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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual report under Section 13 or 15(d) of the Securities and Exchange Act
of 1934 For the fiscal year ended December 31, 1995.
[ ] Transition report under Section 13 or 15 (d) of the Securities and
Exchange Act of 1934
For the transition period from ____________________ to __________________.
Commission file number 0-15501
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BIKERS DREAM, INC.
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(Name of Small Business Issuer in Its Charter)
California 33-0140149
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1420 Village Way Santa Ana, California 92705
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(Address of Principal Executive Offices) (Zip Code)
(714) 835-8464
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(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of each class on Which Registered
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Common Stock, No Par Value NASDAQ (OTC Bulletin Board)
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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(Title of Class)
2,522,037
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(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
(1)No X
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(2)Yes X
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B not contained in this form, and no disclosure will
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-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenue for its most recent fiscal year. $7,790,090
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange
Act.)
The aggregate market value of voting stock held by non-affiliates was
$14,395,700, based on the average bid and asked prices of said stock on
March 27, 1996.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. The number of shares
outstanding of the issuer's common stock as of March 27, 1996, was 5,905,912
shares.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference:
Registration Statement and Prospectus, Form SB-2, filed March 31, 1995 and
effective November 27, 1995, whereby 2,221,117 shares of affiliates and
non-affiliates were registered. Certain exhibits thereto are incorporated by
reference on the exhibit list attached hereto, Item 13.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PART I PAGE
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 7. Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, F-1, F-26
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART III
Item 9. Directors and Executive Officers of Bikers Dream, Inc. . . . . . . . . . . . . . . . . . . 16
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 11. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 19
Item 12. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 21
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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ITEM 1. BUSINESS
GENERAL BUSINESS DEVELOPMENT
The Company, which was formerly known as HDL Communications, was incorporated
in California in October, 1985. The Company was engaged in the publishing
business until June, 1989, when it discontinued operations. The Company
remained inactive until March 13, 1995 when it acquired Bikers Dream, Inc., a
California corporation engaged in the sales and service of used Harley-Davidson
motorcycles and in retail sales of aftermarket accessories and parts for
Harley-Davidson motorcycles. Prior to its acquisition of Bikers Dream, Inc.,
the Company effected a 1 for 1,363,341.473 reverse split of its outstanding
Common Stock. After the acquisition, Bikers Dream, Inc. was merged into HDL
Communications and HDL Communications changed its name to Bikers Dream, Inc.
For accounting purposes, Bikers Dream, Inc. is considered to be the acquiror of
HDL Communications.
BUSINESS OF BIKERS DREAM
The Company operates five retail outlets known as Bikers Dream Superstores
("Superstores"), selling quality used Harley-Davidson motorcycles ("Harleys")
and a full range of aftermarket parts, accessories and service to Harley
enthusiasts. The Company is not a licensed Harley-Davidson dealer and does
not sell new Harley-Davidson motorcycles or buy any products or services
directly from Harley-Davidson, Inc. The aftermarket for parts and accessories
for Harleys is believed to be quite large, although there is no known public
source for sales statistics. There are more than 600,000 Harleys currently
registered in the United States and, based upon the Harley-Davidson Company's
current production plans, this number will increase to approximately 900,000 by
1999. New Harleys are in high demand, with customers waiting up to one year or
more to buy one and many customers have turned to the resale market to satisfy
their desire for a Harley. The Company believes that Harley customers
typically spend between $4,000 and $10,000 on their newly acquired Harleys in
the form of custom upgrades and accessories within two years of their initial
purchase of the motorcycle. The Company does not depend on any one customer to
support its retail operations.
The Company's Superstores are located in Santa Ana, California, Thousand Oaks,
California, Sacramento, California, Dallas, Texas and Tampa Bay, Florida. The
Company is also establishing a network of franchised Bikers Dream stores, five
of which are open and operating as of March 27, 1996. Sales of aftermarket
parts and accessories are also made through the Company's 100 page full color
mail order catalogue.
The Company intends to actively pursue a strategy of business growth that
involves the opening of additional Superstores, and is also pursuing the sale
and opening of additional franchises. In addition the Company plans to open a
central warehouse to replenish inventories of Company-owned Superstores and
franchises and to fill orders received from mail-order catalogue customers.
The Company further has opened what it believes is the first retail store of
its type on wheels, which the Company calls "Dream Wheels." This mobile retail
store is a 53 foot tractor/trailer which will travel the United States to
promote and sell motorcycles, accessories and apparel to Harley enthusiasts at
nationally acclaimed events such as Daytona Bike Week, Sturgis, Laconia and the
Laughlin River Run. Dream Wheels will carry up to 20 motorcycles for sale as
well as a variety of accessories and apparel. It made its initial debut at
Daytona Bike Week, March 1-10, 1996.
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BIKERS DREAM SUPERSTORES
Each Superstore features a large showroom for the display of merchandise,
warehousing for inventory and a repair and customizing shop. The Santa Ana
Superstore also contains administrative and franchise training offices. The
showroom is organized to allow variation in location of the displays to
accommodate customer traffic flow within the store and heighten interest. The
area designated as service and assembly is large enough to house a staff of
mechanics and service personnel and is capable of accommodating the custom
building and rebuilding of motorcycles. The forward area of the showroom is
reserved for a display of used Harley-Davidson motorcycles for sale. Larger
Superstores are approximately 10,000 square feet in size, while smaller
Superstores are approximately 4,000 to 6,000 square feet. The Company
currently has three large Superstores and two small Superstores. Management
believes this compares favorably with many competitive providers of aftermarket
parts, accessories and services to Harley owners which are small, independently
owned shops, ranging in size from approximately 1,500 to 4,000 square feet and
located in older facilities. These independent shops have limited space for
display of motorcycles and accessories to appeal to today's typical Harley
customer. In addition, most Harley dealers have few, if any, new Harleys in
the showroom since they have all been pre-sold, nor do they carry a large
number of used Harleys.
USED HARLEY SALES
Each large Superstore showroom typically has 30 or more quality used Harleys on
display at all times. Approximately 70% of these are 1990 to 1996 model
Harleys, approximately 20% are 1984 to 1990 models and the remaining 10% are
pre-1984 models and an occasional classic. Most of the Harley models on
display feature the "Evolution" power train which the Harley-Davidson Company
began producing in 1984. Approximately 25% of the used Harleys on display in a
Superstore showroom are owned by the Company and the remaining 75% are taken on
consignment.
Sources of used Harleys are numerous and include private sellers, regional
brokers, in-house buyers and regional/national motorcycle sales publications.
The Company buys used Harleys taking into consideration the wholesale value of
the motorcycle and the costs of buying, delivering, repairing, reconditioning
and otherwise making the motorcycles ready for sale. The Company believes that
it will not encounter significant difficulty in maintaining its inventory of
used Harleys, although prices of used Harleys are subject to market variations.
Approximately 75% of the used Harleys sold by the Company have been taken in on
consignment. Under this arrangement the Company receives a flat fee plus the
difference between the actual sales price and the price agreed upon by the
Company and the consignee. Consignments are obtained through local ads,
referrals, and ongoing consignee relationships.
The Company uses an on-line video system in each of its larger Superstores,
which allows customers to view, in real time full motion video, all models of
Harley motorcycles and other custom items, such as custom paint jobs, available
at all of the larger Superstores and at participating Bikers Dream franchise
stores. Management believes that this is a new concept in retail motorcycle
sales and customers have accepted the concept very favorably.
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As part of its commitment to sell quality used Harleys, the Company's service
department inspects each motorcycle in accordance with a comprehensive,
standard inspection list. All safety-related items such as brakes, lights and
tires, are repaired as needed prior to offering the motorcycle for sale. Other
repairs and reconditioning, if required, can also be done by the Company's
service department. In addition, all motorcycles are thoroughly detailed
before they are placed on the showroom floor.
The Company offers financing through several financial sources at rates which
the Company believes are competitive with other financing sources for
motorcycles. The Company also offers third party warranty policies on the late
model Harley motorcycles it sells. The warranty policies are sold at a premium
over dealer cost. Motorcycle insurance is also offered through several
independent national companies. The Company receives a fee of up to 20% of the
annual insurance premium. Warranties and insurance are also often financed, at
inception of the sale, with recourse, or over the term of the finance agreement
following the rule of 78's.
The Company also has an agreement with a leading financial institution whereby
the institution has issued and underwritten a Bikers Dream credit card which
can be used to purchase motorcycles as well as parts, accessories and apparel.
This credit card can only be used at Superstores and participating Bikers Dream
franchise stores.
AFTERMARKET PRODUCTS
The Company stocks and sells an extensive range of aftermarket products for the
Harley enthusiast. Many of these products are not offered by Harley dealers
because of the sourcing restrictions in their dealer agreements, nor by
independent retailers who typically carry a limited range of products for a
variety of motorcycles. According to published reports, only 23% of the
independent retailers carry aftermarket parts and accessories for Harleys. The
Company currently offers as many as 10,000 different parts, accessories and
apparel items, including replacement parts for Harley motorcycles. The Company
does not buy any products directly from the Harley-Davidson Company.
The Company has supply arrangements with most of the major motorcycle
aftermarket parts and accessory suppliers. Under these arrangements, only one
of which is subject to a formal agreement, the Company is entitled to quantity
discounts on a distributor-type basis, allowing the Company to sell certain
products at dealer price levels to the Company's franchisees and other dealers.
The Company purchases its parts and accessories on either extended terms or on
a COD basis and considers its relationship with its suppliers to be good. No
single company supplies more than 20% of the products sold by the Company.
Management believes that the loss of any supplier would not have a material
adverse effect on the Company because other suppliers could be relied upon to
meet the Company's requirements at a comparable cost.
The Company sells a line of accessories under the brand names Dream Products
and Bikers Dream Products. Some of these products, such as Dream Seats (custom
motorcycle seats) are designed in-house, and some are existing products which
are private label. The Company, pursuant to arrangements with the
manufacturers, also blister packs or repackages certain items using the Bikers
Dream Logo. The Company plans to expand its proprietary product line and
utilize blister packaging as merchandising and sales warrant.
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The Company also sells a complete line of products under its Chrome Exchange
Program. Under this program, retail customers select a chrome part from a list
of over 100 items that the Company keeps in stock. These are new and like new
parts which have been chrome plated by a quality outside vendor. The customer
pays not only for the added chrome to the part, but also a "core" charge for
the part itself at the time of purchase. The customer then has the option to
return their like "core," which was removed from their motorcycle, for credit.
The returned core is completely inspected by qualified Bikers Dream personnel
to ensure that it meets the original manufacturers specifications. If it meets
those strict specifications, the customer then receives credit for the core.
The core is then re-chromed for sale to the next customer. This program helps
keep the cost down for those customers who enjoy upgrading their motorcycle.
Those parts used in the program are re-cycled by Bikers Dream to satisfy the
needs of the customer.
SERVICE DEPARTMENT
The service department of each Superstore services and repairs customer-owned
Harleys as well as the used Harleys on display in the showroom. The service
department can also install parts and accessories sold in the Superstore.
FRANCHISING ACTIVITIES
The Company is in the process of establishing a network of franchised Bikers
Dream stores. The franchise stores are modeled after the Company-owned
Superstores and are expected to be located throughout the United States to
service the mid-size markets not directly serviced by large Company-owned
Superstores. The Company has sold ten Bikers Dream franchises (three in
California and seven in other states). The franchises were sold at a price of
$15,000 per franchise. Five of these franchises are currently open and
operating, of which two have filed suit for breach of contract. In addition,
the Company is conducting negotiations with several other potential candidates
for the sale of a Bikers Dream franchise.
The Company has marketed its franchises primarily by advertising in motorcycle
and speciality magazines. The franchise advertisement has appeared in a
portion of a larger general advertisement featuring the Company's products,
service and mail-order catalogue. The majority of responses to the franchise
advertisements has been from Harley owners and enthusiasts. The Company
continues to advertise in publications such as The Robb Report, The Dupont
Registry, Big Twin and Easy Rider magazines.
Each franchise receives an exclusive territory for which the franchisee pays an
initial franchise fee and monthly royalties based on sales. The Company
provides franchisees with in-house and on-site training and a copy of the
Company's franchise operations manual, ongoing newsletters, site training and
other operational marketing assistance.
The Company was advised in 1995 by its retained special franchise counsel that
certain previous franchise sales and offers to sell franchises were not in
compliance with applicable federal and state franchise laws and regulations.
Special franchise counsel also advised the Company that applicable federal and
state franchise laws have broad enforcement provisions, and that under certain
state laws the potential and existing franchisees may have a private cause of
action for franchise violations. Consequently, the Company suspended its
franchise sales activities in March, 1995 while it was in the process of
preparing
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the required disclosure documents and complying with federal and state
franchising laws for future offers and sales of franchises. The Company,
through its wholly owned subsidiary, Bikers Dream International, Inc. ("BDII"),
has filed its franchise registrations as required by law, and as of December
31, 1995, is authorized to sell franchises in all states and possessions of the
United States.
The Company has restructured its franchise program, and resumed its franchise
sales activities in August, 1995. Bikers Dream has resolved disputes with
three franchisees, and one person who was negotiating to acquire a Bikers Dream
franchise in California in accordance with the remedies available under
California franchise laws. As a result the Company has acquired one operating
franchise from a California franchisee for approximately $340,000, another for
approximately $140,000, and has made refund to another franchisee in the amount
of $20,176. The Company has also accrued the return of the franchise fee for a
non-California franchise which never opened. In addition, the Company has paid
a prospective California franchisee $22,500 for a full release of any and all
past and future claims.
The Company has signed a new franchise agreement with one of its existing
franchisees, and received notice of suit from two of its franchisees in
February and March of 1996, which Management believes at this time are likely
to be claims of no material consequence. The Company is currently evaluating
its relationship with the two other franchisees. The Company also signed a
mutual release agreement in February, 1996 with another franchise which
cancelled the relationship with Bikers Dream. Management believes that it will
resolve the existing disputes with two franchisees and that the remaining two
franchisees will accept the Company's offer regarding the restructured
franchise program and remain franchisees of the Company.
COMPETITION
The market in which Bikers Dream competes is highly competitive. The main
source of competition is the licensed Harley-Davidson motorcycle dealer
network, which primarily sells new Harley-Davidson motorcycles, accessories and
parts and provides repair/maintenance service on all Harley-Davidson models.
Bikers Dream believes that most of the licensed Harley-Davidson dealers neither
emphasize nor use marketing or business practices and procedures comparable to
those used by the Company in the sale of used Harley-Davidson motorcycles or
the sale of aftermarket accessories and apparel. In addition, there are a
substantial number of independent motorcycle shops which provide aftermarket
parts, services and accessories to Harley-Davidson motorcycle owners. Bikers
Dream believes that most of the aftermarket motorcycle shops are small,
privately owned businesses with limited facilities, capital and other
resources.
PATENTS, LICENSES AND TRADEMARKS
The Company has no patents or product licenses. The Company has obtained a
service mark registration in the United States for the mark "Bikers Dream."
REGULATION
The Company's operations are subject to regulation, supervision and licensing
under various federal, state and local statutes, ordinances and regulations.
Compliance with existing laws and regulations applicable to the Company has not
had a material adverse effect on the Company's operations. Management believes
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that it maintains all requisite licenses and permits and is in compliance with
all applicable federal, state and local laws and regulations.
EMPLOYEES
As of December 31, 1995, the Company had 83 full time employees.
ITEM 2. PROPERTIES
Bikers Dream operations are conducted in leased facilities located throughout
the United States. Its primary administrative facilities are located in Santa
Ana, California. The following table describes the general character of the
existing facilities as of December 31, 1995:
<TABLE>
<CAPTION>
LOCATION PRIMARY FUNCTION SQUARE FEET LEASE EXPIRES
- -------- ---------------- ----------- -------------
<S> <C> <C> <C>
Santa Ana, California Executive Offices,
Corporate Warehouse &
Retail Superstore 12,107 2003
Dallas, Texas Retail Superstore 10,000 1999
Clearwater, Florida Retail Superstore 10,500 2000
Thousand Oaks, California Retail Store 4,092 1999
Sacramento, California Retail Store 10,480 2000
</TABLE>
The Santa Ana location serves not only as a retail Superstore location, but
also as a central warehouse supplying goods to both company owned retail stores
and franchised dealerships. While the Company believes that its current
facilities are adequate for its current needs, future expansion of additional
company-owned retail stores and franchised dealerships may necessitate
expansion of the Corporate Warehouse and Executive Offices.
ITEM 3. LEGAL
There were no material legal proceedings, pending or in existence, to which the
Registrant was a party as of December 31, 1995. Subsequent to December 31,
1995, the Registrant received two "cease and desist" notices of alleged patent
infringements related to Bikers Dream label products. The Company is
investigating these claims, and does not believe they are likely to have a
material effect on the Company's business.
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In February and March, 1996, the Company was served with lawsuits from its
Oklahoma and North Carolina franchisees alleging, generally, certain violations
of state statutes governing franchise activities and failing to provide
adequate franchisee support.
The Oklahoma franchisee seeks compensatory damages in the amount of $71,627 and
unspecified punitive damages, and the North Carolina complaint seeks damages in
excess of $10,000 for breach of contract, and a sum in excess of $10,000 for
punitive damages.
The position of the Company at this time is that these lawsuits are without
merit; however, investigation and the discovery process are in early stages.
Management has provided a reserve for its expected costs associated with these
claims and does not believe these claims are likely to have a material effect
on the Company's financial prospects in excess of the reserves provided.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
There were no matters submitted during the fourth quarter of fiscal year 1995
to a vote of security-holders.
ITEM 5. MARKET FOR BIKERS DREAM, INC. COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Bikers Dream, Inc. common stock is traded in the over the counter market and
quoted on the National Association of Securities Dealers Electronic Bulletin
Board ("OTC Bulletin Board") under the symbol "BIKR." It was previously traded
under the ticker symbol "HOGS" until December 29, 1995 at which time it was
changed to the current "BIKR" symbol. The stock first began trading as Bikers
Dream, Inc. on March 23, 1995. To date, the volume of trading in the Common
Stock has been limited and, therefore, the market prices for the Common Stock
may not accurately reflect the value of the Company. The high and low bid
prices for the common stock were as follows:
<TABLE>
<CAPTION>
1995 LOW HIGH
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<S> <C> <C>
First Quarter $1.75 $1.75
Second Quarter $1.75 $4.00
Third Quarter $1.25 $4.75
Fourth Quarter $1.375 $4.75
</TABLE>
To date, the Company has not paid dividends on its common stock.
As of December 31, 1995, there were approximately 1,300 shareholders of record
of Bikers Dream, Inc. common stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Bikers Dream, Inc., incorporated in California in 1985 as HDL Communications,
Inc., sells used Harley-Davidson motorcycles ("Harleys") and aftermarket parts,
accessories and related apparel to Harley enthusiasts. From 1990 until late
1993, the business operated in a facility of approximately 2,400 square feet in
Huntington Beach, California. In December, 1993, the Company opened its first
Superstore, a 12,100 square foot facility located in an up-scale commercial
center in Santa Ana, California. The Company's second Superstore, a 10,000
square foot facility, was opened on April 8, 1995 in Dallas, Texas. The third
Company-owned Superstore was opened on July 28, 1995, in Clearwater, Florida
(Tampa Bay area). The fourth Company-owned Superstore, a 4,100 square foot
facility, was acquired from a former franchisee on September 22, 1995 and is
located in Thousand Oaks, California. The fifth Company-owned Superstore was
acquired in November, 1995 from another former franchisee. It is a 10,500
square foot facility located in Sacramento, California, approximately one-half
of which is being currently utilized.
In early 1996, the Company launched it first mobile store. This store, which
is a custom built 53 foot trailer pulled by a Kenworth tractor, is believed to
be the first of its kind in the industry. This mobile store, called "Dream
Wheels," carries motorcycles, parts, accessories and apparel for sale at major
motorcycle events throughout the United States. The tractor and the trailer
have been financed substantially with outside debt for which the equipment is
pledged as security. Dream Wheels made its debut at Daytona Bike Week on
March 1, 1996.
In addition to retail sales at its Superstores, aftermarket parts, accessories
and related apparel are sold through the Company's 100 page full color mail
order catalogue. The Company published its second catalogue in February, 1996
for distribution at major biker events such as the Daytona Bike Week,
March 1-10, 1996, and the Laughlin River Run of April 18-21, 1996. The Company
plans to create its third catalogue of approximately 320 pages in the second
half of 1996 for pre-holiday distribution. All catalogues will be full color
productions.
The Company is in the process of establishing a network of franchised Bikers
Dream stores. As of December 31, 1995, the Company had sold ten Bikers Dream
franchises (three in California and seven in other states) at a price of
$15,000 per franchise, five of which are currently open and operating. In
addition, the Company has conducted negotiations with several other potential
franchisees for the sale of a Bikers Dream franchise. The Company was advised
in March, 1995 by its special franchise counsel that certain previous franchise
sales and offers to sell franchises were not made in compliance with applicable
federal and state franchise laws and regulations. Special franchise counsel
also advised the Company that applicable federal and state franchise laws have
broad enforcement provisions, and that under certain state laws the potential
and existing franchisees may have a private cause of action for franchise
violations. Consequently, the Company suspended its franchise sales activities
in March, 1995 while it was in the process of preparing the required disclosure
documents and complying with federal and state franchising laws for future
offers and sales of franchises. The Company, through its wholly owned
subsidiary, Bikers Dream International, Inc. ("BDII") has filed its franchise
registrations as required by law and as of December 31, 1995, is authorized to
sell franchises in all states and possessions of the United States. The
Company restructured its franchise program and resumed its franchise sales
activities in late August, 1995.
Bikers Dream provided written notice to its three California franchisees and
one person who was negotiating to acquire a Bikers Dream franchise of their
remedies and rights under California franchise laws. As a result, the Company
acquired two of its former franchises and returned deposits and certain
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expenses to the third franchisee and settled the claims of a prospective
California franchisee. The Company acquired one of the franchises in September
for approximately $340,000 and the other in late November for approximately
$140,000. In addition, the Company settled a dispute with a potential
California franchisee during the fourth quarter of 1995.
The Company has also refunded the deposit of a non-California franchisee which
never commenced business operations, and also signed a mutual release with
another franchisee to terminate the relationship. Two franchisees filed suit
in early 1996 for breach of contract, one franchisee has signed the new
franchise agreement, and negotiations are in process with the remaining two
franchisees to bring them under the new agreement. The Company now has a new
and more complete franchise circular as well as a new program to qualify
prospective franchise applicants. In addition, the franchise training and
support program has been expanded to reduce the risk of future franchise
difficulties.
RESULTS OF OPERATIONS
The following table sets forth for the period indicated the income and expense
items for the year ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31 -
-------------------
1995 1994
------ -------
<S> <C> <C>
Net Revenues $ 7,790,090 $ 4,626,821
Cost of goods sold 5,980,469 3,526,666
----------- -----------
Gross Profit 1,809,621 1,100,155
Other expenses (income)
Selling, general & administrative 3,870,014 1,121,484
Depreciation and amortization 74,543 20,115
Interest expense 33,359 19,990
Franchise income (146,996) (45,000)
Franchise reacquisition expense 269,918 0
Other (income) expense (3,250) (223)
----------- -----------
4,097,588 1,116,366
----------- -----------
Loss before benefit (provision) for
income taxes (2,287,967) (16,211)
(Provision) benefit for income taxes (59,726) 3,199
----------- -----------
Net Loss $(2,347,693) $ (13,012)
=========== ===========
</TABLE>
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COMPARISON OF TOTAL YEAR ENDED DECEMBER 31, 1995 AND 1994:
Net revenues for the year ended December 31, 1995 were $7,790,090, an increase
of $3,163,269 or 68.4% from the total year ended December 31, 1994. The
increase in net revenue is entirely due to the opening of new Company owned
Superstores in Dallas, Texas and Tampa, Florida during the year as well as the
acquisition of two former franchises in Thousand Oaks and Sacramento,
California, and the recognition of income from the sale of financing third
party financing contracts relating to the sale of motorcycles to trade
customers.
Comparable store sales for the year decreased 0.5% compared to the same period
of the prior year. This decrease was due to non-recurrence of the Company's
grand opening event which occurred during 1994 for the Company's then one and
only Superstore located in Santa Ana, California, and the partial distraction
of key retail personnel to the opening of new Superstores.
Total gross profit for the year ended December 31, 1995 was $1,809,621 which
was an increase of $709,466 or 64.5% over the same period in 1994. The
increase in gross profit was due to an increase in the level of sales volume
from the newly opened stores in Dallas, Tampa, Thousand Oaks and Sacramento,
and mix of products sold. The gross profit rate for the year ended December
31, 1995 was 23.2% compared to 23.8% for the same period in 1994. The change
in rate was due to sales mix, plus a reclassification of service department
labor from selling and administrative expenses to cost of goods sold.
Selling, general and administrative expenses were $3,870,014 for the year ended
December 31, 1995, which represents an increase of $2,748,530 or 245.1% over the
same period last year. This increase is due to several factors, including 1)
the opening of new Company owned Superstores, 2) relocation of new employees, 3)
adjustments in insurance costs as a result of audits by insurance carriers, 4)
legal expenses related to re-registration of franchise offering circular and
related matters, 5) legal and accounting fees related to becoming an SEC
reporting company and 6) the increase in executive staff necessary to continue
the Company's growth.
Depreciation and amortization expense was $74,543 for the year, which was
$54,428 or 270.6% higher than the same period in the prior year. The increase
was due to the increase in the number of Company owned Superstores plus the
addition of computers necessary to bring the financial function in house.
Franchise income for the year ended December 31, 1995 was $146,996 which
represents an increase of $101,996 or 226.7% over that of the preceding year.
This increase is attributed to the opening of new franchises during the year
and improved royalty income from franchise sales activities.
Franchise reacquisition expense includes all costs incurred in excess of the
value of assets acquired relating to acquisition of former franchises due to
defects in the original franchise offering circular. These defects have been
corrected in the new offering circular which became effective in August, 1995.
There were no franchises acquired in 1994.
13
<PAGE> 14
The provision for income taxes for total year 1995 was $59,726. This
represents an increase of $62,925. A benefit was recorded in 1994 of $3,199,
as compared to an expense in 1995. The Company decided to fully reserve for
the Deferred Tax Asset primarily related to its net operating loss carry
forwards beginning in the second quarter of 1995. The Company's management has
concluded that, based upon its assessment of all available evidence, the future
benefit of this asset cannot be projected accurately at this time. The major
underlying reason which led to this conclusion is the uncertainty of the
Company's ability to raise sufficient debt and equity capital necessary to
expand the number of Company-owned Superstores. The Company planned to use
this additional capital to expand its retail operations into new locations
which would generate more operating income. This additional operating income
from expanded retail trade-related activities would defray existing centralized
corporate overhead costs and generate additional operating profits to begin
utilizing the tax loss carry forwards. As a result of the current time delays
in the Company's ability to raise the amount of additional capital required,
the Company's management believes that it is not more likely than not that the
timing of the income turnaround can be predicted with accuracy.
The net loss for the year ended December 31, 1995 was $2,347,693 as compared to
a loss of $13,012 in the same period in 1994. This increase of $2,334,681 was
due to continued investment by the Company to expand the business through 1)
the opening of new Superstores in various parts of the U.S., 2) the costs
related to re-establishing the ability to sell franchises, 3) the costs
associated with increased public exposure following the reverse acquisition of
HDL Communications in March, 1995, and 4) the loss incurred in connection with
the acquisition of two former franchises. New Superstores take approximately
six to nine months until they reach the break-even point.
While the Company does not expect inflation to have a material impact upon its
operating results, there can be no assurance that inflation will not affect the
Company's business in the future. The Company expects to mitigate inflationary
increases through securing additional purchase volume discounts as net sales
increase through the opening of future Superstores and franchises.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has substantially relied upon equity capital to sustain
its present growth. In connection with the Company's reverse acquisition of HDL
Communications on March 13, 1995, the Company received $1.2 million from the
private placement of common stock and conversion of warrants.
The Company intends to finance future expansion through a combination of equity
and debt financing. The Company is aggressively pursuing various alternatives
to obtain either debt or equity capital to continue its growth. Although the
Company received $1,240,000 from the private placement of its convertible
promissory notes in June and July, 1995, $629,000 from the private placement of
convertible notes in December 1995, and $450,500 from a similar placement in
January, 1996, such amounts fell short of the additional $8,000,000 to
$10,000,000 deemed necessary to fund all future planned expansion of additional
retail Superstores and a centralized warehouse to supply the needs of the
Company-owned and franchised operations. If the Company is unable to raise
the required additional capital, operations will have to be modified and/or
downsized in order to achieve a profitable position.
14
<PAGE> 15
ITEM 7. FINANCIAL STATEMENTS
BIKERS DREAM, INC. AND SUBSIDIARIES
REPORT ON AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
15
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Bikers Dream, Inc.
Santa Ana, California
We have audited the accompanying consolidated balance sheet of Bikers Dream,
Inc. and Subsidiaries as of December 31, 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Bikers Dream,
Inc. and Subsidiaries as of December 31, 1995 and the consolidated results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has incurred recurring
losses from operations and the ability of the Company to raise additional funds
and ultimately achieve positive operating cash flows is uncertain and,
therefore, this raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Newport Beach, California
February 27, 1996
F-1
<PAGE> 17
Independent Accountants' Report
To the Stockholders of
Bikers Dream, Inc.
We have audited the accompanying balance sheet of Bikers Dream, Inc. as
of December 31, 1994 and the related statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 1994 and
1993. 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 audits 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Bikers Dream, Inc.
as of December 31, 1994, and the results of its operations and its cash flows
for the years ended December 31, 1994 and 1993 in conformity with generally
accepted accounting principles.
March 15, 1995 /s/ LESLEY THOMAS, SCHWARZ & POSTMA, INC.
Lesley, Thomas, Schwarz & Postma, Inc.
A Professional Accountancy Corporation
F-1.1
<PAGE> 18
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 And 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
A S S E T S:
Current assets:
Cash and cash equivalents $ 135,736 $ 18,136
Accounts receivable, net 286,392 98,014
Inventories 1,657,460 701,301
Note receivable from shareholder 24,616
Prepaid expenses and other current assets 131,095 60,296
----------- ----------
Total current assets 2,210,683 902,363
Property, equipment and capitalized leases, net 746,640 114,282
Deferred tax asset 64,785
Deposits and other assets 181,151 37,219
----------- ----------
Total assets $ 3,138,474 $1,118,649
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 434,465 $ 5,116
Other accrued expenses 630,666 125,748
Current portion of long-term debt 31,878 1,230
Current portion of notes payable 242,051 521,000
Notes payable to shareholders 197,047
----------- ----------
Total current liabilities 1,536,107 653,094
Deferred rent 98,374 73,504
Deferred tax liability 5,859
Notes payable, less current portion 642,426
Long-term debt, less current portion 177,412 72,324
----------- ----------
Total liabilities 2,454,319 804,781
----------- ----------
Commitments and contingencies (Note 4)
Shareholders' equity:
Common stock, no par value; 25,000,000 shares
authorized at December 31, 1995; 5,535,920
issued and outstanding at December 31, 1995 3,166,970 448,990
Accumulated deficit (2,482,815) (135,122)
----------- ----------
Total shareholders' equity 684,155 313,868
----------- ----------
Total liabilities and shareholders' equity $ 3,138,474 $1,118,649
=========== ==========
</TABLE>
See the accompanying notes to these consolidated financial statements.
F-2
<PAGE> 19
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1995, 1994 And 1993
--------------------
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Product sales $7,589,933 $4,626,821 $1,436,374
Financing contracts 200,157
--------- --------- ---------
Total revenues 7,790,090 4,626,821 1,436,374
Cost of goods sold 5,980,469 3,526,666 922,509
--------- --------- ---------
Gross profit 1,809,621 1,100,155 513,865
--------- --------- ---------
Expenses:
Selling, general and administrative expenses 3,870,014 1,121,484 641,986
Depreciation and amortization 74,543 20,115 16,004
Interest expense 33,359 19,990 22,980
Franchise income (146,996) (45,000)
Franchise reacquisition expense 269,918
Other (income) expense (3,250) (223) (2,830)
------------ --------- ---------
Total expenses 4,097,588 1,116,366 678,140
--------- --------- ---------
Loss before (provision) benefit for
income taxes (2,287,967) (16,211) (164,275)
(Provision) benefit for income taxes (59,726) 3,199 53,327
----------- --------- ---------
Net loss ($2,347,693) ($13,012) ($110,948)
========= ====== =======
Net loss per share ($0.50) ($0.004) ($0.10)
==== ===== ====
Weighted average shares outstanding 4,730,885 3,300,000 1,153,920
========= ========= =========
</TABLE>
See the accompanying notes to these consolidated financial statements.
F-3
<PAGE> 20
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Years Ended December 31, 1995, 1994 And 1993
--------------------
<TABLE>
<CAPTION>
Common Stock Total
--------------------- Accumulated Shareholders'
Shares Amount Deficit Equity
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
Balances, December 31, 1992 124,947 $17,000 ($11,162) $5,838
Issuance of common stock 1,028,973 140,000 140,000
Net loss (110,948) (110,948)
--------- --------- --------- ---------
Balances, December 31, 1993 1,153,920 157,000 (122,110) 34,890
Issuance of common stock 2,146,080 291,990 291,990
Net loss (13,012) (13,012)
--------- --------- --------- ---------
Balances, December 31, 1994 3,300,000 448,990 (135,122) 313,868
Reverse merger 300,920 300,920 300,920
Private placement 600,000 900,000 900,000
Notes payable conversions 1,120,000 1,740,000 1,740,000
Stock for services 15,000 30,000 30,000
Warrants exercised for cash 200,000 300,000 300,000
Costs associated with stock issuances (552,940) (552,940)
Net loss (2,347,693) (2,347,693)
--------- ---------- ----------- ----------
Balances, December 31, 1995 5,535,920 $3,166,970 ($2,482,815) $ 684,155
========= ========== =========== ==========
</TABLE>
See the accompanying notes to these consolidated financial statements.
F-4
<PAGE> 21
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1995, 1994 And 1993
--------------------
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($2,347,693) ($13,012) ($110,948)
----------- -------- ---------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Deferred income taxes 58,926 (3,999) (54,127)
Note receivable from shareholder - forgiven 24,616
Depreciation and amortization 74,543 20,115 16,004
Franchise reacquisition expense 269,918
Stock issuance for consulting services 30,000
Abandonment of fixed assets 8,161
Changes in assets and liabilities, excluding effects of
franchise acquisitions:
Decrease (increase) in accounts receivable (184,850) (90,945) 12,535
Decrease (increase) in inventories (895,191) (463,890) 133,091
Decrease (increase) in prepaid expenses and other
current assets (64,127) (60,296) 9,408
Increase (decrease) in accounts payable 458,745 (73,735) (147,985)
Increase in cash overdraft (41,922) (1,083)
Increase in other accrued expenses 504,918 3,648 80,057
----------- -------- ---------
Total adjustments 277,498 (711,024) 56,061
----------- -------- ---------
Net cash used in operating activities (2,070,195) (724,036) (54,887)
----------- -------- ---------
Cash flows from investing activities:
Increase in deposits (133,753) (18,509) (12,069)
Payments for purchases of fixed assets (387,431) (63,647) (56,213)
Acquisition of franchises (94,871)
Increase in deferred rent 24,870 73,504
----------- -------- ---------
Net cash used in investing activities (591,185) (8,652) (68,282)
----------- -------- ---------
</TABLE>
Continued
See the accompanying notes to these consolidated financial statements.
F-5
<PAGE> 22
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
For The Years Ended December 31, 1995, 1994 And 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt $ 64,000
Principal payments made on long-term debt and
capitalized leases ($89,690) ($83,144) (65,127)
Payments received on note receivable from shareholder 20,978 2,868
Proceeds from issuance of common stock 1,200,000 291,990 140,000
Costs associated with issuance of common stock (252,020)
Proceeds from issuance of notes payable 521,000 15,000
Proceeds from issuance of convertible notes payable 1,869,000
Principal payments made on notes payable (145,357)
Advances on note receivable from shareholder (33,572)
Proceeds from notes payable to shareholders 198,547
Payments on notes payable to shareholders (1,500)
--------- -------- --------
Net cash provided by financing activities 2,778,980 750,824 123,169
--------- -------- --------
Net increase in cash and cash equivalents 117,600 18,136 -
Cash and cash equivalents, beginning of year 18,136
--------- -------- --------
Cash and cash equivalents, end of year $ 135,736 $ 18,136 $ -
========= ======== =========
</TABLE>
Supplemental Information:
For the years ended December 31, 1995, 1994 and 1993, $33,359,
$19,990 and $22,986, respectively, of cash was paid for interest expense, and
$800 of cash was paid for state income taxes each year.
Supplemental Disclosures Of Noncash Activities:
The Company entered into capital leases on fixed assets in the amount of
$127,928 during 1995.
In September 1995, the Company purchased assets in the amount of $103,359
from a former franchisee, consisting of inventory of $30,961, deposits of
$8,820 and equipment of $63,578. In connection with this transaction, notes
payable in the amount of $247,950 were issued and cash paid of $94,871. In
November 1995, the Company purchased assets from a second franchisee in
the amount of $101,338, consisting of inventory of $44,155, deposits and
other assets of $13,752 and equipment of $43,431. In connection with this
transaction a note payable of $29,293 was issued to the former franchisee
and debt was assumed in the amount of $102,591. With respect to both of the
above transactions, the excess of the purchase price over assets acquired
was expensed during 1995 as these franchises were reacquired due to disputes
with the franchisees as a result of the Company's franchise circular not
being in compliance with applicable federal and state laws.
Continued
See the accompanying notes to these consolidated financial statements.
F-6
<PAGE> 23
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
For The Years Ended December 31, 1995, 1994 And 1993
------------
In March 1995, the Company converted a $500,000 promissory note into 500,000
shares of the Company in connection with the acquisition of HDL
Communications by Bikers Dream, Inc.
In June and July 1995, the Company issued convertible notes in the amount of
$625,000 and $615,000, respectively. These notes were converted into a
total of 620,000 shares of common stock of the Company during the year.
In December 1995, the Company entered into a note payable with a lender for
a Kenworth T-100 tractor in the amount of $97,498.
During 1994, the Company's President and CEO assumed ownership of a Company
automobile and truck, with a net book value of $36,901, along with
forgiveness of a note payable to the Company in the amount of $24,616, which
were treated as compensation expense.
See the accompanying notes to these consolidated financial statements.
F-7
<PAGE> 24
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 And 1993
------------
1. Company Operations And Liquidity:
Bikers Dream, Inc. (the "Company") was originally incorporated in
1991. As of March 13, 1995, the Company acquired a publicly-traded
dormant entity formerly known as HDL Communications ("HDL"). After
the acquisition, the Company was merged into HDL and HDL changed its
name to Bikers Dream, Inc. At the time of acquisition, there was no
active trading market for the Company's stock and management of the
Company and HDL determined in arm's length negotiation that the market
value of the combined entities was approximately $4.0 million (or
approximately $1.00 per share) which was evidenced by the number of
shares issued (4,100,000) in connection with the acquisition as
follows:
3.3 million shares to former Company shareholders
.3 million shares to former HDL shareholders
.5 million shares to holders of $500,000 of convertible
notes of HDL who converted them into shares of the
Company at a price of $1.00 per share immediately prior
to the closing of the acquisition
At the time of the merger, HDL's assets and liabilities consisted of a
note receivable of $500,000 from the Company and notes payable in the
amount of $500,000. As the notes were converted into shares
concurrent with the acquisition, the .3 million shares issued to
former HDL shareholders were issued in consideration for the public
entity HDL.
The substance of the transaction was a recapitalization of the
Company's shares for those of HDL's shares. Shareholders' equity has
been restated to give retroactive recognition to the recapitalization
and has been treated as a stock split for all periods presented. In
addition, all references in the financial statements to number of
shares and per share amounts of the Company's common stock have been
restated.
The surviving company is in the business of selling used Harley
Davidson motorcycles, parts, accessories, apparel and service through
Company-owned retail stores throughout the United States and selling
franchises based upon the Company concept.
The Company's consolidated financial statements for the year ended
December 31, 1995 have been prepared on a going-concern basis which
contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The
Company incurred a net loss of $2,347,693 for the year ended December
31, 1995 and as of December 31, 1995 had an accumulated deficit of
$2,482,815. The Company's working capital at December 31, 1995 is
$674,576. The Company experienced an increase in its selling and
administrative expenses of $2,748,530 over the prior year. This
increase was
Continued
F-8
<PAGE> 25
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
------------
1. Company Operations And Liquidity, Continued:
primarily the result of hiring additional corporate employees to
continue the Company's growth, the startup expenses associated with
the opening of two new Company-owned Superstores, an increase in audit
and legal fees related to the Company becoming an SEC reporting
company and expenses related to the Company's re-registration of its
franchise circular.
Management has previously relied on equity sources to fund operations
as the Company is in its initial growth and expansion stage and the
Company's access to third party financing has been limited. Access to
debt financing has been limited to capital leases entered into for
fixed asset purchases. As a result, the reliance by the Company on
equity sourcing is critical and may not be sufficient to fund
operations in the future and continue support of the corporate and
administrative expense structure.
The Company has retained an investment banking firm to advise and
assist in the sale of equity securities and or placement of private
debt. Management expects these efforts to result in obtaining
additional financing with which to expand its operations and increase
the number of Company-owned Bikers Dream superstores.
The Company has incurred recurring losses from operations and the
ability of the Company to raise additional funds and ultimately
achieve positive operating cash flows is uncertain and, therefore,
this raises substantial doubt about the Company's ability to continue
as a going concern.
Principles Of Consolidation:
The consolidated financial statements include the accounts of Bikers
Dream, Inc. and all of its wholly-owned subsidiaries, including the
accounts of Bikers Dream International, Inc., Bikers Dream
Distribution, Inc., Bikers Dream Management Services, Inc. and Bikers
Dream Eagle Enterprises, Inc. All significant intercompany accounts
and transactions are eliminated in consolidation.
Continued
F-9
<PAGE> 26
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
2. Summary Of Significant Accounting Policies:
Revenue Recognition:
Product Sales - Revenue from the sale of products is
recognized at the time of sale to a retail customer.
Financing Income - Financing income is the Company's
participation in finance contracts for motorcycle sales.
Revenue from financing income is recognized at the time
financing arrangements are contractually completed between a
retail customer and a third-party lender. The Company
recognizes as financing income 80% of the total finance income
expected to be received over the life of the finance contract.
This estimate is based on experience with similar contracts
owned by the finance company.
Franchise Income - Income from the sale of franchises is
recognized at the time the franchise commences retail
operations and the Company has performed substantially all
of the services which it is required to perform under the
Company's franchise agreement. These services provided to
franchises include, but are not limited to, assistance in site
selection and in-house and on-site training with instruction
using the Company's franchise operations manual.
Superstore Pre-Opening Costs:
All costs associated with opening a company-owned and operated
Superstore, with the exception of capitalized furniture, fixtures and
equipment, are expensed when incurred.
Advertising Costs:
Those costs associated with placement of advertisements in various
periodicals are expensed when the advertisement is run. Internal
development costs are expensed as incurred.
Catalog Costs:
Internal costs associated with the development of mail order catalogs
are expensed as incurred. External costs, excluding printing,
relating to the development of the catalog are capitalized and
amortized over 12 months from the first publication. Costs associated
with printing catalogs are inventoried when purchased and expensed as
catalogs are sold or distributed.
Continued
F-10
<PAGE> 27
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
2. Summary Of Significant Accounting Policies, Continued:
Income Taxes:
The Company utilizes Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes
are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the
amount expected to be realized. The provision for income taxes
represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
Net Loss Per Common Share:
The computation of fully diluted net loss per share was antidilutive
in each of the periods presented; therefore, the amounts reported for
primary and fully diluted are the same. Net loss per common share was
determined by dividing net loss by the weighted average shares
outstanding in each period.
Cash And Cash Equivalents:
For purposes of the balance sheet and the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an
original maturity at date of purchase of three months or less to be
cash equivalents.
Accounts Receivable:
At December 31, 1995, the allowance for doubtful accounts was $23,251.
There was no such allowance at December 31, 1994.
Inventories:
Inventories are valued using a cost method which approximates the
first-in, first-out (FIFO) method at the lower of cost or market. The
entire inventory consists of purchased items which are categorized as
finished goods. At December 31, 1995, the reserve for obsolescence
was $30,000. There was no inventory reserve at December 31, 1994.
Continued
F-11
<PAGE> 28
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
2. Summary Of Significant Accounting Policies, Continued:
Property, Equipment And Capitalized Leases:
Property, equipment and capitalized leases are recorded at cost with
depreciation and amortization provided using the straight-line method
over the estimated useful lives of the assets which range from three
to ten years or the term of the lease, whichever is the lesser.
Repairs and maintenance are expensed as incurred. When property and
equipment are retired or disposed of, the related costs and
accumulated depreciation and amortization are eliminated from the
accounts and any gain or loss on such disposition is reflected in
operations.
Deferred Rent:
Deferred rent arises from rent abatements which are negotiated at the
beginning of certain property leases. The total amount of the base
rent payments is being charged to expense on the straight-line method
over the term of the lease. The Company has recorded deferred rent to
reflect the excess of rent expense over the cash payments since the
inception of the lease.
Concentration Of Risk:
The Company is operating in a growing market due to the current
nationwide popularity of Harley Davidson motorcycles. Its future
success is dependent on the continuation of interest in the
recreational motorcycle industry.
Concentration Of Credit Risk:
The Company's cash and cash equivalents are placed with high credit
quality financial institutions. The Company had demand deposits in
excess of Federal Deposit Insurance Corporation ("FDIC") insurance
limits at December 31, 1995.
Other financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade
receivables. These concentrations are limited due to the large number
of customers comprising the Company's customer base and their disper-
sion across different geographic regions. The Company performs
ongoing credit evaluations of customers and generally does not
require collateral. Allowances are maintained for potential credit
losses, and such losses have been within management's expectations.
As of December 31, 1995 and 1994, the Company has no significant
concentrations of credit risk.
Continued
F-12
<PAGE> 29
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
2. Summary Of Significant Accounting Policies, Continued:
Use Of Estimates In The Preparation Of Financial Statements:
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenue and expenses during the reported period. Actual results could
differ from those estimates.
3. Property, Equipment And Capitalized Leases:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
Estimated -----------------
Useful Lives 1995 1994
------------ ---- ----
<S> <C> <C> <C>
Furniture and fixtures 7 years $156,171 $31,012
Leasehold improvements 7 years 226,884 22,255
Equipment 5-7 years 102,326 59,604
Computers 5 years 263,742 29,493
Autos and trucks 3-10 years 97,498
-------- --------
846,621 142,364
Less, Accumulated depreciation and amortization (99,981) (28,082)
-------- --------
$746,640 $114,282
======== ========
</TABLE>
Continued
F-13
<PAGE> 30
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
3. Property, Equipment And Capitalized Leases, Continued:
The Company leases certain computer equipment under agreements which
are classified as capital leases. These leases have original terms of
five years. These leases have bargain purchase options at the end of
the original term. Leased capitalized assets included in property,
equipment and capitalized leases at December 31, 1995 are as follows:
<TABLE>
<S> <C>
Computers $127,928
Less, Accumulated amortization (8,535)
--------
$119,393
========
</TABLE>
There were no assets under capital lease during fiscal 1994. In
February, 1996, the Company contracted to have a custom trailer built
for its Dream Wheels mobile store operation. The Company has secured
a loan in 1996 in the amount of $343,555 for which the custom trailer
is pledged as collateral. Scheduled monthly payments against this
loan will be $5,739 for 72 months beginning in March 1996.
4. Commitments And Contingencies:
The Company leases all of its operating facilities. The Santa Ana,
California operating facility, which serves as a retail Superstore as
well as the Corporate warehouse and executive offices, is leased under
a noncancelable tenant operating lease for the monthly rent of $11,865
subject to annual CPI increases starting the third year of the lease.
The lease term is 120 months commencing November 1, 1993 with two
successive five-year options.
The Company negotiated a lease at a second Company-owned Superstore in
Dallas, Texas. The terms of the lease call for a monthly rent of
$8,000 subject to CPI increases. The lease term is sixty months
commencing January 1, 1995 with two successive five-year options.
On March 1, 1995, the Company negotiated a lease to open its third
Company-owned Superstore in Clearwater, Florida. The lease term is 60
months commencing June 1, 1995 with the monthly lease payments
starting at $4,000 and increasing up to $9,261 per month through the
term of the lease. The Company has an option to extend the lease for
five years.
Continued
F-14
<PAGE> 31
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
4. Commitments And Contingencies, Continued:
On September 22, 1995, the Company purchased one of its franchise
stores. The Company assumed the store's lease as part of the
transaction. The lease term is 60 months commencing January 1, 1994
with monthly lease payments starting at $3,500 and increasing up to
$4,410 per month through the term of the lease.
On November 21, 1995, the Company purchased another of its franchise
stores. The Company did not assume this lease, but instead issued a
guarantee to the former franchisee to continue its lease payment. The
lease term is 63 months commencing on April 1, 1995 with monthly lease
payments of $3,039 per month. The monthly lease payments increase to
$3,555 per month over the term of the lease.
Total rent expense incurred by the Company for the years ended
December 31, 1995, 1994 and 1993 was $313,924, $142,878 and $76,930
respectively.
Minimum future annual non cancelable commitments are as follows
<TABLE>
<CAPTION>
For The Years Ending December 31,
---------------------------------
<S> <C>
1996 $399,867
1997 425,070
1998 434,017
1999 415,614
2000 210,020
Thereafter 379,685
----------
$2,264,273
==========
</TABLE>
The Company is involved in various litigation arising from the sale of
two franchises and in the ordinary course of business. Although the
final outcome of these legal matters cannot be determined, management
has estimated the Company's loss and accrued for such amounts in the
December 31, 1995 financial statements. The final resolution of these
matters could have a material adverse effect on the financial position
of the Company.
Continued
F-15
<PAGE> 32
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
5. Long-Term Debt:
Long-term debt at December 31, 1995 and 1994 consists of the
following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note payable to lender in monthly installments varying
from $457 to $492, including principal and interest at
rates varying from 5% to 7.5%. The note was paid in full
in December 1995. $73,554
Capitalized lease obligation payable to a finance company,
collateralized by certain computer equipment, requiring
principal and interest payments of $2,272 per month, with
interest at 20% per annum through May 2000
$79,212
Capitalized lease obligation payable to a finance company,
collateralized by certain computer equipment, requiring
principal and interest payments of $937 per month, with
interest at 16% per annum through December 2000
42,580
Long-term note payable to a finance company, collateralized
by a diesel tractor, requiring principal and interest payments
of $1,870 per month, with interest at 10% per annum through
January 2001
87,498
-------- -------
209,290 73,554
Less, Current portion (31,878) (1,230)
-------- -------
Long-term debt, net of current portion $177,412 $72,324
======== =======
</TABLE>
Continued
F-16
<PAGE> 33
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
5. Long-Term Debt, Continued:
Minimum future principal debt payments at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Capitalized
Leases Other Total
----------- ----- -----
For The Years Ending December 31,
---------------------------------
<S> <C> <C> <C>
1996 $ 38,510 $ 20,568 $ 59,078
1997 38,510 22,438 60,948
1998 38,510 22,438 60,948
1999 38,510 22,438 60,948
2000 22,603 22,438 45,041
Thereafter 4,258 1,870 6,128
-------- -------- --------
180,901 112,190 293,091
Less, Amounts representing interest (59,109) (24,692) (83,801)
-------- -------- --------
$121,792 $ 87,498 $209,290
======== ======== ========
</TABLE>
6. Income Taxes:
The following table presents the current and deferred income tax
provision (benefit) for federal and state income taxes:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
----------------------- ---- ---- ----
<S> <C> <C> <C>
Current:
Federal - - -
State $800 $800 $800
--- --- ---
800 800 800
--- --- ---
Deferred:
Federal 50,710 (3,999) (54,127)
State 8,216 - -
----- ------ -------
58,926 (3,999) (54,127)
------ ------ -------
Provision (benefit) for
income taxes $59,726 ($3,199) ($53,327)
======= ====== =======
</TABLE>
Continued
F-17
<PAGE> 34
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
---------------
6. Income Taxes, Continued:
The tax effects of temporary differences which give rise to the
deferred tax (provision) benefit consists of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Property and equipment ($19,983) ($3,851)
Accrued liabilities 19,320
Accounts receivable allowance 10,068
Inventory reserve 12,990
Net operating losses 813,984 (11,047)
Other 23,964 18,897
Valuation allowance (919,269)
-------- -------
($58,926) $3,999
======== ======
</TABLE>
The provision (benefit) for income taxes differs from the amount that
would result from applying the federal statutory rate as follows:
<TABLE>
<CAPTION>
For The Year Ended
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Statutory regular federal income tax rate (34.0%) (34.0%)
State income taxes, net of federal benefit .2
Change in valuation allowance 36.5
Other (.1) 14.3
----- -----
2.6% (19.7%)
===== ======
</TABLE>
Continued
F-18
<PAGE> 35
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
6. Income Taxes, Continued:
The components of the deferred income tax assets (liabilities) as of
December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Property and equipment ($26,785) ($5,859)
Accrued expenses 19,320
Accounts receivable allowance 10,068
Inventory reserve 12,990
Net operating loss carryforwards 860,591 46,607
Other 43,085 18,178
-------- ------
Valuation allowance (919,269)
-------- ------
Net deferred tax assets $ - $58,926
======== =======
</TABLE>
As of December 31, 1995, the Company had net operating loss
carryforwards for federal and state purposes of approximately
$2,234,000 and $1,084,000, respectively. The net operating loss
carryforwards begin expiring in 2005 and 1997, respectively. The
utilization of net operating loss carryforwards may be limited due to
the ownership change, under the provisions of Internal Revenue Code
Section 382 and similar state provisions.
7. Notes Payable:
The notes payable at December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note payable to related party, HDL, accruing interest at a
prime rate plus 1% on $200,000 of the unpaid principal balance,
principal plus any accrued interest due March 1995, collateralized
by all assets of the Company. This note was converted into
333,333 shares of common stock in March 1995. $500,000
Note payable to lender, due on demand. This note was paid
in February 1995. 21,000
</TABLE>
Continued
F-19
<PAGE> 36
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
7. Notes Payable, Continued:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note payable to former franchisee in conjunction with
acquisition of former franchise operation. The note accrues
interest at 9% and is payable in equal installments of $13,118
through October 1996, collateralized by all the assets of the
Company. $125,924
Note payable to bank which was assumed in conjunction with
the acquisition of a former franchise operation. The note is
guaranteed by the SBA and is collateralized by all the assets of
the Sacramento store. The note accrues interest at the rate of
prime plus 2-1/2% per annum on the unpaid balance and is payable
in monthly installments through April, 2005. 101,480
Note payable to former franchisee in conjunction with
acquisition of former franchise operation. Note is
uncollateralized, noninterest-bearing and is payable in 24
equal installments of $1,221 through November 1997. 28,073
Convertible notes payable. These notes are collateralized by
the assets of the Company. The notes bear interest at a rate of
8% per annum until the principal is converted into shares of the
Company's common stock at $1.70 per share on the earlier of 90
days after the issuance of the notes or that date on which the
Company receives approved bank financing in the amount of $800,000
or more. These notes matured on March 14, 1996 and were
converted into shares of common stock at $1.70 per share. 629,000
------- -------------
884,477 $521,000
(242,051) (521,000)
Less, Current portion ------- -------------
$642,426 $ -
Notes payable, long-term portion ======== =============
</TABLE>
Continued
F-20
<PAGE> 37
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
8. Franchise Income:
The Company entered into five and three franchise store agreements
during fiscal years 1995 and 1994, respectively. The Company received
a $15,000 fee for each store and is due to receive 5% of each store's
weekly sales through the term of the franchise agreements. The
franchise agreement initial term does not exceed twenty years. During
1995 the Company reacquired two franchise operations and refunded the
franchise fee at a third franchisee.
9. Stock Options:
The Company has three active stock option plans. All plans were
adopted by the Board of Directors in 1995 and will be presented to the
shareholders for approval at their first annual meeting in June 1996.
The stock option plans have effectively been approved in 1995 as the
Board of Directors constitutes a majority of the shareholders. The
shares issued pursuant to the plans are restricted shares, until or
unless registered by the Company.
The Incentive Stock Option Plan is intended to meet the requirements
of Section 422A of the Internal Revenue Code of 1986, as amended.
Under the plan, options may be granted by the Compensation Committee
to its officers, key employees, and other employees according to
responsibility and length of service. Options may not be granted to
employees owning more than 10% of the total combined voting power of
the stock of the corporation. Options granted under the plan shall be
granted within 10 years of the date of the adoption of the plan, and
must be exercised within 10 years of the grant. The aggregate number
of shares that may be issued pursuant to the plan is 500,000 over the
life of the plan, and the aggregate fair market value of the stock for
exercise for the first time during any calendar year is $100,000 per
individual. Options vest pro rata over a four-year period. The
option price is determined by the bid price of the Company's shares as
quoted on NASDAQ or the Bulletin Board at the close of business on the
date of the grant.
