Franchise Agreement

BANDAG SYSTEM FRANCHISE AGREEMENT


THIS AGREEMENT is made by and between Bandag, Incorporated, an Iowa corporation ("BANDAG") and _____________________________________________________ ("FRANCHISEE"), a ____ corporation organized under the laws of the state of _____________, ____ sole proprietorship owned by ____________________________________________________, ____ partnership organized under the laws of the state of _________________________________, doing business under the name: ________________________________________________________, whose mailing address is: _____________________________________________________________, with employer federal identification number _____________________________.


Introduction


Over many years and at substantial expense, BANDAG has developed, promoted and improved for its franchises, and continues to improve, a unique method of retreading tires with pre-cured rubber. This method utilizes manufacturing technology, engineering and know-how, other proprietary processes, and specialized equipment made by or for BANDAG or one of its corporate affiliates for use in the process of inspecting and preparing casings for retreading, affixing and bonding the tread rubber to the casing, and repairing casings (herein, such equipment, as modified, improved and supplemented by BANDAG from time to time, to be called "BANDAG Equipment"). BANDAG has also developed for use in this unique retreading method BANDAG(R) tread rubber, BANDAG(R) cushion gum, other tread materials and other materials used between the tread materials and the casing (including without limitation cushion rubber, cushion gum and other adhesives, repair gums, filling materials, special extrusions, re-belting materials, cements and other rubber items) (herein, such items, as modified, improved and supplemented by BANDAG from time to time, to be called "BANDAG Rubber Products"). In addition, BANDAG has developed at substantial expense valuable market research, proprietary rights (including patents, trademarks, confidential know-how and copyrights), expertise in managing retread facilities, and programs for the marketing and sale of retreaded tires, for the technical and sales training of personnel, and for customer service. In this Agreement, all the foregoing described in this Introduction, as they may be modified from time to time by BANDAG, shall be referred to as the "BANDAG Method".


FRANCHISEE desires to acquire the right to practice the BANDAG Method, and BANDAG is pleased to grant this valuable right to FRANCHISEE on the terms stated in this Agreement.


In consideration of the mutual agreements herein and other good and valuable consideration, BANDAG and FRANCHISEE agree as follows:


I. BANDAG Method and Grant of Franchise


(a) BANDAG hereby grants to FRANCHISEE the non-exclusive right to make and
sell light truck, truck and bus tires (but excluding any aircraft,
agricultural or passenger tires) retreaded by the BANDAG Method (as
improved by BANDAG during the term of this Agreement) with a minimum bead
diameter of 13 inches and a maximum finished outside diameter of 53.5
inches.


(b) FRANCHISEE may make retreaded tires by the BANDAG Method only at the
facility located at:


"Authorized Location:" ____________________________________

____________________________________


____________________________________


(c) FRANCHISEE's non-exclusive Territory shall be:


_________________________________________________________________________


_________________________________________________________________________


_________________________________________________________________________


_________________________________________________________________________


________________________________.

FRANCHISEE may sell tires retreaded by the BANDAG Method wherever and to
whomever and at any price FRANCHISEE may choose, in or outside the
Territory (as is the case with other BANDAG franchisees).


(d) FRANCHISEE may not resell BANDAG Rubber Products purchased from BANDAG or
from any other franchisee of BANDAG other than to (i) end users (and in
that instance, only if such items are incorporated into tires retreaded
by the BANDAG Method) and (ii) other BANDAG franchisees authorized to
retread tires by the BANDAG Method in the United States.


