<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended
March 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from
to
COMMISSION FILE NO. 0-14819
RENT-A-WRECK OF AMERICA, INC.
-------------------------------------------------
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3926056
- ------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
11460 Cronridge Drive, Suite 120, Owings Mills, MD 21117
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code (410) 581-5755
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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.
Yes X No
----------- -----------
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is 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 revenues for its most recent fiscal year. $3,454,786
----------
4,121,642 shares of common stock were outstanding as of May 1, 1996.
Aggregate market value of voting stock held by nonaffiliates of
registrant, based upon the average of the last bid and asked price of
the Common Stock on the Nasdaq SmallCap Market, was $2,811,241 on May
1, 1996. Shares of Common Stock held by each officer and director and
by each person who owns 10% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily conclusive.
The following documents are incorporated by reference and made a part
of the Form 10- KSB:
1. Portions of the Registrant's Proxy Statement for the 1996
Annual Meeting of Stockholders are incorporated by reference
in Part III hereof.
Transitional Small Business Disclosure Format (check one): Yes No X
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I Page
- ------ ----
<S> <C> <C>
Item 1. Description of Business................. 3
2. Description of Properties............... 6
3. Legal Proceedings....................... 7
4. Submission of Matters to a Vote
of Security Holders................... 7
Part II
Item 5. Market for the Common Equity and
Related Stockholder Matters........... 7
6. Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................ 10
7. Financial Statements.................... 12
8. Changes in and Disagreements with
Accountants on Accounting
and Financial Disclosure.............. 31
Part III
Item 9. Directors and Executive Officers,
Promoters and Control Persons;
Compliance with Section 16(a) of
Exchange Act of the Registrant........ 31
10. Executive Compensation.................. 31
11. Security Ownership of Certain Beneficial
Owners and Management................. 31
12. Certain Relationships and Related
Transactions.......................... 31
Item 13. Exhibits and Reports on Form 8-K........ 31
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Rent-A-Wreck of America, Inc. (the "Company" or "RAWA") (organized
October 12, 1983), which conducts its operations primarily through its
wholly-owned subsidiary Bundy American Corporation ("Bundy") (organized April
22, 1977), markets and administers the Rent-A-Wreck vehicle rental franchise
program. The Rent-A-Wreck franchisees in aggregate operate one of the largest
used vehicle rental fleets in the nation, offering rentals of cars, trucks and
vans at rates that are generally less than those charged by new car rental
companies. The Company also has international franchisees. Reference to the
"Company" includes Rent-A- Wreck of America, Inc. and its subsidiaries unless
the content otherwise requires.
The Franchise Program
The Company sells to qualified persons the right to operate a Rent-
A-Wreck franchise offering motor vehicles (automobiles, vans and trucks) for
rental or lease ("Rental Vehicles") to the general public. Further, the Company
offers each franchise territory rights.
Franchisees purchase the right to use certain of the Company's
resources, experience and knowledge in connection with the operation of the
business. The franchisee utilizes the Company's systems, methods,
specifications, standard operating procedures, guidance, trade and service
marks.
The Company believes the Rent-A-Wreck name is unique and enjoys
international recognition. Ongoing marketing programs further promote name
recognition. The Company develops and executes advertising and marketing
programs that have included radio and television commercials, direct mail, print
advertising and promotional items.
Public relations activities conducted on the franchisees' behalf
include a franchise award announcement, grand opening release and anniversary
releases. Assistance in planning and implementing local promotional activities
is available to franchisees. The Public Relations Department also publishes the
Rent-A-Wreck Reporter, which is distributed internally to franchisees and
externally to trade and consumer media, and the Company's sources of referral
such as insurance adjusters, automotive repair shops, travel agents and
corporate travel managers.
The Company maintains a national insurance program with an "A" rated
carrier which offers group insurance rates available to most franchisees. The
Company continues to seek out various insurance programs to offer insurance to
the franchise system as a whole.
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The Company has arranged a vehicle financing program whereby
franchisees may finance vehicles over a 24-30 month period (see Note 2 to the
Financial Statements). The program is available to qualified applicants which
maintain a level of creditworthiness that the Company has assessed on a case by
case basis.
