred by K/S in
enforcing this Agreement.
Executed as of the date first given above.
Account: K/S:
BIG O TIRES, INC. THE KELLY-SPRINGFIELD
TIRE COMPANY
By: /s/ John B. Adams (seal) By: /s/ G.L. Sutherland (seal)
---------------------------- -----------------------------
G. L. Sutherland
/s/ John B. Adams Title: Vice President and CFO
----------------------------
Title: Executive Vice President
Attest/Witness: Attest:
/s/ Steven P. Cloward /s/ D.E. Taylor
----------------------------- --------------------------------
Secretary/
The Kelly-Springfield
Tire Company
BIG O TIRES OF IDAHO, INC.
By: /s/ John B. Adams (seal)
---------------------------
Title: Vice President
Attest/Witness:
/s/ Steven P. Cloward
------------------------------
BIG 0 RETAIL ENTERPRISES, INC.
By: /s/ John B. Adams (seal)
--------------------------
/s/ John B. Adams
-----------------------------
Title: Vice President
Attest/Witness:
/s/ Steven P. Cloward
-----------------------------
PAGE 4
<PAGE>
SCHEDULE A
QUALIFYING INTEREST RATE
INTEREST REDUCTION
SCHEDULE
--------
Effective
% of Base Units Interest rate
--------------- -------------
Less than 38% Prime + 2%
38.01 - 45.00 Prime
45.01 - 50.00 Prime less .4%
50.01 - 55.00 Prime less .8%
55.01 - 60.00 Prime less 1.2%
60.01 - 65.00 Prime less 1.6%
65.01 - 70.00 Prime less 2.0%
70.01 - 75.00 Prime less 2.25%
75.01 - 80.00 Prime less 2.50%
All Kelly-Springfield product qualifies to calculate total purchases supplied
including Kelly Brand, Hallmark ect. providing the product is purchased directly
from Kelly-Springfield.
Base for the following years will be determined by the actual purchases for the
preceding year by quarter +/- % Industry Increase/Decrease as reported by RMA
for each such quarter.
PAGE 5
<PAGE>
EXHIBIT "E"
EXHIBIT 10.85
BIG O TIRES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the "Plan") is made and
entered into this 7th day of December, 1994 by Big O Tires, Inc., a Nevada
corporation ("Employer"), effective as of January 1, 1994.
1. Purpose of Plan. The Employer desires to provide certain key employees
(each a "Participant") a deferred compensation benefit based upon compensation
which each such Participant receives in excess of the limitation on compensation
for the purpose of qualified retirement plans. It is the intention of the
Employer that this Plan qualify as a plan which is unfunded and maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees and as a result is exempt from the
provisions of Parts 2, 3 and 4 of Title I of the Employee Retirement Income
Security Act of 1974 ("ERISA") and all provisions of the Plan will be construed
in accordance with this intention.
2. Participants. The initial Participants shall be those employees listed
on Exhibit A attached hereto and made a part hereof. The Board of Directors of
the Employer ("Board") may add or delete employees as participants under this
Plan.
3. Amount of Deferred Compensation. The Employer shall maintain for each
key employee an account reflecting the number of units of deferred compensation
awarded to such Employee pursuant to the terms of this Plan. Each year the
Employer determines the contribution that it is made to the Big 0 Tires, Inc.
Employee Stock Ownership Plan (the "ESOP"). Such contribution shall be
expressed as a percentage of the compensation of the Participants in the ESOP as
determined in the sole discretion of the Employer (the "ESOP Percentage
Contribution Rate"). Each Participant in this Plan shall receive deferred
compensation units each year in an amount equal to the ESOP Percentage
Contribution Rate multiplied by such employee's taxable compensation in excess
of $150,000 (or such higher amount as is permitted to be counted for the
purposes of the ESOP) divided by the value of the corporation's stock as of
December 31 of such year. The resulting number shall be the number of units
awarded to each such Participant. A unit shall be equal to the value of one
share of the corporation's common stock.
4. Maintenance of Accounts. The Employer shall credit each year such
amounts determined under Paragraph 3 above to the account of each Participant.
The value of the employee's account shall be equal to the number of units
multiplied by the value of the corporation's common stock. When distribution is
to be made under this Plan, the value shall be determined as of the date
distribution commences. In the event the common stock of the corporation is not
publicly traded, the valuation used shall be the valuation as of the most recent
valuation conducted for the purposes of the Employer's ESOP. The number of units
in each Participant's account shall be adjusted for any stock dividends or
splits in the same proportion as the outstanding shares of common stock. As of
the date on which payment commences, the number of units a participant shall be
frozen.
5. Service Requirement. An employee shall be entitled to a percentage of
the value of the Participant's deferred compensation account at the time of
distribution based upon the number of years of service completed for the
Employer. Years of service shall be determined in accordance with the
provisions of the Employer's Employee Stock Ownership Plan. The percentage of
the Participant's deferred compensation account to be received upon the date of
distribution shall be determined as follows based upon the years of service:
<PAGE>
Less than 2 years 0%
Three years 20%
Four years 40%
Five years 60%
Six years 80%
Seven or more 100%
6. Unfunded Status. A Participant's account shall be comprised solely
of units and the Employer shall not fund any portion of the account prior to
payment of deferred compensation to a participant.
7. Distribution on Termination of Employment or Change
---------------------------------------------------
of Control.
----------
(a) Upon termination of the employment of the Participant with the
Employer for any reason other than death, the Participant will be
entitled to receive all amounts credited to the Participant's Account
as of the date of termination of employment for any reason. The
Participant will receive distribution of all amounts payable to him
under this paragraph (a) in installments over the designated period of
months, pursuant to the provisions of paragraph (e) of this Section.
(b) Upon termination of a Participant's employment with the Employer by
reason of death, the Participant's designated beneficiary or
beneficiaries will be entitled to receive all amounts credited to the
Account of the Participant as of the date of his death. Said amounts
shall be payable in installments over the designated period of months,
pursuant to the provisions of paragraph (e) of this Section.
(c) Upon the death of the Participant prior to complete distribution to
him of the entire balance of his Account (and after the date of
termination of his service or employment with the Employer as provided
in subparagraph (a), above), the balance of his Account on the date of
his death shall be payable to the Participant's designated beneficiary
or beneficiaries pursuant to subparagraph (e), hereof.
