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CITGO Petroleum Corporation


CITGO


DISTRIBUTOR FRANCHISE AGREEMENT


Between CITGO Petroleum Corporation and BOWLIN'S INCORPORATED
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NOTICE


As a Franchised Distributor, under this agreement you will be entitled to the Protections of the Petroleum Marketing Practices Act, a federal law which was enacted on June 19, 1978. Title I of this law is intended to protect you against any arbitrary or discriminatory termination or non-renewal of your Franchise. CITGO Petroleum Corporation, as a Franchisor, is required to provide you with a summary of title I of the Petroleum Marketing Practices Act whenever notification of termination or non-renewal of your franchise is given. However, CITGO wishes to ensure that you are totally familiar with your rights in this regard even prior to executing this Franchise Agreement. Accordingly, on page i through iii herein we have produced the concise summary of the provisions of Title I as prepared and published by the secretary of energy in the Federal Register. Please review this summary carefully. You should resolve with your lawyer or other appropriate parties any questions you might have, prior to executing this franchise.
1 A 3128-0l


OFFICE OF THE SECRETARY


SUMMARY OF TITLE I OF THE PETROLEUM


MARKETING PRACTICES ACT


AGENCY: Department of Energy.


ACTION: Notice


SUMMARY: This notice contains a summary of title I of the Petroleum Marketing Practices Act, a new Federal law enacted on June 19. 1978. The law is intended to protect franchised distributors and retailers of gasoline and diesel motor-fuel against arbitrary or discriminatory termination or non-renewal of franchises. The summary describes the reasons for which a franchise may be terminated or not renewed under the new law, the responsibilities of franchisors. and the remedies and relief available to franchisees. Franchisors must give franchisees copies of their summary contained in this notice whenever notification of termination or nonrenewal of a franchise is given.


FOR FURTHER INFORMATION CONTACT:


William C. Lane, Jr., Office of Competition. Department of Energy. 20
Massachusetts Avenue NW., Room 7123. Washington, D.C. 20845,202-376-9495.
Michael Paige or Judith H. Garfield, Office of General Counsel, Department
of Energy, 12th and Pennsylvania Avenue NW., Room 5134, Washington, D.C.
20461, 202-566-9565 or 202-566-2085.


SUPPLEMTARY INFORMATION: Title I of the Petroleum Marketing Practices Act. Pub- L. 95-297 (the "Act"), enacted on June 19, 1978, provides for the protection of franchised distributors and retailers of motor fuel by establishing minimum Federal standards governing the termination of franchises and the nonrenewal of franchise relationships by the franchisor or distributor of such fuel. Section 104(d)(1) of the Act provides that the Secretary of Energy shall prepare and publish in the FEDERAL REGISTER. not later than 30 days after enactment of the Act, a simple and concise summary of the provisions of title 1, including a statement of the respective responsibilities of; and the remedies and relief available to. franchisors and franchisees. under that title.


As required by section 104(d)(1) of the Act, the following is a summary statement of the respective responsibilities of. and the remedies and relief available to. franchisors and franchisees. Franchisors must give copies of this summary statement to their franchisees when entering an agreement to terminate the franchise or of to renew the franchise relationship, and when giving notification of termination or nonrenewal. In addition to the summary of the provisions of title 1, a more detailed description of the definition contained in the Act and of the legal remedies available to franchisees is also included in this notice, following the summary statement.


NOTICES


SUMMARY OF LEGALS RIGHTS OF MOTOR


FUEL FRANCHISES


This is a summary of the franchise protection provisions of the Federal Petroleum Marketing Practices Act. This summary must be given to you. as a person holding a franchise for the sale. consignment or distribution of gasoline or diesel motor fuel. in connection with any termination or nonrenewal of your franchise by your franchising company (referred to in this summary as your supplier).


The franchise protection provisions of the Act apply to a variety of franchise arrangements- The term "franchise" is broadly defined as a license to use a motor fuel trademark which is owned or controlled by a refiner, and it includes secondary arrangements such as leases of real property and motor fuel supply agreements which have existed continuously since May 15, 1973 regardless of a subsequent withdrawal of a trademark. Thus, if you have lost the use of a trademark previously granted by your supplier but have continued to receive motor fuel supplies through a continuation of a supply agreement with your supplier, you are protected under the Act.


You should read this summary carefully, and refer to the act if necessary, to determine whether a proposed termination or nonrenewal of your franchise is lawful, and what legal remedies are available to you if you think the proposed termination or failure to renew is not lawful. In addition. if you think your supplier has failed to comply with the Act. you may wish to consult an attorney in order to enforce your legal rights.


The Act is intended to protect you, whether you are a distributor or a retailer, from arbitrary of discriminatory termination or nonrenewal of your franchise agreement. To accomplish this, the Act first lists the reasons for which termination or nonrenewal is permitted. Any notice of termination or nonrenewal must state the precise reason, as listed in the Act, for which the particular termination or nonrenewal is being made. These reasons are described below under the headings "Reasons for Termination" and "Reasons for Nonrenewal."