The Company is committed to educating and training its franchisees. The
Company conducts Rent-A-Wreck School at its headquarters in Maryland every 45
days. All new franchisees are required to attend. School is also available at no
charge to current franchisees and their staff. During an intensive five-day
period, attendees learn all aspects of the Rent-A-Wreck program. This includes
vehicle acquisition, maintenance and sales, telephone techniques, counter
procedures, and rental operations, promotion, publicity, advertising and sales
tactics, relevant aspects of insurance, accounting and other general business
skills.
The Company employs field service staff who have many years of
experience in the car rental industry. Their responsibility is to provide
continuous advice via personal visits and a toll-free telephone number.
The Company's Eastern Region conducts an intensive two-day refresher
school periodically for the benefit of existing franchisees and their staff.
Additionally, the Company has organized several franchisee state
associations that meet periodically to discuss regional issues and exchange
ideas. Finally, the Company holds and strongly encourages franchisees to attend
regional meetings and national conventions. The Company utilizes these meetings
to present new programs to the franchisee body in attendance and to provide
continued training and advice.
The Company's National Franchisee Advisory Council, which consists of
seven members, meets quarterly. Six of the members are elected by the
franchisees in their region. The seventh member is a franchisee appointed by the
Company. It is a forum through which franchisees can express opinions and
concerns to the Company. The council also provides suggestions as to how the
national advertising fund is allocated.
The Company charges an initial franchise fee that varies according to
the population of the franchisee's primary service area at the time the
franchise is granted. The initial fee can be financed over a period not to
exceed twelve months based on the creditworthiness of the franchisee.
Additionally, franchisees are required to pay monthly royalties and contribute
to the national advertising fund. These fees vary according to franchisees'
fleet size or gross revenues.
The advertising monies paid into the national advertising fund are
expended on the franchisees' behalf after consultation with the National
Franchisee Advisory Council. The Company also receives consideration in the form
of meeting sponsorships and otherwise from suppliers of goods and services to
the franchise network.
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During the fiscal year ended March 31, 1996, 73 new franchises were
granted and 3 existing franchise locations were transferred to new ownership.
This resulted in approximately 440 franchised locations worldwide at the end of
this fiscal year compared to 384 at the end of the fiscal year ended March 31,
1995.
EMPLOYEES
The Company currently employs nineteen people in its franchising
operations. Ten full-time and three part-time employees are engaged in franchise
sales and service and six full-time employees are engaged in administrative
activities. In addition, the Company retains the services of three franchise
brokers who sell the Company's franchises. None of the employees is covered by a
collective bargaining agreement, and management believes that its relations with
its employees are good.
COMPETITION
The Company pioneered the concept of used car rentals. Unlike the
traditional airport rental companies, Rent-A-Wreck developed its niche serving
the "neighborhood" rental market. The Company emphasizes convenience and service
and generally offers rentals of used cars, trucks and vans at rates that are
lower than those charged by new car rental companies.
The Company's customers generally are people from the local community,
although most locations do service some business and leisure travelers. Customer
segments include insurance and service replacement, commercial, short-term
moving and general use.
Rent-A-Wreck franchisee fleets usually consist of a variety of used
vehicles, although some locations rent new cars as well. The franchisees
purchase vehicles according to local demand. Trucks, passenger vans and cargo
vans are available at many locations. The flexibility to fleet a wider variety
of vehicle types enhances the franchisees' ability to compete.
Significant competition exists in the local market. It affects the
Company's continuing franchise fees and rental operations revenues. Large
systems like Agency, Enterprise and U-Save compete nationwide. Dozens of local
independent companies compete with the Company in various areas. In most major
urban areas, in-terminal companies like Hertz, Avis, National and Budget also
operate in-city and suburban offices.