The Nonqualified Stock Plan was adopted by the Board of Directors in
April 1995, subject to approval by the shareholders. This plan
provides for incentives to management, executive personnel of the
Company and others. The plan limits the number of shares to 500,000,
and the aggregate value of underlying shares granted in any year for
any single employee may not exceed $100,000 in value. The option
price is fixed by the bid price of the Company's shares as quoted on
NASDAQ or the Bulletin Board at the close of business on the date of
the grant. Options must be exercised within 10 years of the date of
grant thereof and shall vest at such time or times as the Board of
Directors shall fix on the date of grant.
Continued
F-21
<PAGE> 38
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
9. Stock Options, Continued:
The Director's plan is a Nonqualified Plan adopted in April 1995. The
plan provides, as amended, for 300,000 shares in total, 50,000 shares
to be granted to each director on assuming office. The underlying
share price is determined by the bid price on NASDAQ or the Bulletin
Board on the date of the grant. The options vest over a five-year
period.
Information regarding the Company's stock option plans is summarized
below:
<TABLE>
<CAPTION>
Director's
Incentive Stock Nonqualified Nonqualified
Option Plan Option Plan Option Plan
--------------- ------------ ------------
<S> <C> <C> <C>
Shares under option:
Activity during 1995:
Granted 374,800 690,000 300,000
Exercised
Canceled
------- ------------ ------------
Outstanding at December 31, 1995 374,800 690,000 300,000
======= ============ ============
Grant price per share $1.50-$2.875 $1.50-$2.875 $1.50-$2.875
Exercisable at December 31, 1995 55,000 640,000 60,000
</TABLE>
The Company also has issued nonqualified options, in conjunction with
the HDL and Company merger, to purchase 550,000 shares of common stock
at an exercise price of $1.00 per share. The options are exercisable
at any time prior to March 13, 1998. The $1.00 exercise price was
established at the time the Company agreed to be acquired by HDL in
August 1994.
Prior to April 1995, when options were granted to key employees and
directors at an option price of $1.50 per share, there was no active
trading of the shares. To set the option value, the Company looked to
the valuation of the most recent large transaction, i.e., shares
issued at a price of $1.50 per share in connection with the HDL
acquisition of the Company in March 1995. Subsequent to that period,
the Company has used the bid price for the shares.
Refer also to stock option transactions described in Note 10.
Continued
F-22
<PAGE> 39
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
10. Related Party Transactions:
At December 31, 1994, the Company had a demand note receivable from
its majority shareholder that was noninterest-bearing in the amount of
$24,616. This obligation was forgiven by the Company and considered
as compensation expense in 1995.
During 1995 and 1994, the Company incurred $219,045 and $156,923,
respectively, in legal fees and/or consulting fees from a law firm of
which Rowland W. Day, II, a director of the Company, is a partner.
In August 1994, Rowland W. Day, II loaned $300,000 to HDL. HDL used
the proceeds from the loan from Mr. Day, along with the proceeds of
other loans from nonaffiliates in the aggregate additional amount of
$200,000, to make a $500,000 collateralized loan to the Company upon
the signing of the Acquisition Agreement. The loan was evidenced by
the Company's noninterest-bearing convertible promissory note which
was converted into shares of the Company's common stock upon
consummation of the acquisition on March 13, 1995 at the conversion
price of $1.00 per share. The Company also agreed to issue warrants
to such nonaffiliates to purchase 200,000 shares of the Company's
common stock at a price of $1.50 per share. The warrants were
converted to 200,000 shares of common stock on September 8, 1995.
In February 1995, Rowland W. Day, II loaned $50,000 to the Company,
the proceeds of which were used to purchase four used Harley-Davidson
motorcycles. The Company repaid the loan and interest thereon in the
amount of $2,000 to Mr. Day in March 1995.
The Company agreed to grant to Rowland W. Day, II and/or his assigns,
upon consummation of the Bikers Dream Acquisition, an irrevocable
three-year option to purchase, at a price of $1.00 per share, 550,000
shares of common stock (Note 9). Mr. Day has assigned his right to
receive options to purchase 170,000 of such shares to other persons.
The Company has granted options to Company officers, in connection
with employment agreements, to purchase 100,000 shares and 350,000
shares of common stock at a per share exercise price of $1.50 and
$2.50, respectively. The options vest over a five-year period
commencing in March 1995 and September 1995, respectively. The
options expire 10 years following the date of the option grant.
Continued
F-23
<PAGE> 40
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
10. Related Party Transactions, Continued:
In April 1995, the Company granted options to each of its then current
directors to purchase, at an exercise price of $1.50 per share, 50,000
shares of common stock, which options vest in increments over a
five-year period.
In April 1995, Dennis Campbell, President, Chief Executive Officer and
a director of the Company, loaned $75,000 to the Company, the proceeds
of which were used for working capital. The Company agreed to repay
the loan and interest thereon of $5,000 within 60 days after the date
of the loan. This loan was subsequently paid in full with interest.
On April 6, 1995, the Company entered into a consulting agreement with
Meyer Duffy & Associates, Inc. ("Meyer Duffy") for management
consulting, financial advisory and investment banking services to be
rendered to the Company for six months in consideration of a monthly
fee of 2,500 shares of the Company's common stock, plus travel
expenses, if incurred. This agreement was effective through September
1995, and the 15,000 shares were issued in December 1995 at $2 per
share. Donald Duffy, a member of the Board of Directors of the
Company, is a principal of Meyer Duffy.
The Company has granted nonqualified options to Meyer Duffy to
purchase 30,000 shares of common stock at $2.50 per share. The
options vested at the time of grant for services rendered, and are
exercisable within two years following the date of grant in April
1995.
On August 31, 1995, Dennis Campbell loaned the Company $24,000 on a
demand note at an interest rate of 16% per annum. This note was
reduced by a principal payment of $1,500 during 1995, leaving a
balance of $22,500 as of December 31, 1995.
On December 31, 1995, Dennis Campbell loaned the Company $14,547 on
demand at 10% interest, which note was outstanding at December 31,
1995, and subsequently paid in full in January 1996.
On December 31, 1995, the Company issued its demand note payable in
lieu of compensation to Dennis Campbell in the sum of $100,000,
bearing interest at 10%, in consideration of a bonus deferral.
On October 1, 1995, the Company entered into a consulting agreement
with Meyer Duffy, which was amended on November 1, 1995, whereby Meyer
Duffy was retained to provide consulting, financial advisory
and investment banking services for a ten-month term commencing
October 1, 1995. The agreement provides for the payment of
$5,000 per month to Meyer Duffy.
Continued
F-24
<PAGE> 41
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
10. Related Party Transactions, Continued:
On October 17, 1995, William R. Gresher, Senior Vice President, Chief
Financial Officer and a director of the Company, loaned $50,000 to the
Company, pursuant to a note bearing interest at 11% per annum, on
demand, and on October 24, 1995, Mr. Gresher loaned an additional
$10,000 to the Company on the same terms.
On November 3, 1995, M.D. Strategic L.P., a partnership of which
Donald Duffy, a director of the Company, is a principal, loaned
$100,003 to the Company for 90 days at 8% interest per annum,
receiving notes which are convertible into shares of common stock of
the Company at $1.70 per share on certain conditions related to
proposed asset-based financing of the Company. On December 3, 1995,
M.D. Strategic made an additional loan of $49,997 to the Company, and
on December 5, 1995, a similar loan was consummated in the sum of
$50,000, for convertible notes bearing the same terms and due 90 days
from the funding thereof. These notes were converted on March 14,
1996 into common stock of the Company.
Under the terms of the agreement, Meyer Duffy is to use its best
efforts to obtain a commitment from an investment banking firm to
raise up to $20 million in capital for the Company. The agreement
provides that upon the successful closing of an offering through an
investment banker introduced by Meyer Duffy, the Company will issue an
option to Meyer Duffy to purchase 10,000 shares of the Company's
common stock for each $1 million of capital received by the Company in
such an offering, up to a maximum of 100,000 shares for $20 million in
capital received, and that the option is granted in pro rata
increments, exercisable at a price of $1.70 per share at any time
within two years after the date of completion of a successful
financing pursuant thereto.
In addition, Meyer Duffy is to be compensated by means of an option to
purchase 50,000 shares of the Company's common stock at a price of
$1.70 per share within two years of a grant in consideration of
arranging for bridge financing to the Company in the amount of $1.1
million in convertible debt, and a fee of 5% of all proceeds received
from the bridge financing in excess of $100,000.
During 1995, the Company incurred $28,557 in legal fees to the law
offices of Robert E. King, Jr. of which Richard E. King, Jr.,
Secretary and a director of the Company, is the principal.
Continued
F-25
<PAGE> 42
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 1995, 1994 And 1993
11. Fair Value Of Financial Instruments:
The fair value of the Company's long-term debt and notes payable
approximates the carrying value at December 31, 1995. This estimate
is based on the fact that the majority of the long-term debt and notes
payable were negotiated transactions near year-end, and the negotiated
interest rates approximate a market rate at that time.
12. Recently Issued Accounting Standard:
The Financial Accounting Standards Board has issued a Statement of
Financial Accounting Standards No. 123 (FAS 123) entitled "Accounting
for Stock-Based Compensation." Upon adoption of FAS 123 in fiscal
1996, the Company will continue to account for stock-based
compensation in accordance with Accounting Principles Board Opinion
No. 25 and provide disclosure with respect to the fair value of the
Company's options. The Company has not yet determined the impact of
this disclosure on its financial statements.
13. Subsequent Events (Unaudited):
On January 19, 1996 the Company issued convertible notes at $450,500,
bearing interest at 8% annually. The notes are convertible into
common stock at $1.70 per share on April 19, 1996.
On April 10, 1996 the Company signed a ninety day loan for $300,000
with Meyer & Duffy. The loan bears interest, which is prepaid at 14.0%
annually.
Continued
F-26
<PAGE> 43
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Coopers and Lybrand L.L.P., independent accountants, audited the financial
statements of the Company for the fiscal year ended December 31, 1995.
Lesley, Thomas, Schwarz & Postma, Inc., independent accountants, audited the
financial statements of the Company for all preceding fiscal years. The
former accountants for HDL Communications were KPMG Peat Marwick LLP. Form 8K
was filed in 1995 with the Securities and Exchange Commission announcing the
change in independent accountants. There are no disagreements with either of
these public accounting firms on accounting matters and financial disclosure.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF BIKERS DREAM, INC.
The Company's current officers and directors consist of the following persons:
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
Dennis W. Campbell President, CEO and Director
William R. Gresher Sr. Vice President, Chief Financial Officer and Director
Jeffrey L. Simons Executive Vice President
Richard E. King, Jr. Secretary and Director
Rowland W. Day, II Director
Donald J. Duffy Director
Humbert B. Powell, III Director
</TABLE>
Mr. Day has been a director of the Company since October, 1985, serving in
various executive capacities, including President, from October, 1985 until
March 13, 1995. Mr. Campbell, Mr. Gresher and Mr. King have held office since
March 13, 1995 (the date of acquisition by the Company of Bikers Dream, Inc.).
Mr. Duffy became a director on December 7, 1995, and Mr. Powell on December 19,
1995. Mr. Simons joined the Company on March 1, 1995 and Mr. Gresher became a
full time employee on September 25, 1995.
Directors are elected on an annual basis at the Company's annual meeting of
stockholders. The present term of each director will expire at the next annual
meeting of stockholders or at such time as their respective successors are duly
elected and qualified. Executive officers are elected annually and, except to
the extent governed by employment contracts, serve at the discretion of the
Board of Directors.
DENNIS W. CAMPBELL. 36, President and CEO, Director and founder of Bikers
Dream. Prior to founding Bikers Dream in 1990 as a sole proprietorship and
incorporating the business in 1991, Mr. Campbell had extensive experience in
developing, opening and operating automobile parts and accessories stores. In
1983, Mr. Campbell opened Vee Dub Parts Unlimited, which offered custom parts
and accessories for Volkswagen automobiles. Within one year of its inception,
Vee Dub Parts Unlimited was one of the industry leaders on a worldwide basis.
In 1985, Mr. Campbell started Vee Dub Parts Unlimited Machine Shop, a division
of Vee Dub Parts Unlimited, dedicated to building engines, custom machining,
and development of signature series hi-flow racing heads. In 1986, Mr.
Campbell purchased Ed's Machine, a crankshaft manufacturing company, which
provided a complete line of high performance crankshafts for Volkswagen
automobiles. In 1987, Mr. Campbell sold Denmar Enterprises, Inc., a holding
company for
16
<PAGE> 44
Vee Dub Parts Unlimited and Ed's Machine. From 1987 to 1990, Mr. Campbell was
employed as Finance Manager for Bill Maxey Toyota in Huntington Beach,
California. Mr. Campbell is a major shareholder of the Company and holds
approximately 40% of the common stock.
WILLIAM R. GRESHER. 49, Sr. Vice President, Chief Financial, Operational and
Administrative Officer and Director. Since early 1990, Mr. Gresher served in
a variety of executive financial positions with Allergan, Inc. Mr. Gresher's
last position was Vice President Corporate Financial Planning at Allergan
before he joined Bikers Dream in September, 1995 on a full time basis. Mr.
Gresher also served in the capacity of Vice President and Controller for
Allergan Europe, based in the United Kingdom. Before his employment with
Allergan, Mr. Gresher held various executive financial positions with Baxter
International, Deerfield, Illinois for 10 years; Bell & Howell, Lincolnwood,
Illinois for seven years; and Arthur Andersen & Co., certified public
accountants, for five years. Mr. Gresher's international experience includes
four years as an expatriate in Tokyo, Japan, and two years in London, England
plus four years of financial responsibility for businesses in the Pacific Rim
and Europe. Mr. Gresher is a certified public accountant and holds both
Bachelor's and Masters degrees from Northern Illinois University.
JEFFREY L. SIMONS. 40, Executive Vice President, Vice President of Retail
Operations and President of the franchise subsidiary. Prior to joining the
Company in 1995, Mr. Simons served as Director of Retail Operations and
Merchandising with Easyriders Franchising, Inc. where he was responsible for
all facets of franchise development and implementation, including concepts,
planning, operations, systems, staffing, training and merchandising. From 1982
to 1994, Mr. Simons ascended through various divisions in Harley-Davidson, Inc.
and Harley-Davidson International, Inc. where he was involved in testing and
development, engineering and powertrain performance, international sales,
marketing and distribution. He was also responsible for the strategic
planning, implementation, and management of all Harley-Davidson International
"Designer Store" franchise development, renovation, and merchandising programs
outside of North America. During his career with Harley-Davidson, he spent
extensive periods of time overseas engaged in negotiation, sales and
communication with independent distributors, subsidiary management, and the
franchise dealers network.
RICHARD E. KING, JR. 60, Secretary and Director. Mr. King is a practicing
attorney in Newport Beach, California. He has practiced in the area of
business and corporate law, corporate finance, tax and international tax, and
estate planning for over 30 years. He has also served as President and Chief
Executive Officer of two corporations in the construction and sports industries
and has served on the Board of Directors of a number of corporations. Mr. King
is a member of the California, Pennsylvania, Federal District Courts and U.S.
Tax Court bars. He holds a Bachelor of Arts degree from Denison University,
Granville, Ohio and a Juris Doctorate from the University of Michigan Law
School, Ann Arbor.
ROWLAND W. DAY II. 40, Director. Mr. Day is a partner in the law firm of Day,
Campbell & McGill in Costa Mesa, California. He has practiced in the area of
business and corporate law and corporate finance for 12 years. Mr. Day is a
member of the California bar. He holds a Bachelor of Arts degree from
California State University at Fullerton and a Juris Doctorate from Whittier
Law School.
DONALD J. DUFFY. 28, Director. Mr. Duffy is a founder and principal of Meyer,
Duffy & Associates, Inc. a strategic consulting group based in New York City.
He is also a founder and board member of Predictive Systems, a network
management consulting company. Mr. Duffy has served in a variety of analytical
and investment management positions at Oak Hill Capital Advisors, Inc. and
Sloate, Weisman, Murray & Company, Inc. specializing in research and
investments in retail and gaming companies.
17
<PAGE> 45
HUMBERT B. POWELL, III. 57, Director. Mr. Powell is Vice Chairman of Marleau,
Lemire Securities, Inc. and Chairman of Marleau, Lemire USA. He served as
Senior Managing Director in the Corporate Finance Department of Bear Sterns &
Co. for eight years with responsibility for domestic and international
investment banking. Mr. Powell has also served as Senior Vice President and
Director of E.F. Hutton & Co. where he was employed for 18 years. He is also a
Director of Marleau, Lemire Inc., Tatham Offshore Corp., and Salem-Teiko
University.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that an
initial report of ownership and one report covering one transaction were filed
late by Rowland W. Day, II.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
POSITION ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------ ------------------------------- -----------------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
COMPEN- STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS SATION AWARD(S) SARS PAYOUTS COMPENSATION
YEAR ($) ($) ($) ($) (#) ($) ($)
------ -------- -------- ------- --------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CEO - Dennis W.
Campbell 1995 95,000 115,000 8,940 --- 50,000 --- 51,571(1)
CFO - William R.
Gresher 1995 49,333 --- 1,089 --- 350,000 --- ---
Executive Vice Pres -
Jeffrey L. Simons 1995 81,346 17,750 34,101 --- 100,000 --- ---
</TABLE>
18
<PAGE> 46
(1) In accordance with the HDL acquisition agreement to acquire Bikers Dream,
Inc., Mr. Campbell was required to remove certain personal assets carried on
the Company's books from the Company prior to its acquisition. This action
created additional taxable income for Mr. Campbell and accordingly his
employment contract was amended to increase his compensation for the amount of
assets withdrawn and the related income taxes. The gross impact on this
transaction was to increase compensation in 1995 by $49,155. This is a
non-recurring compensation component. Also included in other compensation in
1995 is an automobile allowance, and disability and medical insurance premiums
paid by the Company.
OPTION/SAR GRANTS IN FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS/
OPTIONS/SARS SARS GRANTED EXERCISE OR
GRANTED TO EMPLOYEES BASE PRICE
NAME (#) IN FISCAL YEAR ($/SHARE) EXPIRATION DATE
---- ------------ -------------- ----------- ---------------
<S> <C> <C> <C> <C>
CEO - Dennis W. Campbell 50,000 3.7% $1.50 04/04/05
CFO - William R. Gresher 240,000 17.6% $2.50 09/25/05
60,000 4.4% $2.50 09/25/05
50,000 3.7% $1.50 04/04/05
Executive Vice President -
Jeffrey L. Simons 100,000 7.3% $1.50 03/01/05
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 27, 1996, information regarding
ownership of Common Stock by present directors of the Company, each of the
executive officers of the Company, and all of the directors and executive
officers of the Company as a group. All persons named have sole voting power
and investment power over their shares except as otherwise noted:
19
<PAGE> 47
<TABLE>
<CAPTION>
NAME AND NUMBER OF
ADDRESS OF SHARES
BENEFICIAL OWNER OWNED PERCENT OF CLASS
- ---------------- --------- ----------------
<S> <C> <C>
Dennis W. Campbell 2,477,990(1) 38.1%
1420 Village Way
Santa Ana, California 92705
William R. Gresher 400,632(2) 6.2%
1420 Village Way
Santa Ana, California 92705
Rowland W. Day, II 881,181(3) 13.5%
3070 Bristol Street, Suite 650
Costa Mesa, California 92626
Donald J. Duffy 524,705(4) 8.1%
237 Park Avenue, Eighth Floor
New York, New York 10017
Humbert B. Powell, III 2,500(5) 0.0%
712 Fifth Avenue, Eleventh Floor
New York, New York 10019
Richard E. King, Jr. 25,000(6) 0.4%
2244 West Coast Highway, Suite 100
Newport Beach, California 92663
Jeffrey L. Simons 10,000(7) 0.2%
1420 Village Way
Santa Ana, California 92705
All officers and directors as a
group (7 persons) 3,867,667(1)(2)(3) 66.4%
(4)(5)(6)(7)
</TABLE>
- -----------------
(1) Includes 20,000 shares subject to the presently exercisable portion of an
option held by Mr. Campbell to purchase a total of 50,000 shares as a
director.
(2) Includes 70,000 shares subject to the presently exercisable portion of
options held by Mr. Gresher to purchase a total of 350,000 shares in
accordance with the terms of his employment agreement and a total of
50,000 shares as a director.
20
<PAGE> 48
(3) Includes 400,000 shares subject to the presently exercisable portion of
options held by Mr. Day and the Day Family Trust to purchase up to 50,000
shares as a director and up to 380,000 shares as part of the acquisition
of Bikers Dream.
(4) Includes 92,500 shares subject to the presently exercisable portion of
options held by Mr. Duffy and Meyer Duffy & Associates, Inc. to purchase
up to 50,000 shares as a director, 10,000 shares as part of the HDL
acquisition of Bikers Dream, and 80,000 shares as part of a consulting
agreement with Bikers Dream, Inc. Also includes 120,000 shares owned by
MD Strategic L.P., an investment partnership in which Mr. Duffy acts as
one of two general partners who have full discretion to invest the fund of
the partnership.
(5) Includes 2,500 shares subject to the presently exercisable portion of an
option held by Mr. Powell to purchase up to 50,000 shares as a director.
(6) Includes 20,000 shares subject to the presently exercisable portion of
options held by Mr. King to purchase a total of 50,000 shares as a
director.
(7) Includes 10,000 shares subject to the presently exercisable portion of
options held by Mr. Simons to purchase a total of 100,000 shares which may
be issued upon exercise of an option granted to Mr. Simons in accordance
with the terms of his employment agreement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Related Parties footnotes in Item 7. Financial Statements.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the last quarter of 1995.
On March 13, 1995, the Company filed a Form 8-K relating to Change in Control
of Registrant and acquisition and disposition of assets.
On May 4, 1995, the Company filed a Form 8-K relating to a change in its fiscal
year.
On July 17, 1995, the Company filed a Form 8-K relating to a change in
registrants' certifying accountant, which was subsequently amended on Form
8-KA.
On March 27, 1996, the Company filed a Form 8-K relating to a change in
registrants' certifying accountant, which was subsequently amended on Form
8-KA.
21
<PAGE> 49
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
No. Exhibits Page No.
- ----- -------- --------
<S> <C> <C>
3.1 Articles of Incorporation(1)
3.2 Bylaws, as amended, of Bikers Dream, Inc.
10.1 Employment Agreement dated September 1, 1994, between the Company
and Dennis Campbell(2)
10.2 Employment Agreement dated February 8, 1995, between the Company and
Jeffrey L. Simons(3)
10.3 Employment Agreement dated September 18, 1995, between the Company
and William R. Gresher
10.4 Loan and Security Agreement among the Company, Glenoaks Overseas
Corp. and Silverstone International Corp. dated August 4, 1994, as
amended by agreement dated February 3, 1995(4)
10.5 Convertible Secured Promissory Note of the Company dated August 4,
1994, payable to Glenoaks Overseas Corp. in the amount of $100,000(5)
10.6 Convertible Secured Promissory Note of the Company dated August 4,
1994, payable to Silverstone International Corp. in the amount of
$100,000(6)
</TABLE>
__________________________________
1 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 3.1 thereof incorporated by reference.
2 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.14 thereof incorporated by reference.
3 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.15 thereof incorporated by reference.
4 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.4 thereof incorporated by reference.
5 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.5 thereof incorporated by reference.
6 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.6 thereof incorporated by reference.
22
<PAGE> 50
<TABLE>
<CAPTION>
<S> <C>
10.7 Common Stock Purchase Warrant dated August 4, 1994, to purchase
100,000 shares of Common Stock issued in the name of Glenoaks
Overseas Corp.(7)
10.8 Common Stock Purchase Warrant dated August 4, 1994, to purchase
100,000 shares of Common Stock issued in the name of Silverstone
International Corp.(8)
10.9 Option dated March 13, 1995, granted to Rowland W. Day, II IRA to
purchase 200,000 shares of Common Stock at a price of $1.00 per
share(9)
10.10 Option dated March 13, 1995, granted to Day Family Trust to purchase
180,000 shares of Common Stock at a price of $1.00 per share(10)
10.11 Option dated March 13, 1995, granted to Caldwell R. Campbell to
purchase 100,000 shares of Common Stock at a price of $1.00 per
share(11)
10.12 Option dated March 13, 1995, granted to Rowland W. Day to purchase
50,000 shares of Common Stock at a price of $1.00 per share(12)
10.13 Option dated March 13, 1995, granted to Eric Meyer to purchase
10,000 shares of Common Stock at a price of $1.00 per share(13)
</TABLE>
__________________________________
7 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.7 thereof incorporated by reference.
8 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.8 thereof incorporated by reference.
9 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.9 thereof incorporated by reference.
10 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.10 thereof incorporated by reference.
11 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.11 thereof incorporated by reference.
12 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.12 thereof incorporated by reference.
13 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.13 thereof incorporated by reference.
23
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C>
10.17 Lease dated August 5, 1993, between the Company and McFadden Plaza(14)
10.18 Lease dated November 1, 1994, between the Company and Valley View
Partnership(15)
10.19 A, B, C, D and E: Franchising agreements between the Company and
its franchisees
10.20 Consulting Agreement dated April 6, 1995, between the Company and
Meyer Duffy & Associates, Inc.(16)
10.21 Consulting Agreement dated October 1, 1995, between the Company and
Meyer Duffy & Associates, Inc.
10.22 The 1995 Incentive Stock Option Plan of the Company
10.23 The 1995 Non-Qualified Stock Option Plan of the Company
10.24 The 1995 Non-Qualified Directors' Stock Option Plan of the Company
10.25 Amendment to Consulting Agreement and Stock Option Agreement dated
November 1, 1995, between the Company and Meyer Duffy & Associates
16. Letter on change of certifying accountant - Lesley, Thomas, Schwarz &
Postma, Inc.
16.1 Letter on change of certifying accountant - KPMG Peat Marwick LLP
21. Subsidiaries of the Registrant
24. Powers of Attorney
27. Financial Data Schedule
99. Additional Exhibits:
(a)8-K dated March 13, 1995
(b)8-K dated May 4, 1995
(c)8-K dated July 17, 1995
(d)8-KA dated July 17, 1995
</TABLE>
__________________________________
14 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.16 thereof incorporated by reference.
15 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.17 thereof incorporated by reference.
16 Registration Statement on Form SB-2, filed May 31,
1995, Exhibit 10.20 thereof incorporated by reference.
24
<PAGE> 52
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BIKERS DREAM, INC.
----------------------------------------------------------------
(Registrant)
By: /s/ DENNIS W. CAMPBELL
-------------------------------------------------------------
DENNIS W. CAMPBELL, PRESIDENT, CEO, DIRECTOR
Date: April 12, 1996
-------------------------------------------------------------
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ WILLIAM R. GRESHER
-------------------------------------------------------------
WILLIAM R. GRESHER, SENIOR VICE PRESIDENT, CFO, DIRECTOR
Date: April 12, 1996
-------------------------------------------------------------
By: /s/ RICHARD E. KING, JR.
-------------------------------------------------------------
RICHARD E. KING, JR., SECRETARY, DIRECTOR
Date: April 12, 1996
-------------------------------------------------------------
By: /s/ ROBERT VON BOECKMANN
-------------------------------------------------------------
ROBERT VON BOECKMANN, CONTROLLER
Date: April 12, 1996
-------------------------------------------------------------
By: * /s/ ROWLAND W. DAY, II
-------------------------------------------------------------
ROWLAND W. DAY, II, DIRECTOR
Date: April 12, 1996
-------------------------------------------------------------
By: * /s/ DONALD J. DUFFY
-------------------------------------------------------------
DONALD J. DUFFY, DIRECTOR
Date: April 12, 1996
-------------------------------------------------------------
By: * /s/ HUMBERT B. POWELL, III
-------------------------------------------------------------
HUMBERT B. POWELL, III, DIRECTOR
Date: April 12, 1996
-------------------------------------------------------------
25
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
BIKERS DREAM, INC.
A CALIFORNIA CORPORATION
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of business of the corporation is hereby fixed and located at 1420
Village Way, City of Santa Ana, County of Orange, State of California. The
location may be changed by approval of a majority of the authorized Directors,
and additional offices may be established and maintained at such other place or
places, either within or without California, as the Board of Directors may from
time to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at
any time be established by the Board of Directors at any place or places where
the corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the General Corporation Law and to any limitations in the
Articles of Incorporation of the corporation relating to action required to be
approved by the Shareholders, as that term is defined in Section 153 of the
California Corporations Code, or by the outstanding shares, as that term is
defined in Section 152 of the Code, the business and affairs of the corporation
shall be managed and all corporate powers shall be exercised by or under the
direction of the Board of Directors. The Board may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board.
Section 2. STANDARD OF CARE. Each Director shall perform the
duties of a Director, including the duties as a member of any committee of the
Board upon which the Director may serve, in good faith, in a manner such
Director believes to be in the best interests of the corporation, and with such
care, including reasonable inquiry, as an ordinary prudent person in a like
position would use under similar circumstances. (Section 309)
Section 3. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the
provisions of Section 1, in the event that this corporation shall elect to
become a close corporation as defined in Section 158, its Shareholders may
enter into a Shareholders' Agreement as defined in Section 186. Said Agreement
may provide for the exercise of corporate powers and the management of the
business and affairs of this corporation by the Shareholders, provided,
however, such
-1-
<PAGE> 2
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each Shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300(d); and the Directors shall
be relieved to that extent from such liability.
Section 4. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of Directors shall be six (6) until changed by a duly adopted
amendment to the Articles of Incorporation or by an amendment to this by-law
adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote, as provided in Section 212.
Section 5. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors
shall be elected to each annual meeting of the Shareholders to hold office
until the next annual meeting. Each Director, including a Director elected to
fill a vacancy, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified.
Section 6. VACANCIES. Vacancies in the Board of Directors may
be filled by a majority of the remaining Directors, though less than a quorum,
or be a sole remaining Director, except that a vacancy created by the removal
of a Director by the vote or written consent of the Shareholders or by court
order may be filled only by the vote of a majority of the shares entitled to
vote represented at a duly held meeting at which a quorum is present, or by the
written consent of the holders of a majority of the outstanding shares entitled
to vote. Each Director so elected shall hold office until the next annual
meeting of the Shareholders and until a successor has been elected and
qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of the death, resignation, or removal of any Director, or if
the Board of Directors by resolution declares vacant the office of a Director
who has been declared of unsound mind by an order of the court or convicted of
a felony, or if the authorized number of Directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any Director or
Directors are elected, to elect the number of Directors to be voted for at that
meeting.
The Shareholders may elect a Director or Directors at any time to fill
any vacancy or vacancies not filled by the Directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
No reduction of the authorized number of Directors shall have the
effect of removing any Director before that Director's term of office expires.
Section 7. REMOVAL OF DIRECTORS. The entire Board of Directors
or any individual Director may be removed from office as provided in Sections
302, 303 and 304 of the Corporations Code of the State of California. In such
case, the remaining Board members may elect a successor Director to fill such
vacancy for the remaining unexpired term of the Director so removed.
-2-
<PAGE> 3
Section 8. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of
the Board of Directors may be called by the Chairman of the Board, or the
President, or any Vice President, or the Secretary, or any two (2) Directors
and shall be held at the principal executive office of the corporation, unless
some other place is designated in the notice of the meeting. Members of the
Board may participate in a meeting through use of a conference telephone or
similar communications equipment so long as all members participating in such a
meeting can hear one another. Accurate minutes of any meeting of the Board or
any committee thereof, shall be maintained as required by Section 1500 of the
Code by the Secretary or other Officer designated for that purpose.
Section 9. ORGANIZATION MEETINGS. The organization meetings of
the Board of Directors shall be held immediately following the adjournment of
the annual meetings of the Shareholders.
Section 10. OTHER REGULAR MEETINGS. Regular meetings of the
Board of Directors shall be held at the corporate offices, or such other place
as may be designated by the Board of Directors, as follows:
Time of Regular Meeting: Immediately after Annual
Shareholders' Meeting
Date of Regular Meeting: First Tuesday in June
If said day shall fall upon a holiday, such meetings shall be held on
the next succeeding business day thereafter. No notice need to be given of
such regular meetings.
Section 11. SPECIAL MEETINGS - NOTICES - WAIVERS. Special
meetings of the Board may be called at any time by any of the aforesaid
Officers, i.e., by the Chairman of the Board or the President or any Vice
President or the Secretary or any two (2) Directors.
At least forty-eight (48) hours notice of the time and place of
special meetings shall be delivered personally to the Directors or personally
communicated to them by a corporate Officer by telephone or telegraph. If the
notice is sent to a Director by letter, it shall be addressed to him or her at
his or her address as it is shown upon the records of the corporation, or if it
is not so shown on such records or is not readily ascertainable, at the place
in which the meetings of the Directors are regularly held. In case such notice
is mailed, it shall be deposited in the United States mail, postage prepaid, in
the place in which the principal executive office of the corporation is located
at least four (4) days prior to the time of the holding of the meeting. Such
mailing, telegraphing or delivery as above provided shall be due, legal and
personal notice to such Director.
When all of the Directors are present at any Directors' meeting,
however called or noticed, and either (i) sign a written consent thereto on the
records of such meeting, or, (ii) if a majority of the Directors are present
and if those not present sign a waiver of notice of such meeting or a consent
to holding the meeting or an approval of the minutes thereof, whether prior to
or after the holding of such meeting, which said waiver, consent of approval
shall be filed with the Secretary of the corporation, or, (iii) if a Director
attends a meeting without notice but without protesting, prior
-3-
<PAGE> 4
thereto or at its commencement, the lack of notice, then the transactions
thereof are as valid as if had at a meeting regularly called and noticed.
Section 12. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION
OR BY-LAWS. In the event only one (1) Director is required by the By-Laws or
Articles of Incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the Directors
shall be deemed to refer to such notice, waiver, etc., by such sole Director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to a Board of Directors.
Section 13. DIRECTORS ACTION BY UNANIMOUS WRITTEN CONSENT. Any
action required or permitted to be taken by the Board of Directors may be taken
without a meeting and with the same force and effect as if taken by a unanimous
vote of Directors, if authorized by a writing signed individually or
collectively by all members of the Board. Such consent shall be filed with the
regular minutes of the Board.
Section 14. QUORUM. A majority of the number of Directors as
fixed by the Articles of Incorporation or By-Laws shall be necessary to
constitute a quorum for the transaction of business, and the action of a
majority of the Directors present at any meeting at which there is a quorum,
when duly assembled, is valid as a corporate act; provided that a minority of
the Directors, in the absence of a quorum, may adjourn from time to time, but
may not transact any business. A meeting at which a quorum is initially
present may continue to transact business, notwithstanding the withdrawal of
Directors, if any action taken is approved by a majority of the required quorum
for such meeting.
Section 15. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given to absent Directors if the
time and place be fixed at the meeting adjourned and held within twenty-four
(24) hours, but if adjourned more than twenty-four (24) hours, notice shall be
given to all Directors not present at the time of adjournment.
Section 16. COMPENSATION OF DIRECTORS. Directors, as such, shall
not receive any stated salary for their services, but by resolution of the
Board a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board; provided that
nothing herein contained shall be construed to preclude any Director from
serving the corporation in any other capacity and receiving compensation
thereof.
Section 17. COMMITTEES. Committees of the Board may be appointed
by resolution passed by a majority of the whole Board. Committees shall be
composed of two (2) or more members of the Board, and shall have such powers of
the Board as may be expressly delegated to it by resolution of the Board of
Directors, except those powers expressly made non-delegable by Section 311.
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Section 18. ADVISORY DIRECTORS. The Board of Directors from time
to time may elect one or more persons to be Advisory Directors who shall not by
such appointment be members of the Board of Directors. Advisory Directors
shall be available from time to time to perform special assignments specified
by the President, to attend meetings of the Board of Directors upon invitation
and to furnish consultation to Board. The period during which the title shall
be held may be prescribed by the Board of Directors. If no period is
prescribed, the title shall be held at the pleasure of the Board.
Section 19. RESIGNATIONS. Any Director may resign effective upon
giving written notice to the Chairman of the Board, the President, the
Secretary or the Board of Directors of the corporation, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The Officers of the corporation shall be a
President, a Secretary, and a Chief Financial Officer. The corporation may
also have, at the discretion of the Board of Directors, a Chairman of the
Board, one or more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other Officers as may be appointed in
accordance with the provisions of Section 3 of this Article III. Any number of
offices may be held by the same person.
Section 2. ELECTION. The Officers of the corporation, except
such Officers as may be appointed in accordance with the provisions of Section
3 or Section 5 of this Article, shall be chosen annually by the Board of
Directors, and each shall hold office until he or she shall resign or shall be
removed or otherwise disqualified to serve, or a successor shall be elected and
qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors
may appoint such other Officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in the By-Laws or as the Board of Directors may
from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an Officer under any contract of employment, any Officer may
be removed, either with or without cause, by the Board of Directors, at any
regular or special meeting to the Board, or, except in case of an Officer
chosen by the Board of Directors, by any Officer upon whom such power of
removal may be conferred by the Board of Directors.
Any Officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Office is a
party.
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Section 5. VACANCIES. A vacancy is any office because of death,
resignation, removal disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an Officer be elected, shall, if present, preside at meetings of the Board
of Directors and exercise and perform such other powers and duties as may be
from time to time assigned by the Board of Directors or prescribed by the
By-Laws. If there is no President, the Chairman of the Board shall in addition
be the Chief Executive Officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article III.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board, if
there be such an Officer, the President shall be the Chief Executive Officer of
the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and Officers of
the corporation. He or she shall preside at all meetings of the Shareholders
and in the absence of the Chairman of the Board, or if there be none, at all
meetings of the Board of Directors. The President shall be ex officio a member
of all the standing committees, including the Executive Committee, if any, and
shall have the general powers and duties of management usually vested in the
office of the President of a corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors, or if not ranked, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting shall all the powers of, and be subject to, all the restrictions upon,
the President. The Vice Presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them respectively
by the Board of Directors or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be
kept, a book of minutes at the principal office or such other place as the
Board of Directors may order, of all meetings of Directors and Shareholders,
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice of thereof given, the names of those present at
Directors' meetings, the number of shares present or represented at
Shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses; the number and classes of shares held by each; the number and date
of certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
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The Secretary shall give, or cause to be given, notice of all the
meetings of the Shareholders and of the Board of Directors required by the
By-Laws or by law to be given. He or she shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
earnings (or surplus) and shares. The books of account shall at all reasonable
times be open to inspection by any Director.
This Officer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositories as may be
designated by the Board of Directors. He or she shall disburse the funds of
the corporation as may be ordered by the Board of Directors, shall render to
the President and Directors, whenever they request it, an account of all of his
or her transactions and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or the By-Laws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders
shall be held at such appropriate and convenient location as is designated for
that purpose from time to time by the Board of Directors.
Section 2. ANNUAL MEETINGS. The annual meetings of the
Shareholders shall be held, each year, at the time and on the day following:
Time of Meeting: 10:00 A.M.
Date of Meeting: First Tuesday in June
If this day shall be a legal holiday, then the meeting shall be held
on the next succeeding business day, at the same hour. At the annual meeting,
the Shareholders shall elect a Board of Directors, consider reports of the
affairs of the corporation and transact such other business as may be properly
brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the
Shareholders may be called at any time by the Board of Directors, the Chairman
of the Board, the President, a Vice President, the Secretary, or by one or more
Shareholders holding not less than one-tenth (1/10) of the voting power of the
corporation. Except as next provided, notice shall be given as for the annual
meeting.
Upon receipt of a written request addressed to the Chairman,
President, Vice President, or Secretary, mailed or delivered personally to such
Officer by any person (other than the Board) entitled to call a special meeting
of Shareholders, such Officer shall cause notice to be given, to the
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Shareholders entitled to vote, that a meeting will be held at a time requested
by the person or persons calling the meeting, not less than thirty-five (35)
nor more than sixty (60) days after the receipt of such request. If such
notice is not given within twenty (20) days after receipt of such request, the
persons calling the meeting may give notice thereof in the manner provided by
these By-Laws or apply to the Superior Court as provided in Section 305(c).
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings,
annual or special, shall be given in writing not less than ten (10) nor more
than sixty (60) days before the date of the meeting to Shareholders entitled to
vote thereat. Such notice shall be given by the Secretary or the Assistant
Secretary, or if there be no such Officer, or in the case of his or her neglect
or refusal, by any Director or Shareholder.
Such notices or any reports shall be given personally or by mail or
other means of written communication as provided in Section 601 of the Code and
shall be sent to the Shareholder's address appearing on the books of the
corporation, or supplied by him or her to the corporation for the purpose of
notice, and in the absence thereof, as provided in Section 601 of the Code.
Notice of any meeting of Shareholders shall specify the place, the day
and the hour of meeting, and (1) in case of a special meeting, the general
nature of the business to be transacted and no other business may be
transacted, or (2) in the case of an annual meeting, those matters which the
Board at date of mailing, intends to present for action by the Shareholders.
At any meetings where Directors are to be elected, notice shall include the
names of the nominees, if any, intended at date of notice to be presented by
management for election.
If a Shareholder supplied no address, notice shall be deemed to have
been given if mailed to the place where the principal executive office of the
corporation, in California, is situated, or published at least once in some
newspaper of general circulation in the County of said principal office.
Notice shall be deemed given at the time it is delivered personally or
deposited in the mail or sent by other means of written communication. The
Officer giving such notice or report shall prepare and file an affidavit or
declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice
of the adjourned meeting shall be given as in case of an original meeting.
Save, as aforesaid, it shall not be necessary to give any notice of adjournment
or of the business to be transacted at an adjourned meeting other than by
announcement at the meeting at which adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of Shareholders, however called and noticed,
shall be valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the Shareholders entitled to vote, not
present in person or by proxy, sign a written waiver of notice, or a consent to
the holding of such meeting or an approval of the minutes thereof. All such
waivers, consents or approvals shall
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be filed with the corporate records or made a part of the minutes of the
meeting. Attendance shall constitute a waiver of notice, unless objection
shall be made as provided in Section 601(e).
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING - DIRECTORS.
Any action which may be taken at a meeting of the Shareholders, may be taken
without a meeting or notice of meeting if authorized by a writing signed by all
of the Shareholders entitled to vote at a meeting such purpose, and filed with
the Secretary of the corporation, provided, further, that while ordinarily
Directors can only be elected by unanimous written consent under Section
603(d), if the Directors fail to fill a vacancy, then a Director to fill that
vacancy may be elected by the written consent of persons holder a majority of
shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise
provided in the California Corporations Code or the Articles, any action which
may taken at any annual or special meeting of Shareholders may be taken without
a meeting and without prior notice, if a consent in writing, setting forth the
action so taken, signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorized or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Unless the consents of all Shareholders entitled to vote have been
solicited in writing,
(1) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 without a meeting by less than unanimous
written consent shall be given at least ten (10) days before the
consummation of the action authorized by such approval, and
(2) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less
than unanimous written consent, to each of those Shareholders entitled
to vote who have not consented in writing.
Any Shareholder giving a written consent, or the Shareholder's proxy
holders, or a transferee of the shares of a personal representative of the
Shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the corporation.
Section 8. QUORUM. The holders of a majority of the shares
entitled to vote thereat, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction of
business except as otherwise provided by law, by the Articles of Incorporation,
or by these By-Laws. If, however, such majority shall not be present or
represented at any meeting of the Shareholders, the Shareholders entitled to
vote thereat, present in person, or by proxy, shall have the power to adjourn
the meeting from time to time, until the requisite amount of voting shares
shall be present. At such adjourned meeting at which the requisite amount of
voting shares shall be represented, any business may be transacted which might
have been transacted at a meeting as originally notified.
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If a quorum be initially present, the Shareholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken is approved by a
majority of the Shareholders required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled
to vote stand on the stock records of the corporation on the day of the meeting
of Shareholders, unless some other day be fixed by the Board of Directors for
the determination of Shareholders of record, and then on such other day, shall
be entitled to vote at such meeting.
Provided the candidate's name has been placed in nomination prior to
the voting and one or more Shareholder has given notice at the meeting prior to
the voting of the Shareholder's intent to cumulate the Shareholder's votes,
every Shareholder entitled to vote at any election for Directors of any
corporation for profit may cumulate their votes and give one candidate a number
of votes equal to the number of Directors to be elected multiplied by the
number of votes to which his or her shares are entitled, or distribute his or
her votes on the same principle amount as many candidates as he or she thinks
fit.
The candidates receiving the highest number of votes up to the number
of Directors to be elected are elected.
The Board of Directors may fix a time in the future not exceeding
sixty (60) days preceding the date of any meeting of Shareholders or the date
fixed for the payment of any dividend or distribution, or for the allotment or
rights, or when any change or conversion or exchange of shares shall go into
effect, as a record date for the determination of the Shareholders entitled to
notice of and to vote at any such meeting, or entitled to receive any such
dividend or distribution, or any allotment of rights, or to exercise the rights
in respect to any such change, conversion or exchange of shares. In such case
only Shareholders of record on the date so fixed shall be entitled to notice of
and to vote at such meeting, or to receive such dividends, distribution or
allotment of rights, or to exercise such rights, as the case may be
notwithstanding any transfer of any share on the books of the corporation after
any record date fixed as aforesaid. The Board of Directors may close the books
of the corporation against transfers of shares during the whole or any part of
such period.
Section 10. PROXIES. Every Shareholder entitled to vote, or to
execute consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Sections 604 and 705 of the Code and filed
with the Secretary of the corporation.
Section 11. ORGANIZATION. The President, or in the absence of
the President, any Vice President, shall call the meeting of the Shareholders
to order, and shall act as chairman of the meeting. In the absence of the
President and all of the Vice Presidents, Shareholders shall appoint a chairman
for such meeting. The Secretary of the corporation shall act as Secretary of
all meetings of the Shareholders, but in the absence of the Secretary at any
meeting of the Shareholders, the presiding Officer may appoint any person to
act as Secretary of the meeting.
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Section 12. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board of Directors may, if they so elect, appoint inspectors
of election to act at such meeting or any adjournment thereof. If inspectors
of election be not so appointed, or if any persons so appointed fail to appear
or refuse to act, the chairman of any such meeting may, and on the request of
any Shareholder or his or her proxy shall, make such appointment at the meeting
in which case the number of inspectors shall be either one (1) or three (3) as
determined by a majority of the Shareholders represented at the meeting.
Section 13. (A) SHAREHOLDERS' AGREEMENTS. Notwithstanding the
above provisions, in the event this corporation elects to become a close
corporation, an agreement between two (2) or more Shareholders thereof, if in
writing and signed by the parties thereof, may provide that in exercising any
voting rights the shares held by them shall be voted as provided therein or in
Section 706, and may otherwise modify these provisions as to Shareholders'
meetings and actions.
(B) EFFECT OF SHAREHOLDERS' AGREEMENTS. Any
Shareholders' Agreement authorized by Section 300(b), shall only be effective
to modify the terms of these By-Laws if this corporation elects to become a
close corporation with appropriate filing of or amendment to its Articles as
required by Section 202 and shall terminate when this corporation ceases to be
a close corporation. Such an agreement cannot waive or alter Section 158,
(defining close corporations), 202 (requirements of Articles of Incorporation),
500 and 501 relative to distributions, 111 (merger), 1201 (e) (reorganization)
or Chapters 15 (Records and Reports) or 16 (Rights of Inspection), 18
(Involuntary Dissolution) or 22 (Crimes and Penalties). Any other provisions
of the Code or these By-Laws may be altered or waived thereby, but to the
extent they are not so altered or waived, these By-Laws shall be applicable.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares
shall be of such form and device as the Board of Directors may designate and
shall state the name of the record holder of the shares represented thereby;
its number; date of issuance; the number of shares for which it is issued; a
statement of the rights, privileges, preferences and restrictions, if any; a
statement as to the redemption or conversion, if any; a statement of liens or
restrictions upon transfer or voting, if any; if the shares be assessable or,
if assessments are collectible be personal action, a plain statement of such
facts.
All certificates shall be signed in the name of the corporation by the
Chairman of the Board or Vice Chairman of the Board or the President or Vice
President and by the Chief Financial Officer or an Assistant Treasurer or the
Secretary or any Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the Shareholders.
Any or all of the signatures on the certificate may be facsimile. In
case any Officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on a certificate shall have ceased to be
that Officer, transfer agent, or registrar before that certificate is issued,
it may be
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issued by the corporation with the same effect as if that person were an
Officer, transfer agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the
Secretary or transfer agent of the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming
a certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of the fact and shall, if the Directors so require, give the
corporation a bond of indemnity, in form and with one or more sureties
satisfactory to the Board, in at least double the value of the stock
represented by said certificate, whereupon a new certificate may be issued in
the same tenor and for the same number of shares as the one alleged to be lost
or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board of
Directors may appoint one or more transfer agents or transfer clerks, and one
or more registrars, which shall be an incorporated bank or trust company,
either domestic or foreign, who shall be appointed at such times and places as
the requirements of the corporation may necessitate and the Board of Directors
may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS - RECORD DATE. In order
that the corporation may determine the Shareholders entitled to notice of any
meeting or to vote or entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any rights in
respect of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
prior to the date of such meeting nor more than sixty (60) days prior to any
other action.
If no record date is fixed, the record date for determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders
shall be at the close of business on the business day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held. The record
date for determining Shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board is necessary,
shall be the day on which the first written consent is given.
The record date for determining Shareholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date of
such other action, whichever is later.
Section 6. LEGEND CONDITION. In the event any shares of this
corporation are issued pursuant to a permit or exemption therefrom requiring
the imposition of a legend condition, the person or persons issuing or
transferring said shares shall make sure said legend appears on the certificate
and shall not be required to transfer any shares free of such legend unless an
amendment to such permit or a new permit be first issued so authorizing such a
deletion.
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Section 7. CLOSE CORPORATION CERTIFICATES. All certificates
representing shares of this corporation, in the event it shall elect to become
a close corporation, shall contain the legend required by Section 418(c).
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. The corporation shall maintain, in
accordance with generally accepted accounting principles, adequate and correct
accounts, books and records of its business and properties. All of such books,
records and accounts shall be kept at its principal executive office in the
State of California, as fixed by the Board of Directors from time to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and
records provided for in Section 1500 shall be open to inspection of the
Directors and Shareholders from time to time and in the manner provided in said
Section 1600 - 1602.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The
original or a copy of these By-Laws, as amended or otherwise altered to date,
certified by the Secretary, shall be kept at the corporation's principal
executive office and shall be open to inspection by the Shareholders of the
corporation at all reasonable times during office hours, as provided in Section
213 of the Corporations Code.
Section 4. CHECKS, DRAFTS, ETC. All checks, drafts, or other
orders for payment of money, notes or other evidences of indebtedness, issued
in the name of or payable to the corporation, shall be signed or endorsed by
such person or persons and in such manner as shall be determined from time to
time by resolution of the Board of Directors.
Section 5. CONTRACTS, ETC. -- HOW EXECUTED. The Board of
Directors, except as in the By-Laws otherwise provided, may authorize any
Officer or Officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation. Such authority may
be general or confined to specific instances. Unless so authorized by the
Board of Directors, no Officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge
its credit, or to render it liable for any purpose or to any amount, except as
provided in Section 313 of the Corporations Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. REPORT TO SHAREHOLDERS, DUE DATE. The Board of
Directors shall cause an annual report to be sent to the Shareholders not later
than one hundred twenty (120) days after the close of the fiscal or calendar
year adopted by the corporation. This report shall be sent at least fifteen
(15) days before the annual meeting of Shareholders to be held during the next
fiscal year and in the manner specified in Section 4 of Article IV of these
By-Laws for giving notice to Shareholders of the corporation. The annual
report shall contain a balance sheet as of the end of the fiscal year and an
income statement and statement of changes in financial position for the fiscal
year,
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accompanied by any report of independent accountants or, if there is no such
report, the certificate of an authorized Officer of the corporation that the
statements were prepared without audit from the books and records of the
corporation.
Section 2. WAIVER. The annual report to Shareholders referred
to in Section 1501 of the California General Corporation Law is expressly
dispensed with so long as this corporation shall have less than one hundred
(100) Shareholders. However, nothing herein shall be interpreted as
prohibiting the Board of Directors from issuing annual or other periodic
reports to the Shareholders of the corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BY-LAWS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be
adopted or these By-Laws may be amended or repealed by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that if the Articles of Incorporation of the corporation set
forth the number of authorized Directors of the corporation, the authorized
number of Directors may be changed only by an amendment to the Articles of
Incorporation.
Section 2. POWERS OF DIRECTORS. Subject to the right of the
Shareholders to adopt, amend or repeal By-Laws, as provided in Section 1 of
this Article VIII, and the limitations of section 204(a)(5) and Section 212,
the Board of Directors may adopt, amend or repeal any of these By-Laws other
than a By-Law or amendment thereof changing the authorized number of Directors.
Section 3. RECORD OF AMENDMENTS. Whenever an amendment or new
By-Law is adopted, it shall be copied in the book of By-Laws with the original
By-Laws, in the appropriate place. If any By-Law is repealed, the fact of
repeal with the date of the meeting at which the repeal was enacted or written
assent was filed shall be stated in said book.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the corporation, the year or date of its incorporation, and
the word "California."
ARTICLE X
MISCELLANEOUS
Section 1. REFERENCES TO CODE SECTIONS. "Section" references
herein refer to the equivalent Sections of the California Corporations Code
effective January 1, 1977, as amended.
Section 2. REPRESENTATION OF SHARES IN OTHER CORPORATIONS.
Shares of other corporations standing in the name of this corporation may be
voted or represented and all incidents thereto may be exercised on behalf of
the corporation by the Chairman of the Board, the President or any Vice
President and the Secretary or an Assistant Secretary.
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Section 3. SUBSIDIARY CORPORATIONS. Shares of this corporation
owned by a subsidiary shall not be entitled to vote on any matter. A
subsidiary for these purposes is defined as a corporation, the shares of which
possessing more than 25% of the total combined voting power of all classes of
shares entitled to vote, are owned directly or indirectly through one (1) or
more subsidiaries.
Section 4. INDEMNIFICATION AND LIABILITY. The liability of the
Directors of the corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to the corporation and shareholders through bylaw provisions or through
agreements with the agents, or both, in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject to the
limits on such excess indemnification set forth in Section 204 of the
California Corporations Code.
Section 5. ACCOUNTING YEAR. The accounting year of the
corporation shall be fixed by resolution of the Board of Directors.
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CERTIFICATE OF ADOPTION OF BY-LAWS
CERTIFICATE BY SECRETARY
I DO HEREBY CERTIFY AS FOLLOWS:
That I am the duly elected, qualified and acting Secretary of the
above named corporation, that the foregoing By-Laws were adopted as the amended
By-Laws of said corporation by the Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 5th day of December, 1995.
/s/ Richard E. King, Jr.
---------------------------------------
Secretary
-16-
<PAGE> 1
Exhibit 10.3
EMPLOYMENT CONTRACT FOR SENIOR EXECUTIVE
Bikers Dream, Inc., a California corporation, located at 1420 Village
Way, Santa Ana, California 92705, hereinafter referred to as Employer, and
William R. Gresher, hereinafter referred to as Employee, in consideration of
the mutual promises made herein, agree as follows:
ARTICLE 1. TERM OF EMPLOYMENT
Specified Period
Section 1.01. Employer hereby employs Employee and Employee hereby
accepts employment with Employer for a period of Five (5) years beginning on
September ___, 1995 and terminating on September _____, 2000. This Agreement
shall thereafter be renewed annually, unless a party shall have given 30 days'
notice to the other of intention not to renew.
"Employment Term" Defined
Section 1.02. As used herein, the phrase "employment term" refers to
the entire period of employment of Employee by Employer hereunder, whether for
the periods provided above, or whether terminated earlier as hereinafter
provided or extended automatically or by mutual agreement between Employer and
Employee.
ARTICLE 2. DUTIES AND OBLIGATIONS OF EMPLOYEE
General Duties
Section 2.01. Employee shall serve as the Senior Vice President and
Chief Financial, Operating and Administrative Officer of Bikers Dream, Inc. In
the aforesaid capacities as Senior Vice President of Bikers Dream, Inc.,
Employee shall do and perform all services, acts, or things necessary or
advisable to manage and conduct the financial activities, operations and
administration of Employer.
Specific Duties and Authority
Section 2.02. Employee shall have the authority to approve or
disapprove all cash disbursements, except for ongoing contractual obligations
in existence at the date of hire, develop and approve budgets and business and
corporate planning, manage human resources, oversee all operations, and
administration of staff and systems. Employee shall work with and report to
the president and Board of Directors of the corporation, which shall comprise
the only elements of superior authority in Employer corporation.