(d) Upon a Change of Control, as described herein, of the Employer, the
Participant will be entitled to receive all amounts credited to the
Participant's Account. The Participant will receive distribution of all
amounts payable to him under this paragraph (d) in installments over
the designated period of months, pursuant to the provisions of
paragraph (e) of this Section.
(e) The Employer shall direct distribution of the amounts credited to a
Participant's Account, to a Participant or his beneficiary or
beneficiaries pursuant to the preceding paragraphs of this Section, in
one hundred and twenty (120) equal monthly installment payments, unless
the Participant has previously filed an election with the Employer to
receive such payment in lump sum or in sixty (60) equal monthly
payments, pursuant to the terms of subparagraph (f), hereof. In the
event of a distribution pursuant to subparagraph (c), the balance of
the Participant's Account shall be paid in accordance with the number
of remaining installment payments after taking into consideration that
number of payments made to the Participant during his life.
Distribution shall be made or commence on the first day of the month
next following (i) the date upon which the Participant's service or
employment with the Employer terminates in the event of
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<PAGE>
a distribution pursuant to subparagraph (a) of this Section; (ii) the date
of the Participant's death in the event of a distribution pursuant to
subparagraphs (b) and (c) of this Section, (iii) as soon as possible, but
in no event longer than thirty days following a Change of Control; or (iv)
the age specified by the Participant in the Distribution Election. All
other installment payments, if any, shall be made on the first day of each
subsequent month until the Participant's Account is paid in full. Each such
installment, if any, shall include interest or other earnings on investment
credited to the balance of the Account pursuant to Section 6.
(f) At the election of the Participant, as described herein, the
Employer shall direct distribution of the amounts credited to a
participant's Account in lump sum on or before the last day of the calendar
month coinciding with or next following the effective date of the
Participant's termination of employment with the Employer, or Change of
Control of Employer, or in sixty (6) equal monthly installments beginning
within thirty (30) days after the Participant's termination of employment
with the Employer, or Change of Control of Employer. Such election shall be
made on the Distribution Election form, attached hereto as Exhibit B. The
election to be made pursuant to this subparagraph (f), shall not be
effective unless made in a writing signed by the Participant and delivered
to the Employer prior to January I of the calendar year in which
termination of employment or Change of Control occurs. Such election shall
be made on the Distribution Election form, attached hereto as Exhibit B. A
Participant shall also elect at the time any election is made as to the
form of payment, the age at which distribution is to commence or whether
distribution is to be made immediately. Such an election shall be made
prior to the calendar year in which the distribution takes place. Any
election as to distribution shall be irrevocable prior to the date of the
event which triggers distribution.
(g) The Employer may, at any time and from time to time, determine in
its sole discretion to instruct the distribution of the then remaining
balance of a Participant's Account in such other manner and in such other
amounts as it shall deem appropriate. Except as provided in
subparagraph(f), hereof, Participant shall have no right to determine the
manner and time of distributions.
(h) For purposes of this Plan, Change of Control shall mean: the
purchase or other acquisition by any person, entity or group of persons,
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934 ("Act"), or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Act) of
50 percent or more of either the outstanding shares of common stock or the
combined voting power of Employer's then outstanding voting securities
entitled to vote generally, or the approval by the stockholders of
Employer's of a reorganization, merger, or consolidation, in each case,
with respect to which persons who were stockholders of Employer immediately
prior to such reorganization, merger or consolidation do not, immediately
thereafter, own more than 50 percent of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged
or consolidated Employer's then outstanding securities, or a liquidation or
dissolution of Employer or of the sale of all or substantially all of
Employer's assets. In addition, Change of Control shall mean the
termination of the Employer's Employee Stock Ownership Plan.
8. Participant's Rights: Effect on Other Compensation and Benefits. Any
payments or credits under this Plan shall not be deemed salary or other
compensation to the Participant for purposes of computing benefits to which the
Participant may be entitled under any qualified retirement plan or other
arrangement of the Employer for the benefit of its employees.
9. Participant's Rights Unsecured. The right of the Participant or his
designated beneficiary or beneficiaries to receive a distribution hereunder
shall be an unsecured claim against
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<PAGE>
the general assets of the Employer, and the Plan constitutes a mere promise by
the Employer to make benefit payments in the future. Neither the Participant nor
his designated beneficiary or beneficiaries shall have any rights in or against
any amount credited to his Account or any other specific assets of the Employer.
The Participant's rights to benefit payments under the Plan are not subject IN
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or his
designated beneficiary or beneficiaries.
10. Designation of Beneficiary. In the event a Participant dies before the
credits to his Account are fully paid out, the beneficiary or beneficiaries
designated in the last Notice filed with the Board will receive the balance of
the credits to the deceased Participant's Account in accordance with the
schedule of payments set forth in Section 7 of this Agreement. A form
Designation of Beneficiary is attached hereto as Exhibit C.
11. Amendments to the Plan. The Board may amend this Plan at any time
without the consent of the Participants or their Beneficiaries, provided,
however, that no amendment shall divest any Participant or beneficiary of the
credits to his Account, or of any rights to which he would have been entitled if
this Plan had been terminated immediately prior to the effective date of
such amendment.
12 Termination of the Plan. The Board may terminate this Plan at any
time. Upon termination, distribution of the credits to a Participant's Account
shall be made in the manner and at the time heretofore prescribed.
13. Expenses. Costs of administration of this Plan will be paid by the
Employer as may be determined by the Board in its sole discretion.
14. Notices. Any notice or election required or permitted to be given
hereunder shall be deemed to be filed (i) on the date it is personally delivered
to the Secretary of the Employer, or (ii) three business days after it is sent
by registered or certified mail, addressed to such Secretary at 11755 E.
Peakview Ave., Englewood, Colorado 80111.
15. Severability. In the event any one or more of the provisions
contained in this Agreement, or any application hereof, shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
16. Governing Law. This Agreement , its interpretation, construction and
enforcement shall be governed by the laws of the State of Colorado.
17. Binding Effect. This agreement shall be binding upon and shall inure
to the benefit of the Corporation, its successors and assigns, as well as the
Stockholders, their respective heirs, legatees and personal representatives.
Any pronoun used in the masculine shall be interpreted as the context requires.