(e) While this Agreement is in effect, FRANCHISEE will not in any manner
(directly or indirectly) own, manage, operate, join, participate in,
associate with or be connected with or interested in, as a franchisee,
investor, lender, manager, agent, employee, officer, director, partner,
shareholder or proprietor of or consultant to, or provide service, advice
or other assistance to, any occupation, entity, interest, business or
enterprise that is engaged in any form of tire retreading business, other
than as described in Annex A, that competes with Bandag, or the Bandag
Method, or retread tires by any method other than the Bandag Method,
without the express prior written approval of Bandag. In order to obtain
Bandag's consent, Franchisee must demonstrate to Bandag's satisfaction
that the transaction contemplated will not in any way damage Bandag, the
Bandag Method, and/or the Bandag franchise network. In the event that any
part of the covenants or agreements set forth in this Section I(e) shall
be determined by any court of competent jurisdiction to be invalid or
unenforceable by reason of extending for too great a period of time or
over too great a geographical area, or by reason of being too extensive
in any other respect, and if such determination is upheld on appeal or no
appeal from such determination is taken, then Bandag and Franchisee agree
that this Agreement shall be amended so that the affected part of said
covenant shall be interpreted to extend only over the maximum period of
time for which it may be enforceable, and/or over the maximum
geographical area as to which it may be enforceable and/or to the maximum
extent in all other respects as to which it may be enforceable, all as
determined by such court in such action. Notwithstanding the foregoing,
the unaffected parts of said covenants shall remain in full force and
effect.


(f) For the purposes of this Agreement,


(1) "Affiliate" shall mean any natural person or legal entity that,
directly or indirectly, controls, is controlled by or is under common
control with either FRANCHISEE or any Controlling Person; and


(2) "Controlling Person" shall be any natural person or other legal
entity with a 5% or greater interest in FRANCHISEE or in another entity
that has, directly or indirectly, a 5% or greater interest in FRANCHISEE,
or otherwise having the power to control, directly or indirectly, the
management, direction or day-to-day operations of FRANCHISEE. Without
limiting the


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generality of the foregoing, a natural person or legal entity shall be a
"Controlling Person" of FRANCHISEE if it owns a 5% or greater interest in
another entity that either is itself a Controlling Person of FRANCHISEE
or has an indirect ownership interest in FRANCHISEE through one or more
intervening levels of direct or indirect subsidiaries. For example, if
FRANCHISEE is a wholly-owned subsidiary of another corporation that is,
in turn, owned equally by three other corporations, each of these three
corporations shall be considered a Controlling Person for purposes of
this Agreement.


II. Materials Provided by BANDAG; Obligations of FRANCHISEE


(a) To assist its franchisees, BANDAG has developed materials relating to the
BANDAG Method and to production engineering (including technical
bulletins), public relations, and advertising, merchandising and
promotion of the BANDAG Method and of tires retreaded by the BANDAG
Method. BANDAG will provide to FRANCHISEE from time to time such
materials as are provided by BANDAG to its franchisees generally. BANDAG
may amend and revise such materials and charge for materials in excess of
those normally provided.


(b) All proprietary and other information obtained directly or indirectly by
FRANCHISEE with respect to BANDAG's business plans, policies, and
modified or new methods, processes or products, and all written matter
furnished to FRANCHISEE by BANDAG or its affiliates (whether or not
FRANCHISEE shall be charged for same), shall remain BANDAG's property and
shall be deemed confidential information. Such information and materials
(including any translation) shall not be reproduced or disclosed to
others or used for any purpose other than performance of FRANCHISEE's
obligations under this Agreement. FRANCHISEE shall cause its employees to
comply with this provision.


If there is any claim or litigation involving the confidential
information, and if BANDAG in its sole discretion undertakes the
negotiation, settlement, defense or prosecution, FRANCHISEE shall execute
any documents and render assistance (exclusive of out-of-pocket
expenditures) as may be reasonably requested to carry out the same. If
any confidential information is sought by discovery procedures,
FRANCHISEE shall (i) notify BANDAG within three (3) days after receipt of
such discovery request, (ii) seek appropriate protective orders for such
information and (iii) join in any motion BANDAG may file to protect
against disclosure of such materials.