Earlier this decade, many of the new car rental companies were owned,
wholly or partially, by automobile manufacturers who sold them cars at
discounted prices and guaranteed to repurchase cars after four to nine months in
rental service. This enabled the rental companies to pass along their savings to
retail customers in the form of lower rental prices. More recently, the rental
companies have been returning to independent ownership, the discounts and
buybacks have been reduced, and retail rental prices have risen, reflecting real
costs more accurately. As the Company's franchisees generally attempt to provide
substantial discounts off the retail prices charged by the large new car rental
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companies, the Company believes that the increase in prices charged by such
companies has enabled franchisees to compete more effectively and profitably.
GOVERNMENT REGULATION
The offering and sale of franchises is subject to Federal and State
regulation.
The Federal Trade Commission ("FTC"), pursuant to the Federal Trade
Commission Act, has adopted regulations requiring full pre-sale disclosure to
prospective franchisees of certain information, including information about the
franchisor, its existing franchises, the rights and obligations of franchisees,
and termination, cancellation and renewal of franchises. Disclosure is required
to be made prior to the sale in the form of an offering circular.
Many states in which the Company sells or may sell franchises may
require pre-sale registration of the Company and/or the offering circular and
franchise agreement to be used in selling franchises from or in the state.
Many states also regulate various aspects of the franchisor- franchisee
relationship, including regulations regarding awarding, renewing, and
terminating franchise relationships.
Compliance with the laws of the state from or in which the sale is to
be made, in addition to the Federal regulations, may be required because the FTC
has determined that its franchising regulations will not preempt state or local
laws and regulations which are consistent with its Federal regulations, or which
if inconsistent, would provide protection to prospective franchisees equal to or
greater than that imposed by the Federal franchising regulations.
The Company is authorized to sell franchises in all 50 states and has
registered its trade and service marks in approximately 24 foreign countries.
TRADEMARK
The Company believes that name recognition of its trademark "Rent-
A-Wreck" is important to its franchise program. A trademark may be held for an
indefinite duration, but it may be lost or its value diminished if adequate
steps to police its use are not taken. The Company believes that its efforts to
police the use of its trademarks are adequate.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company currently leases approximately 6,790 square feet of
executive office space at 11460 Cronridge Drive, Suite 120, which lease will
expire in November 1999. The Company also rents on a month-to-month basis
approximately 1,384 square feet of executive office space at 11460 Cronridge
Drive, Suite 118, Owings Mills, MD 21117 (see Item 12 Certain Relationships and
Related Transactions).
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Management believes that the facilities leased by the Company are
adequate for the Company's current and future operations or that adequate
alternative space is readily available.
ITEM 3. LEGAL PROCEEDINGS
Suit was initiated against the Company, an officer of the Company, and
another defendant on August 17, 1994 in the Supreme Court of the State of New
York, County of Suffolk, by Mongo, Inc. and John and Roberta Batcher. The suit
subsequently was removed by the defendants to the United States District Court
for the Eastern District of New York. The suit alleges breach of contract, fraud
and RICO violations in connection with alleged promises of automobile financing
to be provided by the Company to a former franchisee, and seeks damages of
approximately $4.1 million (of which $4.0 million represents claims for punitive
damages and treble damages under RICO). The Company believes the suit is without
merit and filed a motion to dismiss the complaint in July 1995. The Company
intends to defend the suit vigorously.
The Company's wholly owned subsidiary, Bundy American Corporation
("Bundy"), initiated a lawsuit on November 21, 1994 in the United States
District Court for the Southern District of New York to collect amounts owed by
a former franchisee, Motorcar Exchange, Inc., and its principals, Gary and
Debbie Blankfort. In April 1996 Bundy obtained a default judgment against the
defendants for approximately $140,000 in addition to a contempt judgment for
approximately $70,000 plus interest. Subsequently, one of the defendants, Debbie
Blankfort, filed a petition as a debtor under the United States bankruptcy laws.
Bundy will seek to collect amounts due pursuant to the judgments to the fullest
extent permitted by law.
On April 26, 1996, suit was initiated against Bundy and one of its
officers in the Circuit Court for Baltimore County, Maryland by a former
employee claiming $1.5 million in damages for wrongful discharge. The Company
believes the suit is without merit and intends to defend it vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the 4th
quarter of the fiscal year ended March 31, 1996.