-4-
<PAGE>
IN WITNESS WHEREOF, the Employer has caused this instrument to be
executed in its name by its duly authorized officers and its corporate seal to
be hereunto affixed, this 7th day of December, 1994.
"EMPLOYER"
Big O Tires, Inc., a Nevada corporation
ATTEST:
/s/ Philip J. Teigen By: /s/ Thomas L. Staker
------------------------------- ---------------------------------------
Mr. Philip J. Teigen, Secretary Mr. Thomas L. Staker Sr. Vice President
-5-
<PAGE>
EXHIBIT A
LIST OF PARTICIPANTS
as of date of Adoption of Plan
Steven P. Cloward
John B. Adams
-6-
<PAGE>
EXHIBIT B
DISTRIBUTION ELECTION
Pursuant to the BIG O TIRES, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(the "Plan"), I hereby elect to receive distribution in the following form
depending upon the type of event triggering distribution [check one type of
distribution for each event]:
1. Event of Termination
1. Termination of Employment 2. Death
[X] Lump sum [X] Lump Sum
[_] 60 equal monthly payments [_] 60 equal monthly payments
[_] 120 equal monthly payments [_] 120 equal monthly payments
3. Plan Termination 4. Change in Control
[X] Lump sum [X] Lump sum
[_] 60 equal monthly payments [_] 60 equal monthly payments
[_] 120 equal monthly payments [_] 120 equal monthly payments
II. I further elect that the payment commencement date shall be the following
[select one for each type of termination]:
1. Termination of Employment
[X] Immediate [_] Defer until Age [specify]:_____________________
2. Death
[X] Immediate [_] Defer until Age [specify]:_____________________
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<PAGE>
EXHIBIT C
DESIGNATION OF BENEFICIARY
Pursuant to the BIG O TIRES, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(the "Plan"), I hereby designate the following individuals as my beneficiaries
to receive that percentage, as designated below, of all amounts held for me
under the Plan which have not been paid to me at the date of my death.
Beneficiary Percentage
----------- ----------
DATED:_______________________
_____________________________ _______________________________
Witness Participant
-9-
<PAGE>
EXHIBIT 10.86
STOCK APPRECIATION RIGHTS AGREEMENT
This STOCK APPRECIATION RIGHTS AGREEMENT ("Agreement") dated as of
February 15, 1995, is between Big O Tires, Inc., a Nevada corporation (the
"Company"), and John E. Siipola ("Employee").
This Agreement sets forth the terms and conditions of the stock
appreciation rights granted by the Company to the Employee.
Employee is employed at the pleasure of the Company as its
Chairman and a Member of the Office of the Chief Executive, under the
direction of the Company's Board of Directors.
In consideration of the mutual covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Employee, intending to be
legally bound hereby, agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHTS.
----------------------------------
(a) Subject to vesting as provided in Section 3 hereof, the Company hereby
grants Employee 100,000 share equivalent units (the "Units"), each of which
shall represent an equal, undivided interest in the future appreciation in the
value of a share of the Company's common stock ("Common Stock").
(b) The Company shall not be required to segregate any of its assets in
order to provide for the satisfaction of its obligations with respect to the
Units awarded herein. The Employee shall have no interest whatsoever in any
particular property or assets of the Company.
(c) The Units do not, in and of themselves, constitute a share of, or
represent any ownership interest in, the Company. The Employee shall have no
rights of a shareholder of the Company by virtue of the award of Units herein.
The Units represent, upon vesting as provided in Section 3 hereof, the right to
cash as provided in Section 5.
2. DESCRIPTION OF UNITS. Subject to vesting as provided in Section 3
hereof, each Unit shall entitle the Employee to receive, in cash only, the
difference between the Base Value of a share of Common Stock and the Market
Value of a share of Common Stock on the Exercise Date (the "Net Appreciation").
Base Value shall mean $13.875 per share. Market Value shall mean, as of any
Exercise Date, the average composite closing price of the Common Stock on the
Nasdaq National
1
<PAGE>
Market System or any national securities exchange on which the Common Stock is
then traded (or if the Common Stock is not then traded on the Nasdaq National
Market System or a national securities exchange, the average of the
representative closing bid prices of the Common Stock on the Nasdaq Small Cap
Market or the over-the-counter market), as reported in the Wall Street Journal
for each of the four (4) Trading Days preceding such date. Trading Days shall
mean a business day on which shares of the Common Stock have actually traded in
the public markets in the U.S. Exercise Date shall have the meaning ascribed to
such term in Section 4(c) hereof.
3. VESTING OF UNITS. The Employee's right to exercise any Units granted
herein shall not vest until August 16, 1995. Thereafter, the Employee's
right pursuant to Section 4 to exercise any Units granted herein shall vest,
subject to Sections 4(b) and 7 hereof, at a rate of 16,662 Units on
August 16, 1995 and at a rate of 2,777 Units on the last day of each month
thereafter until the last day of January, 1998, at which time the 2,805
unvested Units shall vest. Such vesting shall occur only if the Employee is in
the full time employ of the Company or any Company subsidiary on each vesting
date and has been continually employed (except for such leaves of absence as
have been approved by the Company's Board of Directors) for the period
commencing as of the date of this Agreement.
4. EXERCISE OF RIGHTS.
------------------
(a) Upon the exercise of the rights relating to each vested Unit, Employee
will be entitled to receive payment for the Net Appreciation pursuant to Section
5 hereof. Vested Units may be exercised at the sole discretion of the Employee
at any time after August 16, 1995, and continuing thereafter with no
expiration date on Employee's right to exercise the Units except as provided
herein.
(b) On the date the Employee ceases, for any reason, to be employed by the
Company, Employee shall forfeit all non-vested Units granted him. For this
purpose, Employee's employment shall not be deemed to be continued for any days
Employee is paid for accrued vacation or sick pay or for severance pay. If
Employee's employment is terminated for any reason other than for Misconduct (as
defined in Section 7), upon such termination all vested but unexercised Units
shall be deemed to have been immediately exercised and payment shall be made to
the Employee or, in the case of the Employee's death, to his designated
beneficiary or beneficiaries pursuant to Section 10 hereof.