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Matters Requiring Consent of Board of Directors
Section 2.03. Employee shall not, without specific approval of
Employer's Board of Directors, do or contract to do any of the following:
(1) Borrow on behalf of Employer during any one fiscal year an amount
in excess of $100,000.
(2) Permit any customer of Employer to become indebted to Employer in
an amount in excess of $100,000.
(3) Purchase capital equipment for amounts in excess of $10,000.00
expenditure by the Board of Directors.
(4) Sell any single capital asset of Employer having a market value in
excess of $10,000 or a total of capital assets during a fiscal year having a
market value in excess of $30,000.
(5) Terminate the services of any other officer of Employer or hire
any replacement of any officer whose services have been terminated.
Devotion to Employer's Business
Section 2.04. (a) Employee shall devote his entire productive time,
ability, and attention to the business of Employer during the term of this
contract.
(b) Employee shall not engage in any other business duties or pursuits
whatsoever, or directly or indirectly render any services of a business,
commercial, or professional nature to any other person or organization, whether
for compensation or otherwise, without the prior written consent of Employer's
Board of Directors.
(c) This agreement shall not be interpreted to prohibit Employee from
making passive personal investments or conducting private business affairs if
those activities do not materially interfere with the services required under
this agreement.
Competitive Activities
Section 2.05. During the term of this contract Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of Employer.
Uniqueness of Employee's Services
Section 2.06. Employee hereby represents and agrees that the services
to be performed under the terms of this contract are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated
2
<PAGE> 3
in damages in an action at law. Employee therefore expressly agrees that
Employer, in addition to any other rights or remedies that Employer may
possess, shall be entitled to injunctive and other equitable relief to prevent
or remedy a breach of this contract by Employee.
Indemnification for Misconduct
Section 2.07. Employee shall indemnify and hold Employer harmless
from all liability for loss, damage, or injury to persons or property resulting
from the misconduct of Employee. Misconduct shall include acts involving moral
turpitude, illegal acts, or acts outside of Employee's authority which cause
damage to Employer.
Trade Secrets
Section 2.08. (a) The parties acknowledge and agree that during the
term of this agreement and in the course of the discharge of his duties
hereunder, Employee shall have access to and become acquainted with information
concerning the operation of Employer, including without limitation, customer
lists, financial, personnel, sales, and other information that is owned by
Employer and regularly used in the operation of Employer's business, and that
such information constitutes Employer's trade secrets.
(b) Employee specifically agrees that he shall not misuse,
misappropriate, or disclose any such trade secrets, directly or indirectly, to
any other person or use them in any way, either during the term of this
agreement or at any other time thereafter, except as is required in the course
of his employment hereunder.
(c) Employee acknowledges and agrees that the sale or unauthorized use
or disclosure of any of Employer's trade secrets obtained by Employee during
the course of his employment under this agreement, including information
concerning Employer's current or any future and proposed work, services, or
products, the facts that any such work, services, or products are planned,
under consideration, or in production, as well as any descriptions thereof,
constitute unfair competition. Employee promises and agrees not to engage in
any unfair competition with Employer, either during the term of this agreement
or at any other time thereafter.
(d) Employee further agrees that all files, records, documents,
specifications, equipment, and similar items relating to Employer's business,
whether prepared by Employee or others, are and shall remain exclusively the
property of Employer and that they shall be removed from the premises of
Employer only with the express prior written consent of Employer's Board of
Directors.
Services as Consultant
Section 2.09. Following Employee's retirement, and if the employment
term has not been terminated for cause, Employee shall make his advice and
counsel available to Employer for three months, at not less than one half of
his previous year's compensation. The parties agree that this advice and
counsel shall not entail full time service and shall be consistent with
Employee's retirement status.
3
<PAGE> 4
ARTICLE 3. OBLIGATIONS OF EMPLOYER
General Description
Section 3.01. Employer shall provide Employee with the compensation,
incentives, benefits, and business expense reimbursement specified elsewhere in
this agreement.
Office and Staff
Section 3.02. Employer shall provide Employee with a private office,
stenographic help, office equipment, supplies, and other facilities and
services, suitable to Employee's position and adequate for the performance of
his duties.
Indemnification of Losses of Employee
Section 3.03. Employer shall indemnify Employee for all losses
sustained by Employee in direct consequence of the discharge of his duties on
Employer's behalf.
ARTICLE 4. COMPENSATION OF EMPLOYEE
Annual Salary
Section 4.01. (a) As compensation for the services to be performed
hereunder, Employee shall receive a salary at the rate of $185,000 per annum,
payable not less than bi-monthly during the employment term.
(b) Employee shall receive such annual increases in salary, if any, as
may be determined by Employer's Board of Directors in its sole discretion at a
meeting the agenda of which includes compensation of officers.
Tax Withholding
Section 4.02. Employer shall have the right to deduct or withhold from
the compensation due to Employee hereunder any and all sums required for
federal income and Social Security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
ARTICLE 5. EMPLOYEE INCENTIVES
Bonus
Section 5.01. Employee shall receive a sum equivalent to five
percent (5%) of the first $1 million net profits after tax of Employer, and
two percent (2%) of the second $1 million of net profits after tax of Employer,
computed for purposes of quantifying this bonus without its inclusion
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<PAGE> 5
as an expense item. For purposes of this computation, the opinion of the
Employee's independent accountants shall be binding on the parties. The bonus
will be paid to Employee within 60 days of the end of each fiscal year during
the term or any extension hereof.
Stock Options
Section 5.02. Employee will be granted stock options outside of
Employer's Incentive Stock Options Plan in the aggregate amount of 300,000
shares, exercisable at $2.50 per share at any time within two years of the
expiration date of all options. 50,000 of the stock options shall vest upon
execution of this agreement and commencement of employment, and 50,000 shall
vest on each anniversary of the date hereof for five years. Options granted
pursuant to this Agreement shall expire on September 25, 2002.
ARTICLE 6. EMPLOYEE BENEFITS
Annual Vacation
Section 6.01. Employee shall be entitled to five weeks vacation time
each year, with an increase of one week for each three years of service.
Vacation will vest throughout the year beginning as of the date of employment,
with 1/24 being earned each semi-monthly payroll period. The Employee shall
have the right to buyback vacation up to two weeks a year. Any accrued, vested
and unused vacation at the termination of employment for any reason will be due
and payable as compensation at the time of termination without loss of other
elements of compensation. In the event that Employee is unable for any reason
to take the total amount of vacation time authorized herein during any year, he
may accumulate that time and add it to vacation time for any following year,
not to exceed 10 weeks in the aggregate.
Medical Coverage
Section 6.02. Employer agrees to, within 5 months of hire, include
Employee in the coverage of its medical, major medical, hospital, dental, and
eye care insurance. This shall include a flex spending account, and a PPO or
HMO option; a "cafeteria" plan will be provided if practical.
Life Insurance
Section 6.03. (a) Employer agrees to obtain term a life insurance
policy on the life of Employee in the face amount of $500,000. Employer further
agrees to make that insurance policy payable to the beneficiary or
beneficiaries designated by Employee. Employer agrees to pay all premiums on
the policy during the term of employment provided herein.
(b) Employee agrees to submit to a physical examination at any time
requested by Employer for the purpose of Employer's obtaining life insurance on
the life of Employee for the benefit of Employer; provided, however, that
Employer shall bear the entire cost of that examination. Employer shall pay
for an annual physical examination at a physician/institution of Employee's
choosing.
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<PAGE> 6
ARTICLE 7. BUSINESS EXPENSES
Reimbursement of Business Expenses
Section 7.01. (a) Employer shall promptly reimburse Employee for all
reasonable business expenses incurred by Employee in connection with the
business of Employer.
(b) Each such expenditure shall be reimbursable only if Employee
furnishes to Employer adequate records and other documentary evidence required
by federal and state statutes and regulations issued by the appropriate taxing
authorities for the substantiation of each such expenditure as an income tax
deduction.
ARTICLE 8. TERMINATION OF EMPLOYMENT
Termination for Cause
Section 8.01. (a) Employer reserves the right to terminate this
agreement if Employee wilfully breaches or habitually neglects the duties which
he is required to perform under the terms of this agreement; or commits such
acts of dishonesty, fraud, misrepresentation or other acts of moral turpitude
as would prevent the effective performance of his duties.
(b) Employer may at its option terminate this agreement for the
reasons stated in this Section by giving written notice of termination to
Employee without prejudice to any other remedy to which Employer may be
entitled either at law, in equity, or under this agreement.
(c) The notice of termination required by this section shall specify
the ground for the termination and shall be supported by a statement of all
relevant facts.
(d) Termination under this section shall be considered "for cause"
for the purposes of this agreement.
Termination Without Cause
Section 8.02. (a) If Employee is terminated by Employer during the
first 12 months of employment without cause, Employee shall be entitled to
severance pay equal to one year's compensation, incremented by one additional
month for each month of service, not to exceed a total of 24 months, payable in
the same manner as if Employee remained employed by Employer.
Effect of Merger, Transfer of Assets, Dissolution, other termination.
Section 8.03. (a) At the option of Employee, this agreement shall not
be terminated by any voluntary or involuntary dissolution of Employer resulting
from either a merger or consolidation in which Employer is not the consolidated
or surviving corporation, or a transfer of all or substantially all of the
assets of Employer.
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<PAGE> 7
(b) In the event of any such merger or consolidation or transfer of
assets, Employer's rights, benefits, and obligations hereunder shall be
assigned to the surviving or resulting corporation or the transferee of
Employer's assets.
(c) If Employee does not wish to continue his employment with a
corporation other than Employer which is not the surviving corporation in a
merger, Employee shall be entitled to severance pay equal to one years total
compensation, incremented by one additional month for each month of service,
not to exceed a total of 24 months.
Termination by Employee
Section 8.04. Employee may terminate his obligations under this
agreement by giving Employer at least one months notice in advance.
Death of Employee
Section 8.05. This Agreement shall be terminated upon the death of
Employee.
ARTICLE 9. GENERAL PROVISIONS
Notices
Section 9.01. Any notices to be given hereunder by either party to the
other shall be in writing and may be transmitted by personal delivery or by
mail, registered or certified, postage prepaid with return receipt requested.
Mailed notices shall be addressed to the parties at the addresses appearing in
the introductory paragraph of this agreement, but each party may change that
address by written notice in accordance with this section. Notices delivered
personally shall be deemed communicated as of the date of actual receipt;
mailed notices shall be deemed communicated as of five days after date of
mailing.
Arbitration
Section 9.02. (a) Any controversy between Employer and Employee
involving the construction or application of any of the terms, provisions, or
conditions of this agreement shall on the written request of either party
served on the other be submitted to arbitration. Arbitration shall comply with
and be governed by the provisions of the California Arbitration Act.
(b) Employer and Employee shall each appoint one person to hear and
determine the dispute. If the two persons so appointed are unable to agree,
then those persons shall select a third impartial arbitrator whose decision
shall be final and conclusive upon both parties.
(c) The cost of arbitration shall be borne by the losing party or in
such proportions as the arbitrators decide.
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<PAGE> 8
Attorneys' Fees and Costs
Section 9.03. If any legal action is necessary to enforce or interpret
the terms of this agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief to which that party may be entitled. This provision shall be
construed as applicable to the entire contract.
Entire Agreement
Section 9.04. This agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Employee by Employer and contains all of the covenants and
agreements between the parties with respect to that employment in any manner
whatsoever. Each party to this agreement acknowledges that no representation,
inducements, promises, or agreements, orally or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in
this agreement shall be valid or binding on either party.
Modifications
Section 9.05. Any modification of this agreement will be effective
only if it is in writing and signed by the party to be charged.
Effect of Waiver
Section 9.06. The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this agreement by
the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
Partial Invalidity
Section 9.07. If any provision in this agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force without being impaired or
invalidated in any way.
Law Governing Agreement
Section 9.08. This agreement shall be governed by and construed in
accordance with the laws of the State of California.
Sums Due Deceased Employee
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Section 9.09. If Employee dies prior to the expiration of the term of
his employment, any sums that may be due him from Employer under this agreement
as of the date of death shall be paid to Employee's executors, administrators,
heirs, personal representatives, successors, and assigns.
Executed on __________________, 1995, at __________________________,
California.
EMPLOYER
Bikers Dream, Inc.
By: _________________________________
Dennis Campbell, President
EMPLOYEE
By: _________________________________
William R. Gresher
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<PAGE> 1
Exhibit 10.19-A
AGREEMENT
This Agreement is entered into this ____ day of November, 1995 by and between
Bikers Dream, Inc, ("BDI"), Bikers Dream International, Inc., a wholly owned
subsidiary of BDI ("Bikers Dream"), and Christine Crowner and Randy Crowner
(individually and collectively the "Dealer");
RECITALS
WHEREAS, the Dealer entered into a Franchise Agreement with BDI on February 20,
1995 (the "Franchise Agreement") which is attached hereto as Exhibit A and
incorporated herein by reference; and
WHEREAS, the Dealer desires to terminate the Franchise Agreement and
simultaneously execute the Dealer Agreement with Bikers Dream (the "Dealer
Agreement), as modified by this Agreement, which is attached hereto as Exhibit
B and incorporated herein by reference; and
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
in this Agreement, and for other good and valuable consideration, the parties
hereby contract, agree and stipulate as follows:
1. TERMINATION OF FRANCHISE AGREEMENT. Concurrently with the execution
of this Agreement, the Franchise Agreement is hereby terminated in all
respects and will be of no further force and effect. All rights,
privileges and obligations of the Dealer and BDI under the Franchise
Agreement are hereby terminated in all respects.
2. EXECUTION OF DEALER AGREEMENT CONCURRENTLY WITH AGREEMENT.
Concurrently with the execution of this Agreement, the Dealer will
execute the Dealer Agreement, which will replace the Franchise
Agreement in all respects.
3. Article 5.1 of the Dealer Agreement is amended as follows:
5.1 AMOUNT OF WEEKLY CONTINUING FEES. In addition to the Initial
Fee payable by the Dealer, the Dealer will, for the entire term of
this Agreement, pay Bikers Dream weekly continuing fees equal to five
percent (5%) of the Dealer's Gross Sales, as defined in Article 33.4,
one percent (1%) of the Dealers motorcycle sales, as defined in
Article 33.8 and one half percent (1/2%) of the Dealer's consignment
motorcycle sales, as defined in Article 33.9 ("Weekly Continuing
Fees"). The Weekly Continuing Fees paid by the Dealer to Bikers Dream
will not be refundable to the Dealer under any circumstances.
4. Article 6.1 of the Dealer Agreement is amended as follows:
6.1 LOCAL ADVERTISING EXPENDITURES. Each calendar month during
the term of this Agreement, the Dealer will spend two percent (2%) of
its monthly Gross Sales, motorcycle
<PAGE> 2
sales and consignment motorcycle sales in the Dealer's market area for
advertising, marketing. public relations, telemarketing and/or
promotional programs for the Dealer's Bikers Dream Motorcycle
Dealership which have been approved by Bikers Dream in writing ("Local
Advertising").
5. Article 33.4 of the Dealer Agreement is amended as follows:
33.4 GROSS SALES. "Gross Sales," will mean the aggregate gross
amount of all revenues from whatever source derived (whether in the
form of cash, credit, agreements to pay or other consideration, and
whether or not payment is received at the time of sale or any such
amounts prove collectible) which arise from or derived by the Dealer
or by any other person from the Business conducted or which originated
in, on, from, or through the Premises of the Business, whether such
business is conducted in compliance with or in violation of the terms
of this Agreement, including all payments received by the Dealer from
any business interruption insurance policy carried by the Dealer and
all sales, use or gross receipts tax rebates, but excluding only sales
or other tax receipts (the collection of which is required by law).
Gross Sales will not include motorcycle sales, consignment motorcycle
sales or product returns and allowances.
6. Article 33.8 of the Dealer Agreement is amended as follows:
33.8 MOTORCYCLE SALES. "Motorcycle sales" will mean the aggregate
gross amount of all revenues received by the Dealer from the sale of
used and/or customized Harley-Davidson(R) motorcycles or other
motorcycles. Motorcycle sales will not include consignment motorcycle
sales.
7. Article 33.9 will be added to the Dealer Agreement as follows:
33.9 CONSIGNMENT MOTORCYCLE SALES. "Consignment motorcycle sales"
will mean the aggregate gross amount of all revenues received by the
Dealer from the sale of motorcycles not owned by the Dealer, but in
which the Dealer is entrusted to sell and receives payment is a result
of the sale.
8. RELEASE OF DEALER BY BIKERS DREAM AND BDI. Bikers Dream and BDI for
themselves and their respective past and present employees, agents,
affiliates, accountants, insurers, indemnitors, attorneys, heirs,
representatives, predecessors, successors and assigns (collectively
"Bikers Dream, BDI and Associates"), do hereby release and forever
discharge the Dealer and their respective past and present officers,
Directors, shareholders, employees, agents, afflliates, partners,
subsidiaries, accountants, insurers, indemnitors, attorneys, heirs,
representatives, predecessors, successors and assigns (collectively
"the Dealer and Associates"), individually and as officers, Directors
or shareholders of any corporation or partners of any partnership,
from any and all causes of action, suits, claims, demands, damages,
judgments, losses, penalties, expenses (including, but not limited
to, reasonable attorneys' fees), costs, settlements and liabilities
whatsoever, whether known or unknown, liquidated or unliquidated,
fixed, contingent, direct or indirect, whether at law or in equity,
which Bikers Dream, BDI and Associates have had or now have or
may in the future have against the Dealer and Associates,
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or any one of them, for, upon or by reason of any matter, fact or
thing whatsoever from the beginning of time to the date of this
Agreement including, but not limited to, any claims under the United
States Federal Trade Commission's Trade Regulation Rule, "mini" FTC
laws, deceptive or unfair trade practices laws, franchise laws or
securities laws, including the Iowa Business Opportunity Promotions
Law, common law, and any other local, municipal, state, federal,
commonwealth or other laws, statutes. rules or regulations of the
United States or any state or other governmental subdivision or agency
thereof, arising from, as a result of, or in connection with the,
Dealer's purchase or operation of the Bikers Dream(R) Motorcycle
Dealership, the Franchise Agreement or any other oral or written
agreement between Bikers Dream, BDI and Associates and the Dealer,
including any alleged breaches or violations of any oral or written
agreement between Bikers Dream, BDI and Associates and any third party,
including real estate leases, and any other leases or contracts to
purchase goods or services.
9. RELEASE OF BIKERS DREAM AND BDI BY THE DEALER. The Dealer for
themselves and their respective past and present employees, agents,
affiliates, accountants, insurers, indemnitors, attorneys, heirs,
representatives, predecessors, successors and assigns (collectively
"the Dealer and Associates"), do hereby release and forever discharge
BDI and Bikers Dream and their respective past and present officers,
Directors, Shareholders, employees, agents, afflliates, partners,
subsidiaries, accountants, insurers, indemnitors, attorneys, heirs,
representatives, predecessors, successors and assigns (collectively
"BDI, Bikers Dream and Associates"), individually and as officers,
Directors or shareholders of any corporation or partners of any
partnership, from any and all causes of action, suits, claims,
demands, damages, judgments, losses, penalties, expenses (including,
but not limited to, reasonable attorneys' fees), costs, settlements
and liabilities whatsoever, whether known or unknown, liquidated or
unliquidated, fixed, contingent, direct or indirect, whether at law or
in equity, which the Dealer and Associates have had or now have or may
in the future have against BDI, Bikers Dream and Associates, or any
one of them, for, upon or by reason of any matter, fact or thing
whatsoever from the beginning of time to the date of this Agreement
including, but not limited to, any claims under the United States
Federal Trade Commission's Trade Regulation Rule, "mini" FTC laws,
deceptive or unfair trade practices laws, franchise laws or securities
laws, including the Iowa Business Opportunity Promotions Law, common
law, and any other local, municipal, state, federal, commonwealth or
other laws, statutes, rules or regulations of the United States or any
state or other governmental subdivision or agency thereof, arising
from, as a result of, or in connection with the Dealer's purchase or
operation of the Bikers Dream(R) Motorcycle Dealership, the Franchise
Agreement or any other oral or written agreement between the Dealer
and Associates and BDI or Bikers Dream, including any alleged breaches
or violations of any oral or written agreement between the Dealer and
Associates and any third party, including real estate leases, and any
other leases or contracts to purchase goods or services.
To the extent that this Agreement is deemed to be inconsistent with any terms
or conditions of the Dealer Agreement or the exhibits or attachments thereto,
the terms of this Agreement will govern. All other terms and conditions of the
Dealer Agreement will remain the same.
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<PAGE> 4
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges that it has
read this Agreement, understands and consents to be bound by all of its terms,
and agrees that it will be effective as of date first above written.
"BDI"
BIKERS DREAM, INC.
By:
---------------------------------
Its:
--------------------------------
"Bikers Dream"
BIKERS DREAM INTERNATIONAL INC.
By:
---------------------------------
Its:
--------------------------------
"Dealer"
------------------------------------
Christine Crowner
------------------------------------
Randy Crowner
4
<PAGE> 5
EXHIBIT A
FRANCHISE AGREEMENT
Agreement
Biker's Dream, Inc.
Biker's Dream International, Inc.
Christine and Randy Crowner
<PAGE> 6
EXHIBIT B
DEALER AGREEMENT
Agreement
Biker's Dream, Inc.
Biker's Dream International, Inc.
Christine and Randy Crowner
<PAGE> 1
Exhibit 10.19-B
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Preliminary Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Grant of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Duration of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Initial Franchise Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
5. Recurring Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Franchise and Advertising Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Gross Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
6. Restriction to Location of BDI STORES and Limitation on
Number BDI STORES in Franchisee's Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Restriction of Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Limitation on Number of BDI STORES in Franchisee's Area . . . . . . . . . . . . . . . . . . 2
C. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Location Zone and Franchise Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. Lease, Construction and Opening of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A. Lease or Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Construction of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. Equipment, Signs and Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. BDI STORE Opening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Termination of Franchisee for Failure to open BDI STORE . . . . . . . . . . . . . . . . . . 5
8. Training and Operations Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A. Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Requirement of Completion of Training/Failure to Complete . . . . . . . . . . . . . . . . . 5
C. Hiring of Employees and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
D. Operations Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
E. Group Purchasing of Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
F. Product Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
G. Delivery of Equipment and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. Operation of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A. Operating Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B. Alteration to BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
C. Uniformity, Authorized Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Use of Approved Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Materials Imprinted with Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Standards, Specifications & Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . 8
G. Compliance with Law and Good Business Practices . . . . . . . . . . . . . . . . . . . . . . 8
H. Prices for Services Determined by Franchisee . . . . . . . . . . . . . . . . . . . . . . . 9
I. Duty to Manage and Avoid Conflicting or Competing Interests . . . . . . . . . . . . . . . . 9
J. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
K. Operations Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Procedures and Operating Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
12. Advertising and Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13. Records Keeping Standards and Reporting Procedures . . . . . . . . . . . . . . . . . . . . . . 11
A. Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
B. Business Reports and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
C. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
14. Names and Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
A. Ownership of Names and Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B. Limitation on Use of Names and Marks by Franchisee . . . . . . . . . . . . . . . . . . . 12
C. Notification of Infringement and Claims . . . . . . . . . . . . . . . . . . . . . . . . . 12
D. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
15. Inspections and Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Right of Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
16. Termination of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. By Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. By BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
17. Franchisee's Rights and Obligations Upon Termination or Expiration . . . . . . . . . . . . . . 15
A. Payment of amounts Cued to BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. Return of Proprietary Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. Cancellation of Assumed Names and Transfer of Telephone Numbers . . . . . . . . . . . . . 15
E. Modification of Agreement by Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . 15
F. Modification of Agreement by BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
G. Assignment by BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
H. Death or Incapacity of Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
I. Removal of All Signs and Identification . . . . . . . . . . . . . . . . . . . . . . . . . 16
J. Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
K. Continuing Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
L. Franchisee's Right to Sell BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . 16
18. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. By BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. Franchisee May Not Assign Without Approval of BDI . . . . . . . . . . . . . . . . . . . . 17
C. Assignment to Partnership or Corporation . . . . . . . . . . . . . . . . . . . . . . . . 17
D. BDI'S Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
19. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A. Judicial Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
B. Jurisdiction, Venue and Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 18
C. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
D. Severability and Substitution of Valid Provisions . . . . . . . . . . . . . . . . . . . . 19
E. Waiver of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
F. Franchisee May Not Withhold Payments Due BDI . . . . . . . . . . . . . . . . . . . . . . 19
G. Rights of Parties are Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
H. Governing law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
I. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
J. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20. Independent Contractors/Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
22. Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
23. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 3
BIKER'S DREAM, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this 21st day of
NOVEMBER, 1994 by and between BIKER'S DREAM, Inc., a California
Corporation (hereinafter "BDI") and STEVEN R. HYDER (hereinafter
"FRANCHISEE"), whose principal address is: 1718 SOPLO SE. ALBUQUERQUE
NEW MEXICO 87123
1. PRELIMINARY STATEMENT. BDI is developing a chain of
Motorcycle, motorcycle parts, accessories and service Dealerships under the
trade name "BIKER'S DREAM" (hereinafter "BDI"). Each BDI LOCATION is built to
standard specifications and uses standard operating procedures, equipment,
forms, signs and designs. All BDI LOCATIONS are to be operated in accordance
with franchise uniform standards of identity, quality, appearance, operating
methods and services provided.
2. GRANT OF FRANCHISE. BDI hereby grants to FRANCHISEE, as an
individual, subject to the provisions of this Agreement, a franchise to operate
one (1) BDI LOCATION within the following location zone:
THE STATE OF NEW MEXICO
- -----------------------------------------------------
CITY OF ALBUQUERQUE WILL BE THE
- -----------------------------------------------------
PHYSICAL LOCATION OF STORE
- -----------------------------------------------------
- ----------------------------------------------------.
3. DURATION OF THIS AGREEMENT. This agreement shall begin as of
the date of execution hereof and shall continue for a term of fifteen (15)
years and, unless either party gives written notice of its intention to
terminate this Agreement at least one hundred eighty (180) days prior to the
expiration of the fifteen (15) year term, the term of this Agreement shall be
deemed to be renewed for five (5) years and thereafter for further periods of
five (5) years duration, unless BDI or FRANCHISEE mails a written notice of
intention not to renew to the other party at least one hundred eighty (180)
days prior to the end of any renewal period. If such notice is so mailed, the
Agreement shall terminate as to all parties at the end of the current period.
4. INITIAL FRANCHISE FEE. FRANCHISEE shall pay to BDI a
nonrefundable initial franchise fee in the amount of Fifteen thousand dollars
($15,000.00) in cash, payable in cash upon the execution of this Agreement.
The initial franchise fee shall be fully earned by BDI when paid, provided that
if BDI elects to terminate the franchise due to the failure of FRANCHISEE to
complete satisfactorily the prescribed training program or to lease or purchase
suitable premises for the BDI LOCATION, or to open the BDI LOCATION in the time
prescribed in this agreement,
1.
<PAGE> 4
BDI shall refund to FRANCHISEE that part of the initial franchise fee
heretofore paid by FRANCHISEE. BDI shall have the right, at its option, to
repurchase at cost any and all equipment, supplies and training material which
it sold to FRANCHISEE.
5. RECURRING FEES.
(A) FRANCHISE AND ADVERTISING FEES. Beginning at the time
FRANCHISEE opens the BDI LOCATION for business and through the duration of this
franchise agreement, FRANCHISEE shall pay to BDI in weekly amounts, recurring
franchise fees of a sum equal to five (5%) percent and advertising trust fund
contributions of a sum equal to two (2%) percent (or $250.00, whichever is
greater) of the gross receipts for the preceding calendar week from the BDI
LOCATION operated by FRANCHISEE. The check or money order in full payment of
the said recurring franchise fee and the advertising trust fund contribution
for the preceding week shall be transmitted with the weekly business report and
shall be due and payable at the home office of BDI at 1420 Village Way, Santa
Ana, CA 92705 by 5:00 p.m. on Thursday, the 3rd day after the day on which the
weekly business report is mailed. These fees are not refundable.
(B) GROSS RECEIPTS. "Gross receipts" shall consist of money and
other consideration of any kind howsoever received by FRANCHISEE from any
source as the result of, or in connection with, the exercise of the franchise
granted hereunder including but not limited to all monies or other
consideration received for clothing, accessories and services sold and/or
rendered within or without the BDI LOCATION being operated by FRANCHISEE under
this franchise. Monies received from Motorcycle sales are not considered
"Gross receipts".
(C) INTEREST. All recurring franchise fees, advertising trust
account contributions and amounts owed for products purchased by FRANCHISEE
pursuant to the franchise shall bear interest after due date at the current six
month Treasury Bill rate plus two (2%) percent.
6. RESTRICTION TO LOCATION OF BDI LOCATIONS AND LIMITATION ON
NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
(A) RESTRICTION OF LOCATION. FRANCHISEE may operate the BDI
LOCATION only within the Location Zone identified herein or a substitute
location and/or premises hereinafter approved by BDI in writing. Specific
location must be approved by BDI. If the FRANCHISEE'S lease for the premises
of the BDI LOCATION expires or terminates without fault of FRANCHISEE, or if
the premises are damaged, condemned or otherwise rendered unusable, or if in
the judgment of BDI and FRANCHISEE there is a change in the character of the
location of the BDI LOCATION sufficiently detrimental to its business potential
to warrant its relocation, BDI will grant permission for relocation of the BDI
LOCATION to a location and premises approved by BDI.
(B) LIMITATION ON NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
BDI agrees that the number of franchised BDI LOCATIONS shall be limited to a
maximum of one BDI LOCATION within the Location Zone. BDI will not establish
any franchised or Company owned BDI LOCATIONS within ten (10) miles of
Franchisee's location without Franchisee's consent.
2.
<PAGE> 5
(C) RIGHT OF FIRST REFUSAL. FRANCHISEE shall have the right of
first refusal for any franchise which BDI proposes to grant immediately
adjacent to FRANCHISEE'S Franchise Area, as designated below. To exercise this
right, FRANCHISEE must execute the then current Franchise Agreement and pay ten
thousand dollars ($10,000.00) of the then current initial franchise fee within
fifteen (15) days of written notification of the proposed grant of franchise.
The balance of the initial franchise fee shall be payable within an additional
thirty (30) days.
(D) LOCATION ZONE. The BDI LOCATION to be operated pursuant to
this Franchise Agreement shall be located within the following designated
Location Zone:
- -----------------------------------------------------------
EL PASO, TEXAS
- -----------------------------------------------------------
DURANGO, COLORADO
- -----------------------------------------------------------
- -----------------------------------------------------------
For the term of this agreement, BDI will not grant any new franchises or open
any company owned BDI LOCATIONS within the Location Zone.
7. LEASE, CONSTRUCTION AND OPENING OF BDI LOCATION.
(A) LEASE OR PURCHASE. Franchisee will lease or purchase the
premises of the BDI LOCATION described in paragraph 2 of this Agreement within
ninety (90) days after execution of this Agreement. If specific premises are
not identified in paragraph 2 of this Agreement, FRANCHISEE agrees to lease or
purchase suitable premises, reasonably acceptable to BDI, within ninety (90)
days after execution of this Agreement. If FRANCHISEE fails to lease or
purchase suitable premises within ninety (90) days after execution of this
Agreement, BDI may terminate this Agreement, effective upon delivery of written
notice of termination to FRANCHISEE. In the event of such termination, the
3.
<PAGE> 6
parties agree to execute all instruments required to rescind fully all
agreements, purchases and any other transaction between BDI and FRANCHISEE.
Upon execution of all required instruments, BDI shall refund to FRANCHISEE that
part of the initial franchise fee heretofore paid by FRANCHISEE, less Two
Thousand Five Hundred Dollars ($2,500.00) dollars to cover training and
administration expense, whether or not training has been completed. BDI shall
have the right, at its option to repurchase at cost any or all equipment,
supplies and training material which it sold to FRANCHISEE.
(B) CONSTRUCTION OF BDI LOCATION. BDI will furnish to FRANCHISEE
its standard detailed specifications for a BDI LOCATION, including requirements
for dimensions, exterior design, interior layout, building materials,
equipment, signs and color scheme. FRANCHISEE agrees to do or cause to be done
the following:
(1) obtain all required building, utility, sign, use,
health, sanitation and business permits, licenses and other required
permits and licenses;
(2) submit to BDI for its approval FRANCHISEE'S BDI
LOCATION plans;
(3) construct the premises and paint the premises in
compliance with plans and specifications approved by BDI;
(4) purchase or lease and install all equipment and signs
required for the BDI LOCATION; and
(5) secure all financing required by FRANCHISEE to fully
develop the BDI LOCATION.
(C) EQUIPMENT, SIGNS AND INVENTORY. BDI will provide FRANCHISEE
with a complete list of all inventory, parts, components, accessories, signs
and equipment required to open the BDI LOCATION. FRANCHISEE agrees to use in
the operation of his BDI LOCATION only those brands of inventory, parts,
components, accessories, signs and equipment that BDI has approved for BDI
LOCATIONS as meeting its standards and specifications for function,
attractiveness, serviceability and overall appearance. FRANCHISEE may purchase
or lease approved brands of these items from any supplier. If FRANCHISEE
proposes to purchase or lease any brand which has not then approved by BDI,
FRANCHISEE shall first notify BDI and shall submit to BDI, upon its request,
sufficient specifications, photographs, drawings and/or other information or
samples for determination by BDI whether such brand of inventory, parts,
components, accessories, signs and equipment complies with its standards and
specifications, which determination will be made and communicated to FRANCHISEE
in writing within a reasonable time.
(D) BDI LOCATION OPENING. Upon completion of FRANCHISEE'S
training program, as described in paragraph 8 of this agreement, and within
fifteen (15) days after BDI'S determination that the premises described herein
are in suitable condition and comply with the standards and specifications
prescribed by BDI, FRANCHISEE agrees to open the BDI LOCATION for business and
commence the conduct of business. BDI will assist FRANCHISEE in the opening of
the BDI LOCATION.
4.
<PAGE> 7
(E) TERMINATION OF FRANCHISEE FOR FAILURE TO OPEN BDI LOCATION.
If the FRANCHISEE fails to complete preparation of the BDI LOCATION and open the
BDI LOCATION for business within one hundred eighty (180) days after execution
of this Agreement, BDI shall have the right to terminate this Agreement,
effective upon delivery to FRANCHISEE of written notice of termination. In the
event of such termination and upon delivery to BDI of all releases, waivers and
other instruments required to rescind fully all agreements, purchases and other
transactions between BDI and FRANCHISEE, BDI shall refund to FRANCHISEE that
part of the initial franchise fee paid by FRANCHISEE, less Two Thousand Five
Hundred Dollars ($2,500.00) for training and administrative expense (or actual
costs incurred), whichever is greater. BDI shall have the right, at its option,
to repurchase at cost any or all equipment, supplies, inventory and training
material which it sold to FRANCHISEE.
8. TRAINING AND OPERATIONS ASSISTANCE.
(A) TRAINING. Before the opening of the BDI LOCATION, BDI shall
train FRANCHISEE in the operation of a BDI LOCATION. Such training shall take
place at a time and place specified by BDI. Training will be conducted at the
BDI home office at 1420 Village Way, Santa Ana, CA 92705 and at FRANCHISEE'S
location. Training will be for one week at each location. Training at home
office will be completed within sixty (60) days after signing this agreement.
Training at Franchisee's location will be completed prior to and during first
week of operation of Franchisee's BDI LOCATION. FRANCHISEE shall be
responsible for any travel and living expenses incurred in connection with the
training program. Training will cover four distinct areas: (1) Operation of a
BDI LOCATION; (2) Purchasing and financing motorcycles, parts, and accessories;
(3) Sales and marketing; (4) Business and systems procedures. Initial training
class may be attended by three persons, one of which must be FRANCHISEE.
(B) REQUIREMENT OF COMPLETION OF TRAINING/FAILURE TO COMPLETE.
FRANCHISEE shall complete the training program provided by BDI. If BDI
reasonably determines that FRANCHISEE is unable to complete satisfactorily the
said training program, this Agreement shall terminate and upon delivery to BDI
of all assignments, releases, waivers and other instruments required to rescind
fully all agreements, purchases and other transactions between BDI and
FRANCHISEE, BDI shall refund to FRANCHISEE that part of the initial franchise
fee paid by FRANCHISEE to BDI pursuant to this agreement. BDI shall have the
right, at its option, to repurchase at cost any or all equipment, supplies and
training material which it sold to FRANCHISEE.
(C) HIRING OF EMPLOYEES AND TRAINING OF EMPLOYEES BY FRANCHISEE.
FRANCHISEE shall hire all employees of the BDI LOCATION and be exclusively
responsible for the terms of their employment, compensation and the training of
such employees in the proper conduct of their jobs in operation of a BDI
LOCATION. BDI will make available to FRANCHISEE training for new employees or
updating those already employed. Such training and updating shall take place
at a time and place specified by BDI. Training will be conducted at the BDI
home office or at another BDI LOCATION designated by BDI. FRANCHISEE shall be
responsible for any travel and living expenses incurred by such employees, in
connection with the training.
5.
<PAGE> 8
(D) OPERATIONS ASSISTANCE. BDI shall advise FRANCHISEE of problems
arising out of the operation of the BDI LOCATION as disclosed by reports
submitted to BDI by FRANCHISEE or by inspections conducted by BDI of the BDI
LOCATION. BDI will furnish FRANCHISEE with such assistance in connection with
the operation of the BDI LOCATION as is reasonably determined to be necessary
by BDI from time to time. Operations assistance may consist of advice and
guidance with respect to:
(1) proper utilization of procedures developed for a BDI
LOCATION including sales and display procedures developed by BDI;
(2) additional services and products authorized for BDI
LOCATIONS;
(3) purchase of various products, materials and supplies;
(4) the institution of proper administrative,
bookkeeping, accounting, inventory control, supervisory and general
operating procedures for the effective operation of a BDI LOCATION
(5) advertising and promotional programs.
(E) GROUP PURCHASING OF INVENTORY AND SUPPLIES. FRANCHISEE shall
have the right to participate on the same basis as other franchisees of BDI and
BDI owned BDI LOCATIONS in group purchasing of motorcycles, parts, accessories,
and other materials and supplies which BDI way from time to time develop and
sponsor.
(F) PRODUCT AVAILABILITY. During the term of this Agreement, BDI
will make available for purchase by FRANCHISEE approved products necessary to
operate a BDI LOCATION.
(G) DELIVERY OF EQUIPMENT AND SERVICES. All of the
specifications, equipment and inventory lists, training, equipment, operations
manuals, and preopening operations assistance to be provided by BDI to
FRANCHISEE pursuant to this Agreement shall be delivered within ninety (90)
days after execution of this Agreement.
9. OPERATION OF BDI LOCATION.
(A) OPERATING STANDARDS. FRANCHISE agrees to operate and maintain
his BDI LOCATION in a manner consistent with the public image of a BDI LOCATION
as a clean, modern and efficient retail motorcycle, parts and accessories
store, providing high quality products and services. FRANCHISEE agrees to
effect a maintenance program for the BDI LOCATION which will assure such
condition, appearance and operation, including replacement of worn out or
obsolete equipment and signs, repair of the interior and exterior of the BDI
LOCATION, painting and periodic cleaning, consistent with the nature of the
business of the BDI LOCATION and the reputation of BDI. If, at any time in
BDI'S reasonable judgement, the general state of repair, appearance of
cleanliness of the premises of the BDI LOCATION or its equipment or signs does
not meet BDI'S
6.
<PAGE> 9
standards therefor, BDI shall so notify FRANCHISEE specifying the action to be
taken by FRANCHISEE to correct such deficiency. If FRANCHISEE fails or refuses
to initiate corrective action within thirty (30) days after receipt of such
notice, and thereafter continue, a bona fide program to undertake and complete
any such required maintenance, BDI shall have the right, but shall not be
obligated, to enter upon the premises of the BDI LOCATION and effect such
repairs, painting and/or replacement of equipment or signs on behalf of
FRANCHISEE and FRANCHISEE shall pay the entire costs thereof to BDI upon
demand.
(B) ALTERATIONS TO BDI LOCATION. FRANCHISEE agrees that he shall
make no material alterations to the structural improvements or appearance of
the BDI LOCATION nor shall FRANCHISEE make any material replacements or
alterations to the equipment or signs of the BDI LOCATION without prior written
approval of BDI.
(C) UNIFORMITY, AUTHORIZED PRODUCTS AND SERVICES. Uniformity of
products, procedures and services and the image such uniformity creates in the
mind of the public are essential elements of a successful franchise chain.
FRANCHISEE therefore agrees to offer motorcycles, parts, accessories, services
and products which BDI from time to time authorizes for BDI LOCATIONS
FRANCHISEE agrees to submit written requests for authorization of additional
products or services to be offered for sale at FRANCHISEE'S BDI LOCATION.
FRANCHISEE further agrees that the BDI LOCATION will not, without prior written
approval by BDI, offer any other products or services nor shall the BDI
LOCATION or the premises it occupies be used for any purpose other than the
operation of an authorized BDI LOCATION in compliance with the terms of the
Agreement.
(D) USE OF APPROVED PRODUCTS. Consistency of quality in the
products and services offered by BDI is essential to the maintenance and
enhancement of BDI'S reputation and the good will it has generated by the sale
of high quality products and the efficient delivery of high quality services to
its customers. For these reasons FRANCHISEE agrees that all motorcycles,
parts, accessories and other inventory, materials and supplies used in the
operation of the BDI LOCATION shall be purchased by FRANCHISEE from the list of
types or brands approved by BDI as meeting its specifications and standards.
If FRANCHISEE desires to use in the operation of the BDI LOCATION any type or
brand of motorcycles, accessories and other inventory, materials and supplies
which is not then approved by BDI as meeting its standards and specifications,
FRANCHISEE shall first notify BDI, in writing, and shall upon request by BDI
submit samples and such other information as BDI reasonably requires for
examination and/or testing to determine otherwise whether such product meets
its standards and specifications. BDI shall notify FRANCHISEE within a
reasonable time whether it approves such product. The BDI LOCATION shall at
all times maintain an inventory of motorcycles, parts, accessories and other
inventory, materials and supplies, sufficient to satisfy customer demand and
operate efficiently.
7.
<PAGE> 10
(E) MATERIALS IMPRINTED WITH NAMES AND MARKS. FRANCHISEE shall in
the operation of the BDI LOCATION utilize letterheads, business cards, forms
and other materials imprinted with the Names and Marks as prescribed from time
to time by BDI.
(F) STANDARDS, SPECIFICATIONS AND PROCEDURES. FRANCHISEE agrees
as a material part of the consideration of this Agreement to comply with all
mandatory standards, specifications and operating procedures relating to the
operation of a BDI LOCATION, including but not limited to the following:
(1) use of standard sales and operating procedures;
(2) general appearance of employees;
(3) use of quality products and high standards of methods
and procedures relating to retail business;
(4) use of Names and Marks;
(5) prescribed hours of operation during which the BDI
LOCATION will be open for business;
(6) use of standard forms, programs, formats, and records
keeping including the preparation and retention of duplicate customer
sales slips and related documents;
(7) identification of the FRANCHISEE as the owner of the
BDI LOCATION; and
(8) proper use and illumination of BDI signs, posters,
displays and other advertising and promotional displays as prescribed
by BDI from tine to time.
BDI agrees that all such standards, specifications, procedures and operating
requirements shall be reasonable and consistent with the obligations of
FRANCHISEE under the lease or deed for the premises of the BDI LOCATION and
applicable ordinances. Mandatory standards, specifications and operating
procedures prescribed from time to time by BDI in the procedures and operating
manuals for BDI LOCATIONS or otherwise communicated to FRANCHISEE in writing,
shall constitute provisions of this Agreement as if fully set forth herein.
All references herein to this Agreement shall include all such mandatory
standards, specifications and operating procedures. BDI reserves the absolute
right to change, modify, add to or delete any and all standards, specifications
and operating procedures.
(G) COMPLIANCE WITH LAW AND GOOD BUSINESS PRACTICES. FRANCHISEE
shall secure, file and maintain in full force and effect all required licenses,
permits, certificates, notices and disclosures relating to the operation of a
BDI LOCATION and shall operate the BDI LOCATION in full compliance with all
applicable federal, state and local statutes, regulations, and ordinances,
including but not limited to all government regulations relating to retail
facilities, occupational hazards and health, workers' compensation insurance,
federal and state withholding and payment of federal and state income taxes,
social security taxes and sales taxes.
8.
<PAGE> 11
All advertising and promotion by FRANCHISEE shall be completely factual and
shall conform to the highest standards of ethical advertising. FRANCHISEE
agrees to refrain from any business or advertising practice which may be
injurious to the business and good name of BDI and the reputation and good will
associated with Names and Marks of BDI and BDI LOCATIONS.
(H) PRICES FOR PRODUCTS AND SERVICES DETERMINED BY FRANCHISEE.
From time to time BDI may advise FRANCHISEE of prices for products and services
offered by BDI LOCATIONS which BDI in its considered judgment believes to be
appropriate and consistent with good business practice. FRANCHISEE shall not
be obligated to accept any such advice and shall have the sole right to
determine the prices to be charged by the BDI LOCATION. FRANCHISEE understands
and agrees that such advice furnished by BDI shall in no way be deemed or
construed to impose upon FRANCHISEE any obligation to charge any fixed, minimum
or maximum price for any product or service offered for sale by the BDI
LOCATION.
(I) DUTY TO MANAGE AND AVOID CONFLICTING OR COMPETING INTERESTS.
The BDI LOCATION shall at all times be under the direct, on-premises
supervision of FRANCHISEE and/or a trained and competent employee. FRANCHISEE
shall keep BDI informed at all times of the identity of any employee(s) acting
as manager(s) of the BDI LOCATION. FRANCHISEE agrees that he will at all times
faithfully, honestly and diligently perform his obligation under this
Agreement and that he will continuously exert his best efforts to promote and
enhance the business of the BDI LOCATION. FRANCHISEE further agrees not to
engage in any business which will detract from or conflict with his obligation
hereinunder.
(J) INSURANCE. FRANCHISEE shall at all times during the term of
this Agreement or any amendment or renewal hereto maintain in full force and
effect at his sole expense, comprehensive, public and product insurance against
claims for bodily and personal injury, death and property damage caused by or
occurring in conjunction with the operation of the BDI LOCATION or otherwise in
conjunction with conduct of business by FRANCHISEE pursuant to this franchise.
Such insurance coverage shall be maintained under one or more policies of
insurance containing a comprehensive general liability policy including
products liability in the minimum amount of $500,000/$500,000 bodily injury
liability and $500,000 property damage liability, an "umbrella" package in the
amount of $1,000,000, or such other amounts as BDI may reasonably request for
the operation of the premises. All such liability insurance policies shall
name BDI as an additional insured and shall provide that BDI receives thirty
(30) days prior written notice of termination, expiration or cancellation of
any such policy. BDI may reasonably increase the maximum liability protection
requirement annually to reflect inflation or higher damage awards in public or
product liability litigation. FRANCHISEE shall have his insurance carriers
submit to BDI annually a statement of coverage. All policies shall be renewed
and evidence of renewal mailed to BDI prior to the expiration date. If
FRANCHISEE at any time fails or refuses to maintain any insurance coverage
required by BDI or to furnish satisfactory evidence thereof, BDI at its option
and in addition to its other rights and remedies hereunder, may, but need not,
obtain such coverage on behalf of the FRANCHISEE and
9.
<PAGE> 12
FRANCHISEE shall pay to BDI on demand any costs and premium incurred by BDI in
connection therewith. FRANCHISEE is responsible for all loss or damage and
contractual liability to third persons originating in or in connection with the
operation of a BDI LOCATION and for all claim or demands for damages to
property or for injury, illness or death of persons directly or indirectly
resulting therefrom. FRANCHISEE agrees to defend, indemnify and hold BDI
harmless from and with respect to any such claim, losses, or damages as
hereinabove described.
(K) OPERATIONS MEETINGS. From, time to time BDI will call
operations meetings. These meetings will be held regionally where feasible to
keep expense and time loss for FRANCHISEE to a relative minimum. Attendance at
operations meetings is mandatory for FRANCHISEE or his Manager(s).
10. PROCEDURES AND OPERATING MANUALS. BDI will license to
FRANCHISEE, to use during the term of the franchise, a proprietary special
design computer software program and one or more copies of procedures and
operating manuals for BDI LOCATIONS containing mandatory and suggested
standards, specifications and operating procedures for BDI LOCATIONS and
up-to-date information relative to such standards, specifications and operating
procedures along with other obligations of FRANCHISEE hereunder with respect to
the operation of a BDI LOCATION. BDI shall have the right to add to and
otherwise modify the procedures and operating manuals from time to time to
reflect changes in authorized products and services, product quality or
standards of service or the operation of a BDI LOCATION provided that no such
addition or modification shall alter FRANCHISEE'S fundamental status and rights
under this Agreement. The operating and procedures manuals contain proprietary
information of BDI and FRANCHISEE agrees to keep the computer software program
and the operating and procedures manuals confidential at all times during and
after the term of the franchise.
11. TRADE SECRETS. FRANCHISEE as a material part of the
consideration for this Agreement understands and agrees that his knowledge of
the operation of a BDI LOCATION will be derived from information disclosed to
FRANCHISEE by BDI pursuant to the franchise and that certain such information
is proprietary, confidential and a trade secret of BDI. FRANCHISEE agrees that
he will maintain the absolute confidentiality of all such information during
and after the term of the franchise and that he will not use any such
information in any other business or in any manner not specifically authorized
or approved by BDI.
12. ADVERTISING AND PROMOTION. FRANCHISEE agrees that it is
essential for the growth of the BDI franchise chain that he participates and
cooperates in advertising programs and other promotional activities.
Accordingly, FRANCHISEE agrees to contribute to an advertising trust fund
administered by BDI, or its designated agent. (Paragraph 6 section A of
Offering Circular and Paragraph 5, this Agreement). The said monies shall be
used by BDI exclusively for advertising and promotional purposes. Advertising
and promotional purposes may include, but are not limited to, radio and
television advertising, newspaper advertisements, and the production and
distribution of such advertising. BDI agrees to provide FRANCHISEE with an
annual statement of the receipts and disbursements of the advertising trust
fund. It is understood by BDI and Franchisee, that after BDI has five (5)
franchises open and operating, an executive advertising committee will be
selected by BDI, that will include Franchisees. This committee will be
instrumental in administering the distribution of the advertising trust monies.
10.
<PAGE> 13
The uncommitted reserve in the advertising trust fund will be
reconciled with expenditures annually at the close of BDI'S fiscal year to
limit the reserve to an amount not greater than the most recent ninety (90) day
expenditure or the succeeding ninety (90) day planned expenditure. BDI shall
thereafter notify FRANCHISEE of the appropriate pro rata reduction of
FRANCHISEE'S advertising trust fund contributions until the excess in the
uncommitted reserve, if any, is depleted.
13. RECORDS KEEPING STANDARDS AND REPORTING PROCEDURES.
(A) RECORDS AND ACCOUNTING. FRANCHISEE shall establish a record
keeping, bookkeeping and accounting system in conformance with the requirements
prescribed by BDI including, but not limited to, the use and retention of sales
records, invoices, payroll records, check stubs, bank deposit receipts, sales
tax records and returns, cash disbursements journals and general ledgers.
(B) BUSINESS REPORTS AND TAX RETURNS. FRANCHISEE shall furnish to
BDI, in accordance with BDI'S procedures and operating manual for BDI
LOCATIONS, the following:
(1) by Monday of each week on the business report form, a report
of the gross and net revenues of the BDI LOCATION for the preceding week
together with all information required by BDI as part of the weekly business
report procedure;
(2) within thirty (30) days after the date federal and state
income tax and sales tax returns are filed, FRANCHISEE shall provide BDI with
exact copies of such returns and all schedules attached thereto.
(C) FINANCIAL STATEMENTS. FRANCHISEE shall furnish to BDI in the
form prescribed by BDI:
(1) within thirty (30) days after the end of each month, a monthly
profit and loss statement from the beginning of FRANCHISEE'S fiscal year to the
end of the preceding month for the BDI LOCATION, prepared, verified and signed
by FRANCHISEE; and
(2) within sixty (60) days after the end of each fiscal year of
the BDI LOCATION, an unaudited annual statement of profit and loss and source
and application of funds of the BDI LOCATION for the fiscal year and a balance
sheet for the BDI LOCATION as of the end of the fiscal year, compiled or
reviewed by an independent public accountant or a certified public accountant
in accordance with standards published by the A.I.C.P.A., verified and signed
by FRANCHISEE as to the information furnished to such accountant.
(3) BDI may order FRANCHISEE to provide an audited financial
statement at any time. If this audit discloses an understatement for the
period covered greater than three (3%) percent, FRANCHISEE will pay all costs
associated with the audit and within fifteen (15) days pay to BDI all recurring
franchise fees and advertising trust fund contributions due on the amount of
the understatement. BDI shall then have the right to require FRANCHISEE to
furnish audited financial statements thereafter. If the understatement is
three (3%) percent or less, BDI will pay the reasonable auditor's fees.
14. NAMES AND MARKS.
(A) OWNERSHIP OF NAMES AND MARKS. FRANCHISEE acknowledges and
agrees as a material part of the consideration for this Agreement that BDI is
the owner of the following names and Marks: "THE BIKERS DREAM", "BIKERS
DREAM"', BIKER'S DREAM" and "DREAM", referred to in this Agreement as "Names
and Marks". BDI hereby licenses FRANCHISEE to use the Names and Marks in the
operation of the franchise. FRANCHISEE'S right to use the Names and Marks is
derived solely from this Agreement, and is limited to the operation of the BDI
LOCATION in compliance with this Agreement. FRANCHISEE shall use and display
the Names and Marks only in a manner and form expressly approved by BDI.
FRANCHISEE, upon request by BDI, shall affix to any materials displaying the
Marks, whatever legends, markings, and notices of trademark ownership or
FRANCHISOR/FRANCHISEE relationship as way be specified by BDI.
11.
<PAGE> 14
(B) FRANCHISEE acknowledges the right of BDI and its affiliates to
use the Marks, including any additions, deletions, or changes thereto, in
connection with the products and services to which they are or may be applied
by BDI and its affiliates, and represents, warrants and agrees that FRANCHISEE
shall not, either during the term of this Agreement or after the expiration or
other termination hereof, directly or indirectly contest or aid in contesting
the validity, ownership, registration, or use of the marks or any additions,
deletions or changes thereto by BDI, or take any action whatsoever in
derogation of the rights claimed therein by BDI.
(C) The License granted to Franchise under this Agreement to use
the Marks is nonexclusive, and BDI, in its sole and absolute discretion, has
the right to grant other licenses in, to and under those names and marks in
addition to those licenses already granted, and to develop and license other
names and marks an any such terms as BDI deem appropriate.
(D) Nothing contained in this Agreement shall be construed to vest
in FRANCHISEE any right, title or interest in or to any of the Marks, the
goodwill now or hereafter associated therewith, or any right in the design of
any building or premises, other than rights and license expressly granted
herein for the term hereof.
(E) FRANCHISEE shall not use any of the Marks in connection with
any statement or material which may, in the judgement of BDI, be in bad taste
or inconsistent with BDI'S public image or tend to bring disparagement,
ridicule or scorn upon BDI, any of the Marks, or the goodwill associated
therewith. FRANCHISEE shall not adopt, use, display or register, in whole or
in part, any trademarks, service marks, trade names, logos, insignia, slogans,
emblem, symbols, designs or other identifying characteristics. Neither
FRANCHISEE nor any entity directly or indirectly affiliated with FRANCHISEE
shall adopt, use or register (by filing a certificate or articles of
incorporation, a fictitious business name statement, or otherwise) any trade or
business name, style or design which includes, or is similar to, in whole or in
part, any of the Marks or any other of BDI'S trademarks, service marks, trade
names, logos, insignia, slogans, emblems, symbols, designs or other identifying
characteristics.
(F) BDI shall have the right at any time and from time to time
upon notice to FRANCHISEE to make additions to, deletions from, and changes in
any of the Marks, or any of them, all of which shall be as effective as if they
were incorporated in this Agreement. All such additions, deletions and changes
shall be made in good faith, on a reasonable basis and with a view toward the
overall best interests of the System. No such addition, deletion or change
will cause any change in any of FRANCHISEE'S financial obligations to BDI.
(G) LIMITATIONS ON USE OF NAMES AND MARKS BY FRANCHISEE.
FRANCHISEE agrees to use the Names and Marks during the term of the franchise
as the sole servicemark and tradename identification of the BDI LOCATION.
FRANCHISEE shall not use during the term of the franchise any Name and Mark as
part of any corporate name or with any prefix, suffix or other modifying words,
terms, designs or symbols, or any modified form, nor may FRANCHISEE use any Name
or Mark in connection with the sale of any unauthorized product or service or
in any other manner not explicitly authorized in writing by BDI.
(H) NOTIFICATION OF INFRINGEMENT AND CLAIMS. FRANCHISEE shall
immediately notify BDI of any apparent infringement of or challenge to
FRANCHISEE'S use of any Name or Mark.