You should note that the Act does not restrict the reasons which may be given for the termination of a franchise agreement entered into before the June 19, 1978 effective date of the Act. However. any nonrenewal of such a terminated franchise must be based on one of the reasons for nonrenewal summarized below.


The Act also requires your supplier to give you a written notice of termination or intention not to renew the franchise within certain time periods. These requirements are summarized below. under the heading "Notice Requirements for Termination or Nonrenewal."


The Act allows trial and interim franchise agreements, which are described below under the heading "Trial and Interim Franchises "below under the heading "Trial and Interim Franchises."


The Act gives you certain legal rights if your supplier terminates or does not renew your franchise in a way that is not permitted by the Act. These legal rights are described below under the heading .. "Your Legal Rights."


This summary is intended as a simple and concise description of the general nature of your rights under the Act. For a more detailed description of these rights, You should read the text of the Petroleum Marketing Practices Act itself (Pub. L. 95-297. 92 Stat. 322. 15 U.S.C. 2801).


1. REASONS FOR TERMINATION


The following is a list of the only reasons for which your franchise is permitted to be terminated by the Act. One or more of these reasons must be specified if your franchise was entered into on or after June 19, 1978 and is being terminated. If your franchise was entered into before June 19, 1978. as discussed above, there is no statutory restriction on the reasons for which it may be terminated. If such a franchise is terminated, however, the Act required the supplier to renew the franchise relationship unless one of the reasons listed under this heading or one of the additional reasons for nonrenewal described below under the heading "Reasons for Nonrenewal" exists.


If your supplier attempts to terminate a franchise which you entered into on or after June 19. 1978 for a reason that is not listed under this heading. you can take the legal action against your supplier that is described below under the heading "Your Legal Rights."


Noncompliance with franchise agreement. Your supplier may terminate your franchise if you do not comply with a reasonable and important requirement of the franchise relationship. In order to use this reason, your supplier must have learned of this non-compliance recently. The Act limits the time period within which your supplier must have learned of your non-compliance to various periods. the longest of which is 120 days. before you receive notification of the termination.


Lack of good faith efforts. Your supplier may terminate your franchise if you have not made good faith efforts to carry out the requirements of the franchise, provided you are not first notified in writing that you are not meeting a requirement of the franchise and you are given an opportunity to make a -good faith effort to carry out the requirement. This reason can be used by your supplier only if you fail to make good faith efforts to carry out the requirements of the franchise for a period of 180 days before you, receive the notice of termination.


Mutual agreement to terminate the franchise. A franchise can be terminated by an agreement in writing between you and your supplier if the agreement is entered into not more than 180 days before the effective date of the termination and you receive a copy of this


FEDERAL REGISTER, VOL. 43, NO. 169 - WEDNESDAY, AUGUST 30,1978
2 agreement, toghether with this Summary statement of your rights under the Act. You may cancel the agreement to terminate within 7 days after you receive a copy of the agreement. by mailing (by certified mail) a written statement to this effect to your supplier.


Withdrawal from the market area. Under certain conditions. the Act permits your supplier to terminate your franchise if your supplier is withdrawing from marketing activities in the entire geographic area in which you operate. You should read the Act for a more detailed description of the conditions under which market withdrawal terminations are permitted.


Other events permitting a termination. If your supplier learns within the time period specified in the Act (which in no case is more than 120 days prior to the termination notice) that one of the following events has occurred, your supplier may terminate your franchise agreement:
(1) Fraud or criminal misconduct by you that relates to the operation of your marketing premises.
(2) You declare bankruptcy or a court determines that you are insolvent.
(3) You have a severe physical or mental disability lasting at least 3 months which makes you unable to provide forthe continued proper operation of the marketing premises.
(4) Expiration of your supplier's underlying lease to the leased marketing premises, if you were given written notice before the beginning of the term in the franchise of the duration of the underlying lease and that the underlying lease might expire and not be renewed during the term of the franchise.
(5) Condemnation or other taking by the government, in whole or in part of the marketing premises pursuant to the power of eminent domain. If the termination is based on a condemnation or other taking. your supplier must give you a fair share of any compensation which he receives for any loss of business opportunity or good will,
(6) Loss of your supplier's right to grant the use of the trademark that is the subject of the franchise. unless the loss was because of bad faith actions by your supplier relating to trademark abuse violation of Federal or State law, or other fault or negligence.
(7) Destruction (other than by your supplier) of all or a substantial part of your marketing premises. If their termination is based on the destruction of the marketing premises and if the premises are rebuilt or replaced by your supplier and operated under a franchise. your supplier must give you a right of first refusal to this new franchise.
(8) Your failure to make payments to your supplier of any sums to which your supplier is legally entitled.
(9) Your failure to operate the marketing premises for 7 consecutive days, or any shorter period of time which taking into account facts and circumstances, amounts to an unreasonable period of time not to operate.
(10) Your intentional adulteration. mislabeling or misbranding of motor fuels or other trademark violations.
(11) Your failure to Comply with Federal. State. or local laws or regulations of which you have knowledge and that relate to the operation of the marketing premises.
(12) Your conviction of any felony involving moral turpitude.
(13) Any event that affects the franchise relationship and as a result of which termination is reasonable.