(c) Except as provided in Section 4(b), Employee must give written notice
of any exercise of rights with regard to vested Units to the Human Resources
Committee of the Company and to the Chief Financial Officer of the Company at
the
2
<PAGE>
address of the Company. Such written notice must be given in the manner or form
as the Human Resources Committee may determine. Any exercise of rights will be
deemed to have been made on the date such notice is received by the Human
Resources Committee (the "Exercise Date").
5. PAYMENT FOR UNITS.
-----------------
(a) Upon exercise by the Employee of each vested Unit, the value of each
Unit will be the Net Appreciation and Employee will be entitled to payment from
the Company for the number of vested Units multiplied by the Net Appreciation.
(b) Within 10 days after the Exercise Date of any vested Units by the
Employee, the Company shall be obligated to pay the Employee in cash which shall
be made by check in U.S. dollars (the "Payment Due Date"). If the Company does
not have sufficient funds on hand on the Payment Due Date to make a lump sum
cash payment due Employee, which determination shall be made by the Company in
its sole discretion, the Company may elect to pay one half of the amount due in
cash by check in U.S. dollars and to pay the balance by entering into a
promissory note with Employee whereby Company will pay the payment to Employee
in monthly installments over a period not to exceed 36 months. Such note shall
be unsecured and shall bear interest at an annual rate equal to the prime rate
as announced by the Company's then primary bank. Upon the death of the
Employee prior to complete payment to him of the entire balance of any such
note, all remaining payments due under the note shall be payable to the
Employee's designated beneficiary or beneficiaries pursuant to Section 10
hereof. Following such payment or the entering of such a note, the Company shall
reduce on its records the total number of Units held by the Employee by the
number of Units exercised.
(c) The Employee shall not be obligated to make any payments to the
Company in the event that the value of his Units at any time is less than zero.
(d) To the extent required by applicable law, the Company shall make tax
withholdings on payments made by the Company. The payments required to be made
by the Company under this Section 5 shall be reduced by the amount required to
be withheld by the United States Internal Revenue Code and the Regulations
adopted thereunder and any applicable state law.
6. CHANGE OF CONTROL OF COMPANY.
----------------------------
(a) If the Effective Date of a Change of Control of the Company shall
occur prior to August 16, 1995, Employee shall forfeit all Units, vested and
non-vested,
3
<PAGE>
granted him and this Agreement shall be considered cancelled and of no further
force or effect and no payment shall be due Employee.
(b) For purposes of this Agreement, Change of Control shall mean: the
purchase or other acquisition by any person, entity or group of persons, within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended ("Act"), or any comparable successor provisions, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Act) of 50% or more of
either the outstanding shares of Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally, or
the approval by the stockholders of the Company of a reorganization, merger, or
consolidation, in each case, with respect to which persons (not including the
Company's Employee Stock Ownership Plan) who were stockholders of the Company
immediately prior to such reorganization, merger or consolidation do not
immediately thereafter own more than 50% of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding securities, or a liquidation or
dissolution of the Company or of the sale of all or substantially all of the
Company's assets. Effective Date shall mean the date on which the Change of
Control became a legally enforceable transaction between the Company and the
other party or parties to the Change of Control transaction.
7. TERMINATION FOR MISCONDUCT. In the event the Employee's employment
is terminated for Misconduct, then all unexercised vested Units shall be
redeemed by the Company within 30 days after termination of employment for the
total cash amount of $1.00 for all such Units. The term Misconduct shall mean
(i) repeated failure to report for work other than due to illness or authorized
leave of absence; (ii) conviction of a felony; (iii) an act of fraud,
embezzlement or dishonesty; (iv) deliberate and intentional violation of the
material policies or procedures of the Company; or (v) deliberate and
intentional disregard of instructions from the Company's Board of Directors.
8. NONASSIGNABILITY. No right granted herein shall be assignable or
transferable by the Employee except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order. Except as
specifically set forth above, the rights shall be exercisable only by the
Employee and no other person shall acquire any interest therein.
9. ADJUSTMENT FOR RECAPITALIZATION. If the outstanding shares of Common
Stock of the Company are increased, decreased or otherwise changed through a
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate adjustment
shall
4
<PAGE>
be made by the Board of Directors of the Company in the number of Units granted
in this Agreement, the non-vested Units granted prior to the change, and Base
Value of the Units vested but unexercised.
10. DESIGNATION OF BENEFICIARY. The Employee may designate one or more
beneficiaries (who may be designated contingently or successively and which need
not be natural persons) to receive payment for his Units pursuant to Sections
4(b) or 5(b) hereof in the event the Employee dies prior to his receiving the
full amount to which he is entitled thereunder. If the Employee has not
designated a beneficiary, or if a designated beneficiary predeceases the
Employee, the Company shall pay the balance of the amount due the deceased
Employee or beneficiary to the Employee's or beneficiary's personal
representative.
11. NOTICES. All notices to be given hereunder shall be deemed duly
given when delivered personally in writing or mailed, certified mail, return
receipt requested, postage prepaid and addressed, as follows:
(a) If to be given to the Company:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attn: Chief Financial Officer
With a copy of the notice to:
Human Resources Committee of Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
(b) If to be given to Employee:
John E. Siipola
c/o Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
or any such other address as either of the parties may furnish to the other in
writing in accordance with this Section.
5
<PAGE>
12. MISCELLANEOUS. This Agreement may not be changed nor can any
provision hereof be waived except by an instrument in writing duly signed by the
parties to this Agreement, and for all purposes this Agreement constitutes a
separate and independent agreement. This Agreement shall be interpreted,
governed and controlled by the laws of the state of Colorado.
13. INTEGRATION. This Agreement represents the entire agreement and
understanding of the parties hereto in respect of the matters referred to
herein, and supersedes any prior agreement and understanding between the parties
hereto in respect of such matters.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
BIG O TIRES, INC.
By: /s/ John B. Adams, Executive Vice President
EMPLOYEE:
By: /s/ John E. Siipola
6
<PAGE>
STOCK APPRECIATION RIGHTS AGREEMENT
This STOCK APPRECIATION RIGHTS AGREEMENT ("Agreement") dated as of
February 15, 1995, is between Big O Tires, Inc., a Nevada corporation (the
"Company"), and Horst K. Mehlfeldt ("Employee").
This Agreement sets forth the terms and conditions of the stock
appreciation rights granted by the Company to the Employee.
Employee is employed at the pleasure of the Company as its
Vice-Chairman and a Member of the Office of the Chief Executive, under the
direction of the Company's Board of Directors.