III. Maintenance of Quality and Reputation


(a) FRANCHISEE acknowledges the superior quality, performance and reputation
of BANDAG Equipment, BANDAG Rubber Products, and the other items and
services that constitute part of the BANDAG Method. FRANCHISEE further
acknowledges that it is essential to the reputation of the BANDAG Method
and to the maintenance of the BANDAG trademarks and logos, and to avoid
misleading the public with respect to the quality of the tires retreaded
by FRANCHISEE, that the retreaded tires sold by FRANCHISEE be retreaded
strictly in accordance with the BANDAG Method and with BANDAG Equipment
and BANDAG Rubber Products, including BANDAG(R)tread rubber and
BANDAG(R)cushion gum. Accordingly, FRANCHISEE shall utilize in the
retreading of tires with pre-cured rubber at the Authorized Location only
BANDAG Rubber Products and BANDAG Equipment. FRANCHISEE shall also follow
such procedures for retreading tires with pre-cured rubber as are
established by BANDAG from time to time and shall maintain standards and
procedures required to comply with the BANDAG Quality Certification
Program, as revised by BANDAG from time to time. BANDAG may from time to
time require additional certifications for production and marketing of
particular products or utilization of particular technology, and require
FRANCHISEE's continued adherence to the same, if FRANCHISEE desires to
produce such particular products or utilize such technology associated
with the Bandag Method. In addition, FRANCHISEE shall not engage in any
business conduct


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reasonably likely to affect adversely the reputation or goodwill of
BANDAG or the BANDAG Method


(b) Representative samples of any and all materials used in retreading tires
by the BANDAG Method and not falling under Section III(a) of this
Agreement must be submitted for testing and inspection to BANDAG (at
FRANCHISEE's expense) and must be approved by BANDAG in writing prior to
such use by FRANCHISEE; BANDAG will not unreasonably withhold its
approval of such materials if they meet BANDAG's standards for quality
and performance.


(c) All purchases from BANDAG or one of its corporate affiliates shall be at
the prices established by BANDAG from time to time, and shall be subject
to the seller's Standard Terms and Conditions of Sale, as revised from
time to time. These terms and conditions (as supplemented by this
Agreement) shall constitute the entire and only agreement between the
parties with respect to the sale of such products to FRANCHISEE. No
additional or different terms set forth in FRANCHISEE'S purchase order,
acknowledgment or other forms or correspondence shall govern any sales of
such products to FRANCHISEE, and BANDAG hereby objects to any such
additional or different terms contained in any communication from
FRANCHISEE. A copy of the Standard Terms and Conditions of Sale at the
effective date of this Agreement is attached hereto as Annex B. A breach
of such Terms shall be a breach of this Agreement.


(d) FRANCHISEE shall maintain its Authorized Location in accordance with
standards and procedures prescribed by BANDAG from time to time.
FRANCHISEE shall maintain BANDAG Equipment in satisfactory operating
condition and incorporate all modifications prescribed by BANDAG.


(e) FRANCHISEE warrants that all required inspections of equipment used in
retreading tires by the BANDAG Method will be undertaken and that, to the
extent required by local law, FRANCHISEE shall post on such equipment
appropriate certificates of inspection or other evidence of approval.
FRANCHISEE further agrees: (1) to maintain and/or install such safety
features on BANDAG Equipment as are originally installed or are
thereafter recommended by BANDAG and in conformity with all applicable
safety codes and regulations; (2) not to alter any safety features on
BANDAG Equipment, whether such equipment was purchased from BANDAG or a
third party; and (3) to rework or authorize BANDAG to rework any BANDAG
Equipment to reestablish or retrofit any safety feature for the BANDAG
Equipment.


BANDAG determines that any of FRANCHISEE's equipment used in retreading
tires by the BANDAG Method is unsafe or does not comply with current
safety standards used by BANDAG or applicable safety codes and
regulations, BANDAG may give FRANCHISEE written notification thereof, and
FRANCHISEE shall, within one month thereafter at its expense, either (y)
rework, or authorize BANDAG to rework, such equipment, or (z) remove such
equipment from service and sell it back to BANDAG, or trade it in for new
BANDAG Equipment, in either case, at its then-current fair market value,
all without prejudice to the right of BANDAG to remove certificates of
inspection or nameplates from equipment not found in compliance with
applicable safety codes or standards and to notify appropriate
governmental officials that the equipment in question no longer meets
applicable safety requirements.


(f) FRANCHISEE acknowledges that it will, in the operation of its business of
retreading tires with pre-cured rubber, comply with all applicable
federal, state and local laws, ordinances, regulations and orders.
FRANCHISEE shall also refrain from taking any action that prevents BANDAG
from realizing the benefits of this Agreement.