PART II. OTHER INFORMATION
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value, trades on the Nasdaq
SmallCap Market under the symbol RAWA.
The range of high and low bid quotations for the quarterly periods of
the current and prior fiscal years were as follows:
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<TABLE>
<CAPTION>
Year Ended
March 31, 1996 High* Low*
- --------------------- -------- --------
<S> <C> <C>
First Fiscal Quarter $ 1 1/32 $ 15/16
Second Fiscal Quarter 1 5/16 1 1/8
Third Fiscal Quarter 1 1/4 31/32
Fourth Fiscal Quarter 1 3/16 15/16
Year Ended
March 31, 1995 High* Low*
- --------------------- -------- --------
<S> <C> <C>
First Fiscal Quarter $ 1 1/8 $ 7/8
Second Fiscal Quarter 1 1/16 9/16
Third Fiscal Quarter 1 3/4 27/32
Fourth Fiscal Quarter 1 5/8 1
</TABLE>
* Bid quotations as reported by Nasdaq reflect inter-dealer prices, without
retail mark-up, mark-down, or commission and may not represent actual
transactions.
The Company has never paid any cash dividends on its Common Stock, nor
does it anticipate paying dividends on its Common Stock in the foreseeable
future. The Company currently has preferred stock issued with 1,566,375 shares
outstanding. This stock has a quarterly cumulative dividend of two cents per
share. Based on current outstanding preferred shares, the annual dividend is
$125,310. The terms of the outstanding preferred stock provide that the Company
may not declare or pay dividends, whether in cash or in property, on the common
stock unless the full dividends on the preferred stock for all past dividend
periods and the current dividend period shall have been paid or declared and a
sum set aside for payment thereof. The preferred stock is convertible into
common on a share for share basis. There is no public market for the preferred
stock.
The number of stockholders of record of the Company's Common Stock as
of May 1, 1996 was 265. This figure does not include individual participants in
securities position listings of registered clearing agencies. The number of
beneficial stockholders was approximately 1,000 as of May 1, 1996. Trading
activity with respect to the Common Stock has been limited and the volume of
transactions should not of itself be deemed to constitute an "established public
trading market." A public trading market having the characteristics of depth,
liquidity and orderliness depends upon the existence of market makers as well as
the presence of willing buyers and sellers, which are circumstances over which
the Company does not have control.
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SELECTED FINANCIAL DATA
Set forth below are selected financial data with respect to the
consolidated statements of operations of the Company and its subsidiaries for
each of the five years in the period ended March 31, 1996, and with respect to
the balance sheets thereof at March 31 in each of those years.
The selected financial data have been derived from the Company's
audited consolidated financial statements and should be read in conjunction with
the financial statements and related notes thereto and other financial
information appearing elsewhere herein. The selected financial data is not
required by Form 10-KSB and has been included herein to provide an overview of
the Company's operations.
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------------------------------
1992 1993 1994 1995 1996
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(in thousands except per share
and number of franchises)
<S> <C> <C> <C> <C> <C>
FRANCHISEES' RESULTS (UNAUDITED)
Franchisees' Revenue (1) $ 22,436 $ 23,998 $ 25,522 $ 26,482 $ 29,864
Number of Franchises 356 350 365 384 440
COMPANY'S RESULTS OF OPERATIONS
Total Revenue $ 3,322 $ 4,508 $ 3,224 $ 3,003 $ 3,455
Costs and expenses and Other 3,257 4,910 3,511 2,655 3,029
Income (loss) before income
taxes 6 (438) (262) 416 489
Net income (loss) 1 (443) (236) 383 459
Earnings (loss) per share (.06) (.18) (.10) .06 .07
Weighted average number of
shares outstanding 2,133 3,241 3,773 4,301 4,668
COMPANY'S BALANCE SHEET DATA
Working Capital $ 796 $ 117 $ 572 $ 850 $ 902
Total assets 2,253 2,579 2,553 2,102 2,164
Long-term obligations 454 421 119 -- 36
Shareholders' Equity 1,037 694 1,048 1,299 1,372
</TABLE>
(1) The franchisees' revenue data have been derived from unaudited license fee
reports provided by franchisees.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Except for historical information contained herein, the information in
this document contains forward-looking statements which are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties that could
cause the Company's actual results to differ materially from the forward-looking
statements. Factors which could cause or contribute to such differences include,
but are not limited to, compliance with state and federal franchise laws
including maintaining properly registered franchise offering documents and
making any required alterations in the Company's franchise program to comply
with changes in the laws, competitive pressures from other motor vehicle rental
companies which have greater marketing and financial resources than the Company,
protection of the Company's trademark, and maintenance of strong relationships
with the Company's franchisees. The forward-looking statements should be
considered in light of these risks and uncertainties.