In consideration of the mutual covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Employee, intending to be
legally bound hereby, agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHTS.
----------------------------------
(a) Subject to vesting as provided in Section 3 hereof, the Company hereby
grants Employee 100,000 share equivalent units (the "Units"), each of which
shall represent an equal, undivided interest in the future appreciation in the
value of a share of the Company's common stock ("Common Stock").
(b) The Company shall not be required to segregate any of its assets in
order to provide for the satisfaction of its obligations with respect to the
Units awarded herein. The Employee shall have no interest whatsoever in any
particular property or assets of the Company.
(c) The Units do not, in and of themselves, constitute a share of, or
represent any ownership interest in, the Company. The Employee shall have no
rights of a shareholder of the Company by virtue of the award of Units herein.
The Units represent, upon vesting as provided in Section 3 hereof, the right to
cash as provided in Section 5.
2. DESCRIPTION OF UNITS. Subject to vesting as provided in Section 3
hereof, each Unit shall entitle the Employee to receive, in cash only, the
difference between the Base Value of a share of Common Stock and the Market
Value of a share of Common Stock on the Exercise Date (the "Net Appreciation").
Base Value shall mean $13.875 per share. Market Value shall mean, as of any
Exercise Date, the average composite closing price of the Common Stock on the
Nasdaq National
1
<PAGE>
Market System or any national securities exchange on which the Common Stock is
then traded (or if the Common Stock is not then traded on the Nasdaq National
Market System or a national securities exchange, the average of the
representative closing bid prices of the Common Stock on the Nasdaq Small Cap
Market or the over-the-counter market), as reported in the Wall Street Journal
for each of the four (4) Trading Days preceding such date. Trading Days shall
mean a business day on which shares of the Common Stock have actually traded in
the public markets in the U.S. Exercise Date shall have the meaning ascribed to
such term in Section 4(c) hereof.
3. VESTING OF UNITS. The Employee's right to exercise any Units granted
herein shall not vest until August 16, 1995. Thereafter, the Employee's
right pursuant to Section 4 to exercise any Units granted herein shall vest,
subject to Sections 4(b) and 7 hereof, at a rate of 16,662 Units on
August 16, 1995 and at a rate of 2,777 Units on the day of each month
thereafter until the 16th day of January, 1998, at which time the 2,805
unvested Units shall vest. Such vesting shall occur only if the Employee is in
the full time employ of the Company or any Company subsidiary on each vesting
date and has been continually employed (except for such leaves of absence as
have been approved by the Company's Board of Directors) for the period
commencing as of the date of this Agreement.
4. EXERCISE OF RIGHTS.
------------------
(a) Upon the exercise of the rights relating to each vested Unit, Employee
will be entitled to receive payment for the Net Appreciation pursuant to Section
5 hereof. Vested Units may be exercised at the sole discretion of the Employee
at any time after August 16, 1995, and continuing thereafter with no
expiration date on Employee's right to exercise the Units except as provided
herein.
(b) On the date the Employee ceases, for any reason, to be employed by the
Company, Employee shall forfeit all non-vested Units granted him. For this
purpose, Employee's employment shall not be deemed to be continued for any days
Employee is paid for accrued vacation or sick pay or for severance pay. If
Employee's employment is terminated for any reason other than for Misconduct (as
defined in Section 7), upon such termination all vested but unexercised Units
shall be deemed to have been immediately exercised and payment shall be made to
the Employee or, in the case of the Employee's death, to his designated
beneficiary or beneficiaries pursuant to Section 10 hereof.
(c) Except as provided in Section 4(b), Employee must give written notice
of any exercise of rights with regard to vested Units to the Human Resources
Committee of the Company and to the Chief Financial Officer of the Company at
the
2
<PAGE>
address of the Company. Such written notice must be given in the manner or form
as the Human Resources Committee may determine. Any exercise of rights will be
deemed to have been made on the date such notice is received by the Human
Resources Committee (the "Exercise Date").
5. PAYMENT FOR UNITS.
-----------------
(a) Upon exercise by the Employee of each vested Unit, the value of each
Unit will be the Net Appreciation and Employee will be entitled to payment from
the Company for the number of vested Units multiplied by the Net Appreciation.
(b) Within 10 days after the Exercise Date of any vested Units by the
Employee, the Company shall be obligated to pay the Employee in cash which shall
be made by check in U.S. dollars (the "Payment Due Date"). If the Company does
not have sufficient funds on hand on the Payment Due Date to make a lump sum
cash payment due Employee, which determination shall be made by the Company in
its sole discretion, the Company may elect to pay one half of the amount due in
cash by check in U.S. dollars and to pay the balance by entering into a
promissory note with Employee whereby Company will pay the payment to Employee
in monthly installments over a period not to exceed 36 months. Such note shall
be unsecured and shall bear interest at an annual rate equal to the prime rate
as announced by the Company's then primary bank. Upon the death of the
Employee prior to complete payment to him of the entire balance of any such
note, all remaining payments due under the note shall be payable to the
Employee's designated beneficiary or beneficiaries pursuant to Section 10
hereof. Following such payment or the entering of such a note, the Company shall
reduce on its records the total number of Units held by the Employee by the
number of Units exercised.
(c) The Employee shall not be obligated to make any payments to the
Company in the event that the value of his Units at any time is less than zero.
(d) To the extent required by applicable law, the Company shall make tax
withholdings on payments made by the Company. The payments required to be made
by the Company under this Section 5 shall be reduced by the amount required to
be withheld by the United States Internal Revenue Code and the Regulations
adopted thereunder and any applicable state law.
6. CHANGE OF CONTROL OF COMPANY.
----------------------------
(a) If the Effective Date of a Change of Control of the Company shall
occur prior to August 16, 1995, Employee shall forfeit all Units, vested and
non-vested,
3
<PAGE>
granted him and this Agreement shall be considered cancelled and of no further
force or effect and no payment shall be due Employee.