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(g) FRANCHISEE shall not sell, lease or in any other way transfer title or
possession of any BANDAG Equipment to third parties other than BANDAG
franchisees, without first offering such Equipment in writing free and
clear of all claims and encumbrances for purchase by BANDAG at fair
market value. "Fair market value", as used in this Agreement, means the
cash purchase price that would apply in an arm's-length transaction
between an informed and willing BANDAG franchisee under no compulsion to
purchase and an informed and willing BANDAG franchisee under no
compulsion to sell.


IV. Records and Inspection


FRANCHISEE shall maintain and provide to BANDAG financial statements, books of account, and supply, purchasing, inventory, production and sales records (including the date of purchase, weight and source of BANDAG Rubber Products used by FRANCHISEE and records showing the identity and address of all purchasers of BANDAG Rubber Products and of tires retreaded by the BANDAG Method), together with any other business records or information records that BANDAG may request in order to determine whether FRANCHISEE is performing its obligations under this Agreement. FRANCHISEE shall permit BANDAG to examine FRANCHISEE's records, premises and samples of tires made by the BANDAG Method during regular business hours.


V. Relationship of Parties


The relationship of the parties is that of franchisor and franchisee, and seller and buyer only, and FRANCHISEE acknowledges that this Agreement does not create a fiduciary relationship between FRANCHISEE and BANDAG. The parties are independent contractors, and exercise sole control over their businesses at their own risk.


VI. Use of the Marks, Display, Advertising and Promotion of BANDAG Name


FRANCHISEE shall have the non-exclusive right to use the "BANDAG" name and mark, including BANDAG's trademarks, service marks and logos (collectively, the "Marks") in the Territory in connection with the manufacture and sale of tires retreaded by the BANDAG Method, subject to BANDAG's Logo and Trademark Usage Requirements and Policy, as revised from time to time by BANDAG. FRANCHISEE shall at all times comply with such Requirements and Policy, which is attached in its current form as Annex C.


VII. Best Efforts


FRANCHISEE shall at all times while this Agreement remains in effect exert its best efforts to produce and sell tires retreaded by the BANDAG Method.


VIII. Duration


This Agreement shall continue in effect for five years unless terminated as provided elsewhere in this Agreement.


IX. Termination of the Agreement by BANDAG


BANDAG shall have the right to terminate this Agreement:


(a) Effective upon notice to FRANCHISEE, in the event of any breach of
Section I(d) or (e), II(b), III(a), XI, XII or XVI of this Agreement, or


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(b) Effective upon notice to FRANCHISEE, in the event FRANCHISEE shall
fail to pay all amounts due to BANDAG within ten (10) days after BANDAG
notifies FRANCHISEE that payment is due, or


(c) Effective upon notice to FRANCHISEE, in the event FRANCHISEE shall
fail to operate the business of retreading tires by the BANDAG Method at
the location authorized in Section I for more than sixty (60) consecutive
days or otherwise abandons the franchise granted herein, or


(d) Effective upon notice to FRANCHISEE, in the event FRANCHISEE
introduces and/or supports any proceedings challenging the validity of
any trademarks or other unpatented proprietary rights, whether registered
or not, under which BANDAG derives its licensing power hereunder, or


(e) Effective upon notice to FRANCHISEE, in the event of (1) any breach
or non-compliance with any term or provision of this Agreement other than
those described in subsections (a) through (d) above, or any breach or
non-compliance with any other agreement between BANDAG and FRANCHISEE,
and in either such case the breach or non-compliance is not remedied
within thirty (30) days of notice thereof from BANDAG, or (2) the
repeated breach or non-compliance with one or more term or provision of
this Agreement, whether or not such breach or non-compliance is corrected
after notice, or


(f) Immediately, in the event FRANCHISEE becomes insolvent or is subject
to any bankruptcy, insolvency, or similar proceeding, makes an assignment
for the benefit of creditors, becomes unable to pay its debts as they
become due, goes into liquidation or winding up, or in the event a
receiver is appointed for substantial part of FRANCHISEE's assets, or


(g) Effective upon thirty (30) days' notice, in the event of (1) a
decision by a court or government agency that invalidates any significant
provision of this Agreement, or (2) the failure of the heirs or
successors of FRANCHISEE or a Controlling Person to apply for approval of
a transfer of the pre-cured retreading business or the assets of such
business in accordance with Section XI(c), or BANDAG's disapproval of
such transfer.