(I) INDEMNIFICATION. BDI agrees to indemnify FRANCHISEE for all
damages for which he is held liable in any proceeding arising out of his use of
any Name or Mark, pursuant to and in compliance with this Agreement and for all
costs reasonably incurred by FRANCHISEE in the defense of any such claim
brought against him or in any such proceeding in which he is named as a party,
provided that FRANCHISEE has timely notified BDI of such claim or proceeding
and has otherwise complied with this Agreement, and further provided that if it
becomes advisable at any time in the sole discretion of BDI for FRANCHISEE to
modify or discontinue use of any Name or Mark, and/or use additional or
substitute Names or Marks, FRANCHISEE agrees to do so and the sole obligation
of BDI in any such event shall be to reimburse FRANCHISEE for the out-of-pocket
costs of
12.
<PAGE> 15
complying with this obligation. BDI, at its sole discretion may elect to
defend or participate in the defense or prosecution of any action relating to
the protection of the Service Mark and to protect the FRANCHISEE against claim
of infringement or unfair competition with respect to the Service Mark. In
such event, BDI will have the sole discretion to take such action as it deems
appropriate. FRANCHISEE is not precluded from taking over a cause of action
should BDI decide not to proceed with same.
15. INSPECTIONS AND AUDITS.
(A) RIGHT OF INSPECTION. In order to determine whether FRANCHISEE
is in compliance with this Agreement, BDI shall have the right at any time
during business hours, without prior notice to FRANCHISEE, to inspect the BDI
LOCATION and the business records, bookkeeping and accounting records,
invoices, payroll records, check stubs, bank deposit receipts, sales tax
records and returns, sales records and other supporting records and documents
and the inventory of products, materials and supplies of the BDI LOCATION.
(B) RIGHT TO AUDIT. BDI shall have the right at any time during
business hours, and without prior notice to FRANCHISEE, to audit or cause to be
audited the weekly business reports, tax returns, and schedules and other forms,
information and supporting records which FRANCHISEE is required to submit to
BDI hereunder and the books and records of the BDI LOCATION and of any
corporation or partnership which owns or operates the BDI LOCATION. In the
event any such audit shall disclose an understatement of the gross receipts of
the BDI LOCATION for any period or periods, FRANCHISEE shall pay to BDI within
fifteen (15) days after receipt of the audit report, the recurring franchise
fee plus any required advertising trust account contribution due on the amount
of such understatement. Further, in the event such understatement for any
period or periods shall be greater than three (3%) percent, FRANCHISEE shall
reimburse BDI for the cost of such audit, including, but not limited to, the
fee of any independent accountant and the travel expenses, room, board and
compensation of employees of BDI, unless FRANCHISEE demonstrates that such
understatement resulted from inadvertent error.
16. TERMINATION OF FRANCHISE.
(A) BY FRANCHISEE. If FRANCHISEE is in substantial compliance
with this Agreement and BDI breaches this Agreement and fails to cure such
breach within thirty (30) days after written notice thereof is delivered to
BDI, FRANCHISEE may terminate this Agreement effective ten (10) days after
delivery to BDI of notice thereof. The termination of this Agreement by
FRANCHISEE without complying with the foregoing requirement or for any reason
other than breach of this Agreement by BDI and BDI'S failure to cure such
breach within thirty (30) days after receipt of written notice thereof shall be
deemed a termination by FRANCHISEE without cause.
(B) BY BDI. In addition to BDI's right to terminate this
Agreement in the event of the failure of FRANCHISEE to lease or purchase a
premises for the BDI'S LOCATION to develop or open the BDI'S LOCATION as
provided in subparagraph (A) of paragraph 5 herein or upon BDI'S determination
that FRANCHISEE is unable to complete satisfactorily prescribed training as
provided in subparagraph (B) of paragraph 6 herein, BDI may terminate this
Agreement effective upon delivery of notice of termination to FRANCHISEE, if
FRANCHISEE or the BDI LOCATION
13.
<PAGE> 16
(1) makes an assignment for the benefit of creditors or
an admission of his inability to pay his obligations as they become
due;
(2) files a voluntary petition in bankruptcy or any
pleading seeking any reorganization, liquidation or dissolution under
any law, or admitting or failing to contest the material allegations
of any such pleading filed against him or is adjudicated a bankrupt or
insolvent or a receiver is appointed or a substantial part of the
assets of FRANCHISEE or BDI LOCATION are abated or subject to a
moratorium under any law;
(3) abandons or surrenders or transfers control of the
operation of the BDI LOCATION or fails actively to operate the BDI
LOCATION, unless precluded from doing so by damage to the premises of
the BDI LOCATION, war or civil disturbance, natural disaster, or other
event beyond FRANCHISEE'S control;
(4) suffers cancellation of, or fails to renew or extend
the lease for, or otherwise fails to maintain possession of, the
premises of the BDI LOCATION identified herein or a substitute
premises approved by BDI;
(5) submits to BDI on two (2) or more separate occasions
at any time during the term of the franchise, weekly business report,
tax return or schedule or other information or supporting records
which understates the gross receipts of the BDI LOCATION by more than
three (3%) percent for any period of time, unless FRANCHISEE
demonstrates to the satisfaction of BDI that such understatement
results from inadvertent error;
(6) fails or refuses to submit when due, weekly reports,
tax returns, schedules or other information or supporting records,
whether or not such failure or refusal is corrected after notice
thereof is delivered to FRANCHISEE;
(7) operates the BDI LOCATION in a manner which presents
a health or safety hazard to its customers, employees or the public;
(8) makes an unauthorized assignment of the franchise or
ownership of FRANCHISEE as hereinafter defined in paragraph 17 and 18;
(9) operates the BDI LOCATION in a manner in violation of
or inconsistent with all applicable federal, state and local statutes,
regulations, rules and ordinances, including, but not limited to, all
government regulations relating to retail stores;
(10) fails or refuses to pay any amount owed to BDI, for
recurring franchise fees, advertising trust account contributions, any
products purchased from BDI or any amounts due to BDI or fails or
refuses to comply with any mandatory standards, specifications or
operating procedures prescribed by BDI relating to the quality of
products, cleanliness or sanitation and does not correct such failure
or refusal within ten (10) days after written notice thereof is
delivered to FRANCHISEE. Said notice shall describe what corrective
action FRANCHISEE must take; or
14.
<PAGE> 17
(11) fails to comply with any other provision of this
Agreement or any other mandatory standard, specification or operating
procedures prescribed by BDI and does not correct such failure within
thirty (30) days after written notice of such failure to comply is
delivered to FRANCHISEE, provided that if such failure can not
reasonably be corrected within thirty (30) days, then FRANCHISEE must
initiate a program of corrective action within such thirty (30) day
period and thereafter continue such program of corrective action so
that such failure may be corrected within a reasonable time
thereafter. The written notice of failure as herein described shall
describe to FRANCHISEE what corrective action he must take.
17. FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION OR
EXPIRATION.
(A) PAYMENTS OF AMOUNTS OWED TO BDI. FRANCHISEE agrees to pay to
BDI within fifteen (15) days after the effective date of termination or
expiration such recurring franchise fees, advertising trust account
contributions, amounts owed for products purchased by FRANCHISEE from BDI and
other amounts owed to BDI which are then unpaid.
(B) RETURN OF PROPRIETARY OR CONFIDENTIAL MATERIALS. FRANCHISEE
further agrees that upon termination or expiration of the franchise, he will
immediately return to BDI all copies of proprietary and confidential materials
including, but not limited to, BDI'S computer software program and all
operating and procedures manuals.
(C) REPURCHASE. BDI shall have the right, at its option, to
repurchase at cost any and all equipment, inventory, supplies and training
material which it sold to FRANCHISEE.
(D) CANCELLATION OF ASSUMED NAMES AND TRANSFER OF TELEPHONE
NUMBERS. FRANCHISEE further agrees that upon termination or expiration of the
franchise, he will take such action as may be required to cancel all fictitious
business names or registrations relating to his use of any Name or Mark and to
notify the telephone company and all listing agencies of the termination or
expiration of FRANCHISEE'S right to use any telephone numbers and any
classified and other telephone directory listings with any Name or Mark or with
the BDI LOCATION and to authorize transfer of same to BDI or its franchisee.
(E) MODIFICATION OF AGREEMENT BY FRANCHISEE. This Agreement may
be modified by FRANCHISEE only by written agreement with BDI.
(F) MODIFICATION OF AGREEMENT BY BDI. This Agreement may be
modified by BDI only by written agreement with FRANCHISEE.
(G) ASSIGNMENT BY BDI. This agreement is fully assignable by BDI,
and BDI remains liable for the performance of its obligations hereunder.
(H) DEATH OR INCAPACITY OF FRANCHISEE. The Franchise may be
transferred to the heirs or personal representative of the FRANCHISEE upon the
death or incapacity of FRANCHISEE upon written approval of BDI on the same
terms and conditions as any other assignment of the franchise.
15.
<PAGE> 18
(I) REMOVAL OF ALL SIGNS AND IDENTIFICATION. FRANCHISEE further
agrees upon termination or expiration of the franchise, he will immediately
remove all BDI signs and identification from the premises, and immediately and
permanently discontinue the use of the Names and Marks.
(J) COVENANT NOT TO COMPETE. If this Agreement is terminated
prior to its expiration by BDI in accordance with the provisions of this
Agreement or by FRANCHISEE without cause, FRANCHISEE agrees that for a period
of two (2) years commencing on the effective date of termination of this
Agreement, or the date which FRANCHISEE ceases to conduct the business
conducted pursuant to this Agreement, whichever is later, he will not have any
interest as owner (except of publicly traded securities), partner, director,
officer, employee consultant, representative or agent, or in any other
capacity, in any business offering substantially the same products and services
offered by a BDI LOCATION and located within the county wherein the BDI
LOCATION or any BDI LOCATION is located. THIS COVENANT NOT TO COMPETE MAY NOT
BE ENFORCEABLE UNDER CALIFORNIA LAW.
(K) CONTINUING OBLIGATION. All obligations of BDI and FRANCHISEE
which expressly or by their nature survive the expiration or termination of the
franchise shall continue in full force and in effect subsequent to and
notwithstanding the expiration or termination of this Agreement and until they
are satisfied in full or by their nature expire.
(L) FRANCHISEE'S RIGHT TO SELL BDI LOCATION. If BDI terminates
the franchise for a cause other than those specified in paragraph 16 (B),
subparagraphs (3), (4), and (8) of this Agreement, or elects not to renew the
franchise, FRANCHISEE for a period of ten (10) days commencing on the date of
notice of termination or nonrenewal shall have the right to elect to attempt to
sell the BDI LOCATION to a person reasonably acceptable to BDI as a BDI
LOCATION franchisee, providing that the provisions of paragraph (17),
subparagraphs (B) and (D) shall be applicable to any proposed sale of the BDI
LOCATION pursuant to this paragraph. FRANCHISEE'S right to elect hereunder
shall be contingent upon FRANCHISEE reasonably establishing that:
(1) FRANCHISEE will make a bona fide effort to sell the
BDI LOCATION to an acceptable person;
(2) until the closing of such sale or the prior
expiration or termination of FRANCHISEE'S right to sell the BDI LOCATION
pursuant to this paragraph, the BDI LOCATION will be operated in compliance
with this AGREEMENT; and
(3) all amounts owed to BDI pursuant to this Agreement
will be paid to BDI at or prior to the closing of such sale. FRANCHISEE shall
deliver to BDI within the ten (10) day period referred to above, a written
notice of his election to make a bona fide effort to sell the BDI LOCATION to
an acceptable person. FRANCHISEE'S right to sell the BDI LOCATION pursuant to
this paragraph shall expire, in the case of nonrenewal of the franchise, at the
expiration date of the franchise, and in the case of a termination of the
franchise, ninety (90) days after the initial effective date of termination
indicated in the notice from BDI or such earlier date as BDI reasonably
determines that FRANCHISEE has abandoned a bona fide effort to effect a sale of
the BDI LOCATION or fails to operate the BDI LOCATION in compliance with this
Agreement.
16.
<PAGE> 19
18. ASSIGNMENT.
(A) BY BDI. This Agreement is fully assignable by BDI and shall
inure to the benefit of any assignee or other legal successor to the interest
of BDI herein, provided that BDI will subsequent to any such assignment remain
liable for the performance of its obligations under this Agreement. The
franchise may be transferred to the heirs or personal representative of
FRANCHISEE upon the death or incapacity of FRANCHISEE upon the written approval
of BDI on the sane terms and conditions as any other assignment of the
franchise.
(B) FRANCHISEE MAY NOT ASSIGN WITHOUT APPROVAL OF BDI. The
franchise is personal to FRANCHISEE and neither the franchise (except as
hereinafter provided with respect to assignment to a partnership or a
corporation) nor any part of the ownership of FRANCHISEE may be voluntarily,
involuntarily directly or indirectly assigned, subdivided, subfranchised or
otherwise transferred by FRANCHISEE or its owners (including Will, declaration
of or transfer in trust or the laws of intestate succession) without the prior
written approval of BDI and any such assignment or transfer without such
approval shall constitute a breach hereof. BDI shall not unreasonably withhold
its approval of an assignment or transfer of the franchise to proposed
assignees ar transferees who meet BDI'S then applicable standards for
franchisees and who are willing to execute and be bound by all provisions of
BDI'S then current form of Franchise Agreement, which shall provide for the
then applicable rates of recurring franchise fees, advertising trust fund
contributions payable thereunder and a term equal to the remaining term of the
franchise. BDI shall not charge such assignee an initial franchise fee for the
franchise, but will charge FRANCHISEE a transfer fee of Two Thousand Five
Hundred ($2,500.00) Dollars. Any and all obligations of FRANCHISEE hereunder
shall be fully paid and satisfied prior to BDI'S approval of an assignment or
transfer.
(C) ASSIGNMENT TO PARTNERSHIP OR CORPORATION. The franchise may
be assigned to a partnership or corporation which conducts no business other
than the BDI LOCATION (and other BDI LOCATIONS under franchise agreements with
BDI), which is actively managed by FRANCHISEE and in which FRANCHISEE owns and
controls not less than fifty-one (51) percent of the general partnership
interest or the equity and voting power, provided that all partners or
shareholders shall execute an Assignment Agreement undertaking to be bound
jointly and severally by all provisions of this Agreement and all issued and
outstanding stock certificates of such corporation shall bear a legend
reflecting or referring to the restrictions of subparagraph (B) of this
paragraph 18.
(D) BDI'S RIGHT OF FIRST REFUSAL. If FRANCHISEE or its owners
shall at any time determine to sell the BDI LOCATION or an ownership interest
in the franchise, FRANCHISEE or its owners shall obtain a bona fide, executed
written offer from a responsible and fully disclosed purchaser and shall submit
an exact copy of such offer to BDI, which shall, for a period of thirty (30)
days from the date of delivery of such offer, have the right, exercisable by
written notice to FRANCHISEE or its owners, to purchase the BDI LOCATION or
such ownership interest for the price and terms and conditions contained in
such offer, provided that BDI may substitute cash or debt cancellation or a
combination thereof for any form of payment proposed in such offer. If BDI
does not exercise this right of first refusal, FRANCHISEE shall conclude such
sale within one hundred twenty (120) days following the expiration of such
thirty (30) day first refusal period in compliance with the terms of the offer
presented to BDI. After the expiration of such one hundred twenty (120) day
period, FRANCHISEE may not make any transfer without again complying with the
provisions of this section.
17.
<PAGE> 20
19. ENFORCEMENT.
(A) JUDICIAL ENFORCEMENT, INJUNCTIVE AND OTHER RELIEF. FRANCHISEE
acknowledges and agrees as a material part of the consideration for this
Agreement that the damages to be suffered by BDI and other BDI FRANCHISEES as a
result of the violation of the provisions of this Agreement relating to
FRANCHISEE'S use of the Names and Marks of BDI, the obligations of FRANCHISEE
with respect to advertising and the obligations of FRANCHISEE upon termination
or expiration of this Agreement and assignment of the franchise and ownership
interests in the franchise will be in an immeasurable amount and neither BDI
nor other BDI FRANCHISEES will have an adequate remedy at law. For these
reasons, BDI shall be entitled without bond to the entry of temporary and
permanent injunctions and orders of specific performance enforcing the
provisions of this Agreement relating to FRANCHISEE'S use of the Names and
Marks, the obligations of FRANCHISEE with respect to advertising, the
obligations of FRANCHISEE upon termination or expiration of this Agreement and
assignment of the franchise and ownership interests in the franchise. And
further, BDI shall be entitled to the entry of temporary and permanent
injunctions and orders of specific performance to prohibit any act or omission
by FRANCHISEE or employees of the BDI LOCATION that constitute a violation of
any law, ordinance, or regulation, is dishonest or misleading to customers of
the BDI LOCATION or other BDI LOCATIONS, constitutes a danger to employees or
customers of the BDI LOCATION or to the public, or may impair the goodwill
associated with the Names and Marks and BDI LOCATIONS. If BDI secures any such
injunctive orders or orders for specific performance, FRANCHISEE agrees to pay
BDI an amount equal to the aggregate of its cost of obtaining such relief,
including, but not limited to, reasonable attorney's fees, costs of
investigation and proof of facts, court costs, other litigation expenses,
travel and living expenses, and any damages incurred by BDI as a result of the
breach of any such provision including interest from date of breach, at the
then current prime rate plus two (2%) percent.
(B) JURISDICTION, VENUE AND WAIVER OF JURY TRIAL. FRANCHISEE
acknowledges and agrees that this Agreement is entered into in the City of
Huntington Beach, County of Orange, State of California and that any action
commenced for the purpose of enforcing the terms and provisions hereof may be
commenced in the following courts, at the sole option of BDI:
(1) the Federal District Court for the Southern District
of California;
(2) the Superior Court of the State of California in and
for the County of Orange;
(3) the Municipal Court of California, Orange County
Judicial District; or
(4) the United States District Court, Court of general
jurisdiction for the state, or inferior court for the judicial
district in which FRANCHISEE'S BDI LOCATION is located.
18.
<PAGE> 21
It is mutually agreed by and between the parties hereto that the respective
parties shall and they hereby do, waive trial by jury in any action, proceeding
or counterclaim, whether at law or equity brought by either of the parties
hereto against the other or any matters whatsoever arising out of, or in any way
connected with, this Agreement or the performance by the parties of this
Agreement.
(C) ARBITRATION. Except insofar as BDI elects to enforce this
Agreement by judicial process, injunction or specific performance as hereinabove
provided, all disputes and claims arising out of this Agreement and/or
standards, specifications and operating procedures and/or any other obligations
of FRANCHISEE or BDI or any claim that any portion of this Agreement, any
standard specification or operating procedure or other obligation of the
FRANCHISEE or BDI is illegal or otherwise unenforceable under any law,
ordinance, regulation or ruling shall be settled by three member arbitration in
the County of Orange, State of California, under the United States Arbitration
Act (9 U.S.C. SS1 et seq.), if applicable, and the Rules of CCP 1060, provided
that the arbitrators shall award, or include in their awards, the specific
performance of this Agreement unless he determines that performance is
impossible. Judgment upon the award of the arbitrator may be entered in any
court having jurisdiction thereof or of BDI or FRANCHISEE. During the pendency
of an arbitration proceeding hereunder, FRANCHISEE and BDI shall fully perform
this Agreement.
(D) SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS. All
provisions of this Agreement are severable and this Agreement shall be
interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions shall be enforced to the extent valid and enforceable. If any
applicable law or rule requires a greater prior notice of the termination or of
refusal to renew this Agreement than is required hereunder, or the taking of
some action not required hereunder, the prior notice and/or other action
required by such law or rule shall be substituted for the notice requirements
hereof.
(E) WAIVER OF OBLIGATIONS. BDI AND FRANCHISEE may by written
instrument unilaterally waive any obligation of, or restriction upon, the other
under this Agreement. No acceptance by BDI of any payment by FRANCHISEE and no
failure, refusal or neglect of BDI or FRANCHISEE to exercise any right under
this Agreement or to insist upon full compliance by the other with its
obligations hereunder, including but not limited to any mandatory standards,
specifications or operating procedure, shall constitute a waiver of any
provision of this Agreement.
(F) FRANCHISEE MAY NOT WITHHOLD PAYMENTS DUE BDI. FRANCHISEE agrees
that he will not withhold payment of any recurring franchise fee, advertising
trust fund contribution, amounts owed to BDI for products purchased by
FRANCHISEE or any other amounts owed to BDI on grounds of the nonperformance by
BDI of any of its obligations hereunder.
19.
<PAGE> 22
All such claims by FRANCHISEE, if not otherwise resolved by BDI and FRANCHISEE
shall, at the option of BDI, be submitted to arbitration as provided in
paragraph 19, subparagraph (C).
(G) RIGHTS OF PARTIES ARE CUMULATIVE. The rights of BDI and
FRANCHISEE hereunder are cumulative and no exercise or enforcement by BDI or
FRANCHISEE of any right or remedy hereunder shall preclude the exercise or
enforcement by BDI or FRANCHISEE of any other right or remedy hereunder or
which BDI or FRANCHISEE is entitled by law to enforce.
(H) GOVERNING LAW. Except to the extent governed by applicable
federal laws and regulations and the United States Arbitration Act, this
Agreement and the franchise shall be governed by the State of California.
(I) BINDING EFFECT. This Agreement is binding upon the parties
hereto and their respective heirs, assigns and successors in interest.
(J) CONSTRUCTION. The preliminary statements are parts of this
Agreement which constitutes the entire Agreement of the parties and there are
no other oral or written understandings or agreements between BDI and
FRANCHISEE relating to the subject matter of this Agreement, except as
specifically referred to in this Agreement. The headings of the several
sections and paragraphs hereof are for convenience only and do not define,
limit or construe the contents of such sections or paragraphs. The term
"FRANCHISEE" as used herein is applicable to one or more persons, a corporation
or a partnership, as the case may be, and the singular usage includes the
plural and the masculine and neuter usages the other and the feminine.
References to "FRANCHISEE" applicable to an individual or individuals shall
mean the principal owner or owners of the equity or operating control of the
franchise if FRANCHISE is a corporation or partnership.
20. INDEPENDENT CONTRACTORS/INDEMNIFICATION. BDI and FRANCHISEE are
independent contractors. FRANCHISEE shall conspicuously identify himself at the
premises of the BDI LOCATION and in all dealings with suppliers as the owner of
the BDI LOCATION. FRANCHISEE agrees to file applicable fictitious name
statements in the manner prescribed by law. Neither BDI nor FRANCHISEE shall
make any agreements, representations or warranties in the name of, or on behalf
of, the other or represent that the relationship is other than franchisor and
franchisee and that neither BDI nor FRANCHISEE shall be obligated by or have any
liability under any agreements, representations or warranties made by the other,
nor shall BDI be obligated for any damage to any person or property directly or
indirectly arising out of the operation of the BDI LOCATION or FRANCHISEE'S
business conducted pursuant to the franchise, whether caused by FRANCHISEE'S
negligent or willful action or failure to act. BDI shall have no liability for
any sales, use, excise, income, property or other taxes levied upon the BDI
LOCATION or its assets or in connection with the services performed or sales
made or business conducted by the BDI LOCATION. FRANCHISEE agrees to indemnify
BDI against and to reimburse BDI for all such obligations, damages and taxes for
which it is held liable and for all costs reasonably incurred by BDI in defense
of any such claim brought against it or in any action in which it is named as a
party, included but not limited to reasonable attorney's fees, costs of
investigation, proof of facts, court costs, other litigation expenses, travel
and living expenses.
20.
<PAGE> 23
BDI shall have the right to defend any such claim against it. BDI agrees to
indemnify FRANCHISEE against and to reimburse FRANCHISEE for any obligations or
liability for damages attributable to agreements, representations or warranties
of BDI or caused by the negligence or willful action of BDI, and for costs (as
hereinabove defined) reasonably incurred by FRANCHISEE in the defense of any
such claim brought against him or the BDI LOCATION or in any action in which he
is named as a party, provided that BDI shall have the right to participate in
and, to the extent, BDI deems necessary, to control any litigation or
proceeding which might result in liability of or expense to FRANCHISEE subject
to such indemnification. The indemnities and assumption of liabilities and
obligation herein shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.
21. NOTICES. All written notices permitted or required to be
delivered by the provisions of this Agreement or of the operating manual shall
be deemed so delivered by hand or three (3) days after placed in the mail by
Registered or Certified mail, Return Receipt Requested, postage prepaid and
addressed to the party to be notified at its most current principal business
address of which the notifying party has been notified.
22. FAILURE TO EXERCISE RIGHTS. No failure by BDI to exercise any
power given to it hereunder or to insist upon strict compliance with any
obligation or condition hereunder and no custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of BDI'S rights to
demand exact compliance with the terms hereof. Waiver by BDI of any particular
default by FRANCHISEE shall not affect or impair BDI'S rights in respect to any
subsequent default of the same or different nature; nor shall any delay or
omission of BDI to exercise any rights arising from a default affect or impair
BDI'S rights as to said default or any subsequent default.
23. ENTIRE AGREEMENT. This Agreement contains the entire
agreement containing the subject matter hereof, and no representations,
inducements, promises or agreements, oral or otherwise, between the parties
with reference thereto and not embodied herein shall be of any force and
effect. Any agreements hereafter made shall be ineffective to change, modify,
add or discharge in whole or in part the obligations and duties under this
Agreement unless such agreement is in writing and signed by BDI and FRANCHISEE.
BIKER'S DREAM, INC.
By:
------------------------
FRANCHISEE:
- ---------------------------
21.
<PAGE> 24
ADDENDUM TO FRANCHISE AGREEMENT
1. The franchise will probably be put in a corporation. If so, it will
be the only business in said corporation.
2. Franchise area will include all of the State of New Mexico. Because
of the low population and sparsely populated areas, this will enable me to
focus on mail order business throughout the State. The physical location will
be in Albuquerque. No other Company owned BDI LOCATIONS will be established in
New Mexico. No other franchised locations will be established in New Mexico
with any other party or parties.
3. I will have a specific first right of refusal for the El Paso, Texas
area as well as for the Durango, Colorado area. To enable me to properly
evaluate the feasibility of these locations at any given time, I will need 60
days, rather than 15 days, and another 30 days to arrange financing.
[Begin strike out text]4. You did agree to route all 800 order number
calls from area code "505" to me. I would also like any mailing list you have
for New Mexico.[End strike out text]
5. Weekly reports will be mailed on Mondays. I will not be penalized for
late mail service.
6. I will have the right to carry and sell the "Illusion" motorcycles,
and the "Indian" motorcycles (if that dealership becomes available) within the
franchise location.
7. The advertising fund fee shall be waived for a period of six months
beginning on the first day of opening the location.
8. In terms of any visits or audits, as outlined in Section 15, I will be
given at least one day prior notice.
9. I will be responsible only for my employees expenses to attend
training in California. I will not he responsible for BDI's expenses when
training in New Mexico.
10. The 3% figure regarding audits and variances will be raised to 5%.
<PAGE> 1
Exhibit 10.19-C
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Preliminary Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Grant of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Duration of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Initial Franchise Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
5. Recurring Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Franchise and Advertising Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Gross Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
6. Restriction to Location of BDI STORES and Limitation on
Number BDI STORES in Franchisee's Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Restriction of Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Limitation on Number of BDI STORES in Franchisee's Area . . . . . . . . . . . . . . . . . . 2
C. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Location Zone and Franchise Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. Lease, Construction and Opening of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A. Lease or Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Construction of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. Equipment, Signs and Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. BDI STORE Opening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Termination of Franchisee for Failure to open BDI STORE . . . . . . . . . . . . . . . . . . 5
8. Training and Operations Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A. Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Requirement of Completion of Training/Failure to Complete . . . . . . . . . . . . . . . . . 5
C. Hiring of Employees and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
D. Operations Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
E. Group Purchasing of Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
F. Product Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
G. Delivery of Equipment and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. Operation of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A. Operating Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B. Alteration to BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
C. Uniformity, Authorized Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Use of Approved Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Materials Imprinted with Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Standards, Specifications & Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . 8
G. Compliance with Law and Good Business Practices . . . . . . . . . . . . . . . . . . . . . . 8
H. Prices for Services Determined by Franchisee . . . . . . . . . . . . . . . . . . . . . . . 9
I. Duty to Manage and Avoid Conflicting or Competing Interests . . . . . . . . . . . . . . . . 9
J. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
K. Operations Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Procedures and Operating Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
12. Advertising and Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13. Records Keeping Standards and Reporting Procedures . . . . . . . . . . . . . . . . . . . . . . 11
A. Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
B. Business Reports and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
C. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
14. Names and Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
A. Ownership of Names and Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B. Limitation on Use of Names and Marks by Franchisee . . . . . . . . . . . . . . . . . . . 12
C. Notification of Infringement and Claims . . . . . . . . . . . . . . . . . . . . . . . . . 12
D. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
15. Inspections and Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Right of Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
16. Termination of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. By Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. By BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
17. Franchisee's Rights and Obligations Upon Termination or Expiration . . . . . . . . . . . . . . 15
A. Payment of amounts Cued to BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. Return of Proprietary Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. Cancellation of Assumed Names and Transfer of Telephone Numbers . . . . . . . . . . . . . 15
E. Modification of Agreement by Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . 15
F. Modification of Agreement by BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
G. Assignment by BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
H. Death or Incapacity of Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
I. Removal of All Signs and Identification . . . . . . . . . . . . . . . . . . . . . . . . . 16
J. Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
K. Continuing Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
L. Franchisee's Right to Sell BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . 16
18. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. By BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. Franchisee May Not Assign Without Approval of BDI . . . . . . . . . . . . . . . . . . . . 17
C. Assignment to Partnership or Corporation . . . . . . . . . . . . . . . . . . . . . . . . 17
D. BDI'S Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
19. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A. Judicial Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
B. Jurisdiction, Venue and Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 18
C. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
D. Severability and Substitution of Valid Provisions . . . . . . . . . . . . . . . . . . . . 19
E. Waiver of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
F. Franchisee May Not Withhold Payments Due BDI . . . . . . . . . . . . . . . . . . . . . . 19
G. Rights of Parties are Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
H. Governing law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
I. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
J. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20. Independent Contractors/Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
22. Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
23. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 3
BIKER'S DREAM, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this 24th day of June,
1994 by and between BIKER'S DREAM, Inc., a California Corporation
(hereinafter "BDI") and Brenda Bogert and/or assigned corporation
(hereinafter "FRANCHISEE"), whose principal address is: Rt 5 Box 265
Conover, N. Carolina.
1. PRELIMINARY STATEMENT. BDI is developing a chain of
Motorcycle, motorcycle parts, accessories and service Dealerships under the
trade name "BIKER'S DREAM" (hereinafter "BDI"). Each BDI LOCATION is built to
standard specifications and uses standard operating procedures, equipment,
forms, signs and designs. All BDI LOCATIONS are to be operated in accordance
with franchise uniform standards of identity, quality, appearance, operating
methods and services provided.
2. GRANT OF FRANCHISE. BDI hereby grants to FRANCHISEE, as an
individual, subject to the provisions of this Agreement, a franchise to operate
one (1) BDI LOCATION within the following location zone:
See Exhibit A
- -------------------------------------------------------
Western North Carolina Counties within (704) area code
- -------------------------------------------------------
- -------------------------------------------------------
3. DURATION OF THIS AGREEMENT. This agreement shall begin as of
the date of execution hereof and shall continue for a term of fifteen (15)
years and, unless either party gives written notice of its intention to
terminate this Agreement at least one hundred eighty (180) days prior to the
expiration of the fifteen (15) year term, the term of this Agreement shall be
deemed to be renewed for five (5) years and thereafter for further periods of
five (5) years duration, unless BDI or FRANCHISEE mails a written notice of
intention not to renew to the other party at least one hundred eighty (180)
days prior to the end of any renewal period. If such notice is so mailed, the
Agreement shall terminate as to all parties at the end of the current period.
4. INITIAL FRANCHISE FEE. FRANCHISEE shall pay to BDI a
nonrefundable initial franchise fee in the amount of Fifteen thousand dollars
($15,000.00) in cash, payable in cash upon the execution of this Agreement.
The initial franchise fee shall be fully earned by BDI when paid, provided that
if BDI elects to terminate the franchise due to the failure of FRANCHISEE to
complete satisfactorily the prescribed training program or to lease or purchase
suitable premises for the BDI LOCATION, or to open the BDI LOCATION in the time
prescribed in this agreement,
1.
<PAGE> 4
BDI shall refund to FRANCHISEE that part of the initial franchise fee
heretofore paid by FRANCHISEE. BDI shall have the right, at its option, to
repurchase at cost any and all equipment, supplies and training material which
it sold to FRANCHISEE.
5. RECURRING FEES.
(A) FRANCHISE AND ADVERTISING FEES. Beginning at the time
FRANCHISEE opens the BDI LOCATION for business and through the duration of this
franchise agreement, FRANCHISEE shall pay to BDI in weekly amounts, recurring
franchise fees of a sum equal to five (5%) percent and advertising trust fund
contributions of a sum equal to two (2%) percent (or $250.00, whichever is
greater) of the gross receipts for the preceding calendar week from the BDI
LOCATION operated by FRANCHISEE. The check or money order in full payment of
the said recurring franchise fee and the advertising trust fund contribution for
the preceding week shall be transmitted with the weekly business report and
shall be due and payable at the home office of BDI at 18898 Beach Blvd.,
Huntington Beach, CA 92646 by 5:00 p.m. on Thursday, the 3rd day after the day
on which the weekly business report is mailed. These fees are not refundable.
Bikers Dream of North Carolina shall be listed in advertisements.
(B) GROSS RECEIPTS. "Gross receipts" shall consist of money and
other consideration of any kind howsoever received by FRANCHISEE from any
source as the result of, or in connection with, the exercise of the franchise
granted hereunder including but not limited to all monies or other
consideration received for clothing, accessories and services sold and/or
rendered within or without the BDI LOCATION being operated by FRANCHISEE under
this franchise. (See exception item (J) Page 12).
(C) INTEREST. All recurring franchise fees, advertising trust
account contributions and amounts owed for products purchased by FRANCHISEE
pursuant to the franchise shall bear interest after due date at the current six
month Treasury Bill rate plus two (2%) percent.
6. RESTRICTION TO LOCATION OF BDI LOCATIONS AND LIMITATION ON
NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
(A) RESTRICTION OF LOCATION. FRANCHISEE may operate the BDI
LOCATION only within the Location Zone identified herein or a substitute
location and/or premises hereinafter approved by BDI in writing. Specific
location must be approved by BDI. If the FRANCHISEE'S lease for the premises
of the BDI LOCATION expires or terminates without fault of FRANCHISEE, or if
the premises are damaged, condemned or otherwise rendered unusable, or if in
the judgment of BDI and FRANCHISEE there is a change in the character of the
location of the BDI LOCATION sufficiently detrimental to its business potential
to warrant its relocation, BDI will grant permission for relocation of the BDI
LOCATION to a location and premises approved by BDI.
(B) LOCATION ON NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA. BDI
agrees that the number of franchised BDI LOCATIONS shall be limited to a
maximum of one BDI LOCATION within the Location Zone. BDI will not establish
any franchised or Company owned BDI LOCATIONS within ten (10) miles of
Franchisee's location without Franchisee's consent.
2.
<PAGE> 5
(C) RIGHT OF FIRST REFUSAL. FRANCHISEE shall have the right of
first refusal for any franchise which BDI proposes to grant immediately
adjacent to FRANCHISEE'S Franchise Area, as designated below. To exercise this
right, FRANCHISEE must execute the then current Franchise Agreement and pay ten
thousand dollars ($10,000.00) of the then current initial franchise fee within
fifteen (15) days of written notification of the proposed grant of franchise.
The balance of the initial franchise fee shall be payable within an additional
thirty (30) days.
(D) LOCATION ZONE. The BDI LOCATION to be operated pursuant to
this Franchise Agreement shall be located within the following designated
Location Zone:
See exhibit A
- -----------------------------------------------------------------
Western North Carolina Counties listed within (704) area code
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
For the term of this agreement, BDI will not grant any new franchises or open
any company-owned BDI LOCATIONS within the Location Zone.
7. LEASE, CONSTRUCTION AND OPENING OF BDI LOCATION.
(A) LEASE OR PURCHASE. FRANCHISEE will lease or purchase the
premises of the BDI LOCATION described in paragraph 2 of this Agreement within
ninety (90) days after execution of this Agreement. If specific premises are
not identified in paragraph 2 of this Agreement, FRANCHISEE agrees to lease or
purchase suitable premises, reasonably acceptable to BDI, within ninety (90)
days after execution of this Agreement. If FRANCHISEE fails to lease or
purchase suitable premises within ninety (90) days after execution of this
Agreement, BDI may terminate this Agreement, effective upon delivery of written
notice of termination to FRANCHISEE. In the event of such termination, the
3.
<PAGE> 6
parties agree to execute all instruments required to rescind fully all
agreements, purchases and any other transaction between BDI and FRANCHISEE.
Upon execution of all required instruments, BDI shall refund to FRANCHISEE that
part of the initial franchise fee heretofore paid by FRANCHISEE, less Two
Thousand Five Hundred Dollars ($2,500.00) dollars to cover training and
administration expense, whether or not training has been completed. BDI shall
have the right, at its option to repurchase at cost any or all equipment,
supplies and training material which it sold to FRANCHISEE.
(B) CONSTRUCTION OF BDI LOCATION. BDI will furnish to FRANCHISEE
its standard detailed specifications for a BDI LOCATION, including requirements
for dimensions, exterior design, interior layout, building materials,
equipment, signs and color scheme. FRANCHISEE agrees to do or cause to be done
the following:
(1) obtain all required building, utility, sign, use,
health, sanitation and business permits, licenses and other required
permits and licenses;
(2) submit to BDI for its approval FRANCHISEE'S BDI
LOCATION plans;
(3) construct the premises and paint the premises in
compliance with plans and specifications approved by BDI;
(4) purchase or lease and install all equipment and signs
required for the BDI LOCATION; and
(5) secure all financing required by FRANCHISEE to fully
develop the BDI LOCATION.
(C) EQUIPMENT, SIGNS AND INVENTORY. BDI will provide FRANCHISEE
with a complete list of all inventory, parts, components, accessories, signs
and equipment required to open the BDI LOCATION. FRANCHISEE agrees to use in
the operation of his BDI LOCATION only those brands of inventory, parts,
components, accessories, signs and equipment that BDI has approved for BDI
LOCATIONS as meeting its standards and specifications for function,
attractiveness, serviceability and overall appearance. FRANCHISEE may purchase
or lease approved brands of these items from any supplier. If FRANCHISEE
proposes to purchase or lease any brand which has not then approved by BDI,
FRANCHISEE shall first notify BDI and shall submit to BDI, upon its request,
sufficient specifications, photographs, drawings and/or other information or
samples for determination by BDI whether such brand of inventory, parts,
components, accessories, signs and equipment complies with its standards and
specifications, which determination will be made and communicated to FRANCHISEE
in writing within a reasonable time.
(D) BDI LOCATION OPENING. Upon completion of FRANCHISEE'S
training program, as described in paragraph 8 of this agreement, and within
fifteen (15) days after BDI'S determination that the premises described herein
are in suitable condition and comply With the standards and specifications
prescribed by BDI, FRANCHISEE agrees to open the BDI LOCATION for business and
commence the conduct of business. BDI will assist FRANCHISEE in the opening of
the BDI LOCATION.
4.
<PAGE> 7
(E) TERMINATION OF FRANCHISEE FOR FAILURE TO OPEN BDI LOCATION.
If the FRANCHISEE fails to complete preparation of the BDI LOCATION and open the
BDI LOCATION for business within one hundred eighty (180) days after execution
of this Agreement, BDI shall have the right to terminate this Agreement,
effective upon delivery to FRANCHISEE of written notice of termination. In the
event of such termination and upon delivery to BDI of all releases, waivers and
other instruments required to rescind fully all agreements, purchases and other
transactions between BDI and FRANCHISEE, BDI shall refund to FRANCHISEE that
part of the initial franchise fee paid by FRANCHISEE, less Two Thousand Five
Hundred Dollars ($2,500.00) for training and administrative expense (or actual
costs incurred), whichever is greater. BDI shall have the right, at its option,
to repurchase at cost any or all equipment, supplies, inventory and training
material which it sold to FRANCHISEE.
8. TRAINING AND OPERATIONS ASSISTANCE.
(A) TRAINING. Before the opening of the BDI LOCATION, BDI shall
train FRANCHISEE in the operation of a BDI LOCATION. Such training shall take
place at a time and place specified by BDI. Training will be conducted at the
BDI home office at 18898 Beach Blvd., Huntington Beach, CA 92646 and at
FRANCHISEE'S location. Training will be for one week at each location.
Training at home office will be completed within sixty (60) days after signing
this agreement. Training at Franchisee's location will be completed prior to
and during first week of operation of Franchisee's BDI LOCATION. FRANCHISEE
shall be responsible for any travel and living expenses incurred in connection
with the training program. Training will cover four distinct areas:
(1) Operation of a BDI LOCATION; (2) Purchasing and financing motorcycles,
parts, and accessories; (3) Sales and marketing; (4) Business and systems
procedures. Initial training class may be attended by three persons, one of
which must be FRANCHISEE.
(B) REQUIREMENT OF COMPLETION OF TRAINING/FAILURE TO COMPLETE.
FRANCHISEE shall complete the training program provided by BDI. If BDI
reasonably determines that FRANCHISEE is unable to complete satisfactorily the
said training program, this Agreement shall terminate and upon delivery to BDI
of all assignments, releases, waivers and other instruments required to rescind
fully all agreements, purchases and other transactions between BDI and
FRANCHISEE, BDI shall refund to FRANCHISEE that part of the initial franchise
fee paid by FRANCHISEE to BDI pursuant to this agreement. BDI shall have the
right, at its option, to repurchase at cost any or all equipment, supplies and
training material which it sold to FRANCHISEE.
(C) HIRING OF EMPLOYEES AND TRAINING OF EMPLOYEES BY FRANCHISEE.
FRANCHISEE shall hire all employees of the BDI LOCATION and be exclusively
responsible for the terms of their employment, compensation and the training of
such employees in the proper conduct of their jobs in operation of a BDI
LOCATION. BDI will make available to FRANCHISEE training for new employees or
updating those already employed. Such training and updating shall take place
at a time and place specified by BDI. Training will be conducted at the BDI
home office or at another BDI LOCATION designated by BDI. FRANCHISEE shall be
responsible for any travel and living expenses incurred by such employees, in
connection with the training.
5.
<PAGE> 8
(D) OPERATIONS ASSISTANCE. BDI shall advise FRANCHISEE of problem
arising out of the operation of the BDI LOCATION as disclosed by reports
submitted to BDI by FRANCHISEE or by inspections conducted by BDI of the BDI
LOCATION. BDI will furnish FRANCHISEE with such assistance in connection with
the operation of the BDI LOCATION as is reasonably determined to be necessary
by BDI from time to time. Operations assistance may consist of advice and
guidance with respect to:
(1) proper utilization of procedures developed for a BDI
LOCATION including sales and display procedures developed by BDI;
(2) additional services and products authorized for BDI
LOCATIONS;
(3) purchase of various products, materials and supplies;
(4) the institution of proper administrative,
bookkeeping, accounting, inventory control, supervisory and general
operating procedures for the effective operation of a BDI LOCATION
(5) advertising and promotional programs.
(E) GROUP PURCHASING OF INVENTORY AND SUPPLIES. FRANCHISEE shall
have the right to participate on the same basis as other franchisees of BDI and
BDI owned BDI LOCATIONS in group purchasing of motorcycles, parts, accessories,
and other materials and supplies which BDI may from time to time develop and
sponsor.
(F) PRODUCT AVAILABILITY. During the term of this Agreement, BDI
will make available for purchase by FRANCHISEE approved products necessary to
operate a BDI LOCATION.
(G) DELIVERY OF EQUIPMENT AND SERVICES. All of the
specifications, equipment and inventory lists, training, equipment, operations
manuals, and preopening operations assistance to be provided by BDI to
FRANCHISEE pursuant to this Agreement shall be delivered within ninety (90)
days after execution of this Agreement.
9. OPERATION OF BDI LOCATION.
(A) OPERATING STANDARDS. FRANCHISE agrees to operate and maintain
his BDI LOCATION in a manner consistent with the public image of a BDI LOCATION
as a clean, modern and efficient retail motorcycle, parts and accessories
store, providing high quality products and services. FRANCHISEE agrees to
effect a maintenance program for the BDI LOCATION which will assure such
condition, appearance and operation, including replacement of worn out or
obsolete equipment and signs, repair of the interior and exterior of the BDI
LOCATION, painting and periodic cleaning, consistent with the nature of the
business of the BDI LOCATION and the reputation of BDI. If, at any time in
BDI'S reasonable judgement, the general state of repair, appearance of
cleanliness of the premises of the BDI LOCATION or its equipment or signs does
not met BDI'S
6.
<PAGE> 9
standards therefor, BDI shall so notify FRANCHISEE specifying the action to be
taken by FRANCHISEE to correct such deficiency. If FRANCHISEE fails or refuses
to initiate corrective action within thirty (30) days after receipt of such
notice, and thereafter continue, a bona fide program to undertake and complete
any such required maintenance, BDI shall have the right, but shall not be
obligated, to enter upon the premises of the BDI LOCATION and effect such
repairs, painting and/or replacement of equipment or signs on behalf of
FRANCHISEE and FRANCHISEE shall pay the entire costs thereof to BDI upon
demand.
(B) ALTERATIONS TO BDI LOCATION. FRANCHISEE agrees that he shall
make no material alterations to the structural improvements or appearance of
the BDI LOCATION nor shall FRANCHISEE make any material replacements or
alterations to the equipment or signs of the BDI LOCATION without prior written
approval of BDI.
(C) UNIFORMITY, AUTHORIZED PRODUCTS AND SERVICES. Uniformity of
products, procedures and services and the image such uniformity creates in the
mind of the public are essential elements of a successful franchise chain.
FRANCHISEE therefore agrees to offer motorcycles, parts, accessories, services
and products which BDI from time to time authorizes for BDI LOCATIONS.
FRANCHISEE agrees to submit written requests for authorization of additional
products or services to be offered for sale at FRANCHISEE'S BDI LOCATION.
FRANCHISEE further agrees that the BDI LOCATION will not, without prior written
approval by BDI, offer any other products or services nor shall the BDI
LOCATION or the premises it occupies be used for any purpose other than the
operation of an authorized BDI LOCATION in compliance with the terms of the
Agreement.
(D) USE OF APPROVED PRODUCTS. Consistency of quality in the
products and services offered by BDI is essential to the maintenance and
enhancement of BDI'S reputation and the good will it has generated by the sale
of high quality products and the efficient delivery of high quality services to
its customers. For these reasons FRANCHISEE agrees that all motorcycles,
parts, accessories and other inventory, materials and supplies used in the
operation of the BDI LOCATION shall be purchased by FRANCHISEE from the list of
types or brands approved by BDI as meeting its specifications and standards.
If FRANCHISEE desires to use in the operation of the BDI LOCATION any type or
brand of motorcycles, accessories and other inventory, materials and supplies
which is not then approved by BDI as meeting its standards and specifications,
FRANCHISEE shall first notify BDI, in writing, and shall upon request by BDI
submit samples and such other information as BDI reasonably requires for
examination and/or testing to determine otherwise whether such product meets
its standards and specifications. BDI shall notify FRANCHISEE within a
reasonable time whether it approves such product. The BDI LOCATION shall at
all times maintain an inventory of motorcycles, parts, accessories and other
inventory, materials and supplies, sufficient to satisfy customer demand and
operate efficiently.
7.
<PAGE> 10
(E) MATERIALS IMPRINTED WITH NAMES AND MARKS. FRANCHISEE shall in
the operation of the BDI LOCATION utilize letterheads, business cards, forms
and other materials imprinted with the Names and Marks as prescribed from time
to time by BDI.
(F) STANDARDS, SPECIFICATIONS AND PROCEDURES. FRANCHISEE agrees
as a material part of the consideration of this Agreement to comply with all
mandatory standards, specifications and operating procedures relating to the
operation of a BDI LOCATION, including but not limited to the following:
(1) use of standard sales and operating procedures;
(2) general appearance of employees;
(3) use of quality products and high standards of methods
and procedures relating to retail business;
(4) use of Names and Marks;
(5) prescribed hours of operation during which the BDI
LOCATION will be open for business;
(6) use of standard forms, programs, formats, and records
keeping including the preparation and retention of duplicate customer
sales slips and related documents;
(7) identification of the FRANCHISEE as the owner of the
BDI LOCATION; and
(8) proper use and illumination of BDI signs, posters,
displays and other advertising and promotional displays as prescribed
by BDI from time to time.
BDI agrees that all such standards, specifications, procedures and operating
requirements shall be reasonable and consistent with the obligations of
FRANCHISEE under the lease or deed for the premises of the BDI LOCATION and
applicable ordinances, mandatory standards, specifications and operating
procedures prescribed from time to time by BDI in the procedures and operating
manuals for BDI LOCATIONS or otherwise communicated to FRANCHISEE in writing,
shall constitute provisions of this Agreement as if fully set forth herein.
All references herein to this Agreement shall include all such mandatory
standards, specifications and operating procedures. BDI reserves the absolute
right to change, modify, add to or delete any and all standards, specifications
and operating procedures.
(G) COMPLIANCE WITH LAW AND GOOD BUSINESS PRACTICES. FRANCHISEE
shall secure, file and maintain in full force and effect all required licenses,
permits, certificates, notices and disclosures relating to the operation of a
BDI LOCATION and shall operate the BDI LOCATION in full compliance with all
applicable federal, state and local statutes, regulations, and ordinances,
including but not limited to all government regulations relating to retail
facilities, occupational hazards and health, workers' compensation insurance,
federal and state withholding and payment of federal and state income taxes,
social security taxes and sales taxes.
8.
<PAGE> 11
All advertising and promotion by FRANCHISEE shall be completely factual and
shall conform to the highest standards of ethical advertising. FRANCHISEE
agrees to refrain from any business or advertising practice which may be
injurious to the business and good name of BDI and the reputation and good will
associated with Names and Marks of BDI and BDI LOCATIONS.
(H) PRICES FOR PRODUCTS AND SERVICES DETERMINED BY FRANCHISEE.
From time to time BDI may advise FRANCHISEE of prices for products and services
offered by BDI LOCATIONS which BDI in its considered judgment believes to be
appropriate and consistent with good business practice. FRANCHISEE shall not
be obligated to accept any such advice and shall have the sole right to
determine the prices to be charged by the BDI LOCATION. FRANCHISEE understands
and agrees that such advice furnished by BDI shall in no way be deemed or
construed to impose upon FRANCHISEE any obligation to charge any fixed, minimum
or maximum price for any product or service offered for sale by the BDI
LOCATION.
(I) DUTY TO MANAGE AND AVOID CONFLICTING OR COMPETING INTERESTS.
The BDI LOCATION shall at all times be under the direct, on-premises
supervision of FRANCHISEE and/or a trained and competent employee. FRANCHISEE
shall keep BDI informed at all times of the identity of any employee(s) acting
as manager(s) of the BDI LOCATION. FRANCHISEE agrees that he will at all times
faithfully, honestly and diligently perform his obligation under this
Agreement and that he will continuously exert his best efforts to promote and
enhance the business of the BDI LOCATION. FRANCHISEE further agrees not to
engage in any business which will detract from or conflict with his obligation
hereinunder.
(J) INSURANCE. FRANCHISEE shall at all times during the term of
this Agreement or any amendment or renewal hereto maintain in full force and
effect at his sole expense, comprehensive, public and product insurance against
claims for bodily and personal injury, death and property damage caused by or
occurring in conjunction with the operation of the BDI LOCATION or otherwise in
conjunction with conduct of business by FRANCHISEE pursuant to this franchise.
Such insurance coverage shall be maintained under one or more policies of
insurance containing a comprehensive general liability policy including
products liability in the minimum amount of $500,000/$500,000 bodily injury
liability and $500,000 property damage liability, an "umbrella" package in the
amount of $1,000,000, or such other amounts as BDI may reasonably request for
the operation of the premises. All such liability insurance policies shall
name BDI as an additional insured and shall provide that BDI receives thirty
(30) days prior written notice of termination, expiration or cancellation of
any such policy. BDI may reasonably increase the maximum liability protection
requirement annually to reflect inflation or higher damage awards in public or
product liability litigation. FRANCHISEE shall have his insurance carriers
submit to BDI annually a statement of coverage. All policies shall be renewed
and evidence of renewal mailed to BDI prior to the expiration date. If
FRANCHISEE at any time fails or refuses to maintain any insurance coverage
required by BDI or to furnish satisfactory evidence thereof, BDI at its option
and in addition to its other rights and remedies hereunder, may, but need not,
obtain such coverage on behalf of the FRANCHISEE and
9.
<PAGE> 12
FRANCHISEE shall pay to BDI on demand any costs and premiums incurred by BDI in
connection therewith. FRANCHISEE is responsible for all loss or damage and
contractual liability to third persons originating in or in connection with the
operation of a BDI LOCATION and for all claims or demands for damages to
property or for injury, illness or death of persons directly or indirectly
resulting therefrom. FRANCHISEE agrees to defend, indemnify and hold BDI
harmless from and with respect to any such claims, losses, or damages as
hereinabove described.
(K) OPERATIONS MEETINGS. From, time to time BDI will call
operations meetings. These meetings will be held regionally where feasible to
keep expense and time loss for FRANCHISEE to a relative minimum. Attendance at
operations meetings is mandatory for FRANCHISEE or his Manager(s).
10. PROCEDURES AND OPERATING MANUALS. BDI will license to
FRANCHISEE, to use during the term of the franchise, a proprietary special
design computer software program and one or more copies of procedures and
operating manuals for BDI LOCATIONS containing mandatory and suggested
standards, specifications and operating procedures for BDI LOCATIONS and
up-to-date information relative to such standards, specifications and operating
procedures along with other obligations of FRANCHISEE hereunder with respect to
the operation of a BDI LOCATION. BDI shall have the right to add to and
otherwise modify the procedures and operating manuals from time to time to
reflect changes in authorized products and services, product quality or
standards of service or the operation of a BDI LOCATION provided that no such
addition or modification shall alter FRANCHISEE'S fundamental status and rights
under this Agreement. The operating and procedures manuals contain proprietary
information of BDI and FRANCHISEE agrees to keep the computer software program
and the operating and procedures manuals confidential at all times during and
after the term of the franchise.
11. TRADE SECRETS. FRANCHISEE as a material part of the
consideration for this Agreement understands and agrees that his knowledge of
the operation of a BDI LOCATION will be derived from information disclosed to
FRANCHISEE by BDI pursuant to the franchise and that certain such information
is proprietary, confidential and a trade secret of BDI. FRANCHISEE agrees that
he will maintain the absolute confidentiality of all such information during
and after the term of the franchise and that he will not use any such
information in any other business or in any manner not specifically authorized
or approved by BDI.
12. ADVERTISING AND PROMOTION. FRANCHISEE agrees that it is
essential for the growth of the BDI franchise chain that he participates and
cooperates in advertising programs and other promotional activities.
Accordingly, FRANCHISEE agrees to contribute to an advertising trust fund
administered by BDI, or its designated agent. (Paragraph 6 section A of
Offering Circular and Paragraph 5, this Agreement). The said monies shall be
used by BDI exclusively for advertising and promotional purposes. Advertising
and promotional purposes may include, but are not limited to, radio and
television advertising, newspaper advertisements, and the production and
distribution of such advertising. BDI agrees to provide FRANCHISEE with an
annual statement of the receipts and disbursements of the advertising trust
fund. It is understood by BDI and Franchisee, that after BDI has five (5)
franchises open and operating, an executive advertising committee will be
selected by BDI, that will include Franchisees. This committee will be
instrumental in administering the distribution of the advertising trust monies.
10.
<PAGE> 13
The uncommitted reserve in the advertising trust fund will be
reconciled with expenditures annually at the close of BDI'S fiscal year to
limit the reserve to an amount not greater than the most recent ninety (90) day
expenditure or the succeeding ninety (90) day planned expenditure. BDI shall
thereafter notify FRANCHISEE of the appropriate pro rata reduction of
FRANCHISEE'S advertising trust fund contributions until the excess in the
uncommitted reserve, if any, is depleted.
13. RECORDS KEEPING STANDARDS AND REPORTING PROCEDURES.
(A) RECORDS AND ACCOUNTING. FRANCHISEE shall establish a record
keeping, bookkeeping and accounting system in conformance with the requirements
prescribed by BDI including, but not limited to, the use and retention of sales
records, invoices, payroll records, check stubs, bank deposit receipts, sales
tax records and returns, cash disbursements journals and general ledgers.
(B) BUSINESS REPORTS AND TAX RETURNS. FRANCHISEE shall furnish to
BDI, in accordance with BDI'S procedures and operating manual for BDI
LOCATIONS, the following:
(1) by Monday of each week on the business report form, a report
of the gross and net revenues of the BDI LOCATION for the preceding week
together with all information required by BDI as part of the weekly business
report procedure;
(2) within thirty (30) days after the date federal and state
income tax and sales tax returns are filed, FRANCHISEE shall provide BDI with
exact copies of such returns and all schedules attached thereto.