(b) For purposes of this Agreement, Change of Control shall mean: the
purchase or other acquisition by any person, entity or group of persons, within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended ("Act"), or any comparable successor provisions, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Act) of 50% or more of
either the outstanding shares of Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally, or
the approval by the stockholders of the Company of a reorganization, merger, or
consolidation, in each case, with respect to which persons (not including the
Company's Employee Stock Ownership Plan) who were stockholders of the Company
immediately prior to such reorganization, merger or consolidation do not
immediately thereafter own more than 50% of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding securities, or a liquidation or
dissolution of the Company or of the sale of all or substantially all of the
Company's assets. Effective Date shall mean the date on which the Change of
Control became a legally enforceable transaction between the Company and the
other party or parties to the Change of Control transaction.
7. TERMINATION FOR MISCONDUCT. In the event the Employee's employment
is terminated for Misconduct, then all unexercised vested Units shall be
redeemed by the Company within 30 days after termination of employment for the
total cash amount of $1.00 for all such Units. The term Misconduct shall mean
(i) repeated failure to report for work other than due to illness or authorized
leave of absence; (ii) conviction of a felony; (iii) an act of fraud,
embezzlement or dishonesty; (iv) deliberate and intentional violation of the
material policies or procedures of the Company; or (v) deliberate and
intentional disregard of instructions from the Company's Board of Directors.
8. NONASSIGNABILITY. No right granted herein shall be assignable or
transferable by the Employee except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order. Except as
specifically set forth above, the rights shall be exercisable only by the
Employee and no other person shall acquire any interest therein.
9. ADJUSTMENT FOR RECAPITALIZATION. If the outstanding shares of Common
Stock of the Company are increased, decreased or otherwise changed through a
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate adjustment
shall
4
<PAGE>
be made by the Board of Directors of the Company in the number of Units granted
in this Agreement, the non-vested Units granted prior to the change, and Base
Value of the Units vested but unexercized.
10. DESIGNATION OF BENEFICIARY. The Employee may designate one or more
beneficiaries (who may be designated contingently or successively and which need
not be natural persons) to receive payment for his Units pursuant to Sections
4(b) or 5(b) hereof in the event the Employee dies prior to his receiving the
full amount to which he is entitled thereunder. If the Employee has not
designated a beneficiary, or if a designated beneficiary predeceases the
Employee, the Company shall pay the balance of the amount due the deceased
Employee or beneficiary to the Employee's or beneficiary's personal
representative.
11. NOTICES. All notices to be given hereunder shall be deemed duly
given when delivered personally in writing or mailed, certified mail, return
receipt requested, postage prepaid and addressed, as follows:
(a) If to be given to the Company:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attn: Chief Financial Officer
With a copy of the notice to:
Human Resources Committee of Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
(b) If to be given to Employee:
Horst K. Mehlfeldt
c/o Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
or any such other address as either of the parties may furnish to the other in
writing in accordance with this Section.
5
<PAGE>
12. MISCELLANEOUS. This Agreement may not be changed nor can any
provision hereof be waived except by an instrument in writing duly signed by the
parties to this Agreement, and for all purposes this Agreement constitutes a
separate and independent agreement. This Agreement shall be interpreted,
governed and controlled by the laws of the state of Colorado.
13. INTEGRATION. This Agreement represents the entire agreement and
understanding of the parties hereto in respect of the matters referred to
herein, and supersedes any prior agreement and understanding between the parties
hereto in respect of such matters.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
BIG O TIRES, INC.
By: /s/ John B. Adams, Executive Vice President
EMPLOYEE:
By: /s/ Horst K. Mehlfeldt
6
<PAGE>
STOCK APPRECIATION RIGHTS AGREEMENT
This STOCK APPRECIATION RIGHTS AGREEMENT ("Agreement") dated as of
February 15, 1995, is between Big O Tires, Inc., a Nevada corporation (the
"Company"), and Steven P. Cloward ("Employee").
This Agreement sets forth the terms and conditions of the stock
appreciation rights granted by the Company to the Employee.
Employee is employed at the pleasure of the Company as its
President and a Member of the Office of the Chief Executive, under the
direction of the Company's Board of Directors.
In consideration of the mutual covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Employee, intending to be
legally bound hereby, agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHTS.
----------------------------------
(a) Subject to vesting as provided in Section 3 hereof, the Company hereby
grants Employee 100,000 share equivalent units (the "Units"), each of which
shall represent an equal, undivided interest in the future appreciation in the
value of a share of the Company's common stock ("Common Stock").
(b) The Company shall not be required to segregate any of its assets in
order to provide for the satisfaction of its obligations with respect to the
Units awarded herein. The Employee shall have no interest whatsoever in any
particular property or assets of the Company.
(c) The Units do not, in and of themselves, constitute a share of, or
represent any ownership interest in, the Company. The Employee shall have no
rights of a shareholder of the Company by virtue of the award of Units herein.
The Units represent, upon vesting as provided in Section 3 hereof, the right to
cash as provided in Section 5.
2. DESCRIPTION OF UNITS. Subject to vesting as provided in Section 3
hereof, each Unit shall entitle the Employee to receive, in cash only, the
difference between the Base Value of a share of Common Stock and the Market
Value of a share of Common Stock on the Exercise Date (the "Net Appreciation").
Base Value shall mean $13.875 per share. Market Value shall mean, as of any
Exercise Date, the average composite closing price of the Common Stock on the
Nasdaq National
1
<PAGE>
Market System or any national securities exchange on which the Common Stock is
then traded (or if the Common Stock is not then traded on the Nasdaq National
Market System or a national securities exchange, the average of the
representative closing bid prices of the Common Stock on the Nasdaq Small Cap
Market or the over-the-counter market), as reported in the Wall Street Journal
for each of the four (4) Trading Days preceding such date. Trading Days shall
mean a business day on which shares of the Common Stock have actually traded in
the public markets in the U.S. Exercise Date shall have the meaning ascribed to
such term in Section 4(c) hereof.
3. VESTING OF UNITS. The Employee's right to exercise any Units granted
herein shall not vest until August 16, 1995. Thereafter, the Employee's
right pursuant to Section 4 to exercise any Units granted herein shall vest,
subject to Sections 4(b) and 7 hereof, at a rate of 16,662 Units on
August 16, 1995 and at a rate of 2,777 Units on the last day of each month
thereafter until the 16th day of January, 1998, at which time the 2,805
unvested Units shall vest. Such vesting shall occur only if the Employee is in
the full time employ of the Company or any Company subsidiary on each vesting
date and has been continually employed (except for such leaves of absence as
have been approved by the Company's Board of Directors) for the period
commencing as of the date of this Agreement.
