Franchise Agreement Between Co. & Steve Hyder

TABLE OF CONTENTS
Page
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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


BIKERS DREAM, INC.
FORM SB-2
EXHIBIT 10.19 2

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 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: SCPLO 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. 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 nonrefundable.


(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 LOCATIONS 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. 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. 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. 7
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.


4. Weekly reports will be mailed on Mondays. I will not
be penalized for late mail service.


5. 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.


6. The advertising fund fee shall be waived for a period
of six months beginning on the first day of opening the
location.


7. In terms of any visits or audits, as outlined in
Section 15, I will be given at least one day prior notice.


8. I will be responsible only for my employees expenses
to attend training in California. I will not be responsible
for BDI's expenses when training in New Mexico.


9. The 3% figure regarding audits and variances will be
raised to 5%.


5. 8
(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.


6. 9
(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 pre-opening 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 equipmen ...