(C) FINANCIAL STATEMENTS. FRANCHISEE shall furnish to BDI in the
form prescribed by BDI:
(1) within thirty (30) days after the end of each month, a monthly
profit and loss statement from the beginning of FRANCHISEE'S fiscal year to the
end of the preceding month for the BDI LOCATION, prepared, verified and signed
by FRANCHISEE; and
(2) within sixty (60) days after the end of each fiscal year of
the BDI LOCATION, an unaudited annual statement of profit and loss and source
and application of funds of the BDI LOCATION for the fiscal year and a balance
sheet for the BDI LOCATION as of the end of the fiscal year, compiled or
reviewed by an independent public accountant or a certified public accountant
in accordance with standards published by the A.I.C.P.A., verified and signed
by FRANCHISEE as to the information furnished to such accountant.
(3) BDI may order FRANCHISEE to provide an audited financial
statement at any time. If this audit discloses an understatement for the
period covered greater than three (3%) percent, FRANCHISEE will pay all costs
associated with the audit and within fifteen (15) days pay to BDI all recurring
franchise fees and advertising trust fund contributions due on the amount of
the understatement. BDI shall then have the right to require FRANCHISEE to
furnish audited financial statements thereafter. If the understatement is
three (3%) percent or less, BDI will pay the reasonable auditor's fees.
14. NAMES AND MARKS.
(A) OWNERSHIP OF NAMES AND MARKS. FRANCHISEE acknowledges and
agrees as a material part of the consideration for this Agreement that BDI is
the owner of the following names and Marks: "THE BIKERS DREAM", "BIKERS
DREAM", BIKER'S DREAM" and "DREAM", referred to in this Agreement as "Names
and Marks". BDI hereby licenses FRANCHISEE to use the Names and Marks in the
operation of the franchise. FRANCHISEE'S right to use the Names and Marks is
derived solely from this Agreement, and is limited to the operation of the BDI
LOCATION in compliance with this Agreement. FRANCHISEE shall use and display
the Names and Marks only in a manner and form expressly approved by BDI.
FRANCHISEE, upon request by BDI, shall affix to any materials displaying the
Marks, whatever legends, markings, and notices of trademark ownership or
FRANCHISOR/FRANCHISEE relationship as way be specified by BDI.
11.
<PAGE> 14
(B) FRANCHISEE acknowledges the right of BDI and its affiliates to
use the Marks, including any additions, deletions, or changes thereto, in
connection with the products and services to which they are or may be applied
by BDI and its affiliates, and represents, warrants and agrees that FRANCHISEE
shall not, either during the term of this Agreement or after the expiration or
other termination hereof, directly or indirectly contest or aid in contesting
the validity, ownership, registration, or use of the marks or any additions,
deletions or changes thereto by BDI, or take any action whatsoever in
derogation of the rights claimed therein by BDI.
(C) The License granted to Franchise under this Agreement to use
the Marks is nonexclusive, and BDI, in its sole and absolute discretion, has
the right to grant other licenses in, to and under those names and marks in
addition to those licenses already granted, and to develop and license other
names and marks an any such terms as BDI deems appropriate.
(D) Nothing contained in this Agreement shall be construed to vest
in FRANCHISEE any right, title or interest in or to any of the Marks, the
goodwill now or hereafter associated therewith, or any right in the design of
any building or premises, other than rights and license expressly granted
herein for the term hereof.
(E) FRANCHISEE shall not use any of the Marks in connection with
any statement or material which way, in the judgement of BDI, be in bad taste
or inconsistent with BDI'S public image or tend to bring disparagement,
ridicule or scorn upon BDI, any of the Marks, or the goodwill associated
therewith. FRANCHISEE shall not adopt, use, display or register, in whole or
in part, any trademarks, service marks, trade names, logos, insignia, slogans,
emblem, symbols, designs or other identifying characteristics. Neither
FRANCHISEE nor any entity directly or indirectly affiliated with FRANCHISEE
shall adopt, use or register (by filing a certificate or articles of
incorporation, a fictitious business name statement, or otherwise) any trade or
business name, style or design which includes, or is similar to, in whole or in
part, any of the Marks or any other of BDI'S trademarks, service marks, trade
names, logos, insignia, slogans, emblems, symbols, designs or other identifying
characteristics.
(F) BDI shall have the right at any time and from time to time
upon notice to FRANCHISEE to make additions to, deletions from, and changes in
any of the marks, or any of them, all of which shall be as effective as if they
were incorporated in this Agreement. All such additions, deletions and changes
shall be made in good faith, on a reasonable basis and with a view toward the
overall best interests of the System. No such addition, deletion or change
will cause any change in any of FRANCHISEE'S financial obligations to BDI.
(G) LIMITATIONS ON USE OF NAMES AND MARKS BY FRANCHISEE.
FRANCHISEE agrees to use the Names and Marks during the term of the franchise
as the sole servicemark and tradename identification of the BDI LOCATION.
FRANCHISEE shall not use during the term of the franchise any Name and Mark as
part of any corporate name or with any prefix, suffix or other modifying words,
term, designs or symbols, or any modified form, nor may FRANCHISEE use any Name
or Mark in connection with the sale of any unauthorized product or service or
in any other manner not explicitly authorized in writing by BDI.
(H) NOTIFICATION OF INFRINGEMENT AND CLAIMS. FRANCHISEE shall
immediately notify BDI of any apparent infringement of or challenge to
FRANCHISEE'S use of any Name or Mark.
(I) INDEMNIFICATION. BDI agrees to indemnify FRANCHISEE for all
damages for which he is held liable in any proceeding arising out of his use of
any Name or Mark, pursuant to and in compliance with this Agreement and for all
costs reasonably incurred by FRANCHISEE in the defense of any such claim
brought against him or in any such proceeding in which he is named as a party,
provided that FRANCHISEE has timely notified BDI of such claim or proceeding
and has otherwise complied with this Agreement, and further provided that if it
becomes advisable at any time in the sole discretion of BDI for FRANCHISEE to
modify or discontinue use of any Name or Mark, and/or use additional or
substitute Names or Marks, FRANCHISEE agrees to do so and the sole obligation
of BDI in any such event shall be to reimburse FRANCHISEE for the out-of-pocket
costs of
12.
Franchisee may continue to use DBA (AirArt by Brenda). Don Bogert shall from
time to time engage BDI of N.C. to sell one of his bikes. Only the commission
shall be considered as "Gross Receipts"
<PAGE> 15
complying with this obligation. BDI, at its sole discretion may elect to
defend or participate in the defense or prosecution of any action relating to
the protection of the Service Mark and to protect the FRANCHISEE against claims
of infringement or unfair competition with respect to the Service Mark. In
such event, BDI will have the sole discretion to take such action as it deems
appropriate. FRANCHISEE is not precluded from taking over a cause of action
should BDI decide not to proceed with same.
15. INSPECTIONS AND AUDITS.
(A) RIGHT OF INSPECTION. In order to determine whether FRANCHISEE
is in compliance with this Agreement, BDI shall have the right at any time
during business hours, without prior notice to FRANCHISEE, to inspect the BDI
LOCATION and the business records, bookkeeping and accounting records,
invoices, payroll records, check stubs, bank deposit receipts, sales tax
records and returns, sales records and other supporting records and documents
and the inventory of products, materials and supplies of the BDI LOCATION.
(B) RIGHT TO AUDIT. BDI shall have the right at any time during
business hours, and without prior notice to FRANCHISEE, to audit or cause to be
audited the weekly business reports, tax returns, and schedules and other forms,
information and supporting records which FRANCHISEE is required to submit to
BDI hereunder and the books and records of the BDI LOCATION and of any
corporation or partnership which owns or operates the BDI LOCATION. In the
event any such audit shall disclose an understatement of the gross receipts of
the BDI LOCATION for any period or periods , FRANCHISEE shall pay to BDI within
fifteen (15) days after receipt of the audit report, the recurring franchise
fee plus any required advertising trust account contribution due on the amount
of such understatement. Further, in the event such understatement for any
period or periods shall be greater than three (3%) percent, FRANCHISEE shall
reimburse BDI for the cost of such audit, including, but not limited to, the
fee of any independent accountant and the travel expenses, room, board and
compensation of employees of BDI, unless FRANCHISEE demonstrates that such
understatement resulted from inadvertent error.
16. TERMINATION OF FRANCHISE.
(A) BY FRANCHISEE. If FRANCHISEE is in substantial compliance
with this Agreement and BDI breaches this Agreement and fails to cure such
breach within thirty (30) days after written notice thereof is delivered to
BDI, FRANCHISEE may terminate this Agreement effective ten (10) days after
delivery to BDI of notice thereof. The termination of this Agreement by
FRANCHISEE without complying with the foregoing requirement or for any reason
other than breach of this Agreement by BDI and BDI'S failure to cure such
breach within thirty (30) days after receipt of written notice thereof shall be
deemed a termination by FRANCHISEE without cause.
(B) BY BDI. In addition to BDI'S right to terminate this
Agreement in the event of the failure of FRANCHISEE to lease or purchase a
premises for the BDI'S LOCATION to develop or open the BDI'S LOCATION as
provided in subparagraph (A) of paragraph 5 herein or upon BDI'S determination
that FRANCHISEE is unable to complete satisfactorily prescribed training as
provided in subparagraph (B) of paragraph 6 herein, BDI may terminate this
Agreement effective upon delivery of notice of termination to FRANCHISEE, if
FRANCHISEE or the BDI LOCATION
13.
<PAGE> 16
(1) makes an assignment for the benefit of creditors or
an admission of his inability to pay his obligations as they become
due;
(2) files a voluntary petition in bankruptcy or any
pleading seeking any reorganization, liquidation or dissolution under
any law, or admitting or failing to contest the material allegations
of any such pleading filed against him or is adjudicated a bankrupt or
insolvent or a receiver is appointed or a substantial part of the
assets of FRANCHISEE or BDI LOCATION are abated or subject to a
moratorium under any law;
(3) abandons or surrenders or transfers control of the
operation of the BDI LOCATION or fails actively to operate the BDI
LOCATION, unless precluded from doing so by damage to the premises of
the BDI LOCATION, war or civil disturbance, natural disaster, or other
event beyond FRANCHISEE'S control;
(4) suffers cancellation of, or fails to renew or extend
the lease for, or otherwise fails to maintain possession of, the
premises of the BDI LOCATION identified herein or a substitute
premises approved by BDI;
(5) submits to BDI on two (2) or more separate occasions
at any time during the term of the franchise, a weekly business
report, tax return or schedule or other information or supporting
records which understates the gross receipts of the BDI LOCATION by
more than three (3%) percent for any period of time, unless FRANCHISEE
demonstrates to the satisfaction of BDI that such understatement
results from inadvertent error;
(6) fails or refuses to submit when due, weekly reports,
tax returns, schedules or other information or supporting records,
whether or not such failure or refusal is corrected after notice
thereof is delivered to FRANCHISEE;
(7) operates the BDI LOCATION in a manner which presents
a health or safety hazard to its customers, employees or the public;
(8) makes an unauthorized assignment of the franchise or
ownership of FRANCHISEE as hereinafter defined in paragraph 17 and 18;
(9) operates the BDI LOCATION in a manner in violation of
or inconsistent with all applicable federal, state and local statutes,
regulations, rules and ordinances, including, but not limited to, all
government regulations relating to retail stores;
(10) fails or refuses to pay any amount owed to BDI, for
recurring franchise fees, advertising trust account contributions, any
products purchased from BDI or any amounts due to BDI or fails or
refuses to comply with any mandatory standards, specifications or
operating procedures prescribed by BDI relating to the quality of
products, cleanliness or sanitation and does not correct such failure
or refusal within ten (10) days after written notice thereof is
delivered to FRANCHISEE. Said notice shall describe what corrective
action FRANCHISEE must take; or
14.
<PAGE> 17
(11) fails to comply with any other provision of this
Agreement or any other mandatory standard, specification or operating
procedures prescribed by BDI and does not correct such failure within
thirty (30) days after written notice of such failure to comply is
delivered to FRANCHISEE, provided that if such failure can not
reasonably be corrected within thirty (30) days, then FRANCHISEE must
initiate a program of corrective action within such thirty (30) day
period and thereafter continue such program of corrective action so
that such failure way be corrected within a reasonable time
thereafter. The written notice of failure as herein described shall
describe to FRANCHISEE what corrective action he must take.
17. FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION OR
EXPIRATION.
(A) PAYMENTS OF AMOUNTS OWED TO BDI. FRANCHISEE agrees to pay to
BDI within fifteen (15) days after the effective date of termination or
expiration such recurring franchise fees, advertising trust account
contributions, amounts owed for products purchased by FRANCHISEE from BDI and
other amounts owed to BDI which are then unpaid.
(B) RETURN OF PROPRIETARY OR CONFIDENTIAL MATERIALS. FRANCHISEE
further agrees that upon termination or expiration of the franchise, he will
immediately return to BDI all copies of proprietary and confidential materials
including, but not limited to, BDI'S computer software program and all
operating and procedures manuals.
(C) REPURCHASE. BDI shall have the right, at its option, to
repurchase at cost any and all equipment, inventory, supplies and training
material which it sold to FRANCHISEE.
(D) CANCELLATION OF ASSUMED NAMES AND TRANSFER OF TELEPHONE
NUMBERS. FRANCHISEE further agrees that upon termination or expiration of the
franchise, he will take such action as may be required to cancel all fictitious
business names or registrations relating to his use of any Name or Mark and to
notify the telephone company and all listing agencies of the termination or
expiration of FRANCHISEE'S right to use any telephone numbers and any
classified and other telephone directory listings with any Name or Mark or with
the BDI LOCATION and to authorize transfer of same to BDI or its franchisee.
(E) MODIFICATION OF AGREEMENT BY FRANCHISEE. This Agreement may
be modified by FRANCHISEE only by written agreement with BDI.
(F) MODIFICATION OF AGREEMENT BY BDI. This Agreement may be
modified by BDI only by written agreement with FRANCHISEE.
(G) ASSIGNMENT BY BDI. This agreement is fully assignable by BDI,
and BDI remains liable for the performance of its obligations hereunder.
(H) DEATH OR INCAPACITY OF FRANCHISEE. The Franchise may be
transferred to the heirs or personal representative of the FRANCHISEE upon the
death or incapacity of FRANCHISEE upon written approval of BDI on the same
terms and conditions as any other assignment of the franchise.
15.
<PAGE> 18
(I) REMOVAL OF ALL SIGNS AND IDENTIFICATION. FRANCHISEE further
agrees upon termination or expiration of the franchise, he will immediately
remove all BDI signs and identification from the premises, and immediately and
permanently discontinue the use of the Names and Marks.
(J) COVENANT NOT TO COMPETE. If this Agreement is terminated
prior to its expiration by BDI in accordance with the provisions of this
Agreement or by FRANCHISEE without cause, FRANCHISEE agrees that for a period
of two (2) years commencing on the effective date of termination of this
Agreement, or the date which FRANCHISEE ceases to conduct the business
conducted pursuant to this Agreement, whichever is later, he will not have any
interest as owner (except of publicly traded securities) , partner, director,
officer, employee consultant, representative or agent, or in any other
capacity, in any business offering substantially the same products and services
offered by a BDI LOCATION and located within the county wherein the BDI
LOCATION or any BDI LOCATION is located. THIS COVENANT NOT TO COMPETE MAY NOT
BE ENFORCEABLE UNDER CALIFORNIA LAW.
(K) CONTINUING OBLIGATION. All obligations of BDI and FRANCHISEE
which expressly or by their nature survive the expiration or termination of the
franchise shall continue in full force and in effect subsequent to and
notwithstanding the expiration or termination of this Agreement and until they
are satisfied in full or by their nature expire.
(L) FRANCHISEE'S RIGHT TO SELL BDI LOCATION. If BDI terminates
the franchise for a cause other than those specified in paragraph 16 (B),
subparagraphs (3), (4), and (8) of this Agreement, or elects not to renew the
franchise, FRANCHISEE for a period of ten (10) days commencing on the date of
notice of termination or nonrenewal shall have the right to elect to attempt to
sell the BDI LOCATION to a person reasonably acceptable to BDI as a BDI
LOCATION franchisee, providing that the provisions of paragraph (17),
subparagraphs (B) and (D) shall be applicable to any proposed sale of the BDI
LOCATION pursuant to this paragraph. FRANCHISEE'S right to elect hereunder
shall be contingent upon FRANCHISEE reasonably establishing that:
(1) FRANCHISEE will make a bona fide effort to sell the
BDI LOCATION to an acceptable person;
(2) until the closing of such sale or the prior
expiration or termination of FRANCHISEE'S right to sell the BDI LOCATION
pursuant to this paragraph, the BDI LOCATION will be operated in compliance
with this AGREEMENT; and
(3) all amounts owed to BDI pursuant to this Agreement
will be paid to BDI at or prior to the closing of such sale. FRANCHISEE shall
deliver to BDI within the ten (10) day period referred to above, a written
notice of his election to make a bona fide effort to sell the BDI LOCATION to
an acceptable person. FRANCHISEE's right to sell the BDI LOCATION pursuant to
this paragraph shall expire, in the case of nonrenewal of the franchise, at the
expiration date of the franchise, and in the case of a termination of the
franchise, ninety (90) days after the initial effective date of termination
indicated in the notice from BDI or such earlier date as BDI reasonably
determines that FRANCHISEE has abandoned a bona fide effort to effect a sale of
the BDI LOCATION or fails to operate the BDI LOCATION in compliance with this
Agreement.
16.
<PAGE> 19
18. ASSIGNMENT.
(A) BY BDI. This Agreement is fully assignable by BDI and shall
inure to the benefit of any assignee or other legal successor to the interest
of BDI herein, provided that BDI will subsequent to any such assignment remain
liable for the performance of its obligations under this Agreement. The
franchise may be transferred to the heirs or personal representative of
FRANCHISEE upon the death or incapacity of FRANCHISEE upon the written approval
of BDI on the same terms and conditions as any other assignment of the
franchise.
(B) FRANCHISEE MAY NOT ASSIGN WITHOUT APPROVAL OF BDI. The
franchise is personal to FRANCHISEE and neither the franchise (except as
hereinafter provided with respect to assignment to a partnership or a
corporation) nor any part of the ownership of FRANCHISEE may be voluntarily,
involuntarily directly or indirectly assigned, subdivided, subfranchised or
otherwise transferred by FRANCHISEE or its owners (including Will, declaration
of or transfer in trust or the laws of intestate succession) without the prior
written approval of BDI and any such assignment or transfer without such
approval shall constitute a breach hereof. BDI shall not unreasonably withhold
its approval of an assignment or transfer of the franchise to proposed
assignees or transferees who meet BDI'S then applicable standards for
franchisees and who are willing to execute and be bound by all provisions of
BDI'S then current form of Franchise Agreement, which shall provide for the
then applicable rates of recurring franchise fees, advertising trust fund
contributions payable thereunder and a term equal to the remaining term of the
franchise. BDI shall not charge such assignee an initial franchise fee for the
franchise, but will charge FRANCHISEE a transfer fee of Two Thousand Five
Hundred ($2,500.00) Dollars. Any and all obligations of FRANCHISEE hereunder
shall be fully paid and satisfied prior to BDI'S approval of an assignment or
transfer.
(C) ASSIGNMENT TO PARTNERSHIP OR CORPORATION. The franchise may
be assigned to a partnership or corporation which conducts no business other
than the BDI LOCATION (and other BDI LOCATIONS under franchise agreements with
BDI), which is actively managed by FRANCHISEE and in which FRANCHISEE owns and
controls not less than fifty-one (51) percent of the general partnership
interest or the equity and voting power, provided that all partners or
shareholders shall execute an Assignment Agreement undertaking to be bound
jointly and severally by all provisions of this Agreement and all issued and
outstanding stock certificates of such corporation shall bear a legend
reflecting or referring to the restrictions of subparagraph (B) of this
paragraph 18.
(D) BDI IS RIGHT OF FIRST REFUSAL. If FRANCHISEE or its owners
shall at any time determine to sell the BDI LOCATION or an ownership interest
in the franchise, FRANCHISEE or its owners shall obtain a bona fide, executed
written offer from a responsible and fully disclosed purchaser and shall submit
an exact copy of such offer to BDI, which shall, for a period of thirty (30)
days from the date of delivery of such offer, have the right, exercisable by
written notice to FRANCHISEE or its owners, to purchase the BDI LOCATION or
such ownership interest for the price and terms and conditions contained in
such offer, provided that BDI may substitute cash or debt cancellation or a
combination thereof for any form of payment proposed in such offer. If BDI
does not exercise this right of first refusal, FRANCHISEE shall conclude such
sale within one hundred twenty (120) days following the expiration of such
thirty (30) day first refusal period in compliance with the terms of the offer
presented to BDI. After the expiration of such one hundred twenty (120) day
period, FRANCHISEE may not make any transfer without again complying with the
provisions of this section.
17.
(E) Brenda Bogert (or assigned coop.) shall reserve the right to
cancel this contract if BDI does not put forth best efforts to help in setting
up franchisee new location. Total cooperation is expected.
(F) Franchisee reserves the right and hold accountable use of 2%
advertise fund.
<PAGE> 20
19. ENFORCEMENT.
(A) JUDICIAL ENFORCEMENT, INJUNCTIVE AND OTHER RELIEF. FRANCHISEE
acknowledges and agrees as a material part of the consideration for this
Agreement that the damages to be suffered by BDI and other BDI FRANCHISEES as a
result of the violation of the provisions of this Agreement relating to
FRANCHISEE'S use of the Names and Marks of BDI, the obligations of FRANCHISEE
with respect to advertising and the obligations of FRANCHISEE upon termination
or expiration of this Agreement and assignment of the franchise and ownership
interests in the franchise will be in an immeasurable amount and neither BDI
nor other BDI FRANCHISEES will have an adequate remedy at law. For these
reasons, BDI shall be entitled without bond to the entry of temporary and
permanent injunctions and orders of specific performance enforcing the
provisions of this Agreement relating to FRANCHISEE'S use of the Names and
Marks, the obligations of FRANCHISEE with respect to advertising, the
obligations of FRANCHISEE upon termination or expiration of this Agreement and
assignment of the franchise and ownership interests in the franchise. And
further, BDI shall be entitled to the entry of temporary and permanent
injunctions and orders of specific performance to prohibit any act or emission
by FRANCHISEE or employees of the BDI LOCATION that constitute a violation of
any law, ordinance, or regulation, is dishonest or misleading to customers of
the BDI LOCATION or other BDI LOCATIONS, constitutes a danger to employees or
customers of the BDI LOCATION or to the public, or may impair the goodwill
associated with the Names and Marks and BDI LOCATIONS. If BDI secures any such
injunctive orders or orders for specific performance, FRANCHISEE agrees to pay
BDI an amount equal to the aggregate of its cost of obtaining such relief,
including, but not limited to, reasonable attorney's fees, costs of
investigation and proof of facts, court costs, other litigation expenses,
travel and living expenses, and any damages incurred by BDI as a result of the
breach of any such provision including interest from date of breach, at the
then current prime rate plus two (2%) percent.
(B) JURISDICTION, VENUE AND WAIVER OF JURY TRIAL. FRANCHISEE
acknowledges and agrees that this Agreement is entered into in the City of
Huntington Beach, County of Orange, State of California and that any action
commenced for the purpose of enforcing the terms and provisions hereof may be
commenced in the following courts, at the sole option of BDI:
(1) the Federal District Court for the Southern District
of California;
(2) the Superior Court of the State of California in and
for the County of Orange;
(3) the Municipal Court of California, Orange County
Judicial District; or
(4) the United States District Court, Court of general
jurisdiction for the state, or inferior court for the judicial
district in which FRANCHISEE'S BDI LOCATION is located.
18.
<PAGE> 21
It is mutually agreed by and between the parties hereto that the respective
parties shall and they hereby do, waive trial by jury in any action, proceeding
or counterclaim, whether at law or equity brought by either of the parties
hereto against the other or any matters whatsoever arising out of, or in any
way connected with, this Agreement or the performance by the parties of this
Agreement.
(C) ARBITRATION. Except insofar as BDI elects to enforce this
Agreement by judicial process, injunction or specific performance as
hereinabove provided, all disputes and claims arising out of this Agreement
and/or standards, specifications and operating procedures and/or any other
obligations of FRANCHISEE or BDI or any claim that any portion of this
Agreement, any standard specification or operating procedure or other
obligation of the FRANCHISEE or BDI is illegal or otherwise unenforceable under
any law, ordinance, regulation or ruling shall be settled by three member
arbitration in the County of Orange, State of California, under the United
States Arbitration Act (9 U.S.C. SS1 et seq.), if applicable, and the Rules
of CCP 1060, provided that the arbitrators shall award, or include in their
awards, the specific performance of this Agreement unless he determines that
performance is impossible. Judgment upon the award of the arbitrator may be
entered in any court having jurisdiction thereof or of BDI or FRANCHISEE.
During the pendency of an arbitration proceeding hereunder, FRANCHISEE and BDI
shall fully perform this Agreement.
(D) SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS. All
provisions of this Agreement are severable and this Agreement shall be
interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions shall be enforced to the extent valid and enforceable. If any
applicable law or rule requires a greater prior notice of the termination or of
refusal to renew this Agreement than is required hereunder, or the taking of
some action not required hereunder, the prior notice and/or other action
required by such law or rule shall be substituted for the notice requirements
hereof.
(E) WAIVER OF OBLIGATIONS. BDI AND FRANCHISEE may by written
instrument unilaterally waive any obligation of, or restriction upon, the other
under this Agreement. No acceptance by BDI of any payment by FRANCHISEE and no
failure, refusal or neglect of BDI or FRANCHISEE to exercise any right under
this Agreement or to insist upon full compliance by the other with its
obligations hereunder, including but not limited to any mandatory standards,
specifications or operating procedure, shall constitute a waiver of any
provision of this Agreement.
(F) FRANCHISEE MAY NOT WITHHOLD PAYMENTS DUE BDI. FRANCHISEE
agrees that he will not withhold payment of any recurring franchise fee,
advertising trust fund contribution, amounts owed to BDI for products purchased
by FRANCHISEE or any other amounts owed to BDI on grounds of the nonperformance
by BDI of any of its obligations hereunder.
19.
<PAGE> 22
All such claims by FRANCHISEE, if not otherwise resolved by BDI and FRANCHISEE
shall, at the option of BDI, be submitted to arbitration as provided in
paragraph 19, subparagraph (C).
(G) RIGHTS OF PARTIES ARE CUMULATIVE. The rights of BDI and
FRANCHISEE hereunder are cumulative and no exercise or enforcement by BDI or
FRANCHISEE of any right or remedy hereunder shall preclude the exercise or
enforcement by BDI or FRANCHISEE of any other right or remedy hereunder or
which BDI or FRANCHISEE is entitled by law to enforce.
(H) GOVERNING LAW. Except to the extent governed by applicable
federal laws and regulations and the United States Arbitration Act, this
Agreement and the franchise shall be governed by the State of California.
(I) BINDING EFFECT. This Agreement is binding upon the parties
hereto and their respective heirs, assigns and successors in interest.
(J) CONSTRUCTION. The preliminary statements are parts of this
Agreement which constitutes the entire Agreement of the parties and there are
no other oral or written understandings or agreements between BDI and
FRANCHISEE relating to the subject matter of this Agreement, except as
specifically referred to in this Agreement. The headings of the several
sections and paragraphs hereof are for convenience only and do not define,
limit or construe the contents of such sections or paragraphs. The term
"FRANCHISEE" as used herein is applicable to one or more persons, a corporation
or a partnership, as the case may be, and the singular usage includes the
plural and the masculine and neuter usages the other and the feminine.
References to "FRANCHISEE" applicable to an individual or individuals shall
mean the principal owner or owners of the equity or operating control of the
franchise if FRANCHISE is a corporation or partnership.
20. INDEPENDENT CONTRACTORS/INDEMNIFICATION. BDI and FRANCHISEE
are independent contractors. FRANCHISEE shall conspicuously identify himself at
the premises of the BDI LOCATION and in all dealings with suppliers as the owner
of the BDI LOCATION. FRANCHISEE agrees to file applicable fictitious name
statements in the manner prescribed by law. Neither BDI nor FRANCHISEE shall
make any agreements, representations or warranties in the name of, or on behalf
of, the other or represent that the relationship is other than franchisor and
franchisee and that neither BDI nor FRANCHISEE shall be obligated by or have any
liability under any agreements, representations or warranties made by the other,
nor shall BDI be obligated for any damage to any person or property directly or
indirectly arising out of the operation of the BDI LOCATION or FRANCHISEE'S
business conducted pursuant to the franchise, whether caused by FRANCHISEE'S
negligent or willful action or failure to act. BDI shall have no liability for
any sales, use, excise, income, property or other taxes levied upon the BDI
LOCATION or its assets or in connection with the services performed or sales
made or business conducted by the BDI LOCATION. FRANCHISEE agrees to indemnify
BDI against and to reimburse BDI for all such obligations, damages and taxes for
which it is held liable and for all costs reasonably incurred by BDI in defense
of any such claim brought against it or in any action in which it is named as a
party, included but not limited to reasonable attorney's fees, costs of
investigation, proof of facts, court costs, other litigation expenses, travel
and living expenses.
20.
<PAGE> 23
BDI shall have the right to defend any such claim against it. BDI agrees to
indemnify FRANCHISEE against and to reimburse FRANCHISEE for any obligations or
liability for damages attributable to agreements, representations or warranties
of BDI or caused by the negligence or willful action of BDI, and for costs (as
hereinabove defined) reasonably incurred by FRANCHISEE in the defense of any
such claim brought against him or the BDI LOCATION or in any action in which he
is named as a party, provided that BDI shall have the right to participate in
and, to the extent, BDI deems necessary, to control any litigation or
proceeding which might result in liability of or expense to FRANCHISEE subject
to such indemnification. The indemnities and assumption of liabilities and
obligation herein shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.
21. NOTICES. All written notices permitted or required to be
delivered by the provisions of this Agreement or of the operating manual shall
be deemed so delivered by hand or three (3) days after placed in the mail by
Registered or Certified mail, Return Receipt Requested, postage prepaid and
addressed to the party to be notified at its most current principal business
address of which the notifying party has been notified.
22. FAILURE TO EXERCISE RIGHTS. No failure by BDI to exercise any
power given to it hereunder or to insist upon strict compliance with any
obligation or condition hereunder and no custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of BDI IS rights to
demand exact compliance with the terms hereof. Waiver by BDI of any particular
default by FRANCHISEE shall not affect or impair BDI'S rights in respect to any
subsequent default of the same or different nature; nor shall any delay or
omission of BDI to exercise any rights arising from a default affect or impair
BDI'S rights as to said default or any subsequent default.
23. ENTIRE AGREEMENT. This Agreement contains the entire
agreement containing the subject matter hereof, and no representations,
inducements, promises or agreements, oral or otherwise, between the parties
with reference thereto and not embodied herein shall be of any force and
effect. Any agreements hereafter made shall be ineffective to change, modify,
add or discharge in whole or in part the obligations and duties under this
Agreement unless such agreement is in writing and signed by BDI and FRANCHISEE.
BIKER'S DREAM, INC.
By: /s/ DENNIS CAMPBELL
----------------------------------
DENNIS CAMPBELL, PRES.
FRANCHISEE:
/s/ BRENDA W. BOGERT, Pres.
- -------------------------------------
/s/ DONALD A. BOGERT, V. Pres
- -------------------------------------
21.
<PAGE> 24
Exhibit A
Counties
<TABLE>
<S> <C> <C> <C>
Cherokee Jackson Henderson Mitchell
Clay Haywood Polk Avery
Graham Transylvania Anson Caldwell
Swain Madison Rutherford Burke
Macon Buncombe McDowell Cleveland
Gaston Lincoln Yancey Catawba
Alexander Wilkes Watauga Ashe
Alleghany Surry Stokes Yadkin
Iredell Davidson Rowan Davie
Cabarrus Stanly Mecklenburg Union
Forsyth
</TABLE>
<PAGE> 25
[BIKERS DREAM LOGO] 8/2/94
Addendum to Franchise Agreement by and between Don and Brenda Bogert and BIKERS
DREAM, INC.
In the event BIKERS DREAM, INC. should fail in business and become unable to
supply Franchisee with parts and accessories, then BIKERS DREAM, INC. will
provide Franchisees with a list of current suppliers to BIKERS DREAM, INC. so
that Franchisee may purchase directly from them.
Bikers Dream, Inc.
1420 Village Way
Santa Ana, CA 92705
DA Bogert, V Pres
714 835 8464 - 800 677 4294 8-9-94
FAX 714 835 2414
<PAGE> 1
Exhibit 10.19-D
BIKER'S DREAM, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of December,
1994 by and between BIKER'S DREAM, Inc., a California Corporation (hereinafter
"BDI") and Raymond Yanegas hereinafter "FRANCHISEE") whose Principal address
is: 8725 Via De Casa, Scottsdale, Arizona 85258
1. PRELIMINARY STATEMENT. BDI is developing a chain of
Motorcycle, motorcycle parts, accessories and service Dealerships under the
trade name "BIKER'S DREAM" (hereinafter "BDI"). Each BDI LOCATION is built to
standard specifications and uses standard operating procedures, equipment,
forms, signs and designs. All BDI LOCATIONS are to be operated in accordance
with franchise uniform standards of identity, quality, appearance, operating
methods and services provided. Should design standards change, FRANCHISEE
shall not be obligated to remodel if the cost of any such remodeling exceeds
the amount of Ten Thousand dollars ($10,000.00).
2. GRANT OF FRANCHISE. BDI hereby grants to FRANCHISEE, as an
individual, subject to the provisions of this Agreement, a franchise to operate
one (1) BDI LOCATION within the following location zone:
MARICOPA COUNTY, in the STATE OF ARIZONA.
BDI and FRANCHISEE agree that, due to unusual circumstances, all terms of this
agreement, with the exception of payment of the Initial Franchise fee, shall
become effective on February 1, 1995.
3. DURATION OF THIS AGREEMENT. This agreement shall begin as of
the date of execution hereof and shall continue for a term of fifteen (15)
years and, unless either party gives written notice of its intention to
terminate this Agreement at least one hundred eighty (180) days prior to the
expiration of the fifteen (15) year term, the term of this Agreement shall be
deemed to be renewed for five (5) years and thereafter for further periods of
five (5) years duration, unless BDI or FRANCHISEE mails a written notice of
intention not to renew to the other party at least one hundred eighty (180)
days prior to the end of any renewal period. If such notice is so mailed, the
Agreement shall terminate as to all parties at the end of the current period.
FRANCHISEE, if it leases its location, may notify BDI of any option to renew
its lease premises and require BDI to mail a written notice of an intention to
renew to FRANCHISEE at least forty five (45) days prior to the date the option
to renew must be exercised and then such intention shall be binding upon BDI
for the renewal option.
4. INITIAL FRANCHISE FEE. FRANCHISEE shall pay to BDI a
nonrefundable initial franchise fee in the amount of Fifteen Thousand dollars
($15,000.00) in cash. The initial franchise fee shall be fully earned by BDI
when paid, provided that if BDI elects to terminate the franchise due to the
failure of FRANCHISEE to complete satisfactorily the prescribed training
program or to lease or purchase suitable premises for the BDI LOCATION, or to
open the BDI LOCATION in the time prescribed in this agreement, BDI shall
refund to FRANCHISEE the sum of Twelve Thousand Five Hundred ($12,500. 00).
BDI shall have the right and obligation to repurchase, at cost, any and all
equipment, supplies and training material, in unused condition, which it sold
to FRANCHISEE.
1.
<PAGE> 2
5. RECURRING FEES.
(A) FRANCHISE AND ADVERTISING FEES. Beginning at the time
FRANCHISEE opens the BDI LOCATION for business and through the duration of this
franchise agreement, FRANCHISEE shall pay to BDI in weekly amounts, recurring
franchise fees of a sum equal to five (5%) percent and advertising trust fund
contributions of a sum equal to two (2%) percent (or $250.00, whichever is
greater) of the gross receipts for the preceding calendar week from the BDI
LOCATION operated by FRANCHISEE. Advertising trust fund contributions are
waived for the first One Hundred Eighty days after the official opening of
FRANCHISEE's Location. The check or money order in full payment of the said
recurring franchise fee and the advertising trust fund contribution, with the
preceding exception, for the preceding week shall be transmitted with the
weekly business report and shall be due and payable at the home office of BDI
at 1420 Village Way, Santa Ana, CA 92705. by 5:00 p.m. on Thursday, the 3rd day
after the day on which the weekly business report is mailed. These fees are
not refundable.
(B) GROSS RECEIPTS. "Gross receipts" shall consist of money and
other consideration of any kind howsoever received by FRANCHISEE from any
source as the result of, or in connection with, the exercise of the franchise
granted hereunder including but not limited to all monies or other
consideration received for clothing, accessories and services sold and/or
rendered within or without the BDI LOCATION being operated by FRANCHISEE under
this franchise. Monies received from motorcycle sales and /or the operation of
a motorcycle painting facility are not considered "Gross receipts".
(C) INTEREST. All recurring franchise fees, advertising trust
account contributions and amounts owed for products purchased by FRANCHISEE
pursuant to the franchise shall bear interest after due date at the current six
month Treasury Bill rate plus two (2%) percent.
6. RESTRICTION TO LOCATION OF BDI LOCATIONS AND LIMITATION ON
NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
(A) RESTRICTION OF LOCATION. FRANCHISEE may operate the BDI
LOCATION only within the location Zone identified herein or a substitute
location and/or premises hereinafter approved by BDI in writing. Specific
location must he approved by BDI. If the FRANCHISEE'S lease for the premises
of the BDI LOCATION expires or terminates without fault of FRANCHISEE, or if
the premises are damaged, condemned or otherwise rendered unusable, or if in
the judgment of BDI and FRANCHISEE there is a change in the character of the
location of the BDI LOCATION sufficiently detrimental to its business potential
to warrant its relocation, BDI will grant permission for relocation of the BDI
LOCATION to a location and premises approved by BDI.
(B) LIMITATION ON NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
BDI agrees that FRANCHISEE may open additional LOCATIONS within the
county of original location, but FRANCHISEE shall pay the sum of Ten Thousand
dollars ($10, 000. 00) as its fee to open each such additional locations, and
then after each location commences operation, shall file its separate report
and pay fees pursuant to paragraph 5 hereof. BDI will not establish any
franchised or Company owned BDI LOCATIONS within ten (10) miles of Franchisee's
location without Franchisee's consent.
2.
<PAGE> 3
(C) RIGHT OF FIRST REFUSAL. FRANCHISEE shall have the right of
first refusal for any franchise which BDI proposes to grant immediately
adjacent to FRANCHISEE'S Franchise Area, as designated below. To exercise this
right, FRANCHISEE must execute the then current Franchise Agreement and pay
twenty thousand dollars ($10,000.00) of the then current initial franchise fee
within fifteen (15) days of written notification of the proposed grant of
franchise. IF A SUITABLE LOCATION CANNOT BE OBTAINED WITHIN NINETY (90) DAYS
FOLLOWING THE PAYMENT OF THE SAID SUM OF TEN THOUSAND ($10,000.00), then the
amount of Ten Thousand ($10,000.00) shall be returned to FRANCHISEE. The
refusal of FRANCHISEE to exercise the right to expand shall not constitute a
waiver of the right of first refusal as to subsequent expansion sites in the
State of Arizona.
(D) LOCATION ZONE. The BDI LOCATION to be operated pursuant to
this Franchise Agreement shall be located within the following designated
Location Zone:
_________Maricopa County, State of Arizona.__________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
For the term of this agreement, BDI will not grant any new franchises
or open any company-owned BDI LOCATIONS within the Location Zone.
7. LEASE, CONSTRUCTION AND OPENING OF BDI LOCATION.
(A) LEASE OR PURCHASE. FRANCHISEE will lease or purchase the
premises of the BDI LOCATION described in paragraph 2 of this Agreement within
ninety (90) days after execution of this Agreement. If specific premises are
not identified in paragraph 2 of this Agreement, FRANCHISEE agrees to lease or
purchase suitable premises, reasonably acceptable to BDI, within ninety (90)
days after execution of this Agreement. If FRANCHISEE fails to lease or
purchase suitable premises within ninety (90) days after execution of this
Agreement, BDI may terminate this Agreement, effective upon delivery of written
notice of termination to FRANCHISEE. In the event of such termination, the
3.
<PAGE> 4
parties agree to execute all instruments required to rescind fully all
agreements, purchases and any other transaction between BDI and FRANCHISEE.
Upon execution of all required instruments, BDI shall refund to FRANCHISEE that
part of the initial franchise fee heretofore paid by FRANCHISEE, less Two
Thousand Five Hundred Dollars ($2,500.00) dollars to cover training and
administration expense, whether or not training has been completed. BDI shall
have the right and the obligation to repurchase, at cost, any or all
equipment,supplies and training material, in unused condition, which it sold to
FRANCHISEE. In the event BDI does not approve FRANCHISEE'S proposed location,
BDI will grant FRANCHISEE an extension of the ninety day time period.
(B) CONSTRUCTION OF BDI LOCATION. BDI will furnish to FRANCHISEE
its standard detailed specifications for a BDI LOCATION, including requirements
for dimensions, exterior design, interior layout, building materials,
equipment, signs and color scheme, Unless local zoning laws prohibit such
construction or such construction would violate covenants running with the
land, FRANCHISEE agrees to do or cause to be done the following:
(1) obtain all required building, utility, sign, use,
health, sanitation and business permits, licenses and other required
permits and licenses;
(2) submit to BDI for its approval FRANCHISEE'S BDI
LOCATION plans;
(3) construct the premises and paint the premises in
compliance with plans and specifications approved by BDI;
(4) purchase or lease and install all equipment and signs
required for the BDI LOCATION; and
(5) secure all financing required by FRANCHISEE to fully
develop the BDI LOCATION.
(C) EQUIPMENT, SIGNS AND INVENTORY. BDI will provide FRANCHISEE
with a complete list of all inventory, parts, components, accessories, signs
and equipment required to open the BDI LOCATION. FRANCHISEE agrees to use in
the operation of his BDI LOCATION only those brands of inventory, parts,
components, accessories, signs and equipment that BDI has approved for BDI
LOCATIONS as meeting its standards and specifications for function,
attractiveness, serviceability and overall appearance to be utilized at BDI
LOCATION unless local zoning law prohibit such signs or such signs would
violate leasehold covenants. FRANCHISEE may purchase or lease approved brands
of these items from any supplier. If FRANCHISEE proposes to purchase or lease
any brand which is not then approved by BDI, FRANCHISEE shall first notify BDI
and shall submit to BDI, upon its request, sufficient specifications,
photographs, drawings and/or other information or samples for determination by
BDI whether such brand of inventory, parts, components, accessories, signs and
equipment complies with its standards and specifications, which determination
will be made and communicated to FRANCHISEE in writing within a reasonable
time.
(D) BDI LOCATION OPENING. Upon completion of FRANCHISEE'S
training program, as described in paragraph 8 of this agreement, and within
fifteen (15) days after BDI'S determination that the premises described herein
are in suitable condition and comply with the standards and specifications
prescribed by BDI, FRANCHISEE agrees to open the BDI LOCATION for business and
commence the conduct of business. BDI will assist FRANCHISEE in the opening of
the BDI LOCATION.
4.
<PAGE> 5
(E) TERMINATION OF FRANCHISEE FOR FAILURE TO OPEN BDI LOCATION. If
the FRANCHISEE fails to complete preparation of the BDI LOCATION and open the
BDI LOCATION for business within one hundred eighty (180) days after execution
of this Agreement, BDI shall have the right to terminate this Agreement,
effective upon delivery to FRANCHISEE of written notice of termination. In the
event of such termination and upon delivery to BDI of all releases, waivers and
other instruments required to rescind fully all agreements, purchases and other
transactions between BDI and FRANCHISEE, BDI shall refund to FRANCHISEE that
part of the initial franchise fee paid by FRANCHISEE, less Two Thousand Five
Hundred Dollars ($2,500.00) for training and administrative expense (or actual
costs incurred), whichever is greater. BDI shall have the right and
obligation, to repurchase at cost any or all equipment, supplies, inventory and
training material, in unused condition, which it sold to FRANCHISEE.
8. TRAINING AND OPERATIONS ASSISTANCE.
(A) TRAINING. Before the opening of the BDI LOCATION, BDI shall
train FRANCHISEE in the operation of a BDI LOCATION. Such training shall take
place at a time and place specified by BDI. Training will be conducted at the
BDI home office at 18898 Beach Blvd., Huntington Beach, CA 92646 and at
FRANCHISEE'S location. Training will be for one week at each location.
Training at home office will be completed within sixty (60) days after signing
this agreement. Training at Franchisee's location will be completed prior to
and during first week of operation of Franchisee's BDI LOCATION. FRANCHISEE
shall be responsible for any travel and living expenses incurred in connection
with the training program. Training will cover four distinct areas: (1)
Operation of a BDI LOCATION; (2) Purchasing and financing motorcycles, parts,
and accessories; (3) Sales and marketing; (4) Business and systems procedures.
Initial training class may be attended by three persons, one of which must be
FRANCHISEE.
(B) REQUIREMENT OF COMPLETION OF TRAINING/FAILURE TO COMPLETE.
FRANCHISEE shall complete the training program provided by BDI. If BDI
reasonably determines that FRANCHISEE is unable to complete satisfactorily the
said training program, this Agreement shall terminate and upon delivery to BDI
of all assignments, releases, waivers and other instruments required to rescind
fully all agreements, purchases and other transactions between BDI and
FRANCHISEE, BDI shall refund to FRANCHISEE that part of the initial franchise
fee paid by FRANCHISEE to BDI pursuant to this agreement. BDI shall have the
right, and obligation to repurchase at cost any or all equipment, supplies and
training material, in unused condition, which it sold to FRANCHISEE.
(C) HIRING OF EMPLOYEES AND TRAINING OF EMPLOYEES BY FRANCHISEE.
FRANCHISEE shall hire all employees of the BDI LOCATION and be exclusively
responsible for the terms of their employment, compensation and the training of
such employees in the proper conduct of their jobs in operation of a BDI
LOCATION. BDI will make available to FRANCHISEE training for new employees or
updating those already employed. Such training and updating shall take place
at a time and place specified by BDI. Training will be conducted at the BDI
home office or at another BDI LOCATION designated by BDI. FRANCHISEE shall be
responsible for any travel and living expenses incurred by such employees, in
connection with the training.
5.
<PAGE> 6
(D) OPERATIONS ASSISTANCE. BDI shall advise FRANCHISEE of
problems arising out of the operation of the BDI LOCATION as disclosed by
reports submitted to BDI by FRANCHISEE or by inspections conducted by BDI of
the BDI LOCATION. BDI will furnish FRANCHISEE with such assistance in
connection with the operation of the BDI LOCATION as is reasonably determined
to be necessary by BDI from time to time. Operations assistance may consist of
advice and guidance with respect to:
(1) proper utilization of procedures developed for a BDI
LOCATION including sales and display procedures developed by BDI;
(2) additional services and products authorized for BDI
LOCATIONS;
(3) purchase of various products, materials and supplies;
(4) the institution of proper administrative,
bookkeeping, accounting, inventory control, supervisory and general
operating procedures for the effective operation of a BDI LOCATION
(5) advertising and promotional programs.
(E) GROUP PURCHASING OF INVENTORY AND SUPPLIES. FRANCHISEE shall
have the right to participate on the same basis as other franchisees of BDI and
BDI owned BDI LOCATIONS in group purchasing of motorcycles, parts, accessories,
and other materials and supplies which BDI may from time to time develop and
sponsor.
(F) PRODUCT AVAILABILITY. During the term of this Agreement, BDI
will make available for purchase by FRANCHISEE approved products necessary to
operate a BDI LOCATION.
(G) DELIVERY OF EQUIPMENT AND SERVICES. All of the
specifications, equipment and inventory lists, training, equipment, operations
manuals, and preopening operations assistance to be provided by BDI to
FRANCHISEE pursuant to this Agreement shall be delivered within ninety (90)
days after execution of this Agreement.
9. OPERATION OF BDI LOCATION.
(A) OPERATING STANDARDS. FRANCHISE agrees to operate and maintain
his BDI LOCATION in a manner consistent with the public image of a BDI LOCATION
as a clean, modern and efficient retail motorcycle, parts and accessories
store, providing high quality products and services. FRANCHISEE agrees to
effect a maintenance program for the BDI LOCATION which will assure such
condition, appearance and operation, including replacement of worn out or
obsolete equipment and signs, repair of the interior and exterior of the BDI
LOCATION, painting and periodic cleaning, consistent with the nature of the
business of the BDI LOCATION and the reputation of BDI. If, at any time in
BDI'S reasonable judgement, the general state of repair, appearance of
cleanliness of the premises of the BDI LOCATION or its equipment or signs does
not met BDI'S
6.
<PAGE> 7
standards therefor, BDI shall so notify FRANCHISEE specifying the action to be
taken by FRANCHISEE to correct such deficiency. If FRANCHISEE fails or refuses
to initiate corrective action within thirty (30) days after receipt of such
notice, and thereafter continue, a bona fide program to undertake and complete
any such required maintenance, BDI shall have the right, but shall not be
obligated, to enter upon the premises of the BDI LOCATION and effect such
repairs, painting and/or replacement of equipment or signs on behalf of
FRANCHISEE and FRANCHISEE shall pay the entire costs thereof to BDI upon
demand.
(B) ALTERATIONS TO BDI LOCATION. FRANCHISEE agrees that he shall
make no material alterations to the structural improvements or appearance of
the BDI LOCATION nor shall FRANCHISEE make any material replacements or
alterations to the equipment or signs of the BDI LOCATION without prior written
approval of BDI, which shall not be unreasonably withheld.
(C) UNIFORMITY, AUTHORIZED PRODUCTS AND SERVICES. Uniformity of
products, procedures and services and the image such uniformity creates in the
mind of the public are essential elements of a successful franchise chain.
FRANCHISEE therefore agrees to offer motorcycles, parts, accessories, services
and products which BDI from time to time authorizes for BDI LOCATIONS
FRANCHISEE agrees to submit written requests for authorization of additional
products or services to be offered for sale at FRANCHISEE'S BDI LOCATION.
FRANCHISEE further agrees that the BDI LOCATION will not, without prior written
approval by BDI, offer any other products or services nor shall the BDI
LOCATION or the premises it occupies be used for any purpose other than the
operation of an authorized BDI LOCATION in compliance with the terms of the
Agreement. BDI agrees to allow FRANCHISEE the right to operate at its BDI
location, a custom paint department to service motorcycles exclusively.
FRANCHISEE agrees to comply with all BDI operational specifications.
(D) USE OF APPROVED PRODUCTS. Consistency of quality in the
products and services offered by BDI is essential to the maintenance and
enhancement of BDI'S reputation and the good will it has generated by the
sale of high quality products and the efficient delivery of high quality
services to its customers. For these reasons FRANCHISEE agrees that all
motorcycles, parts, accessories and other inventory, materials and supplies
used in the operation of the BDI LOCATION shall be purchased by FRANCHISEE from
the list of types or brands approved by BDI as meeting its specifications and
standards. If FRANCHISEE desires to use in the operation of the BDI LOCATION
any type or brand of motorcycles, accessories and other inventory, materials
and supplies which is not then approved by BDI as meeting its standards and
specifications, FRANCHISEE shall first notify BDI, in writing, and shall upon
request by BDI submit samples and such other information as BDI reasonably
requires for examination and/or testing to determine otherwise whether such
product meets its standards and specifications. BDI shall notify FRANCHISEE
within a reasonable time whether it approves such product. The BDI LOCATION
shall at all times maintain an inventory of motorcycles, parts, accessories and
other inventory, materials and supplies, sufficient to satisfy customer demand
and operate efficiently. The parties agree that the amount of inventory valued
at 1994 prices deemed to be adequate for the operation of the BDI location, in
a satisfactory manner, is the sum of One Hundred Thousand ($100,000.00).
7.
<PAGE> 8
(E) MATERIALS IMPRINTED WITH NAMES AND MARKS. FRANCHISEE shall in
the operation of the BDI LOCATION utilize letterheads, business cards, forms
and other materials imprinted with the Names and Marks as prescribed from time
to time by BDI.
(F) STANDARDS, SPECIFICATIONS AND PROCEDURES. FRANCHISEE agrees
as a material part of the consideration of this Agreement to comply with all
mandatory standards, specifications and operating procedures relating to the
operation of a BDI LOCATION, including but not limited to the following:
(1) use of standard sales and operating procedures;
(2) general appearance of employees;
(3) use of quality products and high standards of methods
and procedures relating to retail business;
(4) use of Names and Marks;
(5) prescribed hours of operation during which the BDI
LOCATION will be open for business;
(6) use of standard forms, programs, formats, and records
keeping including the preparation and retention of duplicate customer
sales slips and related documents;
(7) identification of the FRANCHISEE as the owner of the BDI
LOCATION; and
(8) proper use and illumination of BDI signs, posters,
displays and other advertising and promotional displays as prescribed
by BDI from time to time.
BDI agrees that all such standards, specifications, procedures and operating
requirements shall be reasonable and consistent with the obligations of
FRANCHISEE under the lease or deed for the premises of the BDI LOCATION and
applicable ordinances. Mandatory standards, specifications and operating
procedures prescribed from time to time by BDI in the procedures and operating
manuals for BDI LOCATIONS or otherwise communicated to FRANCHISEE in writing,
shall constitute provisions of this Agreement as if fully set forth herein.
All references herein to this Agreement shall include all such mandatory
standards, specifications and operating procedures. BDI reserves the absolute
right to change, modify, add to or delete any and all standards, specifications
and operating procedures.
(G) COMPLIANCE WITH LAW AND GOOD BUSINESS PRACTICES. FRANCHISEE
shall secure, file and maintain in full force and effect all required licenses,
permits, certificates, notices and disclosures relating to the operation of a
BDI LOCATION and shall operate the BDI LOCATION in full compliance with all
applicable federal, state and local statutes, regulations, and ordinances,
including but not limited to all government regulations relating to retail
facilities, occupational hazards and health, workers' compensation insurance,
federal and state withholding and payment of federal and state income taxes,
social security taxes and sales taxes.
8.
<PAGE> 9
All advertising and promotion by FRANCHISEE shall be completely factual and
shall conform to the highest standards of ethical advertising. FRANCHISEE
agrees to refrain from any business or advertising practice which may be
injurious to the business and good name of BDI and the reputation and good will
associated with Names and Marks of BDI and BDI LOCATIONS.
(H) PRICES FOR PRODUCTS AND SERVICES DETERMINED BY FRANCHISEE. From
time to time BDI way advise FRANCHISEE of prices for products and services
offered by BDI LOCATIONS which BDI in its considered judgment believes to be
appropriate and consistent with good business practice. FRANCHISEE shall not
be obligated to accept any such advice and shall have the sole right to
determine the prices to be charged by the BDI LOCATION. FRANCHISEE understands
and agrees that such advice furnished by BDI shall in no way be deemed or
construed to impose upon FRANCHISEE any obligation to charge any fixed, minimum
or maximum price for any product or service offered for sale by the BDI
LOCATION
(I) DUTY TO MANAGE AND AVOID CONFLICTING OR COMPETING INTERESTS.
The BDI LOCATION shall at all times be under the direct, on-premises
supervision of FRANCHISEE and/or a trained and competent employee. FRANCHISEE
shall keep BDI informed at all times of the identity of any employee(s) acting
as manager(s) of the BDI LOCATION. FRANCHISEE agrees that he will at all times
faithfully, honestly and diligently perform his obligation under this Agreement
and that he will continuously exert his best efforts to promote and enhance the
business of the BDI LOCATION. FRANCHISEE further agrees not to engage in any
business which will detract from or conflict with his obligation hereinunder.
(J) INSURANCE. FRANCHISEE shall at all times during the term of
this Agreement or any amendment or renewal hereto maintain in full force and
effect at his sole expense, comprehensive, public and product insurance against
claims for bodily and personal injury, death and property damage caused by or
occurring in conjunction with the operation of the BDI LOCATION or otherwise in
conjunction with conduct of business by FRANCHISEE pursuant to this franchise.
Such insurance coverage shall be maintained under one or more policies of
insurance containing a comprehensive general liability policy including
products liability in the minimum amount of $500,000/$500,000 bodily injury
liability and $500,000 property damage liability, an "umbrella" package in the
amount of $1,000,000, or such other amounts as BDI my reasonably request for
the operation of the premises. All such liability insurance policies shall
name BDI as an additional insured and shall provide that BDI receives thirty
(30) days prior written notice of termination, expiration or cancellation of
any such policy. BDI may reasonably increase the minimum liability protection
requirement annually to reflect inflation or higher damage awards in public or
product liability litigation. FRANCHISEE shall have his insurance carriers
submit to BDI annually a statement of coverage. All policies shall be renewed
and evidence of renewal mailed to BDI prior to the expiration date. If
FRANCHISEE at any time fails or refuses to maintain any insurance coverage
required by BDI or to furnish satisfactory evidence thereof, BDI at its option
and in addition to its other rights and remedies hereunder, may, but need not,
obtain such insurance coverage on behalf of the FRANCHISEE and
9.