RESULTS OF OPERATIONS
Year ended March 31, 1996 vs. year ended March 31, 1995
Consolidated gross revenues net of advertising increased by $363,225
(15%) for 1996 as compared to the prior year. Revenue from franchising
operations increased by $367,738 (17%). This increase occurred because of an
increase of $182,732 (32%) in initial license fees and a $202,950 (13%) increase
in continuing license fees due to an increase in the number of franchises. The
direct financing program decreased by $17,944 (73%) due to cancellation of the
original outside financing program which was later replaced by the Company's own
financing program.
Total operating expenses increased by $374,021 (14%) in fiscal 1996
compared to the prior year. Salary expense increased by $81,171 (14%) due
primarily to enlarging the sales department. The general and administrative
expenses increased by $165,865 (25%), which resulted primarily from an increase
in legal fees and expenses.
Net interest income decreased $5,127, primarily due to the reduction in
the vehicle finance program.
Net income for the year ended March 31, 1996 was $458,572, compared to
net income of $383,214 in the prior year. This primarily resulted from the
increase in initial license fees and continuing license fees.
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Inflation has had no material impact on the operations and financial
condition of the Company for all years presented.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had working capital of $901,774 compared
to working capital of $850,010 at March 31, 1995. This increase of $51,764
primarily resulted from net income for the year ended March 31, 1996.
Cash provided by operations was $672,713 resulting from an increase in
net income, plus depreciation and provision for doubtful accounts, offset by an
increase in accounts and notes receivable due to the growth of the Company. Cash
used in investing activities of $216,583 related primarily to the acquisition of
property and equipment. Cash used in financing activities during the same period
was $442,631, which was applied to fully pay off long-term debt, payments of
preferred dividends, and the retirement of common and preferred stock.
During the year ended March 31, 1996, the Company announced a buyback
of up to 250,000 shares of its common stock and/or its Series A convertible
preferred stock. During the year ended March 31, 1996, the Company bought back
116,400 shares of its common stock at a cost of $118,561, and also bought back
89,375 shares of its preferred stock at a cost of $117,906. These shares were
retired in the year ended March 31, 1996.
The Company believes that it has sufficient working capital to support
its business plan through fiscal 1997.
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ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
<TABLE>
<CAPTION>
Page
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<S> <C>
Report of Independent Certified Public Accountants... 13
Financial Statements:
Consolidated Balance Sheet as of
March 31, 1996................................... 15
Consolidated Statements of Earnings for
the Years Ended March 31, 1995
and 1996......................................... 17
Consolidated Statements of Shareholders'
Equity for the Years Ended March 31, 1995
and 1996......................................... 18
Consolidated Statements of Cash Flows for the
Years Ended March 31, 1995 and 1996.............. 19
Notes to Consolidated Financial
Statements....................................... 20
Supporting Schedules:
Schedule II - Valuation and Qualifying
Reserves........................... 32
</TABLE>
Schedules other than those listed above have been omitted because they
are either not required, inapplicable, or the required information is included
in the Consolidated Financial Statements or notes thereto.
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Two Hopkins Plaza
Baltimore, MD 21201-2909
410 685-4000
FAX 410 837-0587
Grant Thornton LLP
Accountants and
Management Consultants
The U.S. Member Firm of
Grant Thornton International
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Rent-A-Wreck of America, Inc.