4. EXERCISE OF RIGHTS.
------------------
(a) Upon the exercise of the rights relating to each vested Unit, Employee
will be entitled to receive payment for the Net Appreciation pursuant to Section
5 hereof. Vested Units may be exercised at the sole discretion of the Employee
at any time after August 16, 1995, and continuing thereafter with no
expiration date on Employee's right to exercise the Units except as provided
herein.
(b) On the date the Employee ceases, for any reason, to be employed by the
Company, Employee shall forfeit all non-vested Units granted him. For this
purpose, Employee's employment shall not be deemed to be continued for any days
Employee is paid for accrued vacation or sick pay or for severance pay. If
Employee's employment is terminated for any reason other than for Misconduct (as
defined in Section 7), upon such termination all vested but unexercised Units
shall be deemed to have been immediately exercised and payment shall be made to
the Employee or, in the case of the Employee's death, to his designated
beneficiary or beneficiaries pursuant to Section 10 hereof.
(c) Except as provided in Section 4(b), Employee must give written notice
of any exercise of rights with regard to vested Units to the Human Resources
Committee of the Company and to the Chief Financial Officer of the Company at
the
2
<PAGE>
address of the Company. Such written notice must be given in the manner or form
as the Human Resources Committee may determine. Any exercise of rights will be
deemed to have been made on the date such notice is received by the Chairman of
the Human Resources Committee (the "Exercise Date").
5. PAYMENT FOR UNITS.
-----------------
(a) Upon exercise by the Employee of each vested Unit, the value of each
Unit will be the Net Appreciation and Employee will be entitled to payment from
the Company for the number of vested Units multiplied by the Net Appreciation.
(b) Within 10 days after the Exercise Date of any vested Units by the
Employee, the Company shall be obligated to pay the Employee in cash which shall
be made by check in U.S. dollars (the "Payment Due Date"). If the Company does
not have sufficient funds on hand on the Payment Due Date to make a lump sum
cash payment due Employee, which determination shall be made by the Company in
its sole discretion, the Company may elect to pay one half of the amount due in
cash by check in U.S. dollars and to pay the balance by entering into a
promissory note with Employee whereby Company will pay the payment to Employee
in monthly installments over a period not to exceed 36 months. Such note shall
be unsecured and shall bear interest at an annual rate equal to the prime rate
as announced by the Company's then primary bank. Upon the death of the
Employee prior to complete payment to him of the entire balance of any such
note, all remaining payments due under the note shall be payable to the
Employee's designated beneficiary or beneficiaries pursuant to Section 10
hereof. Following such payment or the entering of such a note, the Company shall
reduce on its records the total number of Units held by the Employee by the
number of Units exercised.
(c) The Employee shall not be obligated to make any payments to the
Company in the event that the value of his Units at any time is less than zero.
(d) To the extent required by applicable law, the Company shall make tax
withholdings on payments made by the Company. The payments required to be made
by the Company under this Section 5 shall be reduced by the amount required to
be withheld by the United States Internal Revenue Code and the Regulations
adopted thereunder and any applicable state law.
6. CHANGE OF CONTROL OF COMPANY.
----------------------------
(a) If the Effective Date of a Change of Control of the Company shall
occur prior to August 16, 1995, Employee shall forfeit all Units, vested and
non-vested,
3
<PAGE>
granted him and this Agreement shall be considered cancelled and of no further
force or effect and no payment shall be due Employee.
(b) For purposes of this Agreement, Change of Control shall mean: the
purchase or other acquisition by any person, entity or group of persons, within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended ("Act"), or any comparable successor provisions, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Act) of 50% or more of
either the outstanding shares of Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally, or
the approval by the stockholders of the Company of a reorganization, merger, or
consolidation, in each case, with respect to which persons (not including the
Company's Employee Stock Ownership Plan) who were stockholders of the Company
immediately prior to such reorganization, merger or consolidation do not
immediately thereafter own more than 50% of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding securities, or a liquidation or
dissolution of the Company or of the sale of all or substantially all of the
Company's assets. Effective Date shall mean the date on which the Change of
Control became a legally enforceable transaction between the Company and the
other party or parties to the Change of Control transaction.
7. TERMINATION FOR MISCONDUCT. In the event the Employee's employment is
terminated for Misconduct, then all unexercised vested Units shall be redeemed
by the Company within 30 days after termination of employment for the total cash
amount of $1.00 for all such Units. The term Misconduct shall mean (i) repeated
failure to report for work other than due to illness or authorized leave of
absence; (ii) conviction of a felony; (iii) an act of fraud, embezzlement or
dishonesty; (iv) deliberate and intentional violation of the material policies
or procedures of the Company; or (v) deliberate and intentional disregard of
instructions from the Company's Board of Directors.
8. NONASSIGNABILITY. No right granted herein shall be assignable or
transferable by the Employee except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order. Except as
specifically set forth above, the rights shall be exercisable only by the
Employee and no other person shall acquire any interest therein.
9. ADJUSTMENT FOR RECAPITALIZATION. If the outstanding shares of Common
Stock of the Company are increased, decreased or otherwise changed through a
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate adjustment
shall
4
<PAGE>
be made by the Board of Directors of the Company in the number of Units granted
in this Agreement, the non-vested Units granted prior to the change, and Base
Value of the Units vested but unexercised.
10. DESIGNATION OF BENEFICIARY. The Employee may designate one or more
beneficiaries (who may be designated contingently or successively and which need
not be natural persons) to receive payment for his Units pursuant to Sections
4(b) or 5(b) hereof in the event the Employee dies prior to his receiving the
full amount to which he is entitled thereunder. If the Employee has not
designated a beneficiary, or if a designated beneficiary predeceases the
Employee, the Company shall pay the balance of the amount due the deceased
Employee or beneficiary to the Employee's or beneficiary's personal
representative.
11. NOTICES. All notices to be given hereunder shall be deemed duly
given when delivered personally in writing or mailed, certified mail, return
receipt requested, postage prepaid and addressed, as follows:
(a) If to be given to the Company:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attn: Chief Financial Officer
With a copy of the notice to:
Human Resources Committee of Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
(b) If to be given to Employee:
Steven P. Cloward
7732 South Glencoe Court
Littleton, Colorado 80122
or any such other address as either of the parties may furnish to the other in
writing in accordance with this Section.