<PAGE> 10
FRANCHISEE shall pay to BDI on demand any costs and premiums incurred by BDI in
connection therewith. FRANCHISEE is responsible for all loss or damage and
contractual liability to third persons originating in or in connection with the
operation of a BDI LOCATION and for all claims or demands for damages to
property or for injury, illness or death of persons directly or indirectly
resulting therefrom. FRANCHISEE agrees to defend, indemnify and hold BDI
harmless from and with respect to any such claims, losses, or damages as
hereinabove described.
(K) OPERATIONS MEETINGS. From time to time BDI will call
operations meetings. These meetings will be held regionally where feasible to
keep expense and time loss for FRANCHISEE to a relative minimum. Attendance at
operations meetings is mandatory for FRANCHISEE or his Manager(s).
10. PROCEDURES AND OPERATING MANUALS. BDI will license to
FRANCHISEE, to use during the term of the franchise, a proprietary special
design computer software program and one or more copies of procedures and
operating manuals for BDI LOCATIONS containing mandatory and suggested
standards, specifications and operating procedures for BDI LOCATIONS and
up-to-date information relative to such standards, specifications and operating
procedures along with other obligations of FRANCHISEE hereunder with respect to
the operation of a BDI LOCATION. BDI shall have the right to add to and
otherwise modify the procedures and operating manuals from time to time to
reflect changes in authorized products and services, product quality or
standards of service or the operation of a BDI LOCATION provided that no such
addition or modification shall alter FRANCHISEE'S fundamental status and rights
under this Agreement. The operating and procedures manuals contain proprietary
information of BDI and FRANCHISEE agrees to keep the computer software program
and the operating and procedures manuals confidential at all times during and
after the terms of the franchise.
11. TRADE SECRETS. FRANCHISEE as a material part of the
consideration for this Agreement understands and agrees that his knowledge of
the operation of a BDI LOCATION will be derived from information disclosed to
FRANCHISEE by BDI pursuant to the franchise and that certain such information is
proprietary, confidential and a trade secret of BDI. FRANCHISEE agrees that he
will maintain the absolute confidentiality of all such information during and
after the term of the franchise and that he will not use any such information
in any other business or in any manner not specifically authorized or approved
by BDI.
12. ADVERTISING AND PROMOTION. FRANCHISEE agrees that it is
essential for the growth of the BDI franchise chain that he participates and
cooperates in advertising programs and other promotional activities.
Accordingly, FRANCHISEE agrees to contribute to an advertising trust fund
administered by BDI, or its designated agent. (Paragraph 6 section A of
Offering Circular and Paragraph 5, this Agreement). The said monies shall be
used by BDI exclusively for advertising and promotional purposes. Advertising
and promotional purposes may include, but are not limited to, radio and
television advertising, newspaper advertisements, and the production and
distribution of such advertising. BDI agrees to provide FRANCHISEE with an
annual statement of the receipts and disbursements of the advertising trust
fund. It is understood by BDI and Franchisee, that after BDI has five (5)
franchises open and operating, an executive advertising committee will be
selected by BDI, that will include Franchisees. This committee will be
instrumental in administering the distribution of the advertising trust monies.
Such Committee will provide advertising beneficial to all BDI LOCATIONS and not
favor certain locations to the exclusion of other locations.
10.
<PAGE> 11
The uncommitted reserve in the advertising trust fund will be
reconciled with expenditures annually at the close of BDI'S fiscal year to
limit the reserve to an amount not greater than the most recent ninety (90) day
expenditure or the succeeding ninety (90) day planned expenditure. BDI shall
thereafter notify FRANCHISEE of the appropriate pro rata reduction of
FRANCHISEE'S advertising trust fund contributions until the excess in the
uncommitted reserve, if any, is depleted.
13. RECORDS KEEPING STANDARDS AND REPORTING PROCEDURES.
(A) RECORDS AND ACCOUNTING. FRANCHISEE shall establish a record
keeping, bookkeeping and accounting system IN conformance with the requirements
prescribed by BDI including, but not limited to, the use and retention of sales
records, invoices, payroll records, check stubs, bank deposit receipts, sales
tax records and returns, cash disbursements journals and general ledgers.
(B) BUSINESS REPORTS AND TAX RETURNS. FRANCHISEE shall furnish to
BDI, in accordance with BDI'S procedures and operating manual for BDI LOCATIONS,
the following:
(1) by Monday of each week on the business report form, a
report of the gross and net revenues of the BDI LOCATION for the
preceding week together with all information required by BDI as part
of the weekly business report procedure;
(2) within thirty (30) days after the date federal and
state income tax and sales tax returns are filed, FRANCHISEE shall
provide BDI with exact copies of such returns and all schedules
attached thereto.
(C) FINANCIAL STATEMENTS. FRANCHISEE shall furnish to BDI in the
form prescribed by BDI:
(1) within thirty (30) days after the end of each month,
a monthly profit and loss statement from the beginning of FRANCHISEE'S
fiscal year to the end of the preceding month for the BDI LOCATION,
prepared, verified and signed by FRANCHISEE; and
(2) within sixty (60) days after the end of each fiscal
year of the BDI LOCATION, an unaudited annual statement of profit and
loss and source and application of funds of the BDI LOCATION for the
fiscal year and a balance sheet for the BDI LOCATION as of the end of
the fiscal year, compiled or reviewed by an independent public
accountant or a certified public accountant in accordance with
standards published by the A.I.C.P.A., verified and signed by
FRANCHISEE as to the information furnished to such accountant.
BDI acknowledges that all information provided by FRANCHISEE pursuant
to paragraph (B) and (C) is confidential and will not be disclosed to third
parties.
11.
<PAGE> 12
(B) FRANCHISEE acknowledges the right of BDI and its affiliates to
use the Marks, including any additions, deletions, or changes thereto, in
connection with the products and services to which they are or may be applied
by BDI and its affiliates, and represents, warrants and agrees that FRANCHISEE
shall not, either during the term of this Agreement or after the expiration or
other termination hereof, directly or indirectly contest or aid in contesting
the validity, ownership, registration, or use of the marks or any additions,
deletions or changes thereto by BDI, or take any action whatsoever in
derogation of the rights claimed therein by BDI.
(C) The License granted to Franchise under this Agreement to use
the Marks is nonexclusive, and BDI, in its sole and absolute discretion, has
the right to grant other licenses in, to and under those names and marks in
addition to those licenses already granted, and to develop and license other
names and marks an any such terms as BDI deems appropriate.
(D) Nothing contained in this Agreement shall be construed to vest
in FRANCHISEE any right, title or interest in or to any of the Marks, the
goodwill now or hereafter associated therewith, or any right in the design of
any building or premises, other than rights and license expressly granted
herein for the term hereof.
(E) FRANCHISEE shall not use any of the Marks in connection with
any statement or material which may, in the judgement of BDI, be in bad taste
or inconsistent with BDI'S public image or tend to bring disparagement,
ridicule or scorn upon BDI, any of the Marks, or the goodwill associated
therewith. FRANCHISEE shall not adopt, use, display or register, in whole or
in part, any trademarks, service marks, trade names, logos, insignia, slogans,
emblems, symbols, designs or other identifying characteristics. Neither
FRANCHISEE nor any entity directly or indirectly affiliated with FRANCHISEE
shall adopt, use or register (by filing a certificate or articles of
incorporation, a fictitious business name statement, or otherwise) any trade or
business name, style or design which includes, or is similar to, in whole or in
part, any of the Marks or any other of BDI'S trademarks, service marks, trade
names, logos, insignia, slogans, emblems, symbols, designs or other identifying
characteristics.
(F) BDI shall have the right at any time and from time to time
upon notice to FRANCHISEE to make additions to, deletions from, and changes in
any of the Marks, or any of them, all of which shall be as effective as if they
were incorporated in this Agreement. All such additions, deletions and changes
shall be made in good faith, on a reasonable basis and with a view toward the
overall best interests of the System. No such addition, deletion or change
will cause any change in any of FRANCHISEE'S financial obligations to BDI.
(G) LIMITATIONS ON USE OF NAMES AND MARKS BY FRANCHISEE.
FRANCHISEE agrees to use the Names and Marks during the term of the franchise
as the sole servicemark and tradename identification of the BDI LOCATION.
FRANCHISEE shall not use during the term of the franchise any Name and Mark as
part of any corporate name or with any prefix, suffix or other modifying words,
terms, designs or symbols, or any modified form, nor may FRANCHISEE use any
Name or Mark in connection with the sale of any unauthorized product or service
or in any other manner not explicitly authorized in writing by BDI.
(H) NOTIFICATION OF INFRINGEMENT AND CLAIMS. FRANCHISEE shall
immediately notify BDI of any apparent infringement of or challenge to
FRANCHISEE'S use of any Name or Mark.
(I) INDEMNIFICATION. BDI agrees to indemnify FRANCHISEE for all
damages for which he is held liable in any proceeding arising out of his use of
any Name or Mark, pursuant to and in compliance with this Agreement and for all
costs reasonably incurred by FRANCHISEE in the defense of any such claim
brought against him or in any such proceeding in which he is named as a party,
provided that FRANCHISEE has timely notified BDI of such claim or proceeding
and has otherwise complied with this Agreement, and further provided that if it
becomes advisable at any tine in the sole discretion of BDI for FRANCHISEE to
modify or discontinue use of any Name or Mark, and/or use additional or
substitute Names or Marks, FRANCHISEE agrees to do so and the sole obligation
of BDI in any such event shall be to reimburse FRANCHISEE for the out-of-pocket
costs of
12.
<PAGE> 13
complying with this obligation. BDI, at its sole discretion may elect to
defend or participate in the defense or prosecution of any action relating to
the protection of the Service Mark and to protect the FRANCHISEE against claims
of infringement or unfair competition with respect to the Service Mark. In
such event, BDI will have the sole discretion to take such action as it deems
appropriate. FRANCHISEE is not precluded from taking over a cause of action
should BDI decide not to procede with same.
15. INSPECTIONS AND AUDITS.
(A) RIGHT OF INSPECTION. In order to determine whether FRANCHISEE
is in compliance with this Agreement, BDI shall have the right at any time
during business hours, without prior notice to FRANCHISEE, to inspect the BDI
LOCATION and the business records, bookkeeping and accounting records,
invoices, payroll records, check stubs, bank deposit receipts, sales tax
records and returns, sales records and other supporting records and documents
and the inventory of products, materials and supplies of the BDI LOCATION.
(B) RIGHT TO AUDIT. BDI shall have the right at any time during
business hours, and without prior notice to FRANCHISEE, to audit or cause to be
audited the weekly business reports, tax returns, and schedules and other
forms, information and supporting records which FRANCHISEE is required to
submit to BDI hereunder and the books and records of the BDI LOCATION and of
any corporation or partnership which owns or operates the BDI LOCATION. In the
event any such audit shall disclose an understatement of the gross receipts of
the BDI LOCATION for any period or periods , FRANCHISEE shall pay to BDI within
fifteen (15) days after receipt of the audit report, the recurring franchise
fee plus any required advertising trust account contribution due on the amount
of such understatement. Further, in the event such understatement for any
period or periods shall be greater than three (3%) percent, FRANCHISEE shall
reimburse BDI for the cost of such audit, including, but not limited to, the
fee of any independent accountant and the travel expenses, room, board and
compensation of employees of BDI, unless FRANCHISEE demonstrates that such
understatement resulted from inadvertent error.
16. TERMINATION OF FRANCHISE.
(A) BY FRANCHISEE. If FRANCHISEE is in substantial compliance
with this Agreement and BDI breaches this Agreement and fails to cure such
breach within thirty (30) days after written notice thereof is delivered to
BDI, FRANCHISEE may terminate this Agreement effective ten (10) days after
delivery to BDI of notice thereof. The termination of this Agreement by
FRANCHISEE without complying with the foregoing requirement or for any reason
other than breach of this Agreement by BDI and BDI'S failure to cure such
breach within thirty (30) days after receipt of written notice thereof shall be
deemed a termination by FRANCHISEE without cause.
(B) BY BDI. In addition to BDI'S right to terminate this
Agreement in the event of the failure of FRANCHISEE to lease or purchase a
premises for the BDI'S LOCATION to develop or open the BDI'S LOCATION as
provided in subparagraph (A) of paragraph 5 herein or upon BDI'S determination
that FRANCHISEE is unable to complete satisfactorily prescribed training as
provided in subparagraph (B) of paragraph 6 herein, BDI may terminate this
Agreement effective upon delivery of notice of termination to FRANCHISEE, if
FRANCHISEE or the BDI LOCATION
13.
<PAGE> 14
(1) makes an assignment for the benefit of creditors or an
admission of his inability to pay his obligations as they become due;
(2) files a voluntary petition in bankruptcy or any
pleading seeking any reorganization, liquidation or disolution under
any law, or admitting or failing to contest the material allegations
of any such pleading filed against him or is adjudicated a bankrupt or
insolvent or a receiver is appointed or a substantial part of the
assets of FRANCHISEE or BDI LOCATION are abated or subject to a
moratorium under any law;
(3) abandons or surrenders or transfers control of the
operation of the BDI LOCATION or fails actively to operate the BDI
LOCATION, unless precluded from doing so by damage to the premises of
the BDI LOCATION, war or civil disturbance, natural disaster, or other
event beyond FRANCHISEE's control;
(4) suffers cancellation of, or fails to renew or extend
the lease for, or otherwise fails to maintain possession of, the
premises of the BDI LOCATION identified herein or a substitute
premises approved by BDI;
(5) submits to BDI on two (2) or more separate occasions
at any time during the term of the franchise, a weekly business
report, tax return or schedule or other information or supporting
records which understates the gross receipts of the BDI LOCATION by
more than three (3) percent for any period of time, unless FRANCHISEE
demonstrates to the satisfaction of BDI that such understatement
results from inadvertent error;
(6) fails or refuses to submit when due, weekly reports,
tax returns, schedules or other information or supporting records,
whether or not such failure or refusal is corrected after notice
thereof is delivered to FRANCHISEE;
(7) operates the BDI LOCATION in a manner which presents
a health or safety hazard to its customers, employees or the public;
(8) makes an unauthorized assignment of the franchise or
ownership of FRANCHISEE as hereinafter defined in paragraph 17 and 18;
(9) operates the BDI LOCATION in a manner in violation of
or inconsistent with all applicable federal, state and local statutes,
regulations, rules and ordinances, including, but not limited to, all
government regulations relating to retail stores;
(10) fails or refuses to pay any amount owed to BDI for
recurring franchise fees, advertising trust account contributions, any
products purchased from BDI or any amounts due to BDI or fails or
refuses to comply with any mandatory standards, specifications or
operating procedures prescribed by BDI relating to the quality of
products, cleanliness or sanitation and does not correct such failure
or refusal within ten (10) days after written notice thereof is
delivered to FRANCHISEE. Said notice shall describe what corrective
action FRANCHISEE must take; or
14.
<PAGE> 15
(11) fails to comply with any other provision of this
Agreement or any other mandatory standard, specification or operating
procedures prescribed by BDI and does not correct such failure within
thirty (30) days after written notice of such failure to comply is
delivered to FRANCHISEE, provided that if such failure can not
reasonably be corrected within thirty (30) days, then FRANCHISEE must
initiate a program of corrective action within such thirty (30) day
period and thereafter continue such program of corrective action so
that such failure may be corrected within a reasonable time
thereafter. The written notice of failure as herein described shall
describe to FRANCHISEE what corrective action he must take.
17. FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION OR
EXPIRATION.
(A) PAYMENTS OF AMOUNTS OWED TO BDI. FRANCHISEE agrees to pay to
BDI within fifteen (15) days after the effective date of termination or
expiration such recurring franchise fees, advertising trust account
contributions, amounts owed for products purchased by FRANCHISEE from BDI and
other amounts owed to BDI which are then unpaid.
(B) RETURN OF PROPRIETARY OR CONFIDENTIAL MATERIALS. FRANCHISEE
further agrees that upon termination or expiration of the franchise, he will
immediately return to BDI all copies of proprietary and confidential materials
including, but not limited to, BDI'S computer software program and all
operating and procedures manuals.
(C) REPURCHASE. Except as otherwise specified herein, BDI shall
have the right and obligation, to repurchase at cost any and all equipment,
inventory, supplies and training material which it sold to FRANCHISEE.
(D) CANCELLATION OF ASSUMED NAMES AND TRANSFER OF TELEPHONE
NUMBERS. FRANCHISEE further agrees that upon termination or expiration of the
franchise, he will take such action as may be required to cancel all fictitious
business names or registrations relating to his use of any Name or Mark and to
notify the telephone company and all listing agencies of the termination or
expiration of FRANCHISEE'S right to use any telephone numbers and any
classified and other telephone directory listings with any Name or Mark or with
the BDI LOCATION and to authorize transfer of same to BDI or its franchisee.
(E) MODIFICATION OF AGREEMENT BY FRANCHISEE. This Agreement may
be modified by FRANCHISEE only by written agreement with BDI.
(F) MODIFICATION OF AGREEMENT BY BDI. This Agreement may be
modified by BDI only by written agreement with FRANCHISEE.
(G) ASSIGNMENT BY BDI. This agreement is fully assignable by BDI,
and BDI remains liable for the performance of its obligations hereunder.
(H) DEATH OR INCAPACITY OF FRANCHISEE. The Franchise way be
transferred to the heirs or personal representative of the FRANCHISEE upon the
death or incapacity of FRANCHISEE upon written approval of BDI on the same
terms and conditions as any other assignment of the franchise.
15.
<PAGE> 16
(I) REMOVAL OF ALL SIGNS AND IDENTIFICATION. FRANCHISEE further
agrees upon termination or expiration of the franchise, he will immediately
remove all BDI signs and identification from the premises, and immediately and
permanently discontinue the use of the Names and Marks.
(J) COVENANT NOT TO COMPETE. If this Agreement is terminated
prior to its expiration by BDI in accordance with the provisions of this
Agreement or by FRANCHISEE without cause, FRANCHISEE agrees that for a period
of two (2) years commencing on the effective date of termination of this
Agreement, or the date which FRANCHISEE ceases to conduct the business
conducted pursuant to this Agreement, whichever is later, he will not have any
interest as owner (except of publicly traded securities), partner, director,
officer, employee consultant, representative or agent, or in any other
capacity, in any business offering substantially the same products and services
offered by a BDI LOCATION and located within the county wherein the BDI
LOCATION or any BDI LOCATION is located. If this Agreement is terminated as to
any one location, in the event FRANCHISEE operates other and different
locations in other counties, this covenant shall have application only to the
county in which the terminated location was operational. THIS COVENANT NOT TO
COMPETE MAY NOT BE ENFORCEABLE UNDER CALIFORNIA LAW.
(K) CONTINUING OBLIGATION. All obligations of BDI and FRANCHISEE
which expressly or by their nature survive the expiration or termination of the
franchise shall continue in full force and in effect subsequent to and
notwithstanding the expiration or termination of this Agreement and until they
are satisfied in full or by their nature expire.
(L) FRANCHISEE'S RIGHT TO SELL BDI LOCATION. If BDI terminates
the franchise for a cause other than those specified in paragraph 16 (B),
subparagraphs (3), (4), and (8) of this Agreement, or elects not to renew the
franchise, FRANCHISEE for a period of ninety (90) days commencing on the date
of notice of termination or nonrenewal shall have the right to elect to attempt
to sell the BDI LOCATION to a person reasonably acceptable to BDI as a BDI
LOCATION franchisee, providing that the provisions of paragraph (17),
subparagraphs (B) and (D) shall be applicable to any proposed sale of the BDI
LOCATION pursuant to this paragraph. FRANCHISEE'S right to elect hereunder
shall be contingent upon FRANCHISEE reasonably establishing that:
(1) FRANCHISEE will make a bona fide effort to sell the BDI
LOCATION to an acceptable person;
(2) until the closing of such sale or the prior expiration or
termination of FRANCHISEE'S right to sell the BDI LOCATION pursuant to this
paragraph, the BDI LOCATION will be operated in compliance with this AGREEMENT;
and
(3) all amounts owed to BDI pursuant to this Agreement will be
paid to BDI at or prior to the closing of such sale. FRANCHISEE shall deliver
to BDI within the ten (10) day period referred to above, a written notice of
his election to make a bona fide effort to sell the BDI LOCATION to an
acceptable person. FRANCHISEE'S right to sell the BDI LOCATION pursuant to
this paragraph shall expire, in the case of nonrenewal of the franchise, at the
expiration date of the franchise, and in the case of a termination of the
franchise, ninety (90) days after the initial effective date of termination
indicated in the notice from BDI or such earlier date as BDI reasonably
determines that FRANCHISEE has abandoned a bona fide effort to effect a sale of
the BDI LOCATION or fails to operate the BDI LOCATION in compliance with this
Agreement.
(4) If a contract to purchase is entered into and the closing date
is extended beyond the ninety (90) day period, said period for termination
shall be extended so as to permit the closing of the sale to an acceptable
franchisee.
16.
<PAGE> 17
18. ASSIGNMENT.
(A) BY BDI. This Agreement is fully assignable by BDI and shall
inure to the benefit of any assignee or other legal successor to the interest
of BDI herein, provided that BDI will subsequent to any such assignment remain
liable for the performance of its allegations under this Agreement. The
franchise may be transferred to the heirs or personal representative of
FRANCHISEE upon the death or incapacity of FRANCHISEE upon the written approval
of BDI on the same terms and conditions as any other assignment of the
franchise.
(B) FRANCHISEE MAY NOT ASSIGN WITHOUT APPROVAL OF BDI. The franchise
is personal to FRANCHISEE and neither the franchise (except as hereinafter
provided with respect to assignment to a partnership or a corporation) nor any
part of the ownership of FRANCHISEE may be voluntarily, involuntarily
directly or indirectly assigned, subdivided, subfranchised or otherwise
transferred by FRANCHISEE or its owners (including Will, declaration of or
transfer in trust or the laws of intestate succession) without the prior
written approval of BDI and any such assignment or transfer without such
approval shall constitute a breach hereof. BDI shall not unreasonably withhold
its approval of an assignment or transfer of the franchise to proposed
assignees or transferees who meet BDI'S then applicable standards for
franchisees and who are willing to execute and be bound by all provisions of
BDI'S then current form of Franchise Agreement, which shall provide for the
then applicable rates of recurring franchise fees, advertising trust fund
contributions payable thereunder and a term equal to the remaining term of the
franchise. BDI shall not charge such assignee an initial franchise fee for the
franchise, but will charge FRANCHISEE a transfer fee of Two Thousand Five
Hundred ($2,500.00) Dollars. Any and all obligations of FRANCHISEE, hereunder
shall he fully paid and satisfied prior to BDI'S approval of an assignment or
transfer.
(C) ASSIGNMENT TO PARTNERSHIP OR CORPORATION. The franchise may
be assigned to a partnership or corporation which conducts no business other
than the BDI LOCATION (and other BDI LOCATIONS under franchise agreements with
BDI), which is actively managed by FRANCHISEE and in which FRANCHISEE owns and
controls not less than fifty-one (51) percent of the general partnership
interest or the equity and voting power, provided that all partners or
shareholders shall execute an Assignment Agreement undertaking to be bound
jointly and severally by all provisions of this Agreement and all issued and
outstanding stock certificates of such corporation shall bear a legend
reflecting or referring to the restrictions of subparagraph (B) of this
paragraph 18.
(D) BDI'S RIGHT OF FIRST REFUSAL. If FRANCHISEE or its owners
shall at any time determine to sell the BDI LOCATION or an ownership interest
in the franchise, FRANCHISEE or its owners shall notify BDI, in writing, of
the proposed terms of sale. FRANCHISEE shall submit its terms to BDI, which
shall, for a period of thirty (30) days from the date of delivery of such
offer, have the right, to exercise the right granted by written notice to
FRANCHISEE or its owners, to purchase the BDI LOCATION or such ownership
interest for the price, terms, and conditions maintained in such offer. If BDI
does not exercise this right of first refusal, FRANCHISEE may then offer the
location or an interest in the franchise to third parties and, provided there
is not more than a 10% deviation in the stated purchase price, FRANCHISEE may
proceed to conclude such sale. Any sale which discounts the offered selling
price by more than 10% cannot be concluded until FRANCHISEE again complies
with the provisions of this section.
17.
<PAGE> 18
19. ENFORCEMENT.
(A) JUDICIAL ENFORCEMENT, INJUNCTIVE AND OTHER EQUITABLE RELIEF.
FRANCHISEE acknowledges and agrees as a material part of the consideration for
this Agreement that the damages to be suffered by BDI and other BDI FRANCHISEES
as a result of the violation of the provisions of this Agreement relating to
FRANCHISEE'S use of the Names and Marks of BDI, the obligations of FRANCHISEE
with respect to advertising and the obligations of FRANCHISEE upon termination
or expiration of this Agreement and assignment of the franchise and ownership
interests in the franchise will be in an immeasurable amount and neither BDI
nor other BDI FRANCHISEES will have an adequate remedy at law. For these
reasons, BDI shall be entitled without bond to the entry of temporary and
permanent injunctions and orders of specific performance enforcing the
provisions of this Agreement relating to FRANCHISEE'S use of the Names and
Marks, the obligations of FRANCHISEE with respect to advertising, the
obligations of FRANCHISEE upon termination or expiration of this Agreement and
assignment of the franchise and ownership interests in the franchise. And
further, BDI shall be entitled to the entry of temporary and permanent
injunctions and orders of specific performance to prohibit any act or emission
by FRANCHISEE or employees of the BDI LOCATION that constitute a violation of
any law, ordinance, or regulation, is dishonest or misleading to customers of
the BDI LOCATION or other BDI LOCATIONS, constitutes a danger to employees or
customers of the BDI LOCATION or to the public, or my impair the goodwill
associated with the Names and Marks and BDI LOCATIONS. If BDI secures any such
injunctive orders or orders for specific performance, FRANCHISEE agrees to pay
BDI an amount equal to the aggregate of its cost of obtaining such relief,
including, but not limited to, reasonable attorney's fees, costs of
investigation and proof of facts, court costs, other litigation expenses,
travel and living expenses, and any damages incurred by BDI as a result of the
breach of any such provision including interest from date of breach, at the
then current prime rate plus two (2%) percent.
(B) JURISDICTION, VENUE AND WAIVER OF JURY TRIAL. FRANCHISEE
acknowledges and agrees that this Agreement is entered into in the City of
Huntington Beach, County of Orange, State of California and that any action
commenced for the purpose of enforcing the terms and provisions hereof may be
commenced in the following courts:
(1) the United States District Court, Court of general
jurisdiction for the state, or inferior court for the judicial
district in which FRANCHISEE'S BDI LOCATION is located.
18.
<PAGE> 19
It is mutually agreed by and between the parties hereto that the respective
parties shall and they hereby do, waive trial by jury in any action, proceeding
or counterclaim, whether at law or equity brought by either of the parties
hereto against the other or any matters whatsoever arising out of, or in any
way connected with, this Agreement or the performance by the parties of this
Agreement.
(C) ARBITRATION. Except insofar as BDI elects to enforce this
Agreement by judicial process, injunction or specific performance as
hereinabove provided, all disputes and claims arising out of this Agreement
and/or standards, specifications and operating procedures and/or any other
obligations of FRANCHISEE or BDI or any claim that any portion of this
Agreement, any standard specification or operating procedure or other
obligation of the FRANCHISEE or BDI is illegal or otherwise unenforceable under
any law, ordinance, regulation or ruling shall be settled by three member
arbitration in the County of Orange, State of California, under the United
States Arbitration Act (9 U. S. C. SS1 et seq.), if applicable, and the Rules
of CCP 1060, provided that the arbitrators shall award, or include in their
awards, the specific performance of this Agreement unless he determines that
performance is impossible. Judgment upon the award of the arbitrator may be
entered in any court having jurisdiction thereof or of BDI or FRANCHISEE.
During the pendency of an arbitration proceeding hereunder, FRANCHISEE and BDI
shall fully perform this Agreement.
(D) SEVERABLITY AND SUBSTITUTION OF VALID PROVISIONS. All provisions
of this Agreement are severable and this Agreement shall be interpreted and
enforced as if all completely invalid or unenforceable provisions were not
contained herein and partially valid and enforceable provisions shall be
enforced to the extent valid and enforceable. If any applicable law or rule
requires a greater prior notice of the termination or of refusal to renew this
Agreement than is required hereunder, or the taking of some action not required
hereunder, the prior notice and/or other action required by such law or rule
shall be substituted for the notice requirements hereof.
(E) WAIVER OF OBLIGATIONS. BDI AND FRANCHISEE may by written
instrument unilaterally waive any obligation of, or restriction upon, the other
under this Agreement. No acceptance by BDI of any payment by FRANCHISEE and no
failure, refusal or neglect of BDI or FRANCHISEE to exercise any right under
this Agreement or to insist upon full compliance by the other with its
obligations hereunder, including but not limited to any mandatory standards,
specifications or operating procedure, shall constitute a waiver of any
provision of this Agreement.
(F) FRANCHISEE MAY NOT WITHHOLD PAYMENTS DUE BDI. FRANCHISEE agrees
that he will not withhold payment of any recurring franchise fee, advertising
trust fund contribution, amounts owed to BDI for products purchased by
FRANCHISEE or any other amounts owed to BDI on grounds of the non-performance by
BDI of any of its obligations hereunder.
19.
<PAGE> 20
All such claims by FRANCHISEE, if not otherwise resolved by BDI and FRANCHISEE
shall, at the option of BDI, be submitted to arbitration as provided in
paragraph 19, subparagraph (C).
(G) RIGHTS OF PARTIES ARE CUMULATIVE. The rights of BDI and
FRANCHISEE hereunder are cumulative and no exercise or enforcement by BDI or
FRANCHISEE of any right or remedy hereunder shall preclude the exercise or
enforcement by BDI or FRANCHISEE of any other right or remedy hereunder or
which BDI or FRANCHISEE is entitled by law to enforce.
(H) GOVERNING LAW. Except to the extent governed by applicable
federal laws and regulations and the United States Arbitration Act, this
Agreement and the franchise shall be governed by the State of California.
(I) BINDING EFFECT. This Agreement is binding upon the parties
hereto and their respective heirs, assigns and successors in interest.
(J) CONSTRUCTION. The preliminary statements are parts of this
Agreement which constitutes the entire Agreement of the parties and there are
no other oral or written understandings or agreements between BDI and
FRANCHISEE relating to the subject matter of this Agreement, except as
specifically referred to in this Agreement. The headings of the several
sections and paragraphs hereof are for convenience only and do not define,
limit or construe the contents of such sections or paragraphs. The term
"FRANCHISEE" as used herein is applicable to one or more persons, a corporation
or a partnership, as the case may be, and the singular usage includes the
plural and the masculine and neuter usages the other and the feminine.
References to "FRANCHISEE" applicable to an individual or individuals shall
mean the principal owner or owners of the equity or operating control of the
franchise if FRANCHISE is a corporation or partnership.
20. INDEPENDENT CONTRACTORS/INDEMNIFICATION.
BDI and FRANCHISEE are independent contractors. FRANCHISEE shall conspicuously
identify himself at the premises of the BDI LOCATION and in all dealings with
suppliers as the owner of the BDI LOCATION. FRANCHISEE agrees to file
applicable fictitious name statements in the manner prescribed by law. Neither
BDI nor FRANCHISEE shall make any agreements, representations or warranties in
the name of, or on behalf of, the other or represent that the relationship is
other than franchisor and franchisee and that neither BDI nor FRANCHISEE shall
be obligated by or have any liability under any agreements, representations or
warranties made by the other, nor shall BDI be obligated for any damage to any
person or property directly or indirectly arising out of the operation of the
BDI LOCATION or FRANCHISEE'S business conducted pursuant to the franchise,
whether caused by FRANCHISEE'S negligent or willful action or failure to act.
BDI shall have no liability for any sales, use, excise, income, property or
other taxes levied upon the BDI LOCATION or its assets or in connection with
the services performed or sales made or business conducted by the BDI LOCATION.
FRANCHISEE agrees to indemnify BDI against and to reimburse BDI for all such
obligations, damages and taxes for which it is held liable and for all costs
reasonably incurred by BDI in defense of any such claim brought against it or
in any action in which it is named as a party, included but not limited to
reasonable attorney's fees, costs of investigation, proof of facts, court
costs, other litigation expenses, travel and living expenses.
20.
<PAGE> 21
BDI shall have the right to defend any such claim against it. BDI agrees to
indemnify FRANCHISEE against and to reimburse FRANCHISEE for any obligations or
liability for damages attributal to agreements, representations or warranties
of BDI or caused by the negligence or willful action of BDI, and for costs (as
hereinabove defined) reasonably incurred by FRANCHISEE in the defense of any
such claim brought against him or the BDI LOCATION or in any action in which he
is named as a party, provided that BDI shall have the right to participate in
and, to the extent, BDI deems necessary, to control any litigation or
proceeding which might result in liability of or expense to FRANCHISEE subject
to such indemnification. The indemnities and assumption of liabilities and
obligation herein shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.
21. NOTICES. All written notices permitted or required to be
delivered by the provisions of this Agreement or of the operating manual shall
be deemed so delivered by hand or three (3) days after placed in the mail by
Registered or Certified mail, Return Receipt Requested, postage prepaid and
addressed to the party to be notified at its most current principal business
address of which the notifying party has been notified.
22. FAILURE TO EXERCISE RIGHTS. No failure by BDI to exercise any
power given to it hereunder or to insist upon strict compliance with any
obligation or condition hereunder and no custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of BDI'S rights to
demand exact compliance with the term hereof. Waiver by BDI of any particular
default by FRANCHISEE shall not affect or impair BDI'S rights in respect to
any subsequent default of the same or different nature; nor shall any delay or
emission of BDI to exercise any rights arising from a default affect or impair
BDI'S rights as to said default or any subsequent default.
23. ENTIRE AGREEMENT. This Agreement contains the entire
agreement containing the subject matter hereof, and no representations,
inducements, promises or agreements, oral or otherwise, between the parties
with reference thereto and not embodied herein shall be of any force and
effect. Any agreements hereafter made shall be ineffective to change, modify,
add or discharge in whole or in part the obligations and duties under this
Agreement unless such agreement is in writing and signed by BDI and FRANCHISEE.
BIKER'S DREAM, INC.
By: ???
--------------------------
FRANCHISEE:
/s/ RAYMOND O'JAY VANEGAS
- ------------------------------
- ------------------------------
21.
<PAGE> 22
MEMORANDUM
TO: Terry Lewis
FROM: O'Jay Vanegas
DATE: November 30, 1994
RE: Biker's Dream, Inc., Franchise Agreement
- --------------------------------------------------------------------------------
References are to paragraphs as numbers in the agreement.
1. PRELIMINARY STATEMENT. At the end of this paragraph add the
following:
"If design standards change, FRANCHISE shall not be obligated to
remodel if the cost of any such remodeling exceeds the amount of $10K.:
This amount needs to be agreed upon.
2. GRANT OF FRANCHISE. Maricopa County, Arizona.
3. DURATION OF THIS AGREEMENT. At the end of this paragraph add
the following:
"FRANCHISEE. if it leases its locations, may notify BDI of any option
to renew its lease premises and require BDI to mail a written notice
of an intention to renew to FRANCHISEE at least forty-five (45) days
prior to the date the option to renew must be exercised and then such
intention shall be binding upon BDI for the period of renewal option."
<PAGE> 23
4. INITIAL FRANCHISE FEE. At the end of page one add:
"... [p]rescribed in this agreement, BDI shall refund to FRANCHISEE
the sun of $12,500. BDI shall have the right and obligation to
repurchase, at cost, any and all equipment, supplies, and training
material which it sold to FRANCHISEE."
5. RECURRING FEES.
(A) FRANCHISE AND ADVERTISING FEES. Strike the printed
paragraph and insert the following:
Beginning at the time FRANCHISEE opens the BDI location for business
and through the duration of this Franchise Agreement, FRANCHISEE shall
pay to BDI in [Begin strikeout text] monthly [End strikeout text]
amount, recurring Franchise Fees of a sum equal to five (5%) percent of
the gross receipts for the preceding calendar [Begin strikeout text]
month [End strikeout text] week from the BDI locations operated by
FRANCHISEE. Beginning [Begin strikeout text] one (1) year [End
strikeout text] 6 months after FRANCHISEE opens the BDI locations for
business and through the duration of this Franchise Agreement,
FRANCHISEE shall pay to BDI in monthly amounts, recurring advertising
trust fund contributions of a sum equal to two percent (2%) or $1,000,
whichever is greater of the gross receipts for the preceding calendar
month from the BDI location operated by FRANCHISEE. This check or
money order in full payment of the said recurring Franchise fee and the
advertising trust fund contribution for the preceding month shall be
transmitted with the monthly business report and shall be due and
payable at the home office of BDI at 1420 Village Way, Santa Ana CA
92705 by 5:00 p.m., due five [Begin strikeout text] (5) [End strikeout
text] (4) business days after the end of each [Begin strikeout text]
month [End strikeout text] week. These fees are not refundable.
<PAGE> 24
(B) GROSS RECEIPTS. The sentence "Monies received from Motorcycle
sales are not considered "Gross Receipts" should be changed to read "Monies
received from Motorcycle sales [Begin strikeout text], used parts and charges
for labor services to install or repair equipment are not considered "Gross
Receipts." [End strikeout text].
6. RESTRICTION TO LOCATIONS OF BDI LOCATIONS AND LIMITATIONS ON
NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
(B) LIMITATIONS OF NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
Strike the printed paragraph and insert the following:
"BDI agrees that FRANCHISEE may open additional locations within the
county of location, but FRANCHISEE shall pay the sum of $10,000 for
its fee to open each such additional locations, and then after each
location commences operation, shall file its separate report and pay
fees pursuant to paragraph 5 hereof."
(C) RIGHT OF FIRST REFUSAL. If a suitable location cannot be
obtained within ninety (90) days following the payment of the
said sum of $10,000, then the amount of $10,000 shall be
returned to FRANCHISEE. The refusal of FRANCHISEE to exercise
the right to expand shall not constitute a waiver of the right
of first refusal as to subsequent expansion sites in the State
of Arizona.
(D) ZONE. Insert the following: "Maricopa County, State of
Arizona."
<PAGE> 25
7. LEASE, CONSTRUCTION, AND OPENING OF BDI.
(A) LEASE OR PURCHASE. Replace the last sentence of this paragraph
with the following:
"BDI shall have the right and the obligation to repurchase, at cost,
any or all equipment, supplies and training materials which it sold to
FRANCHISEE. In the event BDI does not approve FRANCHISEE'S proposed
location. BDI will grant FRANCHISEE an extension of the ninety (90)
day time period.
(B) CONSTRUCTION OF BDI. Insert prior to (1) and before the colon
the following: "...[u]nless local zoning laws prohibit such construction or
such construction would violate covenants running with the land."
(C) EQUIPMENT, SIGNS, AND INVENTORY. Insert: "...[o]n BDI
location unless local zoning law prohibit such signs or such signs would
violate leasehold covenants."
(E) TERMINATION OF FRANCHISE FOR FAILURE TO OPEN BDI LOCATION.
Insert after "one hundred eighty (180) days after execution of this Agreement"
the following: "...[t]he acquisition of the location site by lease or purchase,
whichever is later."
Strike the last sentence and replace with:
"BDI shall have the right
<PAGE> 26
8. TRAINING AND OPERATIONS ASSISTANCE.
(B) REQUIREMENT OF COMPLETION OF TRAINING/FAILURE TO COMPLETE.
Strike the last sentence and replace with: "BDI shall have the right and
the obligation to repurchase, at cost, any or all equipment, supplies, and
training materials which it sold to FRANCHISEE."
9. OPERATION OF BDI
(B) ALTERATIONS TO BDI. At the end of this paragraph before the
period add the following: "... [w]hich shall not be unreasonably withheld."
(C) UNIFORMITY, AUTHORIZED PRODUCTS AND SERVICES. At the end of
this paragraph add the following: "BDI agrees to allow FRANCHISEE the right to
operate at its BDI location a custom paint department to service exclusively
motorcycles. FRANCHISEE agrees to comply with all BDI's operational
specifications.
(D) USE OF APPROVED PRODUCTS. At the end of this paragraph insert
the following: "The parties agree that the amount of inventory valued at 1994
prices deemed to be adequate for the operations of the in a satisfactory manner
is the sum of $150K."
<PAGE> 27
12. ADVERTISING AND PROMOTION. At the end of this paragraph insert
the following: "Such committee will provide advertising beneficial to all BDI
LOCATIONS and not favor certain locations to the exclusion of other locations."
13. RECORDS KEEPING STANDARDS AND REPORTING PROCEDURES.
(B) BUSINESS REPORTS AND TAX RETURNS. BDI acknowledges that all
information provided by FRANCHISEE pursuant to paragraph (B) and (C) is
confidential and will not be disclosed to third parties.
17. FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION OR
EXPIRATION.
(C) REPURCHASE. Insert "Except as otherwise specified herein," at
the beginning of this paragraph.
(H) DEATH OR INCAPACITY OF FRANCHISE. This asset could have no
value upon the death of an individual owner and the FRANCHISEE should be either
a sub-s corporation or a limited liability company if available in Arizona.
<PAGE> 28
(J) COVENANT NOT TO COMPETE. If this Agreement is terminated as
to any one location in the event FRANCHISEE operates other and different
locations in other counties, this covenant shall have application only to the
county in which the terminated located was operational.
(L) FRANCHISEE'S RIGHT TO SELL BDI LOCATION. Replace "ten (10)
days" with ninety (90) days" and add the following:
(4) if a contract to purchase is entered into and the
closing date is extended beyond the ninety (90) day period, said period for
termination shall be extended so as to permit the closing of the sale to an
acceptable franchisee.
18. ASSIGNMENT.
(D) BDI'S RIGHT OF FIRST REFUSAL. If FRANCHISEE or its
owners shall at any time determine to sell the BDI LOCATION or an ownership
interest in the franchise, FRANCHISEE or its owners shall notify BDI, in
writing, of the proposed terms of sale. FRANCHISEE shall submit its terms to
BDI, which shall, for a period of thirty (30) days from the date of delivery of
such offer, have the right, to exercise the right granted by written notice to
FRANCHISEE or its owners, to purchase the BDI LOCATION or such ownership
interest for the price, terms, and conditions maintained in such offer. If BDI
does not exercise this right of first refusal, FRANCHISEE may then offer the
location or an interest in the franchise to third parties and, provided there
is not more than a 10% deviation in the stated purchase price, FRANCHISEE may
proceed to conclude such sale. Any sale which discounts the offered selling
price by more than 10% cannot be concluded until FRANCHISEE again complies with
the provisions of this section.
<PAGE> 29
19. ENFORCEMENT.
(B) JURISDICTION, VENUE, AND WAIVER OF JURY TRIAL. Strike
paragraphs (1), (2), and (3), and delete only (4) as a reference number.
(C) ARBITRATION. Arbitration away from business is too expensive.
If they want to arbitrate, compel it in Phoenix, Arizona. (Paragraphs B & C are
inconsistent.)
(H) GOVERNING LAW. Replace "State of California" with "State of
Arizona" at the end of this paragraph.
<PAGE> 1
EXHIBIT 10.19-E
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Preliminary Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Grant of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Duration of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Initial Franchise Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
5. Recurring Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Franchise and Advertising Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Gross Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
6. Restriction to Location of BDI STORES
and Limitation on Number BDI STORES
in Franchisee's Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Restriction of Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Limitation on Number of BDI
STORES in Franchisee's Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Location Zone and Franchise Area . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. Lease, Construction and Opening
of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A. Lease or Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Construction of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. Equipment, Signs and Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. BDI STORE Opening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Termination of Franchisee for
Failure to open BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Training and Operations Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A. Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Requirement of Completion of
Training/Failure to Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C. Hiring of Employees and Training . . . . . . . . . . . . . . . . . . . . . . . . . 5
D. Operations Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
E. Group Purchasing of Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
F. Product Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
G. Delivery of Equipment and Services . . . . . . . . . . . . . . . . . . . . . . . . 6
9. Operation of BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A. Operating Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B. Alteration to BDI STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
C. Uniformity, Authorized Services . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Use of Approved Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Materials Imprinted with Names . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Standards, Specifications & Procedures . . . . . . . . . . . . . . . . . . . . . . 8
G. Compliance with law and Good
Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
H. Prices for Services Determined
by Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
I. Duty to Manage and Avoid Conflicting
or Competing Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
J. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
K. Operations Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Procedures and Operating Manual . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
12. Advertising and Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13. Records Keeping Standards
and Reporting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
A. Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
B. Business Reports and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 11
C. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
14. Names and Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
A. Ownership of Names and Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B. Limitation on Use of Names and
Marks by Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
C. Notification of Infringement
and-Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
D. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
15. Inspections and Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Right of Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
16. Termination of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. By Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. By BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
17. Franchisee's Rights and obligations
Upon Termination or Expiration . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A. Payment of amounts Owed to BDI . . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. Return of Proprietary Materials . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. Cancellation of Assumed Names
and Transfer of Telephone Numbers . . . . . . . . . . . . . . . . . . . . . . . . . 15
E. Modification of Agreement by Franchisee . . . . . . . . . . . . . . . . . . . . . . 15
F. Modification of Agreement by BDI . . . . . . . . . . . . . . . . . . . . . . . . . 15
G. Assignment by BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
H. Death or Incapacity of Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . 15
I. Removal of All Signs and Identification . . . . . . . . . . . . . . . . . . . . . . 16
J. Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
K. Continuing Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
L. Franchisee's Right to Sell BDI STORE . . . . . . . . . . . . . . . . . . . . . . . 16
18. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. By BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. Franchisee May Not Assign
Without Approval of BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
C. Assignment to Partnership or
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
D. BDI'S Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
19. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A. Judicial Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
B. Jurisdiction, venue and waiver
of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
C. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
D. Severability and Substitution
of Valid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
E. Waiver of obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
F. Franchisee May Not Withhold
Payments Due BDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
G. Rights of Parties are Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 20
H. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
I. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
J. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20. Independent Contractors/Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 20
21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
22. Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
23. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 3
BIKER'S DREAM, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this 10th day of June, 1994
by and between BIKER'S DREAM, Inc., A California Corporation (hereinafter
"BDI") and Marble Pierce Enterprises, L.L.C. (hereinafter "FRANCHISEE"), whose
principal address is: 1021 Silver Oaks Drive, Edmond, Oklahoma 73003.
1. PRELIMINARY STATEMENT. BDI is developing a chain of
Motorcycle, motorcycle parts, accessories and service Dealerships under the
trade name "BIKER'S DREAM" (hereinafter "BDI"). Each BDI LOCATION is built to
standard specifications and uses standard operating procedures, equipment,
forms, signs and designs. All BDI LOCATIONS are to be operated in accordance
with franchise uniform standards of identity, quality, appearance, operating
methods and services provided.
2. GRANT OF FRANCHISE. BDI hereby grants to FRANCHISEE, as an
individual, subject to the provisions of this Agreement, a franchise to operate
one (1) BDI LOCATION within the following location zone:
Oklahoma, Cleveland, Logan and Canadian Counties in the State of Oklahoma.
3. DURATION OF THIS AGREEMENT. This agreement shall begin as of
the date of execution hereof and shall continue for a term of fifteen (15)
years and, unless either party gives written notice of its intention to
terminate this Agreement at least one hundred eighty (180) days prior to the
expiration of the fifteen (15) year term, the term of this Agreement shall be
deemed to be renewed for five (5) years and thereafter for further periods of
five (5) years duration, unless BDI or FRANCHISEE mails a written notice of
intention not to renew to the other party at least one hundred eighty (180)
days prior to the end of any renewal period. If such notice is so mailed, the
Agreement shall terminate as to all parties at the end of the current period.
4. INITIAL FRANCHISE FEE. FRANCHISEE shall pay to BDI a
nonrefundable initial franchise fee in the amount of Fifteen thousand dollars
($15,000.00) in cash, payable in cash upon the execution of this Agreement.
The initial franchise fee shall be fully earned by BDI when paid, provided that
if BDI elects to terminate the franchise due to the failure of FRANCHISEE to
complete satisfactorily the prescribed training program or to lease or purchase
suitable premises for the BDI LOCATION, or to open the BDI LOCATION in the time
prescribed in this agreement,
1.
<PAGE> 4
BDI shall refund to FRANCHISEE that part of the initial franchise fee
heretofore paid by FRANCHISEE. BDI shall have the right, at its option, to
repurchase at cost any and all equipment, supplies and training material which
it sold to FRANCHISEE.
5. RECURRING FEES.
(A) FRANCHISE AND ADVERTISING FEES. Beginning at the time
FRANCHISEE opens the BDI LOCATION for business and through the duration of this
franchise agreement, FRANCHISEE shall pay to BDI in weekly amounts, recurring
franchise fees of a sum equal to five (5%) percent and advertising trust fund
contributions of a sum equal to two (2%) percent (or $250.00, whichever is
greater) of the gross receipts for the preceding calendar week from the BDI
LOCATION operated by FRANCHISEE. The check or money order in full payment of
the said recurring franchise fee and the advertising trust fund contribution
for the preceding week shall be transmitted with the weekly business report and
shall be due and payable at the home office of BDI at 18898 Beach Blvd.,
Huntington Beach, CA 92646 by 5:00 p.m. on Thursday, the 3rd day after the day
on which the weekly business report is mailed. These fees are not refundable.
(B) GROSS RECEIPTS. "Gross receipts" shall consist of money and
other consideration of any kind howsoever received by FRANCHISEE from any
source as the result of, or in connection with, the exercise of the franchise
granted hereunder including but not limited to all monies or other
consideration received for clothing, accessories and services sold and/or
rendered within or without the BDI LOCATION being operated by FRANCHISEE under
this franchise.
(C) INTEREST. All recurring franchise fees, advertising trust
account contributions and amounts owed for products purchased by FRANCHISEE
pursuant to the franchise shall bear interest after due date at the current six
month Treasury Bill rate plus two (2%) percent.
6. RESTRICTION TO LOCATION OF BDI LOCATIONS AND LIMITATION ON
NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
(A) RESTRICTION OF LOCATION. FRANCHISEE may operate the BDI
LOCATION only within the Location Zone identified herein or a substitute
location and/or premises hereinafter approved by BDI in writing. Specific
location must be approved by BDI. If the FRANCHISEE'S lease for the premises
of the BDI LOCATION expires or terminates without fault of FRANCHISEE, or if
the premises are damaged, condemned or otherwise rendered unusable, or if in
the judgment of BDI and FRANCHISEE there is a change in the character of the
location of the BDI LOCATION sufficiently detrimental to its business potential
to warrant its relocation, BDI will grant permission for relocation of the BDI
LOCATION to a location and premises approved by BDI.
(B) LIMITATION ON NUMBER OF BDI LOCATIONS IN FRANCHISEE'S AREA.
BDI agrees that the number of franchised BDI LOCATIONS shall be limited to a
maximum of one BDI LOCATION within the Location Zone. BDI will not establish
any franchised or Company owned BDI LOCATIONS within ten (10) miles of
Franchisee's location without Franchisee's consent.
2.
<PAGE> 5
(C) RIGHT OF FIRST REFUSAL. FRANCHISEE shall have the right of
first refusal for any franchise which BDI proposes to grant immediately
adjacent to FRANCHISEE'S Franchise Area, as designated below. To exercise this
right, FRANCHISEE must execute the then current Franchise Agreement and pay ten
thousand dollars ($10,000.00) of the then current initial franchise fee
within fifteen (15) days of written notification of the proposed grant of
franchise. The balance of the initial franchise fee shall be payable within an
additional thirty (30) days.
(D) LOCATION ZONE. The BDI LOCATION to be operated pursuant to
this Franchise Agreement shall be located within the following designated
Location Zone:
Oklahoma, Cleveland, Logan and Canadian Counties in the State of Oklahoma.
For the term of this agreement, BDI will not grant any new franchises
or open any company-owned BDI LOCATIONS within the Location Zone.
7. LEASE, CONSTRUCTION AND OPENING OF BDI LOCATION.
(A) LEASE OR PURCHASE. FRANCHISEE will lease or purchase the
premises of the BDI LOCATION described in paragraph 2 of this Agreement within
ninety (90) days after execution of this Agreement. If specific premises are
not identified in paragraph 2 of this Agreement, FRANCHISEE agrees to lease or
purchase suitable premises, reasonably acceptable to BDI, within ninety (90)
days after execution of this Agreement. If FRANCHISEE fails to lease or
purchase suitable premises within ninety (90) days after execution of this
Agreement, BDI may terminate this Agreement, effective upon delivery of written
notice of termination to FRANCHISEE. In the event of such termination, the
3.
<PAGE> 6
parties agree to execute all instruments required to rescind fully all
agreements, purchases and any other transaction between BDI and FRANCHISEE.
Upon execution of all required instruments, BDI shall refund to FRANCHISEE that
part of the initial franchise fee heretofore paid by FRANCHISEE, less Two
Thousand Five Hundred Dollars ($2,500.00) dollars to cover training and
administration expense, whether or not training has been completed. BDI shall
have the right, at its option to repurchase at cost any or all equipment,
supplies and training material which it sold to FRANCHISEE.
(B) CONSTRUCTION OF BDI LOCATION. BDI will furnish to FRANCHISEE
its standard detailed specifications for a BDI LOCATION, including requirements
for dimensions, exterior design, interior layout, building materials,
equipment, signs and color scheme. FRANCHISEE agrees to do or cause to be done
the following:
(1) obtain all required building, utility, sign, use,
health, sanitation and business permits, licenses and other required
permits and licenses;
(2) submit to BDI for its approval FRANCHISEE'S BDI
LOCATION plans;
(3) construct the premises and paint the premises in
compliance with plans and specifications approved by
BDI;
(4) purchase or lease and install all equipment and signs
required for the BDI LOCATION; and
(5) secure all financing required by FRANCHISEE to fully
develop the BDI LOCATION.
(C) EQUIPMENT, SIGNS AND INVENTORY. BDI will provide FRANCHISEE with
a complete list of all inventory, parts, components, accessories, signs and
equipment required to open the BDI LOCATION. FRANCHISEE agrees to use in the
operation of his BDI LOCATION only those brands of inventory, parts,
components, accessories, signs and equipment that BDI has approved for BDI
LOCATIONS as meeting its standards and specifications for function,
attractiveness, serviceability and overall appearance. FRANCHISEE may purchase
or lease approved brands of these items from any supplier. If FRANCHISEE
proposes to purchase or lease any brand which is not then approved by BDI,
FRANCHISEE shall first notify BDI and shall submit to BDI, upon its request,
sufficient specifications, photographs, drawings and/or other information or
samples for determination by BDI whether such brand of inventory, parts,
components, accessories, signs and equipment complies with its standards and
specifications, which determination will be made and communicated to FRANCHISEE
in writing within a reasonable time.
(D) BDI LOCATION OPENING. Upon completion of FRANCHISEE'S
training program, as described in paragraph 8 of this agreement, and within
fifteen (15) days after BDI'S determination that the premises described herein
are in suitable condition and comply with the standards and specifications
prescribed by BDI, FRANCHISEE agrees to open the BDI LOCATION for business and
commence the conduct of business. BDI will assist FRANCHISEE in the opening of
the BDI LOCATION.
4.
<PAGE> 7
(E) TERMINATION OF FRANCHISEE FOR FAILURE TO OPEN BDI LOCATION.
If the FRANCHISEE fails to complete preparation of the BDI LOCATION
and open the BDI LOCATION for business within one hundred eighty (180) days
after execution of this Agreement, BDI shall have the right to terminate this
Agreement, effective upon delivery to FRANCHISEE of written notice of
termination. In the event of such termination and upon delivery to BDI of all
releases, waivers and other instruments required to rescind fully all
agreements, purchases and other transactions between BDI and FRANCHISEE, BDI
shall refund to FRANCHISEE that part of the initial franchise fee paid by
FRANCHISEE, less Two Thousand Five Hundred Dollars ($2,500.00) for training and
administrative expense (or actual costs incurred), whichever is greater. BDI
shall have the right, at its option, to repurchase at cost any or all
equipment, supplies, inventory and training material which it sold to
FRANCHISEE.
8. TRAINING AND OPERATIONS ASSISTANCE.
(A) TRAINING. Before the opening of the BDI LOCATION, BDI shall
train FRANCHISEE in the operation of a BDI LOCATION. Such training shall take
place at a time and place specified by BDI. Training will be conducted at the
BDI home office at 18898 Beach Blvd., Huntington Beach, CA 92646 and at
FRANCHISEE'S location. Training will be for one week at each location.