X. Effect of Termination


(a) In the event of termination of this Agreement for any reason:


(1) FRANCHISEE shall surrender and cease to exercise all rights granted
under this Agreement, shall cease all use of the BANDAG Method, shall
cease all use of BANDAG Equipment, and shall cease selling tires
retreaded after date of termination with pre-cured rubber on BANDAG
Equipment. In addition, no officer, director, relative, manager,
shareholder, partner or other owner of FRANCHISEE or any Affiliate or
Controlling Person, or any business enterprise in which any of them is
engaged or to which any of them is related, may directly or indirectly
operate such BANDAG Equipment or sell tires retreaded after date of
termination with pre-cured rubber on BANDAG Equipment. FRANCHISEE shall
also, at its own expense, cease all use of BANDAG's name and Marks in any
and all connections, and refrain from representing any of its products
produced after termination as "BANDAG products" or as being the "same as
BANDAG" or "similar to BANDAG" or represent itself as a BANDAG franchisee
or otherwise identify itself with BANDAG. Without limiting the foregoing,
FRANCHISEE shall change the corporate name to eliminate use of any BANDAG
Marks and change all stationary, envelopes, business cards, other
advertisements and other items and file such documents in all federal,
state and local offices as may be considered appropriate by BANDAG to
change the corporate name of record in such offices.


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(2) Termination of this Agreement shall not relieve FRANCHISEE from its
obligation to pay to BANDAG all moneys that may be due, and all amounts
yet unpaid and not yet due for equipment, materials and supplies shall
become due and payable within ten (10) days of the date of termination.


(3) FRANCHISEE shall immediately cease using, and return within a period
of ten (10) days following termination, all property of BANDAG, including
but not limited to all confidential and proprietary written materials
(and all copies thereof) received from BANDAG and all translations
thereof. Such materials will be delivered in person to a BANDAG designee
or returned via courier service, to be signed for by the recipient.


(4) BANDAG shall have the option, exercisable by notice within sixty (60)
days following the effective date of termination of this Agreement, to
purchase (i) any or all BANDAG Rubber Products at the price paid by
FRANCHISEE and/or (ii) any or all BANDAG Equipment at its 10-year
straight line depreciated value, with a minimum of 15 percent of the
purchase price paid by FRANCHISEE for such Equipment. This option extends
to all BANDAG Equipment and BANDAG Rubber Products used in the business
of FRANCHISEE prior to the effective date of termination. From the
purchase price shall be deducted the amount of any set off or
counterclaim that BANDAG may have against FRANCHISEE. Within two (2) days
of receipt of notice from BANDAG, FRANCHISEE shall prepare for immediate
return all such items.


(b) After receipt of BANDAG's notice of termination, FRANCHISEE shall not
commit itself to further advertising contracts or other agreements by
which it represents itself as a franchisee of BANDAG.


XI. Transfer of Control


(a) FRANCHISEE acknowledges that, to assure BANDAG that FRANCHISEE's
obligations herein will be performed fully and that customers of tires
retreaded by the BANDAG Method will receive adequate service, BANDAG must
know and approve who in fact controls FRANCHISEE. Accordingly, neither
FRANCHISEE nor any Controlling Person, nor any holder or owner of any
equity interest in FRANCHISEE, may enter into any agreement pertaining
to, causing or resulting in a Transfer of Control, or consummate or
permit the consummation thereof, without in each case obtaining BANDAG's
prior written approval. To provide BANDAG an opportunity to consider
whether or not to approve a proposed Transfer of Control, a written
request for such approval shall be submitted to BANDAG at least one
hundred twenty (120) days prior to the proposed or intended date for the
Transfer of Control, which request shall describe the proposed Transfer
of Control and give the identity of the proposed transferee. FRANCHISEE
shall also submit such other information regarding the proposed Transfer
of Control as may be requested by BANDAG. Franchisee agrees that under no
circumstances will Franchisee transfer or assign, directly or indirectly,
any interest in the Franchise to any Person (as defined in this Section
XI(a)) who has any form of retreading business that in any way competes
with the business of Bandag, or the Bandag Method without the express
prior written approval of Bandag in each instance. Furthermore,
Fr ...