12. MISCELLANEOUS. This Agreement may not be changed nor can any
provision hereof be waived except by an instrument in writing duly signed by the
5
<PAGE>
parties to this Agreement, and for all purposes this Agreement constitutes a
separate and independent agreement. This Agreement shall be interpreted,
governed and controlled by the laws of the state of Colorado.
13. INTEGRATION. This Agreement represents the entire agreement and
understanding of the parties hereto in respect of the matters referred to
herein, and supersedes any prior agreement and understanding between the parties
hereto in respect of such matters.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
BIG O TIRES, INC.
By: /s/ John B. Adams, Executive Vice President
EMPLOYEE:
By: /s/ Steven P. Cloward
6
<PAGE>
[LOGO]
BIG O TIRES, INC.
11755 E. Peakview Ave.
Englewood, CO 80111
Telephone: (303) 790-2800
FAX: (303) 790-0225
EXHIBIT 10.87
March 24, 1995
John E. Siipola
32 Upper Bay Road
Sunapee, NH 03782
RE: Severance Package
Dear John:
On behalf of the Board of Directors, I am writing you to confirm our arrangement
regarding severance payments that will be made to you in the event that a change
of control of the Company takes place between February 15, 1995, and August 16,
1995, inclusive.
As directed by the Board of Directors, the Human Resources Committee has
confirmed that your severance package will consist solely of a lump sum payment
of $150,000 in the event that such change of control occurs and your position
within the Company terminates as a result thereof.
In the event that you have any questions regarding this package, please let me
know.
Sincerely,
/s/ Frank L. Carney
Frank L. Carney
Chairman, Human Resources Committee
of the Board of Directors
cc: Board of Directors
Personnel File
<PAGE>
[LOGO]
BIG O TIRES, INC.
11755 E. Peakview Ave.
Englewood, CO 80111
Telephone: (303) 790-2800
FAX: (303) 790-0225
EXHIBIT 10.88
March 24, 1995
Horst K. Mehlfeldt
207 Lake Point Drive
Akron, OH 44333
RE: Severance Package
Dear Horst:
On behalf of the Board of Directors, I am writing you to confirm our arrangement
regarding severance payments that will be made to you in the event that a change
of control of the Company takes place between February 15, 1995, and August 16,
1995, inclusive.
As directed by the Board of Directors, the Human Resources Committee has
confirmed that your severance package will consist solely of a lump sum payment
of $150,000 in the event that such change of control occurs and your position
within the Company terminates as a result thereof.
In the event that you have any questions regarding this package, please let me
know.
Sincerely,
/s/ Frank L. Carney
Frank L. Carney
Chairman, Human Resources Committee
of the Board of Directors
cc: Board of Directors
Personnel File
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
------------
Big O Tire of Idaho, Inc.,
an Idaho corporation
Big O Retail Enterprises, Inc.,
a Colorado corporation
Big O Development, Inc.,
a Colorado corporation
O Advertising, Inc.,
a Colorado corporation
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints John B.
Adams and Philip J. Teigen, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution, for him in
his name, place and stead, in his capacity as an Officer, Director, or both, of
Big O Tires, Inc., a Nevada corporation ("Company"), to sign the Form 10-K
Report of the Company for the year-ended December 31, 1993, and any and all
amendments thereto and to file the same with the United States Securities and
Exchange Commission, granting on said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite necessary to be done in and about the premises, as fully to all agents
and purposes as he might or could do in person, hereby qualifying and confirming
all that said attorneys-in-fact or agents or any of them, or their or his
substitute or substitutes, may fully do or cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ John B. Adams Executive Vice President, 03/22/95
----------------- Chief Financial Officer ----------
John B. Adams and Director
Director
------------------- ----------
Ronald D. Asher
/s/ Frank L. Carney Director 03/23/95
----------------------- ----------
Frank L. Carney
/s/ Steven P. Cloward Director 03/22/95
----------------------- ----------
Steven P. Cloward
/s/ Everett H. Johnston Director 03/23/95
----------------------- ----------
Everett H. Johnston
/s/ Horst K. Mehlfeldt Vice-Chairman and Director 03/22/95
----------------------- ----------
Horst K. Mehlfeldt
/s/ John E. Siipola Director 03/22/95
----------------------- ----------
John E. Siipola
/s/ Ralph J. Weiger Director 03/23/95
----------------------- ----------
Ralph J. Weiger
/s/ C. Thomas Wernholm Director 03/23/95
----------------------- ----------
C. Thomas Wernholm
<PAGE>
APPENDIX 1
The undersigned Directors of Big O Tires, Inc., a Nevada corporation, hereby
waive notice of the Special Meeting by way of consent and without an actual
meeting on March 7, 1995 and consent to all actions taken at said meeting as
reflected in the above minutes.
DIRECTOR DATE
--------- ----
----------------- ----------
John B. Adams
/s/ Ronald D. Asher 3-21-95
------------------- ----------
Ronald D. Asher
----------------------- ----------
Frank L. Carney
----------------------- ----------
Steven P. Cloward
----------------------- ----------
Everett H. Johnston
----------------------- ----------
Horst K. Mehlfeldt
----------------------- ----------
John E. Siipola
----------------------- ----------
Ralph J. Weiger
----------------------- ----------
C. Thomas Wernholm
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,882,000
<SECURITIES> 0
<RECEIVABLES> 11,905,000
<ALLOWANCES> (835,000)
<INVENTORY> 14,219,000
<CURRENT-ASSETS> 33,718,000
<PP&E> 17,177,000
<DEPRECIATION> (5,146,000)
<TOTAL-ASSETS> 61,968,000
<CURRENT-LIABILITIES> 9,051,000
<BONDS> 0
<COMMON> 334,000
0
0
<OTHER-SE> 34,795,000
<TOTAL-LIABILITY-AND-EQUITY> 61,968,000
<SALES> 127,678,000
<TOTAL-REVENUES> 127,678,000
<CGS> 97,547,000
<TOTAL-COSTS> 97,547,000
<OTHER-EXPENSES> 24,025,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,465,000
<INCOME-PRETAX> 4,641,000
<INCOME-TAX> 1,950,000
<INCOME-CONTINUING> 2,691,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,691,000
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