Training at home office will be completed within sixty (60) days after signing
this agreement. Training at Franchisee's location will be completed prior to
and during first week of operation of Franchisee's BDI LOCATION. FRANCHISEE
shall be responsible for any travel and living expenses incurred in connection
with the training program. Training will cover four distinct areas: (1)
Operation of a BDI LOCATION; (2) Purchasing and financing motorcycles, parts,
and accessories; (3) Sales and marketing; (4) Business and systems procedures.
Initial training class may be attended by three persons, one of which must be
FRANCHISEE.
(B) REQUIREMENT OF COMPLETION OF TRAINING/FAILURE TO COMPLETE.
FRANCHISEE shall complete the training program provided by BDI. If BDI
reasonably determines that FRANCHISEE is unable to complete satisfactorily the
said training program, this Agreement shall terminate and upon delivery to BDI
of all assignments, releases, waivers and other instruments required to rescind
fully all agreements, purchases and other transactions between BDI and
FRANCHISEE, BDI shall refund to FRANCHISEE that part of the initial franchise
fee paid by FRANCHISEE to BDI pursuant to this agreement. BDI shall have the
right, at its option, to repurchase at cost any or all equipment, supplies and
training material which it sold to FRANCHISEE.
(C) HIRING OF EMPLOYEES AND TRAINING OF EMPLOYEES BY FRANCHISEE.
FRANCHISEE shall hire all employees of the BDI LOCATION and be exclusively
responsible for the terms of their employment, compensation and the training of
such employees in the proper conduct of their jobs in operation of a BDI
LOCATION. BDI will make available to FRANCHISEE training for new employees or
updating those already employed. Such training and updating shall take place
at a time and place specified by BDI. Training will be conducted at the BDI
home office or at another BDI LOCATION designated by BDI. FRANCHISEE shall be
responsible for any travel and living expenses incurred by such employees, in
connection with the training.
5.
<PAGE> 8
(D) OPERATIONS ASSISTANCE. BDI shall advise FRANCHISEE of
problems arising out of the operation of the BDI LOCATION as disclosed by
reports submitted to BDI by FRANCHISEE or by inspections conducted by BDI of
the BDI LOCATION. BDI will furnish FRANCHISEE with such assistance in
connection with the operation of the BDI LOCATION as is reasonably determined
to be necessary by BDI from time to time. Operations assistance may consist of
advice and guidance with respect to:
(1) proper utilization of procedures developed for a BDI
LOCATION including sales and display procedures developed by BDI;
(2) additional services and products authorized for BDI
LOCATIONS;
(3) purchase of various products, materials and supplies;
(4) the institution of proper administrative,
bookkeeping, accounting, inventory control, supervisory and general
operating procedures for the effective operation of a BDI LOCATION
(5) advertising and promotional programs.
(E) GROUP PURCHASING OF INVENTORY AND SUPPLIES.
FRANCHISEE shall have the right to participate on the same basis as
other franchisees of BDI and BDI owned BDI LOCATIONS in group purchasing of
motorcycles, parts, accessories, and other materials and supplies which BDI may
from time to time develop and sponsor.
(F) PRODUCT AVAILABILITY. During the term of this Agreement, BDI
will make available for purchase by FRANCHISEE approved products necessary to
operate a BDI LOCATION.
(G) DELIVERY OF EQUIPMENT AND SERVICES. All of the
specifications, equipment and inventory lists, training, equipment, operations
manuals, and preopening operations assistance to be provided by BDI to
FRANCHISEE pursuant to this Agreement shall be delivered within ninety (90)
days after execution of this Agreement.
9. OPERATION OF BDI LOCATION.
(A) OPERATING STANDARDS. FRANCHISE agrees to operate and maintain
his BDI LOCATION in a manner consistent with the public image of a BDI LOCATION
as a clean, modern and efficient retail motorcycle, parts and accessories
store, providing high quality products and services. FRANCHISEE agrees to
effect a maintenance program for the BDI LOCATION which will assure such
condition, appearance and operation, including replacement of worn out or
obsolete equipment and signs, repair of the interior and exterior of the BDI
LOCATION, painting and periodic cleaning, consistent with the nature of the
business of the BDI LOCATION and the reputation of BDI. If, at any time in
BDI'S reasonable judgement, the general state of repair, appearance of
cleanliness of the premises of the BDI LOCATION or its equipment or signs does
not meet BDI'S
6.
<PAGE> 9
standards therefor, BDI shall so notify FRANCHISEE specifying the action to be
taken by FRANCHISEE to correct such deficiency. If FRANCHISEE fails or refuses
to initiate corrective action within thirty (30) days after receipt of such
notice, and thereafter continue, a bona fide program to undertake and complete
any such required maintenance, BDI shall have the right, but shall not be
obligated, to enter upon the premises of the BDI LOCATION and effect such
repairs, painting and/or replacement of equipment or signs on behalf of
FRANCHISEE and FRANCHISEE shall pay the entire costs thereof to BDI upon
demand.
(B) ALTERATIONS TO BDI LOCATION. FRANCHISEE agrees that he shall
make no material alterations to the structural improvements or appearance of
the BDI LOCATION nor shall FRANCHISEE make any material replacements or
alterations to the equipment or signs of the BDI LOCATION without prior written
approval of BDI.
(C) UNIFORMITY AUTHORIZED PRODUCTS AND SERVICES. Uniformity of
products, procedures and services and the image such uniformity creates in the
mind of the public are essential elements of a successful franchise chain.
FRANCHISEE therefore agrees to offer motorcycles, parts, accessories, services
and products which BDI from time to time authorizes for BDI LOCATIONS FRANCHISEE
agrees to submit written requests for authorization of additional products or
services to be offered for sale at FRANCHISEE'S BDI LOCATION. FRANCHISEE
further agrees that the BDI LOCATION will not, without prior written approval
by BDI, offer any other products or services nor shall the BDI LOCATION or the
premises it occupies be used for any purpose other than the operation of an
authorized BDI LOCATION in compliance with the term of the Agreement.
(D) USE OF APPROVED PRODUCTS. Consistency of quality in the
products and services offered by BDI is essential to the maintenance and
enhancement of BDI'S reputation and the good will it has generated by the sale
of high quality products and the efficient delivery of high quality services to
its customers. For these reasons FRANCHISEE agrees that all motorcycles,
parts, accessories and other inventory, materials and supplies used in the
operation of the BDI LOCATION shall be purchased by FRANCHISEE from the list of
types or brands approved by BDI as meeting its specifications and standards. If
FRANCHISEE desires to use in the operation of the BDI LOCATION any type or
brand of motorcycles, accessories and other inventory, materials and supplies
which is not then approved by BDI as meeting its standards and specifications,
FRANCHISEE shall first notify BDI, in writing, and shall upon request by BDI
submit samples and such other information as BDI reasonably requires for
examination and/or testing to determine otherwise whether such product meets
its standards and specifications. BDI shall notify FRANCHISEE within a
reasonable time whether it approves such product. The BDI LOCATION shall at
all times maintain an inventory of motorcycles, parts, accessories and other
inventory, materials and supplies, sufficient to satisfy customer demand and
operate efficiently.
7.
<PAGE> 10
(E) MATERIALS IMPRINTED WITH NAMES AND MARKS. FRANCHISEE shall in
the operation of the BDI LOCATION utilize letterheads, business cards, forms
and other materials imprinted with the Names and Marks as prescribed from time
to time by BDI.
(F) STANDARDS, SPECIFICATIONS AND PROCEDURES. FRANCHISEE agrees as a
material part of the consideration of this Agreement to comply with all
mandatory standards, specifications and operating procedures relating to the
operation of a BDI LOCATION, including but not limited to the following:
(1) use of standard sales and operating procedures;
(2) general appearance of employees;
(3) use of quality products and high standards of methods
and procedures relating to retail business;
(4) use of Names and Marks;
(5) prescribed hours of operation during which the BDI
LOCATION will be open for business;
(6) use of standard form, programs, formats, and records
keeping including the preparation and retention of duplicate customer
sales slips and related documents;
(7) identification of the FRANCHISEE as the owner of the
BDI LOCATION; and
(8) proper use and illumination of BDI signs, posters,
displays and other advertising and promotional displays as prescribed
by BDI from time to time.
BDI agrees that all such standards, specifications, procedures and operating
requirements shall be reasonable and consistent with the obligations of
FRANCHISEE under the lease or deed for the premises of the BDI LOCATION and
applicable ordinances. Mandatory standards, specifications and operating
procedures prescribed from time to time by BDI in the procedures and operating
manuals for BDI LOCATIONS or otherwise communicated to FRANCHISEE in writing,
shall constitute provisions of this Agreement as if fully set forth herein.
All references herein to this Agreement shall include all such mandatory
standards, specifications and operating procedures. BDI reserves the absolute
right to change, modify, add to or delete any and all standards, specifications
and operating procedures.
(G) COMPLIANCE WITH LAW AND GOOD BUSINESS PRACTICES. FRANCHISEE shall
secure, file and maintain in full force and effect all required licenses,
permits, certificates, notices and disclosures relating to the operation of a
BDI LOCATION and shall operate the BDI LOCATION in full compliance with all
applicable federal, state and local statutes, regulations, and ordinances,
including but not limited to all government regulations relating to retail
facilities, occupational hazards and health, workers' compensation insurance,
federal and state withholding and payment of federal and state income taxes,
social security taxes and sales taxes.
8.
<PAGE> 11
All advertising and promotion by FRANCHISEE shall be completely factual and
shall conform to the highest standards of ethical advertising. FRANCHISEE
agrees to refrain from any business or advertising practice which may be
injurious to the business and good name of BDI and the reputation and good will
associated with Names and Marks of BDI and BDI LOCATIONS.
(H) PRICES FOR PRODUCTS AND SERVICES DETERMINED BY FRANCHISEE. From
time to time BDI may advise FRANCHISEE of prices for products and services
offered by BDI LOCATIONS which BDI in its considered judgment believes to be
appropriate and consistent with good business practice. FRANCHISEE shall not
be obligated to accept any such advice and shall have the sole right to
determine the prices to be charged by the BDI LOCATION. FRANCHISEE understands
and agrees that such advice furnished by BDI shall in no way be deemed or
construed to impose upon FRANCHISEE any obligation to charge any fixed, minimum
or maximum price for any product or service offered for sale by the BDI
LOCATION.
(I) DUTY TO MANAGE AND AVOID CONFLICTING OR COMPETING INTERESTS.
The BDI LOCATION shall at all times be under the direct, on-premises
supervision of FRANCHISEE and/or a trained and competent employee. FRANCHISEE
shall keep BDI informed at all times of the identity of any employee(s) acting
as manager(s) of the BDI LOCATION. FRANCHISEE agrees that he will at all times
faithfully, honestly and diligently perform his obligation under this Agreement
and that he will continuously exert his best efforts to promote and enhance the
business of the BDI LOCATION. FRANCHISEE further agrees not to engage in any
business which will detract from or conflict with his obligation hereinunder.
(J) INSURANCE. FRANCHISEE shall at all times during the term of
this Agreement or any amendment or renewal hereto maintain in full force and
effect at his sole expense, comprehensive, public and product insurance against
claims for bodily and personal injury, death and property damage caused by or
occurring in conjunction with the operation of the BDI LOCATION or otherwise in
conjunction with conduct of business by FRANCHISEE pursuant to this franchise.
Such insurance coverage shall be maintained under one or more policies of
insurance containing a comprehensive general liability policy including
products liability in the minimum amount of $500,000/$500,000 bodily injury
liability and $500,000 property damage liability, an "umbrella" package in the
amount of $1,000,000, or such other amounts as BDI may reasonably request for
the operation of the premises. All such liability insurance policies shall
name BDI as an additional insured and shall provide that BDI receives thirty
(30) days prior written notice of termination, expiration or cancellation of
any such policy. BDI may reasonably increase the minimum liability protection
requirement annually to reflect inflation or higher damage awards in public or
product liability litigation. FRANCHISEE shall have his insurance carriers
submit to BDI annually a statement of coverage. All policies shall be renewed
and evidence of renewal mailed to BDI prior to the expiration date. If
FRANCHISEE at any time fails or refuses to maintain any insurance coverage
required by BDI or to furnish satisfactory evidence thereof, BDI at its option
and in addition to its other rights and remedies hereunder, may, but need not,
obtain such insurance coverage on behalf of the FRANCHISEE and
9.
<PAGE> 12
FRANCHISEE shall pay to BDI on demand any costs and premiums incurred by BDI in
connection therewith. FRANCHISEE is responsible for all loss or damage and
contractual liability to third persons originating in or in connection with the
operation of a BDI LOCATION and for all claims or demands for damages to
property or for injury, illness or death of persons directly or indirectly
resulting therefrom. FRANCHISEE agrees to defend, indemnify and hold BDI
harmless from and with respect to any such claims, losses, or damages as
hereinabove described.
(K) OPERATIONS MEETINGS. From time to time BDI will call
operations meetings. These meetings will be held regionally where feasible to
keep expense and time loss for FRANCHISEE to a relative minimum. Attendance at
operations meetings is mandatory for FRANCHISEE or his Manager(s).
10. PROCEDURES AND OPERATING MANUALS. BDI will license to
FRANCHISEE, to use during the term of the franchise, a proprietary special
design computer software program and one or more copies of procedures and
operating manuals for BDI LOCATIONS containing mandatory and suggested
standards, specifications and operating procedures for BDI LOCATIONS and
up-to-date information relative to such standards, specifications and operating
procedures along with other obligations of FRANCHISEE hereunder with respect to
the operation of a BDI LOCATION. BDI shall have the right to add to and
otherwise modify the procedures and operating manuals from time to time to
reflect changes in authorized products and services, product quality or
standards of service or the operation of a BDI LOCATION provided that no such
addition or modification shall alter FRANCHISEE'S fundamental status and rights
under this Agreement. The operating and procedures manuals contain proprietary
information of BDI and FRANCHISEE agrees to keep the computer software program
and the operating and procedures manuals confidential at all times during and
after the term of the franchise.
11. TRADE SECRETS. FRANCHISEE as a material part of the
consideration for this Agreement understands and agrees that his knowledge of
the operation of a BDI LOCATION will be derived from information disclosed to
FRANCHISEE by BDI pursuant to the franchise and that certain such information is
proprietary, confidential and a trade secret of BDI. FRANCHISEE agrees that he
will maintain the absolute confidentiality of all such information during and
after the term of the franchise and that he will not use any such information
in any other business or in any manner not specifically authorized or approved
by BDI.
12. ADVERTISING AND PROMOTION. FRANCHISEE agrees that it is
essential for the growth of the BDI franchise chain that he participates and
cooperates in advertising program and other promotional activities.
Accordingly, FRANCHISEE agrees to contribute to an advertising trust fund
administered by BDI, or its designated agent. (Paragraph 6 section A of
Offering Circular and Paragraph 5, this Agreement). The said monies shall be
used by BDI exclusively for advertising and promotional purposes. Advertising
and promotional purposes may include, but are not limited to, radio and
television advertising, newspaper advertisements, and the production and
distribution of such advertising. BDI agrees to provide FRANCHISEE with an
annual statement of the receipts and disbursements of the advertising trust
fund. It is understood by BDI and Franchisee, that after BDI has five (5)
franchises open and operating, an executive advertising committee will be
selected by BDI, that will include Franchisees. This committee will be
instrumental in administering the distribution of the advertising trust monies.
10.
<PAGE> 13
The uncommitted reserve in the advertising trust fund will be
reconciled with expenditures annually at the close of BDI'S fiscal year to
limit the reserve to an amount not greater than the most recent ninety (90) day
expenditure or the succeeding ninety (90) day planned expenditure. BDI shall
thereafter notify FRANCHISEE of the appropriate pro rata reduction of
FRANCHISEE'S advertising trust fund contributions until the excess in the
uncommitted reserve, if any, is depleted.
13. RECORDS KEEPING STANDARDS AND REPORTING PROCEDURES.
(A) RECORDS AND ACCOUNTING. FRANCHISEE shall establish a record
keeping, bookkeeping and accounting system in conformance with the requirements
prescribed by BDI including, but not limited to, the use and retention of sales
records, invoices, payroll records, check stubs, bank deposit receipts, sales
tax records and returns, cash disbursements journals and general ledgers.
(B) BUSINESS REPORTS AND TAX RETURNS. FRANCHISEE shall furnish to
BDI, in accordance with BDI'S procedures and operating manual for BDI
LOCATIONS, the following:
(1) by Monday of each week on the business report form, a report of
the gross and net revenues of the BDI LOCATION for the preceding week together
with all information required by BDI as part of the weekly business report
procedure;
(2) within thirty (30) days after the date federal and state
income tax and sales tax returns are filed, FRANCHISEE shall provide BDI with
exact copies of such returns and all schedules attached thereto.
(C) FINANCIAL STATEMENTS. FRANCHISEE shall furnish to BDI in the
form prescribed by BDI:
(1) within thirty (30) days after the end of each month, a monthly
profit and loss statement from the beginning of FRANCHISEE'S fiscal year to the
end of the preceding month for the BDI LOCATION, prepared, verified and signed
by FRANCHISEE; and
(2) within sixty (60) days after the end of each fiscal year of
the BDI LOCATION, an unaudited annual statement of profit and loss and source
and application of funds of the BDI LOCATION for the fiscal year and a balance
sheet for the BDI LOCATION as of the end of the fiscal year, compiled or
reviewed by an independent public accountant or a certified public accountant
in accordance with standards published by the A.I.C.P.A., I verified and signed
by FRANCHISEE as to the information furnished to such accountant.
(3) BDI may order FRANCHISEE to provide an audited financial statement
at any time. If this audit discloses an understatement for the period covered
greater than three (3%) percent, FRANCHISEE will pay all costs associated with
the audit and within fifteen (15) days pay to BDI all recurring franchise fees
and advertising trust fund contributions due on the amount of the
understatement. BDI shall then have the right to require FRANCHISEE to furnish
audited financial statements thereafter. If the understatement is three (3%)
percent or less, BDI will pay the reasonable auditor's fees.
14. NAMES AND MARKS.
(A) OWNERSHIP OF NAMES AND MARKS. FRANCHISEE acknowledges and
agrees as a material part of the consideration for this Agreement that BDI is
the owner of the following names and Marks: "THE BIKERS DREAM", "BIKERS
DREAM", BIKER'S DREAM" and "DREAM", referred to in this Agreement as "Names
and Marks". BDI hereby licenses FRANCHISEE to use the Names and Marks in the
operation of the franchise. FRANCHISEE'S right to use the Names and Marks is
derived solely from this Agreement, and is limited to the operation of the BDI
LOCATION in compliance with this Agreement. FRANCHISEE shall use and display
the Names and Marks only in a manner and form expressly approved by BDI.
FRANCHISEE, upon request by BDI, shall affix to any materials displaying the
Marks, whatever legends, markings, and notices of trademark ownership or
FRANCHISOR/FRANCHISEE relationship as may be specified by BDI.
11.
<PAGE> 14
(B) FRANCHISEE acknowledges the right of BDI and its, affiliates
to use the Marks, including any additions, deletions, or changes thereto, in
connection with the products and services to which they are or may be applied
by BDI and its affiliates, and represents, warrants and agrees that FRANCHISEE
shall not, either during the term of this Agreement or after the expiration or
other termination hereof, directly or indirectly contest or aid in contesting
the validity, ownership, registration, or use of the marks or any additions,
deletions or changes thereto by BDI, or take any action whatsoever in
derogation of the rights claimed therein by BDI.
(C) The License granted to Franchise under this Agreement to use
the Marks is nonexclusive, and BDI, in its sole and absolute discretion, has
the right to grant other licenses in, to and under those names and marks in
addition to those licenses already granted, and to develop and license other
names and marks an any such terms as BDI deems appropriate.
(D) Nothing contained in this Agreement shall be construed to vest
in FRANCHISEE any right, title or interest in or to any of the Marks, the
goodwill now or hereafter associated therewith, or any right in the design of
any building or premises, other than rights and license expressly granted
herein for the term hereof.
(E) FRANCHISEE shall not use any of the Marks in connection with
any statement or material which may, in the judgement of BDI, be in bad taste
or inconsistent with BDI'S public image or tend to bring disparagement,
ridicule or scorn upon BDI, any of the Marks, or the goodwill associated
therewith. FRANCHISEE shall not adopt, use, display or register, in whole or
in part, any trademarks, service marks, trade names, logos, insignia, slogans,
emblems, symbols, designs or other identifying characteristics. Neither
FRANCHISEE nor any entity directly or indirectly affiliated with FRANCHISEE
shall adopt, use or register (by filing a certificate or articles of
incorporation, a fictitious business name statement, or otherwise) any trade or
business name, style or design which includes, or is similar to, in whole or in
part, any of the Marks or any other of BDI'S trademarks, service marks, trade
names, logos, insignia, slogans, emblem, symbols, designs or other identifying
characteristics.
(F) BDI shall have the right at any time and from time to time
upon notice to FRANCHISEE to make additions to, deletions from, and changes in
any of the marks, or any of them, all of which shall be as effective as if they
were incorporated in this Agreement. All such additions, deletions and changes
shall be made in good faith, on a reasonable basis and with a view toward the
overall best interests of the System. No such addition, deletion or change
will cause any change in any of FRANCHISEE'S financial obligations to BDI.
(G) LIMITATIONS ON USE OF NAMES AND MARKS BY FRANCHISEE. FRANCHISEE
agrees to use the Names and Marks during the term of the franchise as the sole
servicemark and tradename identification of the BDI LOCATION. FRANCHISEE shall
not use during the term of the franchise any Name and Mark as part of any
corporate name or with any prefix, suffix or other modifying words, terms,
designs or symbols, or any modified form, nor may FRANCHISEE use any Name or
Mark in connection with the sale of any unauthorized product or service or in
any other manner not explicitly authorized in writing by BDI.
(H) NOTIFICATION OF INFRINGEMENT AND CLAIMS. FRANCHISEE shall
immediately notify BDI of any apparent infringement of or challenge to
FRANCHISEE'S use of any Name or Mark.
(I) INDEMNIFICATION. BDI agrees to indemnify FRANCHISEE for all
damages for which he is held liable in any proceeding arising out of his use of
any Name or Mark, pursuant to and in compliance with this Agreement and for all
costs reasonably incurred by FRANCHISEE in the defense of any such claim
brought against him or in any such proceeding in which he is named as a party,
provided that FRANCHISEE has timely notified BDI of such claim or proceeding
and has otherwise complied with this Agreement, and further provided that if it
becomes advisable at any time in the sole discretion of BDI for FRANCHISEE to
modify or discontinue use of any Name or Mark, and/or use additional or
substitute Names or Marks, FRANCHISEE agrees to do so and the sole obligation
of BDI in any such event shall be to reimburse FRANCHISEE for the out-of-pocket
costs of
12.
<PAGE> 15
complying with this obligation. BDI, at its sole discretion may elect to
defend or participate in the defense or prosecution of any action relating to
the protection of the Service Mark and to protect the FRANCHISEE against claims
of infringement or unfair competition with respect to the Service Mark. In
such event, BDI will have the sole discretion to take such action as it deems
appropriate. FRANCHISEE is not precluded from taking over a cause of action
should BDI decide not to procede with same.
15. INSPECTIONS AND AUDITS.
(A) RIGHT OF INSPECTION. In order to determine whether FRANCHISEE
is in compliance with this Agreement, BDI shall have the right at any time
during business hours, without prior notice to FRANCHISEE, to inspect the BDI
LOCATION and the business records, bookkeeping and accounting records, invoices,
payroll records, check stubs, bank deposit receipts, sales tax records and
returns, sales records and other supporting records and documents and the
inventory of products, materials and supplies of the BDI LOCATION.
(B) RIGHT TO AUDIT. BDI shall have the right at any time during
business hours, and without prior notice to FRANCHISEE, to audit or cause to be
audited the weekly business reports, tax returns, and schedules and other forms,
information and supporting records which FRANCHISEE is required to submit to
BDI hereunder and the books and records of the BDI LOCATION and of any
corporation or partnership which owns or operates the BDI LOCATION. In the
event any such audit shall disclose an understatement of the gross receipts of
the BDI LOCATION for any period or periods , FRANCHISEE shall pay to BDI within
fifteen (15) days after receipt of the audit report, the recurring franchise
fee plus any required advertising trust account contribution due on the amount
of such understatement. Further, in the event such understatement for any
period or periods shall be greater than three (3%) percent, FRANCHISEE shall
reimburse BDI for the cost of such audit, including, but not limited to, the
fee of any independent accountant and the travel expenses, room, board and
compensation of employees of BDI, unless FRANCHISEE demonstrates that such
understatement resulted from inadvertent error.
16. TERMINATION OF FRANCHISE.
(A) BY FRANCHISEE. If FRANCHISEE is in substantial compliance
with this Agreement and BDI breaches this Agreement and fails to cure such
breach within thirty (30) days after written notice thereof is delivered to
BDI, FRANCHISEE may terminate this Agreement effective ten (10) days after
delivery to BDI of notice thereof. The termination of this Agreement by
FRANCHISEE without complying with the foregoing requirement or for any reason
other than breach of this Agreement by BDI and BDI'S failure to cure such
breach within thirty (30) days after receipt of written notice thereof shall
be deemed a termination by FRANCHISEE without cause.
(B) BY BDI. In addition to BDI'S right to terminate this
Agreement in the event of the failure of FRANCHISEE to lease or purchase a
premises for the BDI'S LOCATION to develop or open the BDI'S LOCATION as
provided in subparagraph, (A) of paragraph 5 herein or upon BDI'S determination
that FRANCHISEE is unable to complete satisfactorily prescribed training as
provided in subparagraph (B) of paragraph 6 herein, BDI way terminate this
Agreement effective upon delivery of notice of termination to FRANCHISEE, if
FRANCHISEE or the BDI LOCATION
13.
<PAGE> 16
(1) makes an assignment for the benefit of creditors or
an admission of his inability to pay his obligations as they become
due;
(2) files a voluntary petition in bankruptcy or any
pleading seeking any reorganization, liquidation or disolution under
any law, or admitting or failing to contest the material allegations
of any such pleading filed against him or is adjudicated a bankrupt or
insolvent or a receiver is appointed or a substantial part of the
assets of FRANCHISEE or BDI LOCATION are abated or subject to a
moratorium under any law;
(3) abandons or surrenders or transfers control of the
operation of the BDI LOCATION or fails actively to operate the BDI
LOCATION, unless precluded from doing so by damage to the premises, of
the BDI LOCATION, war or civil disturbance, natural disaster, or other
event beyond FRANCHISEE'S control;
(4) suffers cancellation of, or fails to renew or extend
the lease for, or otherwise fails to maintain possession of, the
premises of the BDI LOCATION identified herein or a substitute
premises approved by BDI;
(5) submits to BDI on two (2) or more separate occasions
at any time during the term of the franchise, a weekly business
report, tax return or schedule or other information or supporting
records which understates the gross receipts of the BDI LOCATION by
more than three (3) percent for any period of time, unless FRANCHISEE
demonstrates to the satisfaction of BDI that such understatement
results from inadvertent error;
(6) fails or refuses to submit when due, weekly reports,
tax returns, schedules or other information or supporting records,
whether or not such failure or refusal is corrected after notice
thereof is delivered to FRANCHISEE;
(7) operates the BDI LOCATION in a manner which presents a
health or safety hazard to its customers, employees or the public;
(8) makes an unauthorized assignment of the franchise or
ownership of FRANCHISEE as hereinafter defined in paragraph 17 and 18;
(9) operates the BDI LOCATION in a manner in violation of
or inconsistent with all applicable federal, state and local statutes,
regulations, rules and ordinances, including, but not limited to, all
government regulations relating to retail stores;
(10) fails or refuses to pay any amount owed to BDI for
recurring franchise fees, advertising trust account contributions, any
products purchased from BDI or any amounts due to BDI or fails or
refuses to comply with any mandatory standards, specifications or
operating procedures prescribed by BDI relating to the quality of
products, cleanliness or sanitation and does not correct such failure
or refusal within ten (10) days after written notice thereof is
delivered to FRANCHISEE. Said notice shall describe what corrective
action FRANCHISEE must take; or
14.
<PAGE> 17
(11) fails to comply with any other provision of this
Agreement or any other mandatory standard, specification or operating
procedures prescribed by BDI and does not correct such failure within
thirty (30) days after written notice of such failure to comply is
delivered to FRANCHISEE, provided that if such failure can not
reasonably be corrected within thirty (30) days, then FRANCHISEE must
initiate a program of corrective action within such thirty (30) day
period and thereafter continue such program of corrective action so
that such failure may be corrected within a reasonable time
thereafter. The written notice of failure as herein described shall
describe to FRANCHISEE what corrective action he must take.
17. FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION OR
EXPIRATION.
(A) PAYMENTS OF AMOUNTS OWED TO BDI. FRANCHISEE agrees to pay to
BDI within fifteen (15) days after the effective date of termination or
expiration such recurring franchise fees, advertising trust account
contributions, amounts owed for products purchased by FRANCHISEE from BDI and
other amounts owed to BDI which are then unpaid.
(B) RETURN OF PROPRIETARY OR CONFIDENTIAL MATERIALS. FRANCHISEE
further agrees that upon termination or expiration of the franchise, he will
immediately return to BDI all copies of proprietary and confidential materials
including, but not limited to, BDI'S computer software program and all
operating and procedures manuals.
(C) REPURCHASE. BDI shall have the right, at its option, to repurchase
at cost any and all equipment, inventory, supplies and training material which
it sold to FRANCHISEE.
(D) CANCELLATION OF ASSUMED NAMES AND TRANSFER OF TELEPHONE NUMBERS.
FRANCHISEE further agrees that upon termination or expiration of the franchise,
he will take such action as may be required to cancel all fictitious business
names or registrations relating to his use of any Name or Mark and to notify the
telephone company and all listing agencies of the termination or expiration of
FRANCHISEE'S right to use any telephone numbers and any classified and other
telephone directory listings with any Name or Mark or with the BDI LOCATION and
to authorize transfer of same to BDI or its franchisee.
(E) MODIFICATION OF AGREEMENT BY FRANCHISEE. This Agreement may
be modified by FRANCHISEE only by written agreement with BDI.
(F) MODIFICATION OF AGREEMENT BY BDI. This Agreement may be
modified by BDI only by written agreement with FRANCHISEE.
(G) ASSIGNMENT BY BDI. This agreement is fully assignable by BDI,
and BDI remains liable for the performance of its obligations hereunder.
(H) DEATH OR INCAPACITY OF FRANCHISEE. The Franchise may be
transferred to the heirs or personal representative of the FRANCHISEE upon the
death or incapacity of FRANCHISEE upon written approval of BDI on the same
terms and conditions as any other assignment of the franchise.
15.
<PAGE> 18
(I) REMOVAL OF ALL SIGNS AND IDENTIFICATION. FRANCHISEE further
agrees upon termination or expiration of the franchise, he will immediately
remove all BDI signs and identification from the premises, and immediately and
permanently discontinue the use of the Names and Marks.
(J) COVENANT NOT TO COMPETE. If this Agreement is terminated
prior to its expiration by BDI in accordance with the provisions of this
Agreement or by FRANCHISEE without cause, FRANCHISEE agrees that for a period
of two (2) years commencing on the effective date of termination of this
Agreement, or the date which FRANCHISEE ceases to conduct the business
conducted pursuant to this Agreement, whichever is later, he will not have any
interest as owner (except of publicly traded securities), partner, director,
officer, employee consultant, representative or agent, or in any other
capacity, in any business offering substantially the same products and services
offered by a BDI LOCATION and located within the county wherein the BDI
LOCATION or any BDI LOCATION is located. THIS COVENANT NOT TO COMPETE MAY NOT
BE ENFORCEABLE UNDER CALIFORNIA LAW.
(K) CONTINUING OBLIGATION. All obligations of BDI and FRANCHISEE
which expressly or by their nature survive the expiration or termination of the
franchise shall continue in full force and in effect subsequent to and
notwithstanding the expiration or termination of this Agreement and until they
are satisfied in full or by their nature expire.
(L) FRANCHISEE IS RIGHT TO SELL BDI LOCATION. If BDI terminates
the franchise for a cause other than those specified in paragraph 16(B),
subparagraphs (3), (4), and (8) of this Agreement, or elects not to renew the
franchise, FRANCHISEE for a period of ten (10) days commencing on the date of
notice of termination or nonrenewal shall have the right to elect to attempt to
sell the BDI LOCATION to a person reasonably acceptable to BDI as a BDI
LOCATION franchisee, providing that the provisions of paragraph (17),
subparagraphs (B) and (D) shall be applicable to any proposed sale of the BDI
LOCATION pursuant to this paragraph. FRANCHISEE'S right to elect hereunder
shall be contingent upon FRANCHISEE reasonably establishing that:
(1) FRANCHISEE will make a bona fide effort to sell the BDI
LOCATION to an acceptable person;
(2) until the closing of such sale or the prior expiration or
termination of FRANCHISEE'S right to sell the BDI LOCATION pursuant to this
paragraph, the BDI LOCATION will be operated in compliance with this AGREEMENT;
and
(3) all amounts owed to BDI pursuant to this Agreement will be
paid to BDI at or prior to the closing of such sale. FRANCHISEE shall deliver
to BDI within the ten (10) day period referred to above, a written notice of
his election to make a bona fide effort to sell the BDI LOCATION to an
acceptable person. FRANCHISEE'S right to sell the BDI LOCATION pursuant to
this paragraph shall expire, in the case of nonrenewal of the franchise, at the
expiration date of the franchise, and in the case of a termination of the
franchise, ninety (90) days after the initial effective date of termination
indicated in the notice from BDI or such earlier date as BDI reasonably
determines that FRANCHISEE has abandoned a bona fide effort to effect a sale of
the BDI LOCATION or fails to operate the BDI LOCATION in compliance with this
Agreement.
16.
<PAGE> 19
18. ASSIGNMENT.
(A) BY BDI. This Agreement is fully assignable by BDI and shall
inure to the benefit of any assignee or other legal successor to the interest
of BDI herein, provided that BDI will subsequent to any such assignment remain
liable for the performance of its obligations under this Agreement. The
franchise may be transferred to the heirs or personal representative of
FRANCHISEE upon the death or incapacity of FRANCHISEE upon the written approval
of BDI on the same terms and conditions as any other assignment of the
franchise.
(B) FRANCHISEE MAY NOT ASSIGN WITHOUT APPROVAL OF BDI. The franchise
is personal to FRANCHISEE and neither the franchise (except as hereinafter
provided with respect to assignment to a partnership or a corporation) nor any
part of the ownership of FRANCHISEE may be voluntarily, involuntarily directly
or indirectly assigned, subdivided, subfranchised or otherwise transferred by
FRANCHISEE or its owners (including Will, declaration of or transfer in trust
or the laws of intestate succession) without the prior written approval of BDI
and any such assignment or transfer without such approval shall constitute a
breach hereof. BDI shall not unreasonably withhold its approval of an
assignment or transfer of the franchise to proposed assignees or transferees
who meet BDI'S then applicable standards for franchisees and who are willing to
execute and be bound by all provisions of BDI'S then current form of Franchise
Agreement, which shall provide for the then applicable rates of recurring
franchise fees, advertising trust fund contributions payable thereunder and a
term equal to the remaining term of the franchise. BDI shall not charge such
assignee an initial franchise fee for the franchise, but will charge FRANCHISEE
a transfer fee of Two Thousand Five Hundred ($2,500.00) Dollars. Any and all
obligations of FRANCHISEE hereunder shall be fully paid and satisfied prior to
BDI'S approval of an assignment or transfer.
(C) ASSIGNMENT TO PARTNERSHIP OR CORPORATION. The franchise my be
assigned to a partnership or corporation which conducts no business other than
the BDI LOCATION (and other BDI LOCATIONS under franchise agreements with BDI),
which is actively managed by FRANCHISEE and in which FRANCHISEE owns and
controls not less than fifty-one (51) percent of the general partnership
interest or the equity and voting power, provided that all partners or
shareholders shall execute an Assignment Agreement undertaking to be bound
jointly and severally by all provisions of this Agreement and all issued and
outstanding stock certificates of such corporation shall bear a legend
reflecting or referring to the restrictions of subparagraph (B) of this
paragraph 18.
(D) BDI'S RIGHT OF FIRST REFUSAL. If FRANCHISEE or its owners
shall at any time determine to sell the BDI LOCATION or an ownership interest
in the franchise, FRANCHISEE or its owners shall obtain a bona fide, executed
written offer from a responsible and fully disclosed purchaser and shall submit
an exact copy of such offer to BDI, which shall, for a period of thirty (30)
days from the date of delivery of such offer, have the right, exercisable by
written notice to FRANCHISEE or its owners, to purchase the BDI LOCATION or
such ownership interest for the price and terms and conditions contained in
such offer, provided that BDI may substitute cash or debt cancellation or a
combination thereof for any form of payment proposed in such offer. If BDI does
not exercise this right of first refusal, FRANCHISEE shall conclude such sale
within one hundred twenty (120) days following the expiration of such thirty
(30) day first refusal period in compliance with the terms of the offer
presented to BDI. After the expiration of such one hundred twenty (120) day
period, FRANCHISEE way not make any transfer without again complying with the
provisions of this section.
17.
<PAGE> 20
19. ENFORCEMENT.
(A) JUDICIAL ENFORCEMENT, INJUNCTIVE AND OTHER EQUITABLE RELIEF.
FRANCHISEE acknowledges and agrees as a material part of the consideration for
this Agreement that the damages to be suffered by BDI and other BDI FRANCHISEES
as a result of the violation of the provisions of this Agreement relating to
FRANCHISEE'S use of the Names and Marks of BDI, the obligations of FRANCHISEE
with respect to advertising and the obligations of FRANCHISEE upon termination
or expiration of this Agreement and assignment of the franchise and ownership
interests in the franchise will be in an immeasurable amount and neither BDI
nor other BDI FRANCHISEES will have an adequate remedy at law. For these
reasons, BDI shall be entitled without bond to the entry of temporary and
permanent injunctions and orders of specific performance enforcing the
provisions of this Agreement relating to FRANCHISEE'S use of the Names and
Marks, the obligations of FRANCHISEE with respect to advertising, the
obligations of FRANCHISEE upon termination or expiration of this Agreement and
assignment of the franchise and ownership interests in the franchise. And
further, BDI shall be entitled to the entry of temporary and permanent
injunctions and orders of specific performance to prohibit any act or omission
by FRANCHISEE or employees of the BDI LOCATION that constitute a violation of
any law, ordinance, or regulation, is dishonest or misleading to customers of
the BDI LOCATION or other BDI LOCATIONS, constitutes a danger to employees or
customers of the BDI LOCATION or to the public, or may impair the goodwill
associated with the Names and Marks and BDI LOCATIONS. If BDI secures any such
injunctive orders or orders for specific performance, FRANCHISEE agrees to pay
BDI an amount equal to the aggregate of its cost of obtaining such relief,
including, but not limited to, reasonable attorney's fees, costs of
investigation and proof of facts, court costs, other litigation expenses,
travel and living expenses, and any damages incurred by BDI as a result of the
breach of any such provision including interest from date of breach, at the
then current prime rate plus two (2%) percent.
(B) JURISDICTION, VENUE AND WAIVER OF JURY TRIAL. FRANCHISEE
acknowledges and agrees that this Agreement is entered into in the City of
Santa Ana, County of Orange, State of California and that any action commenced
for the purpose of enforcing the terms and provisions hereof may be commenced
in the following courts, at the sole option of BDI:
(1) the Federal District Court for the Southern District
of California;
(2) the Superior Court of the State of California in and
for the County of orange;
(3) the Municipal Court of California, Orange County
Judicial District; or
(4) the United States District Court, Court of
general jurisdiction for the state, or inferior court
for the judicial district in which FRANCHISEE'S BDI
LOCATION is located.
18.
<PAGE> 21
It is mutually agreed by and between the parties hereto that the respective
parties shall and they hereby do, waive trial by jury in any action, proceeding
or counterclaim, whether at law or equity brought by either of the parties
hereto against the other or any matters whatsoever arising out of, or in any
way connected with, this Agreement or the performance by the parties of this
Agreement.
(C) ARBITRATION. Except insofar as BDI elects to enforce this
Agreement by judicial process, injunction or specific performance as
hereinabove provided, all disputes and claims arising out of this Agreement
and/or standards, specifications and operating procedures and/or any other
obligations of FRANCHISEE or BDI or any claim that any portion of this
Agreement, any standard specification or operating procedure or other
obligation of the FRANCHISEE or BDI is illegal or otherwise unenforceable under
any law, ordinance, regulation or ruling shall be settled by three member
arbitration in the County of Orange, State of California, under the United
States Arbitration Act (9 U.S.C. SS1 et seq.), if applicable, and the Rules
of CCP 1060, provided that the arbitrators shall award, or include in their
awards, the specific performance of this Agreement unless he determines that
performance is impossible. Judgment upon the award of the arbitrator way be
entered in any court having jurisdiction thereof or of BDI or FRANCHISEE.
During the pendency of an arbitration proceeding hereunder, FRANCHISEE and BDI
shall fully perform this Agreement.
(D) SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS. All provisions
of this Agreement are severable and this Agreement shall be interpreted and
enforced as if all completely invalid or unenforceable provisions were not
contained herein and partially valid and enforceable provisions shall be
enforced to the extent valid and enforceable. If any applicable law or rule
requires a greater prior notice of the termination or of refusal to renew this
Agreement than is required hereunder, or the taking of some action not required
hereunder, the prior notice and/or other action required by such law or rule
shall be substituted for the notice requirements hereof.
(E) WAIVER OF OBLIGATIONS. BDI AND FRANCHISEE may by written
instrument unilaterally waive any obligation of, or restriction upon, the
other under this Agreement. No acceptance by BDI of any payment by FRANCHISEE
and no failure, refusal or neglect of BDI or FRANCHISEE to exercise any right
under this Agreement or to insist upon full compliance by the other with its
obligations hereunder, including but not limited to any mandatory standards,
specifications or operating procedure, shall constitute a waiver of any
provision of this Agreement.
(F) FRANCHISEE MAY NOT WITHHOLD PAYMENTS DUE BDI. FRANCHISEE agrees
that he will not withhold payment of any recurring franchise fee, advertising
trust fund contribution, amounts owed to BDI for products purchased by
FRANCHISEE or any other amounts owed to BDI on grounds of the nonperformance by
BDI of any of its obligations hereunder.
19.
<PAGE> 22
All such claims by FRANCHISEE, if not otherwise resolved by BDI and FRANCHISEE
shall, at the option of BDI, be submitted to arbitration as provided in
paragraph 19, subparagraph (C).
(G) RIGHTS OF PARTIES ARE CUMULATIVE. The rights of BDI and
FRANCHISEE hereunder are cumulative and no exercise or enforcement by BDI or
FRANCHISEE of any right or remedy hereunder shall preclude the exercise or
enforcement by BDI or FRANCHISEE of any other right or remedy hereunder or
which BDI or FRANCHISEE is entitled by law to enforce.
(H) GOVERNING LAW. Except to the extent governed by applicable
federal laws and regulations and the United States Arbitration Act, this
Agreement and the franchise shall be governed by the State of California.
(I) BINDING EFFECT. This Agreement is binding upon the parties
hereto and their respective heirs, assigns and successors in interest.
(J) CONSTRUCTION. The preliminary statements are parts of this
Agreement which constitutes the entire Agreement of the parties and there are
no other oral or written understandings or agreements between BDI and
FRANCHISEE relating to the subject matter of this Agreement, except as
specifically referred to in this Agreement. The headings of the several
sections and paragraphs hereof are for convenience only and do not define,
limit or construe the contents of such sections or paragraphs. The term
"FRANCHISEE" as used herein is applicable to one or more persons, a corporation
or a partnership, as the case may be, and the singular usage includes the
plural and the masculine and neuter usages the other and the feminine.
References to "FRANCHISEE" applicable to an individual or individuals shall
mean the principal owner or owners of the equity or operating control of the
franchise if FRANCHISE is a corporation or partnership.
20. INDEPENDENT CONTRACTORS/INDEMNIFICATION. BDI and FRANCHISEE are
independent contractors. FRANCHISEE shall conspicuously identify himself at
the premises of the BDI LOCATION and in all dealings with suppliers as the
owner of the BDI LOCATION. FRANCHISEE agrees to file applicable fictitious
name statements in the manner prescribed by law. Neither BDI nor FRANCHISEE
shall make any agreements, representations or warranties in the name of, or on
behalf of, the other or represent that the relationship is other than
franchisor and franchisee and that neither BDI nor FRANCHISEE shall be obligated
by or have any liability under any agreements, representations or warranties
made by the other, nor shall BDI be obligated for any damage to any person or
property directly or indirectly arising out of the operation of the BDI
LOCATION or FRANCHISEE'S business conducted pursuant to the franchise, whether
caused by FRANCHISEE'S negligent or willful action or failure to act. BDI
shall have no liability for any sales, use, excise, income, property or other
taxes levied upon the BDI LOCATION or its assets or in connection with the
services performed or sales made or business conducted by the BDI LOCATION.
FRANCHISEE agrees to indemnify MI against and to reimburse MI for all such
obligations, damages and taxes for which it is held liable and for all costs
reasonably incurred by BDI in defense of any such claim brought against it or in
any action in which it is named as a party, included but not limited to
reasonable attorney's fees, costs of investigation, proof of facts, court
costs, other litigation expenses, travel and living expenses.
20.
<PAGE> 23
BDI shall have the right to defend any such claim against it. BDI agrees to
indemnify FRANCHISEE against and to reimburse FRANCHISEE for any obligations or
liability for damages attributal to agreements, representations or warranties
of BDI or caused by the negligence or willful action of BDI, and for costs (as
hereinabove defined) reasonably incurred by FRANCHISEE in the defense of any
such claim brought against him or the BDI LOCATION or in any action in which he
is named as a party, provided that BDI shall have the right to participate in
and, to the extent, BDI deems necessary, to control any litigation or proceeding
which might result in liability of or expense to FRANCHISEE subject to such
indemnification. The indemnities and assumption of liabilities and obligation
herein shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.
21. NOTICES. All written notices permitted or required to be
delivered by the provisions of this Agreement or of the operating manual shall
be deemed so delivered by hand or three (3) days after placed in the mail by
Registered or Certified mail, Return Receipt Requested, postage prepaid and
addressed to the party to be notified at its most current principal business
address of which the notifying party has been notified.
22. FAILURE TO EXERCISE RIGHTS. No failure by BDI to exercise any
power given to it hereunder or to insist upon strict compliance with any
obligation or condition hereunder and no custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of BDI'S rights to
demand exact compliance with the terms hereof. Waiver by BDI of any particular
default by FRANCHISEE shall not affect or impair BDI'S rights in respect to any
subsequent default of the same or different nature; nor shall any delay or
omission of BDI to exercise any rights arising from a default affect or impair
BDI'S rights as to said default or any subsequent default.
23. ENTIRE AGREEMENT. This Agreement contains the entire
agreement containing the subject matter hereof, and no representations,
inducements, promises or agreements, oral or otherwise, between the parties
with reference thereto and not embodied herein shall be of any force and
effect. Any agreements hereafter made shall be ineffective to change, modify,
add or discharge in whole or in part the obligations and duties under this
Agreement unless such agreement is in writing and signed by BDI and FRANCHISEE.
BIKER'S DREAM, INC.
By:__________________________
FRANCHISEE: MARBLE PIERCE ENTERPRISES, L.L.C.
MANAGERS: Wendy Marble
21.
<PAGE> 24
ADDENDUM
TO
BIKER'S DREAM, INC.
FRANCHISE AGREEMENT
This Addendum to Biker's Dream, Inc. Franchise Agreement is made and
entered into simultaneously with the Biker's Dream, Inc. Franchise Agreement
by and between Biker's Dream, Inc., a California corporation, as franchisor
("BDI"), and Marble Pierce Enterprises, L.L.C., as "FRANCHISEE", dated June 15,
1994 (the "Franchise Agreement").
1. Preliminary Statement. BDI and FRANCHISEE desire to make
certain revisions to and clarify certain terms of the Franchise Agreement as
hereinafter provided. Except as expressly modified by this Addendum, all terms
and provisions of the Franchise Agreement remain in full force and effect.
Capitalized words used in this Addendum that are not otherwise defined shall
have the same meanings as those specified in the Franchise Agreement. In the
event of any conflict between any provision of this Addendum and any provisions
of the Franchise Agreement, the provision of this Addendum shall control.
2. Location Zone. FRANCHISEE's Location Zone shall consist of
the following counties in Oklahoma: Oklahoma, Cleveland, Logan, and Canadian.
3. Termination by FRANCHISEE. In addition to FRANCHISEE's right
to terminate the Franchise Agreement as provided in paragraph 16(A) thereof,
FRANCHISEE may terminate such Franchise Agreement effective upon delivery of
notice of termination to BDI, if BDI (1) makes an assignment for the benefit of
creditors or an admission of its inability to pay its obligations as they
become due; or (2) files a voluntary petition in bankruptcy or any pleading
seeking any reorganization, liquidation or dissolution under any law, or
admitting or failing to contest the material allegations of any such pleading
filed against it or is adjudicated a bankrupt or insolvent or a receiver is
appointed or a substantial part of the assets of BDI are abated or subject to a
moratorium under any law.
4. Termination by BDI. Item 6 of paragraph 16(B) of the
Franchise Agreement is hereby amended to read as follows:
(6) fails or refuses on two or more separate occasions
within any consecutive twelve month period to submit when due, weekly
reports, tax returns, schedules or other information or supporting
records, whether or not such failure or refusal is corrected after
notice thereof is delivered to FRANCHISEE;
5. Gross Receipts. The following shall be added to paragraph
5(B) of the Franchise Agreement:
"Gross Receipts" shall also include all money and other
consideration received by BDI from catalog sales to customers residing
in the 405 area code portion of Oklahoma. "Gross Receipts" shall not
include any money or other consideration
<PAGE> 25
received by FRANCHISEE from any source as the result of, or in
connection, with motorcycle sales.
6. Operations Meetings. The last sentence of paragraph 9(K) of
the Franchise Agreement is hereby revised to read as follows:
Attendance at operations meetings is mandatory for FRANCHISEE
or his Manager(s); provided, however, that attendance will not be
required at more than two such meetings in any calendar year and which
shall not collectively exceed four business days in duration during
any calendar year.
7. Arbitration. The first two lines of paragraph 19(C) of the
Franchise Agreement are hereby amended to read as follows:
Except insofar as BDI is entitled to and elects to enforce
this Agreement by injunction or specific performance as provided in
paragraph 19(A) hereof, all...
IN WITNESS WHEREOF, the parties hereto, have duly executed, sealed and
delivered this Addendum as of the date first above written.
BDI: BIKER'S DREAM, INC.,
a California corporation
By:_______________________________
___________President
FRANCHISEE: MARBLE PIERCE ENTERPRISES, L.L.C.,
an Oklahoma limited liability company
By: /s/ Wendy Marble
______________________________
Manager
<PAGE> 26
CONFIDENTIAL APPLICATION
<TABLE>
<S> <C>
(Wendy)
NAME Wendy G. & Jim Marble & Perry J. & Patricia Pierce BIRTHDATE 11/06/61
-------------------------------------------------- ------------
ADDRESS 1021 Silver Oaks Dr. Edmond, Oklahoma 73003 OWN Marble RENT Pierce
-------------------------------------------- ------ ------
P.O. Box 1112 Tuttle, Oklahoma 73089 HOW LONG? Life
-------------------------------------------- --------------
Marble 341-2549 Wendy
PHONE: HOME (405) Pierce 381-2509 WORK (405) 751-3711 U.S. CITIZEN? Yes
--------------------- -------------- ------
CURRENT EMPLOYER Wendy (A Look for You) Salon
---------------------------------------------------------------
ADDRESS 10495 North May Okla City, Okla
------------------------------------------------------------------------
POSITION Hair Stylist (ATTACH RESUME IF AVAILABLE)
-------------------------------------
MARITAL STATUS Married EDUCATION High School & College (Business Degree)
------------- ----------------------------------------
OTHER SPECIAL TRAINING OR EDUCATION Barber College
--------------------------------------------
- --------------------------------------------------------------------------------
TERRITORY FOR WHICH APPLICATION IS MADE Oklahoma City, Oklahoma
----------------------------------------
When are you ready to commence training? ASAP
---------------------------------------
How did you hear about Bikers Dream? Hot Bike
-------------------------------------------
Would you be involved in this business on a part or full-time basis? Full & Part time
--------------------
Would anyone else be involved? Yes If yes name This is a joint venture Marble & Pierce
---- -----------------------------------------
Do you plan to supervise the business? Yes If not, what role will you play?
---- --------------
Do you intend to have a financial partner? Yes If yes, please explain Perry Pierce & Wife
---- -------------------
Have you ever been a principal owner of a business before? Yes
-------------------------------
If yes, what type of business? Self Employed Have Stylist
-----------------------------------------------------------
Ownership interest in that business Self Position Owner Operator
------ -------------------------------------
Length of time in business 9 years Major Responsibilities Bookkeeping, etc.
---------- ---------------------------
Have other family members been involved in their own business?
Yes (Husband Marble Construction)
- ------------------------------------------------------------------------------------------
If yes, what type of business? Concrete Waterproofing & Building, etc.
-----------------------------------------------------------
Have you or your business ever been involved in a bankruptcy? No If yes, please explain
----
- ------------------------------------------------------------------------------------------
Have you ever been convicted of a felony? No If yes, please explain
---- -------------------
10-KSB 1995 Exhibit 10.19-E
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 27
Financial Information (attach prepared financial statement, if available)
<TABLE>
<CAPTION>
ASSETS LIABILITIES
MARBLE PRICE MARBLE PRICE
<S> <C> <C> <S> <C> <C>
Cash in Checking $ 7,900.00 $ 1,500.00 Notes payable to banks 0 0
---------------------------------------------------- ----------------------------------
Cash in Savings $ 62,011.98 Notes payable to others 0 0
----------------------------------------------------- ---------------------------------
Real estate (Home) $147,600.00 Real estate debt $114,000.00 0
-------------------------------------------------- ----------------------------------------
Other real estate Automobile debt 0 0
--------------------------------------------------- -----------------------------------------
Cash surrender of life insurance $ 1,054.00 $ 1,604.71 Owing on life insurance 0 0
------------------------------------ ---------------------------------
Time Ins. Annuity $ 41,000.00 $ 41,000.00 Taxes payable 0 0
--------------------------------------------------- -------------------------------------------
A1 Jeep Cherokee Limited Charge Accounts Bal. Pd. Monthly 0
Automobiles $ 19,000.00 $ 30,000.00 -----------------------------------------
--------------------------------------------------------- Other liabilities 0 0
Your own business ---------------------------------------
---------------------------------------------------
Appraised Collectibles $ 5,000.00 $ 2,500.00 --------------------------------------------------------
----------------------------------------------
Money due you
-------------------------------------------------------
Other assets Harley's Clear $ 28,800.00 $ 7,500.00
--------------------------------------------------------
Stereo Furn & Misc $ 58,000.00 $ 10,000.00
- --------------------------------------------------------------------
Total assets $308,354.00 $156,116.69
----------------------------------------
Less total liabilities $114,000.00 0
----------------------------------
Net worth $194,354.00 $156,116.69
---------------------------------------------------
(Total $350,470.00)
</TABLE>
<TABLE>
<S> <C>
Credit References
1. Guaranty Bank & Trust Co. Address 2500 W. Memorial OKC
-------------------------------------------- ---------------------------------------
2. Memorial Bank Address Memorial Rd & Broadway Ext. OKC
-------------------------------------------- ---------------------------------------
3. Liberty Bank & Trust Co. Address 9350 So. Western
-------------------------------------------- ---------------------------------------
Business References
Eva Jackson
1. Jackson & Associates Jerry Jackson Address 4911 N. Portland Okla City
-------------------------------------------- ---------------------------------------
2. ABC Associates Realty Inc. Address 1432 SW 89th OKC OK
-------------------------------------------- ---------------------------------------
3. State Beauty Supply Lee Deane Address 5557 NW Expressway OKC
-------------------------------------------- ---------------------------------------
Personal References
1. David Bane
-------------------------------------------- Address 9024 S.E. 6th Midwest City, OK
2. Mike Hiller ---------------------------------------
-------------------------------------------- Address Unk 405-348-6190
3. James & Michelle Mason ---------------------------------------
-------------------------------------------- Address 2900 County Line Rd, Newcastle, Okla
---------------------------------------
</TABLE>
All of the information stated herein is a true and correct representation of my
personal and financial condition. It is understood that the purpose of this
application is for general information and is no way binding upon the
franchisor or the undersigned. This is not a contract.
10-KSB 1995 Exhibit 10.19-E
/s/ WENDY MARBLE 5/6/94
- ----------------------------------------------------------------------------
Signature Date
<PAGE> 28
DRAFT: FOR REVIEW PURPOSES ONLY
AGREEMENT AND MUTUAL RELEASE
THIS AGREEMENT AND MUTUAL RELEASE (this "Agreement") is entered into by and
between Bikers Dream, Inc., a California corporation ("Bikers Dream"), and
Marble Pierce Enterprises, L.L.C., (collectively and individually "Marble
Pierce Enterprises"), on January ___, 1996. The purpose of this Agreement is
to set forth the terms and conditions of the termination and rescission of the
Franchise Agreement between Bikers Dream and Marble Pierce Enterprises and the
mutual release between the parties for Marble Pierce Enterprises' purchase of a
Bikers Dream(R) Motorcycle Dealership.