We have audited the accompanying consolidated balance sheet of Rent-A- Wreck of
America, Inc. (a Delaware corporation) and subsidiaries as of March 31, 1996,
and the related consolidated statements of earnings, 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 financial statements based on our audit. The financial
statements of Rent-A-Wreck of America, Inc. for the year ended March 31, 1995,
were audited by other auditors whose report dated May 19, 1995, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted accounting
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 our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Rent-A-Wreck of
America, Inc. as of March 31, 1996, and the consolidated results of their
operations and their consolidated cash flows for the year then ended in
conformity with generally accepted accounting principles.
We have also audited Schedule II for the year ended March 31, 1996. In our
opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
/s/ Grant Thornton LLP
Baltimore, Maryland
May 31, 1996
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ARTHUR ANDERSON LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Rent-A-Wreck of America, Inc.
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Rent-A-Wreck of America, Inc. (a Delaware
corporation) and subsidiaries for the year ended March 31, 1995. 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 audit.
We conducted our audit in accordance with generally accepted accounting
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 consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Rent-A-Wreck of America, Inc. and subsidiaries for the year ended March 31,
1995, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index of financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Baltimore, Maryland
May 19, 1995
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CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
ASSETS
<TABLE>
<CAPTION>
1996
----------
<S> <C>
CURRENT ASSETS:
Cash and Cash Equivalents, including restricted cash... $ 579,871
Accounts Receivable, net of allowance
for doubtful accounts of $775,376:
Continuing License Fees and
Advertising Fees................................. 267,203
Current Portion of Notes Receivable................ 512,771
Current Portion of Direct Financing
Leases........................................... 33,872
Insurance Premiums Receivable...................... 171,943
Other.............................................. 6,388
Prepaid Expenses....................................... 85,787
----------
TOTAL CURRENT ASSETS............................... 1,657,835
----------
PROPERTY AND EQUIPMENT:
Vehicles............................................. 42,525
Furniture, Equipment and Leasehold
Improvements....................................... 639,439
Less: Accumulated Depreciation and
Amortization.................................. (358,018)
-----------
NET PROPERTY AND EQUIPMENT............................. 323,946
-----------
OTHER ASSETS:
Trademarks and other Intangible Assets, net of
accumulated amortization of $194,312............... 158,743
Notes and Direct Financing Lease Receivables,
net of allowance of $17,604........................ 23,857
----------
182,600
----------
TOTAL ASSETS....................................... $2,164,381
==========
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
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RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996
----------
<S> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses................ $ 598,436
Dividends Payable.................................... 31,327
Insurance Premiums, Deposits, and Loss
Reserves........................................... 109,695
Current Maturities of Capital Lease Obligations...... 16,603
----------
TOTAL CURRENT LIABILITIES.......................... 756,061
----------
CAPITAL LEASE OBLIGATIONS, Less Current Maturities..... 35,927
----------
TOTAL LIABILITIES.................................. 791,988
----------
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY:
Convertible Cumulative Series A Preferred Stock,
$.01 par value; authorized 10,000,000 shares;
issued and outstanding 1,566,375 shares
(aggregate liquidation preference $1,253,100) 15,664
Common Stock, $.01 par value; authorized
25,000,000 shares; issued and
outstanding 4,121,642 shares....................... 41,216
Additional Paid-In Capital........................... 2,992,198
Accumulated Deficit.................................. (1,676,685)
-----------
TOTAL SHAREHOLDERS' EQUITY......................... 1,372,393
----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY........................................... $2,164,381
==========
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
16
<PAGE> 17
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
REVENUES:
Initial License Fees................... $ 567,762 $ 750,494
Advertising Fees....................... 500,353 588,927
Continuing License Fees................ 1,588,908 1,791,858
Vehicle Rental Operations.............. - 3,750