II. REASONS FOR NONRENEWAL


If your supplier gives notice that he does not intend to renew any franchise agreement. the act requires that the reason for nonrenewal must be either one of the reasons for termination listed immediately above. or one of the reasons for nonrenewal listed below.


Failure to agree on changes or additions to franchise. If you and your supplier fail to agree to changes in the franchise that your supplier in good faith has determined are required. and your supplier's insistence on the changes is not for the purpose of preventing renewal of the franchise. your supplier may decline to renew the franchise.


Customer complaints. If your supplier has received numerous customer complaints relating to the condition of your marketing premises or to the conduct of any of your employees, and you have failed to take prompt corrective action after having been notified of these complaints, your supplier may decline to renew the franchise.


Unsafe or unhealthful operations. If you have failed repeatedly to operate your marketing premises in a clean. safe and healthful manner after repeated notices from your supplier. your supplier may decline to renew the franchise.


Operation of franchise is uneconomical. Under certain conditions specified in the act. your supplier may decline to renew your franchise if he has determined that renewal of the franchise is likely to be uneconomical. Your supplier may also decline to renew your franchise if he has decided to convert your marketing premises to a use other than for the sale of motor fuel. to sell the premises. or to materially alter, add to, or replace the premises.


III. NOTICE REQUIREMENTS FOR
TERMINATION OR NONRENEWAL


The following is a description of the requirements for the notice which your supplier must give you before he may terminate your franchise or decline to renew your franchise relationship. These notice requirements apply to all franchise terminations, including franchises entered into before June 19. 1978 and trial and interim franchises. as well as to all nonrenewals of franchise relationships.


How much notice is required. In most cases. your supplier must give you notice of termination or nonrenewal at least 90 days before the termination or nonrenewal takes effect.


In circumstances where it would not be reasonable for your supplier to give you 90 days notice, he must give you notice as soon as he can do so. In addition. if the franchise involves leased marketing premises. your supplier may not establish a new franchise relationship involving the same premises until 30 days after notice was given to you or the date the termination or nonrenewal takes effect. whichever is later. If the franchise agreement permits. your supplier may repossess the premises and. in reasonable circumstances. operate them through his employees or agents.


If the termination or nonrenewal is based upon a determination to withdraw from the marketing of motor fuel in the area. your supplier must give You notice at least 180 days before the termination or nonrenewal takes effect.


Manner and contents of notice. To be valid. the notice must be in writing and must be sent by certified mail or personally delivered to you. It must contain:
(1) A statement of your supplier's intention to terminate the franchise or not to renew the franchise relationship. together with his reasons for this action:
(2) The date the termination or nonrenewal takes effect: and
(3) A copy of this summary.


IV. TRIAL FRANCHISES AND INTERIM FRANCHISES


The following is a description of the special requirements that apply to trial and interim franchises.


Trial franchises. A trial franchise is a franchise, entered into on or after June 19. 1978. in which the franchisee has not previously been a party to a franchise with the franchisor and which has an initial term of 1 year or less. A trial franchise must be in writing and must make certain disclosures, including that it is a trial franchise. and that the franchisor has the right not to renew the franchise relationship at the end of the initial term by giving the franchisee proper notice.


The unexpired portion of a transferred franchise (other than a trial franchise. as described above) does not qualify as described above) does not qualify as a trial franchise.


In exercising his right not to renew a trial franchise at the end of its initial term. your supplier must comply with the notice requirements described above under the heading "Notice Requirements for Termination or Nonrenewal."


Interim franchises. An interim franchise is a franchise, entered into on or after June 19, 1978, the duration of which, when combined with the terms of all prior interim franchises between the franchisor and the franchisee. does not exceed 3 years. and which begins immediately after the expiration of a prior franchise involving the same marketing premises which was not renewed. based upon a lawful determination by the franchisor to withdraw from marketing activities in the geographic area in which the franchisee operates.


An interim franchise must be in writing and must make certain disclosures. including that it is an interim franchise and that the franchisor has the right not to


FEDERAL REGISTER. VOL. 43, NO. 169 - WEDNESDAY, AUGUST 30,1978
ii.
3 renew the franchise at the end of the term based upon a lawful determination to withdraw from marketing activities in the geographic area in which the franchisee operates.


In exercising his right not to renew a franchise relationship under an interim franchise at the end of its term, your supplier must comply with the notice requirements described above under the heading "Notice Requirements for Termination or Nonrenewal."


V. YOUR LEGAL RIGHTS


Under the enforcement provision of the Act, you have the right to sue your supplier if he fails to comply with the requirements of the Act. The courts are authorized to grant whatever equitable relief is necessary to remedy the effects of your supplier's failure to comply with the requirements of the Act, including or judgment, mandatory or prohibitive injunctive relief. and interim equitable relief. Actual damages, exemplatry (punitive) damages under certain circumstances and reasonable attorney and expert witness fees are
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