ARTICLE I
RECITALS
1.1 Marble Pierce Enterprises entered into a Franchise Agreement with
Bikers Dream on June 10, 1994 (the "Franchise Agreement") which is attached
hereto as Exhibit A and incorporated herein by reference; and
1.2 Marble Pierce Enterprises desires to cease operating as a Bikers
Dream(R) Motorcycle Dealership and continue to operate as an independent
motorcycle dealership. Marble Pierce Enterprises desires to use certain
trademarks, servicemarks and logos of the Bikers Dream, receive operating
assistance and continue to buy certain products from Bikers Dream for a
transitional period after the termination of the Franchise Agreement.
1.3 Bikers Dream and Marble Pierce Enterprises desire to terminate the
Franchise Agreement in all respects and provide each other with a mutual
release of all possible claims resulting from Bikers Dream's sale of a Bikers
Dream(R) Motorcycle Dealership to Marble Pierce Enterprises, including Marble
Pierce Enterprises' past due dealer fees and advertising fees.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
in this Agreement, and for other good and valuable consideration, the parties
hereby contract, agree and stipulate as follows:
ARTICLE 2
TERMINATION OF DEALER AGREEMENT
The Franchise Agreement between Bikers Dream and Marble Pierce Enterprises and
all addenda and exhibits to the Franchise Agreement, are hereby terminated in
all respects and will be of no further force and effect. All rights granted to
Marble Pierce Enterprises by Bikers Dream will revert in all respects to Bikers
Dream, and all rights and privileges of Marble Pierce Enterprises under the
Franchise Agreement and all addenda and exhibits will terminate in all
respects.
<PAGE> 29
ARTICLE 3
BIKERS DREAM'S OBLIGATIONS
3.1 ONGOING ASSISTANCE. Bikers Dream will continue its efforts to provide
Marble Pierce Enterprises with the following until January 1, 1997 (the
"Ongoing Assistance Period): (a) additional training for such periods and at
such locations as may be deemed appropriate by Bikers Dream; provided, however,
that Marble Pierce Enterprises will be responsible for the salaries, fringe
benefits, payroll taxes, unemployment compensation, workers' compensation
insurance, travel costs, lodging, food, automobile rental, and all other
expenses for all persons sent to additional training; (b) include Marble Pierce
Enterprises in all Bikers Dream(R) special promotions and assistance with
local, regional and national advertising and marketing in such manner, form and
frequency as Bikers Dream may deem appropriate; (c) assistance with the
operation of Marble Pierce Enterprises' motorcycle dealership in person, by
telephone, at seminars, or by audio tapes or videotapes, newsletters or
bulletins made available from time to time to all Bikers Dream(R) dealers, as
Bikers Dream may deem appropriate; (d) advice concerning operating problems
disclosed by reports submitted to or inspections made by Bikers Dream, as
Bikers Dream may deem appropriate; (e) such assistance as Bikers Dream may deem
reasonably required, including advice and guidance with respect to new and
improved products, and services or methods of operation or business procedures
developed by Bikers Dream, management materials, promotional materials,
advertising formats and the Marks; (f) reasonable dissemination of Bikers
Dream's standards and specifications to prospective suppliers of Marble Pierce
Enterprises upon the written request of Marble Pierce Enterprises to Bikers
Dream; (g) the opportunity to participate, on the same basis as other Bikers
Dream(R) dealers, in purchasing programs for inventory, supplies, insurance and
equipment which Bikers Dream may, from time to time, use, develop, sponsor or
provide and upon such terms and conditions as may be determined solely by
Bikers Dream; and (h) warranties and guaranties on certain products designated
by Bikers Dream.
3.2 CONFIDENTIALITY. Bikers Dream, including their respective past and
present officers, Directors, shareholders, employees, agents, affiliates,
partners, subsidiaries, including Bikers Dream International, Inc., franchisees,
accountants, insurers, indemnitors, attorneys, heirs, representatives,
predecessors, successors and assigns (collectively "Bikers Dream and
Associates") will not disclose to anyone, except to their legal counsel, the
existence of this Agreement or any facts arising out of Marble Pierce
Enterprises' purchase of a Bikers Dream(R) Motorcycle Dealership, without the
prior written consent of Marble Pierce Enterprises. This Article 3.2 will not
apply to any information which is required to be disclosed by law or government
agency.
3.3 PROHIBITION OF DISPARAGEMENT. Bikers Dream and Associates will not
disparage of defame Marble Pierce Enterprises, its respective past and present
officers, Directors, shareholders, employees, agents, affiliates, partners,
subsidiaries, accountants, insurers, indemnitors, attorneys, heirs,
representatives, predecessors, successors and assigns (collectively "Marble
Pierce Enterprises and Associates") or its products or services in any way.
Bikers Dream and Associates recognize and agree that Articles 3.2 and 3.3 were
a significant inducement for Marble Pierce Enterprises to enter into this
Agreement.
2.
<PAGE> 30
ARTICLE 4
MARBLE PIERCE ENTERPRISES' USE OF BIKERS DREAM'S MARKS
4.1 AUTHORIZED USE. Bikers Dream grants to Marble Pierce Enterprises the
nonexclusive personal right to use the name Bikers Dream(R) and certain other
trade marks, service marks, slogans, logos and commercial symbols in the form
designated by Bikers Dream and only in the manner authorized and permitted by
Bikers Dream in writing (the "Marks") for the period between the effective date
of this Agreement and (the "Period of Authorized use
of the Marks"). Marble Pierce Enterprises' right to use the Marks is limited
to the uses set forth in this Agreement and any unauthorized use will
constitute an infringement of Bikers Dream's rights under this Agreement, the
Lanham Act (15 U.S.C. Section 101 et seq.) and the United States Copyright Act
(17 U.S.C. Section 101 et seq.). Marble Pierce Enterprises will not have or
acquire any rights in the Marks other than the right of use as provided herein.
After the Period of Authorized use of the Marks, Marble Pierce Enterprises will
cease to use the Marks and modify or alter their use of the Marks accordingly
so that it will be easily distinguishable from the Marks.
4.2 INJUNCTIVE RELIEF. Bikers Dream will have the right to petition a
court of competent jurisdiction for the entry of temporary and permanent
injunctions and orders of specific performance enforcing the provisions of this
Agreement relating to (a) Marble Pierce Enterprises' improper use of the Marks;
or (d) any breach or threatened breach by Marble Pierce Enterprises and
Associates of Articles 5.1 or 5.2 of this Agreement. Bikers Dream will be
entitled to seek injunctive relief against Marble Pierce Enterprises and
Associates under this provision without posting a bond or other security. In
any action brought under this provision where Bikers Dream prevails against
Marble Pierce Enterprises and Associates, Marble Pierce Enterprises will
indemnify Bikers Dream for all costs that in incurs in any lawsuit or
proceedings under this provision including, without limitation, attorney's fees,
expert witness fees, costs of investigation, court costs, litigation expenses,
travel and living expenses, and all other costs incurred by Bikers Dream.
ARTICLE 5
MARBLE PIERCE ENTERPRISES' OBLIGATIONS
5.1 CONFIDENTIALITY. Marble Pierce Enterprises and Associates will not
disclose to anyone, except to their legal counsel, the existence of this
Agreement or any facts arising out Marble Pierce Enterprises' intended purchase
of a Bikers Dream(R) Motorcycle Dealership, without the prior written consent
of Bikers Dream. This Article 5.1 will not apply to any information which is
required to be disclosed by law or government agency.
5.2 PROHIBITION OF DISPARAGEMENT. Marble Pierce Enterprises and
Associates will not disparage or defame Bikers Dream and Associates or its
products or service in any way. Marble Pierce Enterprises and Associates
recognize and agree that Articles 5.1 and 5.2 were a significant inducement for
Bikers Dream to enter into this Agreement.
3.
<PAGE> 31
ARTICLE 6
MUTUAL RELEASES
6.1 RELEASE OF MARBLE PIERCE ENTERPRISES BY BIKERS DREAM. Bikers Dream
and Associates hereby release and forever discharge Marble Pierce Enterprises
and Associates, individually and as officers, Directors or shareholders of any
corporation or partners of any partnership, from any and all causes of action,
suits, claims, demands, damages, judgments, losses, penalties (including, but
not limited to, overdue franchise fees and advertising fees), expenses
(including, but not limited to, reasonable attorney's fees), costs, settlements
and liabilities whatsoever, whether known or unknown, liquidated or
unliquidated, fixed, contingent, direct or indirect, whether at law or in
equity, which Bikers Dream and Associates have had or now have or may in the
future have against Marble Pierce Enterprises and Associates, or any one of
them, for, upon or by reason of any matter, fact or thing whatsoever from the
beginning of time to the date of this Agreement including, but not limited to,
fraud, misrepresentation, breach of contract, or any alleged violations of the
United States Federal Trade Commission's Trade Regulation Rule relating to
Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures, "mini" FTC laws, deceptive or unfair trade practice laws,
securities laws, and any other local, municipal, state, federal, commonwealth
or other laws, statutes, rules or regulations of the United States or any state
or other governmental subdivision or agency thereof, arising from, as a result
of, or in connection with Marble Pierce Enterprises' purchase of a Bikers
Dream(R) Motorcycle Dealership, the Dealer Agreement or any other oral or
written agreement between Bikers Dream and Associates and Marble Pierce
Enterprises and Associates, including any alleged breaches or violations or the
Franchise Agreement or any oral or written agreement between Bikers Dream and
Associates and any third party, including real estate leases, and any other
leases or contracts to purchase goods or services.
6.2 RELEASE, OF BIKERS DREAM BY MARBLE PIERCE ENTERPRISES. Marble Pierce
Enterprises and Associates hereby release and forever discharge Bikers Dream
and Associates, individually and as officers, Directors or shareholders of any
corporation or partners of any partnership, from any and all courses of action,
suits, claims, demands, damages, judgments, losses, penalties, expenses
(including, but not limited to, reasonable attorney's fees), costs, settlements
and liabilities whatsoever, whether known or unknown, liquidated or
unliquidated, fixed, contingent direct or indirect, whether at law or in
equity, which Marble Pierce Enterprises and Associates have had or now have or
may in the future have against Bikers Dream, or any one of them, for, upon or
by reason of any matter, fact or thing whatsoever from the beginning of time to
the date of this Agreement including, but not limited to, fraud,
misrepresentation, breach of contract, or any alleged violations of the United
States Federal Trade Commission's Trade Regulation Rule relating to Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures, "mini" FTC laws, deceptive or unfair trade practices laws, securities
laws, and any other local, municipal, state, federal, commonwealth or other
laws, statutes, rules or regulations of the United States or any state or other
governmental subdivision or agency thereof, arising from, as a result of, or in
connection with Marble Pierce Enterprises' purchase of a Bikers Dream(R)
Motorcycle Dealership, the Franchise Agreement or any other oral or written
agreement between Marble Pierce Enterprises and Associates and Bikers Dream,
Including any alleged breaches or violation of the Franchise Agreement or any
oral or written agreement between Marble Pierce Enterprises and Associates and
any third party, including real estate leases, and any other leases or
contracts to purchase goods or services.
4
<PAGE> 32
ARTICLE 7
MISCELLANEOUS
7.1 WAIVER. The failure of Bikers Dream or Marble Pierce Enterprises to
enforce at any time any provision of this Agreement, or to exercise any option
which is provided, or to require or fail to require at any time performance by
either party of any provision of this Agreement, will in no way affect the
validity or acts as a waiver of this Agreement, or any part, or the right of
Bikers Dream or Marble Pierce Enterprises' thereafter to enforce it.
7.2 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Oklahoma, and the substantive law or
Oklahoma will govern the rights and obligations of and the relationship between
the parties.
7.3 SEVERABILITY. If any term or provision of this Agreement is
determined to be void, invalid, or unenforceable, such provision will
automatically be voided and will not be part of this Agreement, but the
enforceability or validity of the remainder of this agreement will not be
affected.
7.4 INTEGRATION. This Agreement contains the full agreement of the
parties and may not be modified, altered or changed in any respect unless made
in writing and signed by Marble Pierce Enterprises and an officer of Bikers
Dream. This Agreement supersedes and terminates any and all prior oral and
written agreements and understandings between the parties. The parties, who
have negotiated with respect to the terms of this Agreement, have read this
agreement, have consulted with counsel and understand the meaning of each of the
terms of this Agreement.
7.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each or which will be deemed an original, but all of which
together will constitute one and the same instrument.
5.
<PAGE> 33
IN WITNESS WHEREOF, Bikers Dream and Marble Pierce Enterprises have
respectively signed and sealed this Agreement effective as of the day and year
first above written.
"BIKERS DREAM"
County of Orange )
)ss. BIKERS DREAM, INC.
State of California )
Subscribed and sworn to before me By:____________________________________
this_______day of________1995 Its:___________________________________
"MARBLE PIERCE ENTERPRISES"
County of )
)ss.
State of Oklahoma )
Subscribed and sworn to before me
this_______day of_________1995.
_________________________________ _______________________________________
Notary Public Wendy Marble
County of )
)ss.
State of Oklahoma )
Subscribed and sworn to before me
this_______day of__________1995.
_________________________________ _______________________________________
Notary Public Jim Marble
6.
<PAGE> 34
County of )
)ss.
State of Oklahoma )
Subscribed and sworn to before me
this_______day of__________1995.
_________________________________ _______________________________________
Notary Public Patricia Pierce
County of )
)ss.
State of Oklahoma )
Subscribed and sworn to before me
this_______day of__________1995.
_________________________________ _______________________________________
Notary Public Terry Pierce
7.
<PAGE> 35
EXHIBIT A
FRANCHISE AGREEMENT
Agreement and Mutual Release
Bikers Dream, Inc.
Marble Pierce Enterprises, L.L.C.
<PAGE> 1
Exhibit 10.21
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into this ____ day
of September, 1995, is to be effective October 1, 1995, and sets forth a new
understanding which has been reached between Meyer Duffy & Associates (the
"Consultant") and Bikers Dream, Inc. (the "Company"), concerning the provision
of certain management consulting, financial advisory and investment banking
services by the Consultant to the Company. This Consulting Agreement shall not
supplant the Consulting Agreement of April 6, 1995 ("Initial Consulting
Agreement"), which shall also continue in force until its expiration date of
October 4, 1995.
I. Purpose: The Company hereby engages the Consultant for a ten
month term commencing October 1, 1995 to render consulting advice to the
Company relating to management, financial and similar matters upon the terms
and conditions set forth herein.
II. Duties of the Consultant: During the term of the Agreement,
the Consultant shall use its best efforts to provide the Company with such
regular and customary financial consulting advice and management consulting as
is reasonably requested by the Company consistent with the foregoing, and shall
use its best efforts to obtain a commitment from a reputable investment banking
firm to raise up to Ten Million ($10,000,000.00) Dollars of capital for the
Company.
A. The Consultant's duties may include, but will not
necessarily be limited to, providing recommendations concerning the following
financial and related matters:
1. Rendering advice with regard to internal
operations, including:
a. the formation of corporate goals and
their implementation;
b. revising the Company's business
plan;
c. the Company's financial structure,
including its divisions or
subsidiaries;
d. corporate organization and
personnel;
2. Rendering advice and assistance with regard
to any of the following corporate finance
matters:
a. changes in capitalization of the
Company;
b. changes in the Company's corporate
structure;
c. redistribution of shareholdings of
the Company's stock;
<PAGE> 2
d. offerings of securities in public
transactions;
e. sales of securities in private
transactions;
f. alternative uses of corporate
assets;
g. structure and use of debt; and
h. sales of stock by insiders;
3. Disseminating information about the Company
to the investment community at large;
4. Rendering advice and assistance in connection
with the preparation of annual and interim
reports and press releases;
5. Assisting in the Company's financial public
relations;
6. Arranging, on behalf of the Company, at
appropriate times, meetings with securities
analysts of major regional investment banking
firms;
7. Assistance in negotiations with regional
investment banking firms with the goal of
maximizing the evaluation of the Company and
procuring additional equity and debt capital;
8. introducing clients, customers or other
business opportunities with a view to
generating sales of goods or services by the
Company.
B. In addition to the foregoing, the Consultant agrees
to furnish advice to the Company in connection with (i) the acquisition and/or
merger of or with other companies, any divestiture or any other similar
transaction, or the sale of the Company itself (or any significant percentage
of the assets, subsidiaries or affiliates thereof, and (ii) bank financing or
any other financing from financial institutions.
C. The Consultant shall render such other financial
advisory and investment and/or investment banking services as may from time to
time be agreed upon by the Consultant and the Company.
III. Compensation: The compensation provided for herein is
performance based; that is, contingent upon the achievements of certain goals
by the Company with the assistance of Consultants. In consideration for the
services rendered by the Consultant to the Company pursuant to this Agreement
(and in addition to its expenses), the Company shall compensate the Consultant
as follows:
2
<PAGE> 3
A. The Consultant is entitled to receive a monthly fee
grant of 2,500 shares of the Company's common stock for the six month period
ending October 4, 1995, an aggregate of 15,000 shares, pursuant to the Initial
Consulting Agreement.
B. In addition, in consideration of Consultants'
assistance in placing the Company's $625,000.00 convertible debt offering, the
Company will grant to Consultant an option, in the form of the option attached
hereto, to purchase at any time within two years of the date of the grant
30,000 shares of the Company's common stock at a price of $2.50 per share.
C. In addition, in consideration of Consultants'
assistance in placing an additional $600,000 of the Company's convertible debt
and other services rendered and to be rendered pursuant to this Agreement, the
Company will pay Consultant the sum of $49,200.00, beginning October 1, 1995,
in the following increments:
On October 1, 1995, $4,200.00, and $5,000.00 per month on
November 1, 1995 and the first day of each month thereafter
until fully paid with the final payment due July 1, 1996.
D. In addition, the Consultant is assisting the Company
in raising up to $10,000,00.00 of additional capital through an investment
banker or bankers introduced by Consultant to the Company. Upon the successful
closing of an offering(s) through such an investment banker, the Company agrees
to grant to Consultant an option, in the form of the option attached hereto, to
purchase 10,000 shares of the Company's common stock for each $1,000,000 of
capital received by the Company in such offering(s), up to a maximum of 100,000
shares for $10,000,000 of capital received. The options shall be granted in
pro rata increments, e.g., 7,500,000 in capital raised equates to $75,000.00 in
options. The option shall be exercisable at a price of $2.50 per share, at any
time within two years after the date of completion of a successful financing
pursuant hereto.
E. The Company hereby grants to Consultant observer
status at meetings of its Board of directors, which may be effected by
telephone.
IV. Expenses: The Company shall reimburse the Consultant for the
Consultant's counsel and the Consultant's travel and out-of-pocket expenses
incurred in connection with the services performed by the Consultant pursuant
to the Agreement, provided that any expenses above $500.00 for any single item
shall be pre-approved by the Chief Financial Officer of the Company and, upon
reasonable request, may be advanced.
V. Trade Secrets of the Consultant: The Company acknowledges
that all opinions and advice (written or oral) given by the Consultant to the
Company in connection with the Consultant's engagement are intended solely for
the benefit and use of the Company in considering the transaction to which they
relate, and the Company agrees that no person or entity other than the Company
shall be entitled to make use of or rely upon the advice of the Consultant
given under the Agreement. The Company further acknowledges that any
information given to it by the Consultant, including the
3
<PAGE> 4
names of any funding sources, ESOP consultants, brokerage houses or management
consultants, are confidential, and are trade secrets proprietary to the
Consultant, and during the term of the Agreement and for 5 years thereafter the
Company may make no use of such information without the express written consent
of the consultant.
VI. Registration Rights: The Company shall grant the Consultant
piggyback registration rights with respect to any shares issued to Consultants
pursuant to the Initial Consulting Agreement or shares issuable on exercise of
options granted to Consultant under this Agreement.
VII. The Consultant's Services to Others: The Company acknowledges
that the Consultant and its affiliates are in the business of providing
financial services and consulting advice to others. Nothing herein contained
shall be construed to limit or restrict the Consultant in conducting such
business with respect to others, or in rendering such advice to others.
VIII. Indemnification: The Company shall indemnify and hold the
Consultant harmless to the fullest extent usual and customary in relationships
of this nature. Consultant shall indemnify and hold the Company harmless from
damages accruing to third parties and the Company arising from the disclosure
of information known to Consultant to be inaccurate or misleading.
IX. The Consultant as Independent Contractor: The Consultant
shall perform its services under the Agreement as independent contractor and
not as an employee of the Company or an affiliate thereof.
X. Accurate Information: The Company hereby represents and
warrants that all information provided the Consultant pertaining to the Company
shall be true and correct; and the Company shall hold the Consultant harmless
from any and all liability, expenses or claims arising from the disclosure or
use of such information.
XI. Confidentiality; Right to Publish Tombstone: The parties
shall enter into a confidentiality agreement customary for relationships of
this nature in order to protect the confidentiality of proprietary business
information. The Company specifically acknowledges, however, that the
Consultant shall be entitled to publish or distribute notices in the nature of
so-called "tombstone" advertisements to announce the closing of transactions
involving the Company.
4
<PAGE> 5
XII. Applicable Law: The Agreement will be governed by and
construed under the laws of the State of California, and any action brought by
either party against the other party to enforce or interpret the Agreement
shall be subject to binding arbitration within such State. In the event of any
such action, the prevailing party shall recover all costs and expenses thereof,
including reasonable attorney's fees, from the losing party.
The undersigned concur with the matters set forth in the
foregoing Agreement.
MEYER DUFFY & ASSOCIATES
By:_______________________________
THE COMPANY
By:_______________________________
Dennis Campbell, President
5
<PAGE> 1
Exhibit 10.22
INCENTIVE STOCK OPTION PLAN OF
BIKERS DREAM, INC.
a California Corporation
PURPOSE OF PLAN
1. The purpose of this Plan is to strengthen BIKERS DREAM, INC.,
(hereafter "Corporation") by providing incentive stock options as a means to
attract, retain, and motivate corporate personnel.
ADMINISTRATION OF PLAN
2. This Plan shall be administered by a Compensation Committee
(hereafter "Committee") composed of members selected by, and serving at the
pleasure of, the Board of Directors. The Committee shall have the power to
make all determinations necessary for the administration of the Plan, subject
to the restrictions on committee powers set forth in Corporations Code Section
311.
GRANT OF OPTIONS
3. BIKERS DREAM, INC. is hereby authorized to grant incentive
stock options as defined in Internal Revenue Code Section 422 to any full-time
employee. Options may not be granted to employees who own stock possessing
more than 10 percent of the total combined voting power of all classes of stock
of the corporation, or of its parent or subsidiary, except pursuant to the
restrictions set forth in paragraphs 6 and 7. Any option granted under this
Plan shall be granted within 10 years from the date this Plan is adopted, or
the date this Plan is approved by the shareholders pursuant to paragraph 13,
whichever is earlier.
STOCK SUBJECT TO PLAN
4. The aggregate number of shares that may be issued pursuant to
options granted under this Plan shall be five hundred thousand (500,000) shares
of the Corporation's voting common stock.
AGGREGATE FAIR MARKET VALUE
5. The aggregate fair market value of the stock, as determined in
good faith by the Committee at the time the option is granted, with respect to
which incentive stock options are exercisable for the first time by an employee
during any calendar year (under all incentive stock option plans of the
Corporation and its parent and subsidiary corporations) shall not exceed
$100,000.
<PAGE> 2
EXERCISE OF OPTION
6. Any option granted pursuant to this Plan shall contain
provisions, established by the Committee, setting forth the manner of
exercising the option. However, no option granted under this Plan shall be
exercisable by its terms after the expiration of 10 years from the grant of the
option, and no option granted to a person who owns stock possessing more than
10 percent of the total combined voting power of all classes of the
Corporation's stock shall be exercisable by its term after the expiration of
five years from the date of the grant. The option may be subject to earlier
termination as provided in paragraph 9 hereof.
The optionee shall have the right to receive property at the
time of exercising the option, so long as the property is subject to inclusion
in income under Internal Revenue Code Section 83.
The optionee shall be permitted to experience on a cashless
basis, that is exercise options while simultaneously selling the underlying
shares, provided the underlying shares are registered or subject to an
exemption.
OPTION PRICE
7. The price for a share of stock subject to an option granted
pursuant to this Plan shall not be less than the fair market value for the
stock at the time the option is granted, as determined by the bid price on the
close of the date the option is granted.
OPTIONS NONTRANSFERABLE
8. The terms of any option granted under this Plan shall make
the option nontransferable by the options except by will or the laws of descent
and distribution, and exercisable only by the optionee during his or her
lifetime.
TERMINATION OF EMPLOYMENT
9. An optionee's option shall expire three months after
termination of employment for reasons other than death or disability, subject
to earlier termination pursuant to P 6 of this Plan. An optionee's option
shall expire 12 months after termination of employment due to permanent and
total disability, as defined in Internal Revenue Section 22(e)(3), subject to
earlier termination pursuant to paragraph 6 of this Plan. If an optionee
should die while employed by the Corporation, or its parent, subsidiary, or
successor as defined in Section 424 of the Internal Revenue Code, or within the
three-month period after termination of employment, the person to whom the
optionee's rights pass by will or the laws of descent and distribution may
exercise the option for any of the shares not previously exercised during
Employee's lifetime, within one year after the optionee's death, subject to
earlier termination pursuant to paragraph 6 of this Plan.
STOCK SUBJECT TO OPTION
-2-
<PAGE> 3
10. The Corporation shall at all times during the term of this
Plan reserve the number of shares of five hundred thousand (500,000) required
to meet the requirements of this Plan, and shall pay all fees and expenses
necessarily incurred by the Corporation in connection with the exercise of
options under this Plan.
In the event of a stock split, reverse stock split, stock
dividend, combination, or reclassification of the Corporation's stock, an
appropriate and proportionate adjustment shall be made in the number of shares
to which stock options may be granted. A corresponding change shall be made to
the number and kind of shares, and the exercise price per share, of unexercised
options.
MERGER, CONSOLIDATION, OR DISSOLUTION OF CORPORATION
11. Following the merger of one or more corporations into the
Corporation, or any consolidations of the Corporation and one or more
corporations in which the Corporation is the surviving corporation, the
exercise of options under this Plan shall apply to the shares of the surviving
corporation.
Notwithstanding any other provision of this Plan, all options
under this Plan shall terminate on the dissolution or liquidation of the
Corporation, or on any merger or consolidation in which the Corporation is not
the surviving corporation.
OTHER OPTION TERMS
12. Any option granted pursuant to this Plan shall contain any
other terms that the Board of Directors, the Corporation's legal counsel, or
the Committee deems necessary.
EFFECTIVE DATE OF PLAN
13. This Plan shall be effective on approval by the majority vote
of shareholders of the Corporation.
AMENDMENT AND TERMINATION OF PLAN
14. The Board of Directors may at any time amend or terminate this
Plan. No option may be granted after termination. The amendment or
termination of the Plan shall not, however, alter any optionee's rights or
obligations under an option previously granted, unless the optionee consents to
that alteration.
FINANCIAL STATEMENTS
15. Optionees under this Plan shall receive financial statements
annually regarding the Corporation during the period the options are
outstanding. The financial statements provided need not comply with Title 10,
Section 260.613 of the California Code of Regulations.
Adopted by the Board of Directors on April 4, 1995.
-3-
<PAGE> 1
Exhibit 10.23
NON-QUALIFIED STOCK OPTION PLAN OF
BIKERS DREAM, INC.
a California Corporation
PURPOSE OF PLAN
1. The purpose of this Plan is to strengthen BIKERS DREAM, INC.,
(hereafter "Corporation") by providing stock options as a means to attract,
retain, and compensate Directors of the Corporation.
ADMINISTRATION OF PLAN
2. This Plan shall be administered by the Board of Directors.
The Board of Directors shall have the power to make all determinations
necessary for the administration of the Plan, subject to the restrictions on
such powers set forth in Corporations Code Section 311.
GRANT OF OPTIONS
3. BIKERS DREAM, INC. is hereby authorized to grant stock options
to all management and key personnel of the Corporation. Any option granted
under this Plan shall be granted within 10 years from the date this Plan is
adopted, or the date this Plan is approved by the shareholders pursuant to
paragraph 13, whichever is earlier.
STOCK SUBJECT TO PLAN
4. The aggregate number of shares that may be issued pursuant to
options granted under this Plan shall be one million (1,000,000) shares of the
Corporation's voting common stock.
AGGREGATE FAIR MARKET VALUE
5. The aggregate fair market value of the stock, as determined in
good faith by the Board of Directors at the time the option is granted, with
respect to which stock options are exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000.
EXERCISE OF OPTION
6. Any option granted pursuant to this Plan shall contain
provisions, established by the Board of Directors, setting forth the manner of
exercising the option. However, no option granted under this Plan shall be
exercisable by its terms after the expiration of 10 years from the grant of the
option.
<PAGE> 2
The optionee shall be permitted to experience on a cashless
basis, that is exercise options while simultaneously selling the underlying
shares, provided the underlying shares are registered or subject to an
exemption.
OPTION PRICE
7. The price for a share of stock subject to an option granted
pursuant to this Plan shall be the bid price of the stock at the closing of
trading on the date the option is granted.
OPTIONS NONTRANSFERABLE
8. The terms of any option granted under this Plan shall make
the option nontransferable by the options except by will, revocable living
trust, or the laws of descent and distribution, and exercisable only by the
optionee during his or her lifetime.
TERMINATION OF SERVICE
9. An optionee's option shall not expire by virtue of termination
of service as a member of the Board of Directors. In the event that an
optionee's service on the Board of Directors is terminated for any reason, all
options granted pursuant to this Plan shall immediately vest, regardless of the
length of service. If an optionee should die while serving on the Board of
Directors of the Corporation, or its parent, subsidiary, or successor, the
person to whom the optionee's rights pass by will or the laws of descent and
distribution may exercise the option for any of the shares not previously
exercised during Employee's lifetime, within three years after the optionee's
death.
STOCK SUBJECT TO OPTION
10. The Corporation shall at all times during the term of this
Plan reserve the number of shares of one million (1,000,000) required to meet
the requirements of this Plan, and shall pay all fees and expenses necessarily
incurred by the Corporation in connection with the exercise of options under
this Plan.
In the event of a stock split, reverse stock split, stock
dividend, combination, or reclassification of the Corporation's stock, an
appropriate and proportionate adjustment shall be made in the number of shares
to which stock options may be granted. A corresponding change shall be made to
the number and kind of shares, and the exercise price per share, of unexercised
options.
MERGER, CONSOLIDATION, OR DISSOLUTION OF CORPORATION
11. Following the merger of one or more corporations into the
Corporation, or any consolidations of the Corporation and one or more
corporations in which the Corporation is the surviving corporation, the
exercise of options under this Plan shall apply to the shares of the surviving
corporation.
-2-
<PAGE> 3
Notwithstanding any other provision of this Plan, all options
under this Plan shall terminate on the dissolution or liquidation of the
Corporation.
OTHER OPTION TERMS
12. Any option granted pursuant to this Plan shall contain any
other terms that the Board of Directors or the Corporation's legal counsel
Committee deems necessary.
EFFECTIVE DATE OF PLAN
13. This Plan shall be effective on approval by the outstanding
shares of the Corporation.
AMENDMENT AND TERMINATION OF PLAN
14. The Board of Directors may at any time amend or terminate this
Plan. No option may be granted after termination. The amendment or
termination of the Plan shall not, however, alter any optionee's rights or
obligations under an option previously granted, unless the optionee consents to
that alteration.
Adopted by the Board of Directors on April 4, 1995.
-3-
<PAGE> 1
Exhibit 10.24
NON-QUALIFIED STOCK OPTION PLAN OF
BIKERS DREAM, INC.
a California Corporation
PURPOSE OF PLAN
1. The purpose of this Plan is to strengthen BIKERS DREAM, INC.,
(hereafter "Corporation") by providing stock options as a means to attract,
retain, and compensate Directors of the Corporation.
ADMINISTRATION OF PLAN
2. This Plan shall be administered by the Board of Directors.
The Board of Directors shall have the power to make all determinations
necessary for the administration of the Plan, subject to the restrictions on
such powers set forth in Corporations Code Section 311.
GRANT OF OPTIONS
3. BIKERS DREAM, INC. is hereby authorized to grant stock options
to all management and key personnel of the Corporation. Any option granted
under this Plan shall be granted within 10 years from the date this Plan is
adopted, or the date this Plan is approved by the shareholders pursuant to
paragraph 13, whichever is earlier.
STOCK SUBJECT TO PLAN
4. The aggregate number of shares that may be issued pursuant to
options granted under this Plan shall be one million (1,000,000) shares of the
Corporation's voting common stock.
AGGREGATE FAIR MARKET VALUE
5. The aggregate fair market value of the stock, as determined in
good faith by the Board of Directors at the time the option is granted, with
respect to which stock options are exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000.
<PAGE> 2
EXERCISE OF OPTION
6. Any option granted pursuant to this Plan shall contain
provisions, established by the Board of Directors, setting forth the manner of
exercising the option. However, no option granted under this Plan shall be
exercisable by its terms after the expiration of 10 years from the grant of the
option.
The optionee shall be permitted to experience on a cashless
basis, that is exercise options while simultaneously selling the underlying
shares, provided the underlying shares are registered or subject to an
exemption.
OPTION PRICE
7. The price for a share of stock subject to an option granted
pursuant to this Plan shall be the bid price of the stock at the closing of
trading on the date the option is granted.
OPTIONS NONTRANSFERABLE
8. The terms of any option granted under this Plan shall make
the option nontransferable by the options except by will, revocable living
trust, or the laws of descent and distribution, and exercisable only by the
optionee during his or her lifetime.
TERMINATION OF SERVICE
9. An optionee's option shall not expire by virtue of termination
of service as a member of the Board of Directors. In the event that an
optionee's service on the Board of Directors is terminated for any reason, all
options granted pursuant to this Plan shall immediately vest, regardless of the
length of service. If an optionee should die while serving on the Board of
Directors of the Corporation, or its parent, subsidiary, or successor, the
person to whom the optionee's rights pass by will or the laws of descent and
distribution may exercise the option for any of the shares not previously
exercised during Employee's lifetime, within three years after the optionee's
death.
STOCK SUBJECT TO OPTION
10. The Corporation shall at all times during the term of this
Plan reserve the number of shares of one million (1,000,000) required to meet
the requirements of this Plan, and shall pay all fees and expenses necessarily
incurred by the Corporation in connection with the exercise of options under
this Plan.
In the event of a stock split, reverse stock split, stock
dividend, combination, or reclassification of the Corporation's stock, an
appropriate and proportionate adjustment shall be made in the number of shares
to which stock options may be granted. A corresponding change
-2-
<PAGE> 3
shall be made to the number and kind of shares, and the exercise price per
share, of unexercised options.
MERGER, CONSOLIDATION, OR DISSOLUTION OF CORPORATION
11. Following the merger of one or more corporations into the
Corporation, or any consolidations of the Corporation and one or more
corporations in which the Corporation is the surviving corporation, the
exercise of options under this Plan shall apply to the shares of the surviving
corporation.
Notwithstanding any other provision of this Plan, all options
under this Plan shall terminate on the dissolution or liquidation of the
Corporation.
OTHER OPTION TERMS
12. Any option granted pursuant to this Plan shall contain any
other terms that the Board of Directors or the Corporation's legal counsel
Committee deems necessary.
EFFECTIVE DATE OF PLAN
13. This Plan shall be effective on approval by the outstanding
shares of the Corporation.
AMENDMENT AND TERMINATION OF PLAN
14. The Board of Directors may at any time amend or terminate this
Plan. No option may be granted after termination. The amendment or
termination of the Plan shall not, however, alter any optionee's rights or
obligations under an option previously granted, unless the optionee consents to
that alteration.
Adopted by the Board of Directors on April 4, 1995.
-3-
<PAGE> 1
Exhibit 10.25
AMENDMENT TO CONSULTING AGREEMENT
This Amendment to Consulting Agreement (the "Agreement") made and
entered into as of November 1, 1995, is by and between Bikers Dream, Inc., a
California corporation (the "Company") and Meyer Duffy & Associates (the
"Consultant").
RECITALS
WHEREAS, the Company and the Consultant entered into that certain
Consulting Agreement effective as of October 1, 1995 (the "Agreement"),
pursuant to which the Consultant was engaged by the Company to provide
consulting, financial advisory and investment banking services; and
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. All terms defined in the Agreement and used herein shall have
the meaning given them in the Agreement.
2. Paragraph II of the Agreement is hereby amended by changing
the amount of capital to be raised for the Company from up to
$10,000,000 to up to $20,000,000.
3. Subparagraph D of Paragraph III of the Agreement is hereby
renumbered subparagraph E and is amended to read in full as
follows:
"E. In addition, the Consultant is assisting the Company in
raising up to $20,000,000.00 of additional capital through an
investment banker or bankers introduced by Consultant to the
Company. Upon the successful closing of an offering(s)
through such an investment banker, the Company agrees to grant
to Consultant an option, in the form of the option attached
hereto, to purchase 10,000 shares of the Company's common
stock for each $1,000,000 of capital received by the Company
in such offering(s), up to a maximum of 100,000 shares for
$20,000,000 of capital received. The option shall be granted
in pro rata increments, e.g., $7,500,000 in capital raised
equates to $75,000 option shares. The option shall be
exercisable at a price of $2.50 per share, at any time within
two years after the date of completion of a successful
financing pursuant hereto."
4. Paragraph III of the Agreement is hereby amended by adding a
new subparagraph D thereto which shall read as follows:
"D. In addition, in consideration of Consultants' assistance
in raising additional capital for the Company of up to
$1,100,000 in debt convertible to common stock at a price no
less than $1.70 per share (the "Bridge Financing"), at least
$100,000 of which shall have been
<PAGE> 2
received by the Company on or before November 3, 1995, the
Company will compensate Consultant as follows:
(1) The Company will grant to Consultant an
option, in the form of the option attached hereto, to
purchase, at any time within two years after the date of
grant, 50,000 shares of the Company's common stock at a price
of $1.70 per share.
(2) The Company will pay Consultant a fee of 5%
of all proceeds received by the Company from the Bridge
Financing in excess of the first $100,000 of such proceeds,
such fee to be paid, without any interest thereon, within ten
days after the date on which written demand for such payment
is made by Consultant; provided that consultant shall not make
demand for payment within 180 days after the date on which all
of the proceeds from the Bridge Financing have been received
by the Company."
5. Except as expressly set forth herein, the Agreement shall
remain in full force and effect.
6. This Amendment may be executed in several counterparts, each
of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first hereinabove written.
COMPANY
Bikers Dream, Inc.
By:
-----------------------------------
Its:
-----------------------------------
CONSULTANT
Meyer Duffy & Associates
By:
-----------------------------------
Its:
-----------------------------------
<PAGE> 1
Exhibit 16
[LOGO] [LETTERHEAD OF LESLEY, THOMAS, SCHWARZ & POSTMA, INC.]
April 9, 1996
United States Securities & Exchange Commission
Mail Stop 7-2
Washington, D.C. 20549
Re: Bikers Dream, Inc.
Gentlemen:
We have reviewed the disclosures included in an 8-KA dated April 9, 1996 to be
filed by Bikers Dream, Inc. regarding a change of accountants from this firm to
Coopers & Lybrand, LLP on December 1, 1995.
We agree with the statements contained therein.
There were no disagreements preceding the dismissal of Lesley, Thomas, Schwarz
& Postma, Inc. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
<PAGE> 1
Exhibit 16.1
KPMG [LOGO] Peat Marwick LLP
Orange County Office Telephone 714 850-4300 Telefax 714 850-4488
Center Tower
650 Tower Center Drive
Costa Mesa, CA 92626
July 31, 1995
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for HDL Communications (now known as
Bikers Dream, Inc.) and, under the date of January 6, 1995, we reported on the
financial statements of HDL Communications as of and for the years ended
September 30, 1994 and 1993. On July 17, 1995, our appointment as principal
accountants was terminated. We have read Bikers Dream, Inc.'s statements
included under Item 4 of its Form 8-K/A dated July 28, 1995, and we agree with
such statements, except that we are not in a position to agree or disagree with
Bikers Dream, Inc.'s statement that the change was recommended and approved by
the board of directors or that Coopers & Lybrand LLP was not engaged regarding
the application of accounting principles to a specified transaction or the type
of audit opinion that might be rendered on Bikers Dream, Inc.'s financial
statements.
Very truly yours,
KPMG PEAT MARWICK LLP
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF BIKERS DREAM, INC.
Bikers Dream International, Inc. (California, 1995)
(Franchise subsidiary, active)
Bikers Dream Management Services, Inc. (California, 1995)
(inactive)
Bikers Dream Distribution, Inc. (Nevada, 1995)
(Mobile Store, "Dream Wheels," active)
Bikers Dream Eagle Enterprises, Inc. (California, 1995)
(inactive)
<PAGE> 1
Exhibit 24
BIKERS DREAM, INC.
Special Power of Attorney
for Execution of Document 10-KSB, FYE 1995
and Amendments Thereto
To Be Filed with the
United States Securities & Exchange Commission
The undersigned does hereby appoint Dennis W. Campbell, President and
Chief Executive Officer and William R. Gresher, Senior Vice President and Chief
Financial Officer of Bikers Dream, Inc., a California corporation, or either of
them, my true and lawful attorney to sign, by indicated mark or otherwise, the
signature page(s) of the Bikers Dream Form 10-KSB and documents appurtenant to,
or in amendment thereof, in my name, place or stead, with full power and
authority to each said Power of Attorney to do and perform in the name, and on
behalf of, the undersigned director, each and every act whatsoever necessary or
desirable in connection with filing of said Form 10-KSB, to all intents and
purposes as any such officer might or could do in person.
Dated: 3-22-96 /s/ DONALD DUFFY
------------------- --------------------------------------
Donald B. Duffy
<PAGE> 2
ACKNOWLEDGMENT
State of New York )
) ss.
County of New York )
On March 22, 1996, before me, Maria Natole, personally appeared 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.
Signature /s/ Maria Natole
------------------------------
MARIA NATOLE
Notary Public, State of New York
No. 01NA5011572
Qualified in Queens County
Commission Expires May 15, 1997
<PAGE> 3
BIKERS DREAM, INC.
Special Power of Attorney
for Execution of Document 10-KSB, FYE 1995
and Amendments Thereto
To Be Filed with the
United States Securities & Exchange Commission
The undersigned does hereby appoint Dennis W. Campbell, President and
Chief Executive Officer and William R. Gresher, Senior Vice President and Chief
Financial Officer of Bikers Dream, Inc., a California corporation, or either of
them, my true and lawful attorney to sign, by indicated mark or otherwise, the
signature page(s) of the Bikers Dream Form 10-KSB and documents appurtenant to,
or in amendment thereof, in my name, place or stead, with full power and
authority to each said Power of Attorney to do and perform in the name, and on
behalf of, the undersigned director, each and every act whatsoever necessary or
desirable in connection with filing of said Form 10-KSB, to all intents and
purposes as any such officer might or could do in person.
Dated: 3/13/96 /s/ ROWLAND W. DAY, II
------------------- --------------------------------------
Rowland W. Day, II
<PAGE> 4
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
----------------
County of Orange
---------------
<TABLE>
<S> <C>
On March 14, 1996 before me, Julia C. Boren, Notary Public
-------------- -------------------------------------------------------
Date Name, Title of Officer--E.G., "Jane Doe, Notary Public"
personally appeared Rowland W. Day II
----------------------------------------
Name(s) of Signer(s)
[ ] personally known to me--OR-- [ ] proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) 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.
Julia C. Boren
[SEAL] Comm. #1028718 WITNESS my hand and official seal.
Notary Public--California
Orange County /s/ Julia C. Boren
My Comm. Expires Jun 5, 1998 -----------------------------------------------
Signature of Notary
- -------------------------------------- OPTIONAL --------------------------------------
Though the data below is not required by law, it may prove valuable to persons relying
on the document and could prevent fraudulent reattachment of this form.
</TABLE>
<TABLE>
<S> <C>
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER Special Power of Attorney
----------------------------------------
-------------------------------------- Title or Type of Document
Title(s)
[ ] PARTNER(S) [ ] LIMITED 1
[ ] GENERAL ----------------------------------------
[ ] ATTORNEY-IN-FACT Number of Pages
[ ] TRUSTEE(s)
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER: 3/13/96
-------------------------------- ----------------------------------------
-------------------------------------- Date of Document
--------------------------------------
SIGNER IS REPRESENTING: None
Name of Person(s) or Entity(ies) ----------------------------------------
Signer(s) Other Than Named Above
- -----------------------------------------
- ----------------------------------------- 10-KSB 1995 Exhibit 24
</TABLE>
<PAGE> 5
ACKNOWLEDGMENT
State of CALIFORNIA )
) ss.
County of ORANGE )
On March 14, 1996, before me, Rowland W. Day II, personally appeared 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.
Signature /s/ Julia C. Boren [SEAL] JULIA C. BOREN
-------------------------- COMM. #1028718
Notary Public - California
ORANGE COUNTY
My Comm. Expires JUN 5, 1998
<PAGE> 6
BIKERS DREAM, INC.
Special Power of Attorney
for Execution of Document 10-KSB, FYE 1995
and Amendments Thereto
To Be Filed with the
United States Securities & Exchange Commission
The undersigned does hereby appoint Dennis W. Campbell, President and
Chief Executive Officer and William R. Gresher, Senior Vice President and Chief
Financial Officer of Bikers Dream, Inc., a California corporation, or either of
them, my true and lawful attorney to sign, by indicated mark or otherwise, the
signature page(s) of the Bikers Dream Form 10-KSB and documents appurtenant to,
or in amendment thereof, in my name, place or stead, with full power and
authority to each said Power of Attorney to do and perform in the name, and on
behalf of, the undersigned director, each and every act whatsoever necessary or
desirable in connection with filing of said Form 10-KSB, to all intents and
purposes as any such officer might or could do in person.
Dated: March 15, 1996 /s/ HUMBERT B. POWELL, III
------------------- --------------------------------------
Humbert B. Powell, III
<PAGE> 7
ACKNOWLEDGMENT
State of New York )
) ss.
County of Kings )
On March 15, 1996, before me, Humbert B. Powell III, personally
appeared 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.
Signature /s/ Danny Chin
------------------------------
Notary Public
DANNY CHIN
Notary Public, State of New York
[SEAL] No. 4988776
Qualified in Kings County
Commission Expires November 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 135,736
<SECURITIES> 0
<RECEIVABLES> 309,643
<ALLOWANCES> (23,251)
<INVENTORY> 1,657,460
<CURRENT-ASSETS> 2,210,683
<PP&E> 846,621
<DEPRECIATION> (99,981)
<TOTAL-ASSETS> 3,138,474
<CURRENT-LIABILITIES> 1,536,107
<BONDS> 0
0
0
<COMMON> 3,166,970
<OTHER-SE> (2,482,815)
<TOTAL-LIABILITY-AND-EQUITY> 3,138,474
<SALES> 7,790,090
<TOTAL-REVENUES> 7,940,336
<CGS> 5,980,469
<TOTAL-COSTS> 4,247,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,251
<INTEREST-EXPENSE> 33,359
<INCOME-PRETAX> (2,287,967)
<INCOME-TAX> 59,726
<INCOME-CONTINUING> (2,347,693)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,347,693)
<EPS-PRIMARY> (0.50)
<EPS-DILUTED> (0.50)
</TABLE>
<PAGE> 1
Exhibit 99(a)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) March 13, 1995
--------------
HDL COMMUNICATIONS
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
California 0-15501 33-0140149
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1420 Village Way, Santa Ana, California 92705
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (714) 835-8464
3070 Bristol Street, Suite 650, Costa Mesa, California 92626
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index is on Page 3
of the manually
executed copy
Page 1 of 3 pages
<PAGE> 2
ITEMS 1 AND 2. CHANGE IN CONTROL OF REGISTRANT AND ACQUISITION OR DISPOSITION
OF ASSETS.
On March 13, 1995, HDL Communications, a California corporation
("Registrant"), acquired Bikers Dream, Inc., a California corporation ("BDI") in
accordance with the terms of an Agreement and Plan of Reorganization among the
Registrant, BDI and the stockholders of BDI (the "Acquisition Agreement"). The
acquisition was consummated by the issuance of 3,300,000 shares of the
Registrant's Common Stock to the stockholders of BDI in exchange for all of the
issued and outstanding stock of BDI. Prior to the acquisition, the Registrant
effected a 1 for 1,363.341473 reverse split of its outstanding Common Stock.
Immediately after the acquisition, there were approximately 4,700,000 shares of
the Registrant's Common Stock issued and outstanding, including 1,100,000 shares
issued (on a post-reverse split basis) for cash and cancellation of indebtedness
prior to the acquisition.
BDI is engaged in sales and service of after market Harley-Davidson
motorcycles, parts, accessories and service. Prior to its acquisition by the
Registrant, BDI was a closely held corporation.
The Registrant was not actively engaged in business prior to the
acquisition. Upon consummation of the acquisition (a) all of the officers of the
Registrant resigned and all of the directors of the Registrant, other than
Rowland W. Day II, resigned and (b) Dennis Campbell, the President, a director
and principal stockholder of BDI was elected as a director and President of the
Registrant, William R. Gresher, the Vice President, Chief Financial Officer and
a director of BDI was elected as Vice President, Chief Financial Officer and a
director of the Registrant, Richard E. King, Jr., the Secretary and a director
of BDI, was elected as Secretary and a director of the Registrant and Johnnie
Pag, the Vice President of Operations of BDI, was elected as Vice President of
Operations of the Registrant. In accordance with the terms of the Acquisition
Agreement, Rowland W. Day II will have the right for a period of three
years after the acquisition to designate two members of the Registrant's Board
of Directors (to be composed of five persons) one of which may be Mr. Day. As
of the date of this Report, Mr. Day has not designated anyone other than himself
to serve on Registrant's Board of Directors.
The following table sets forth certain information as of March 13, 1995
with respect to shares of the Registrant's Common Stock owned by (a) each
director and executive officer of the Registrant and (b) each person known to
the Registrant to own beneficially more than 5% of the Registrant's Common Stock
(the only class of stock outstanding):
<TABLE>
<CAPTION>
Name of Number of Shares Percent
Beneficial Owner Beneficially Owned Of Class
---------------- ------------------ --------
<S> <C> <C>
Dennis Campbell(1) 2,457,990 52.2%
Rowland W. Day II(2) 806,181(3) 15.8%
William R. Gresher(4) 342,632 7.2%
Richard E. King, Jr.(5) 5,000 .01%
Johnnie Pag(6) 0(7) 0%
Brian Downing 255,555 5.4%
</TABLE>
______________________
(1) Mr. Campbell is President and a director of the Registrant.
(2) Mr. Day is a director of the Registrant.
(3) Includes 380,000 shares subject to options which are presently exercisable.
(4) Mr. Gresher is Vice President, Chief Financial Officer and a director of
the Registrant.
(5) Mr. King is Secretary and a director of the Registrant.
Page 2 of 3 pages
<PAGE> 3
(6) Mr. Pag is Vice President of Operations of the Registrant.
(7) Does not include up to 45,000 shares which may be issued as a stock bonus to
Mr. Pag in accordance with the terms of his employment.
The basis upon which shares of BDI Common Stock were exchanged for the
shares of Common Stock of the Registrant was established through arm's length
negotiations between the Registrant and BDI. There was no relationship between
BDI or its stockholders, on the one hand, and the Registrant, on the other hand,
prior to entering into the Acquisition Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) and (b) The required financial statements and pro forma financial
information is unavailable as of the date hereof and will
be filed by the Registrant pursuant to the requirements of
the Securities Exchange Act and the rules and regulations
promulgated thereunder within 60 days after the date on
which this report must be filed.
(c) Exhibits
2.1 Agreement and Plan of Reorganization dated August 4, 1994,
among the Registrant, Bikers Dream, Inc. and the
stockholders of Bikers Dream, Inc., as amended.
22.1 The Registrant's only subsidiary is Bikers Dream, Inc.
SIGNATURES
Pursuant to the requirements 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 27, 1995
HDL COMMUNICATIONS
BY: /s/ RICHARD E. KING
------------------------------
Richard E. King, Secretary
<PAGE> 1
Exhibit 99(b)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 4, 1995
-------------
BIKERS DREAM, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
California 0-15501 33-0140149
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1420 Village Way, Santa Ana, California 92705
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (714) 835-8464
HDL Communications, 3070 Bristol Street, Suite 650, Costa Mesa, California 92626
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 2 pages
<PAGE> 2
ITEM 8. CHANGE IN FISCAL YEAR.
Effective May 4, 1995, the board of directors of Bikers Dream, Inc.
(the "Company") approved the change of the Company's fiscal year from a
September 30 year end, the fiscal year end used in its most recent filing with
the Securities and Exchange Commission, to the new fiscal year end of December
31. The report on Form 10-KSB for the fiscal year ended December 31, 1995 will
be the form on which the report covering the transition period will be filed by
the Company.
SIGNATURES
Pursuant to the requirements 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: May 10, 1995 BIKERS DREAM, INC.
By: /s/ RICHARD E. KING, JR.
---------------------------------
Richard E. King, Jr., Secretary
<PAGE> 1
Exhibit 99(c)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 17, 1995
--------------
BIKERS DREAM, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
California 0-15501 33-0140149
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1420 Village Way, Santa Ana, California 92705
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (714) 835-8464
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
1. (i) The Registrant's former independent accountant, KPMG Peat
Marwick LLP, was dismissed from that capacity on July 17, 1995 pursuant to
action recommended and approved by the Registrant's board of directors.
(ii) The report by KPMG Peat Marwick LLP on the financial
statements of the Registrant for fiscal years ended September 30, 1994 and
1993 did not contain any adverse opinion or disclaimer of opinion and was not
qualified as to audit scope or accounting principles.
(iii) During the Registrant's fiscal years ended September 30,
1994 and 1993 and the interim period ended July 17, 1995, there were no
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
The Registrant has requested the former accountant to furnish the
Registrant with a letter addressed to the Commission stating whether the former
accountant agrees with the statements made by Registrant in Item 4 hereof, and,
if not, stating the respect in which the former accountant does not agree.
2. The Registrant engaged Coopers & Lybrand LLP as its new
independent accountant on July 17, 1995. Registrant did not consult with
Coopers & Lybrand LLP or any other accounting firm regarding the application of
accounting principles to a specified transaction, either contemplated or
proposed, or the type of opinion that might be rendered regarding Registrant's
financial statements, nor did Registrant consult with Coopers & Lybrand LLP
with respect to any accounting disagreement or any reportable event at any time
prior to the appointment of such firm.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
16.1 Letter from KPMG Peat Marwick LLP, former principal
accountant for the Registrant.*
- ---------------
* to be filed by Amendment
SIGNATURES
Pursuant to the requirements 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: July 21, 1995 BIKERS DREAM, INC.
By: /s/ DENNIS CAMPBELL
-------------------------------
Dennis Campbell, President
<PAGE> 1
Exhibit 99(d)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 17, 1995
--------------
BIKERS DREAM, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
California 0-15501 33-0140149
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1420 Village Way, Santa Ana, California 92705
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (714) 835-8464
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
KPMG Peat Marwick LLP was previously the principal accountants for HDL
Communications (now known as Bikers Dream, Inc.). On July 17, 1995, that firm's
appointment as principal accountants was terminated and Coopers & Lybrand LLP
was engaged as principal accountants to audit the Registrant's financial
statements for the current fiscal year. The decision to change accountants was
recommended and approved by the Registrant's board of directors.
In connection with the audits of the two fiscal years ended September
30, 1994, and the subsequent interim period through July 17, 1995, there were
no disagreements with KPMG Peat Marwick LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to their satisfaction would
have caused them to make reference in connection with their opinion to the
subject matter of the disagreement.
The audit reports of KPMG Peat Marwick LLP on the financial statements
of HDL Communications as of and for the years ended September 30, 1994 and
1993, did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope, or accounting
principles. A letter from KPMG Peat Marwick LLP is attached as Exhibit 16.1.
The Registrant did not consult with Coopers & Lybrand LLP or any other
accounting firm regarding the application of accounting principles to a
specified transaction, either contemplated or proposed, or the type of opinion
that might be rendered regarding Registrant's financial statements, not did
Registrant consult with Coopers & Lybrand LLP with respect to any accounting
disagreement or any reportable event at any time prior to the appointment of
such firm.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
16.1 Letter from KPMG Peat Marwick LLP, former principal
accountant for the Registrant.
- ---------------
SIGNATURES
Pursuant to the requirements 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: July 28, 1995 BIKERS DREAM, INC.
By: /s/ DENNIS CAMPBELL
------------------------------
Dennis Campbell, President