Direct Financing Leases to Franchisees. 24,725 6,781
Other.................................. 321,239 312,976
---------- ----------
3,002,987 3,454,786
---------- ----------
EXPENSES:
Salaries, Consulting Fees, and
Employee Benefits.................... 592,779 673,950
Advertising and Promotion.............. 682,817 827,578
Sales and Marketing ................... 655,565 636,425
General and Administrative ............ 652,359 818,224
Depreciation and Amortization......... 71,859 73,223
---------- ----------
2,655,379 3,029,400
---------- ----------
OPERATING INCOME................ 347,608 425,386
INTEREST INCOME, NET..................... 68,563 63,436
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 416,171 488,822
INCOME TAX EXPENSE....................... 32,957 30,250
---------- ----------
NET INCOME...................... 383,214 458,572
DIVIDENDS ON CONVERTIBLE CUMULATIVE
PREFERRED STOCK........................ (132,460) (130,122)
---------- -----------
NET INCOME APPLICABLE TO COMMON
AND COMMON EQUIVALENT SHARES........... $ 250,754 $ 328,450
========== ==========
EARNINGS PER COMMON SHARE................ $ .06 $ .07
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING... 4,301,419 4,668,068
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
17
<PAGE> 18
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------- ------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
--------- ------- --------- ------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1994............ 1,655,750 $16,558 4,238,042 $42,380 $3,198,920 $(2,209,893) $1,047,965
Preferred dividends paid ($.08
per share).................... - - - - - (132,460) (132,460)
Net income...................... - - - - - 383,214 383,214
--------- ------- --------- ------- ---------- ----------- ----------
Balance, March 31, 1995........... 1,655,750 16,558 4,238,042 42,380 3,198,920 (1,959,139) 1,298,719
Retirement of common stock...... - - (116,400) (1,164) (123,741) 6,343 (118,562)
Retirement of preferred stock... (89,375) (894) - - (82,981) (34,032) (117,907)
Preferred dividends paid ($.08
per share).................... - - - - - (130,122) (130,122)
Preferred dividends arrearages
paid (5%)..................... - - - - - (18,307) (18,307)
Net income...................... - - - - - 458,572 458,572
--------- ------- --------- ------- ---------- ----------- ----------
Balance, March 31, 1996........... 1,566,375 $15,664 4,121,642 $41,216 $2,992,198 $(1,676,685) $1,372,393
========= ======= ========= ======= ========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
18
<PAGE> 19
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Increase (decrease) in cash and cash
equivalents
Cash flow from operating activities:
Net Income............................................... $383,214 $ 458,572
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization........................ 71,859 73,223
Loss (Gain) on disposal of property and equipment.... 19 (1,800)
Provision for doubtful accounts...................... 237,864 146,418
Changes in assets and liabilities:
Accounts and notes receivables....................... 226,696 (34,265)
Prepaid expenses..................................... (14,175) 13,603
Other assets......................................... 17,402 -
Accounts payable and accrued
expenses........................................... (15,188) 22,722
Insurance premiums, deposits, and
loss reserves...................................... (40,980) (5,760)
-------- ---------
Net cash provided by operating activities......... 866,711 672,713
-------- ---------
Cash flow from investing activities:
Proceeds from sale of property and equipment............. 3,075 37,200
Acquisition of property and equipment.................... (97,850) (234,265)
Additions to trademarks and other........................ (10,750) (19,518)
-------- ---------
Net cash used in investing activities............. (105,525) (216,583)
-------- ---------
Cash flows from financing activities:
Repayments of long-term debt............................. (678,879) (57,733)
Retirement of common stock............................... - (118,562)
Retirement of preferred stock............................ - (117,907)
Preferred dividends paid................................. (99,345) (148,429)
-------- ---------
Net cash used in financing activities............. (778,224) (442,631)
-------- ---------
Net (decrease) increase in cash and cash
equivalents....................................... (17,038) 13,499
Cash and cash equivalents at beginning of year............. 583,410 566,372
-------- ---------
Cash and cash equivalents at end of year................... $566,372 $ 579,871
======== =========
Supplemental disclosure of cash flow information:
Interest paid............................................ $ 19,955 $ 6,349
Taxes paid............................................... $ 39,757 $ 33,857
Non-cash transactions:
Capital Lease Obligations................................ $ 34,944 $ 29,568
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
19
<PAGE> 20
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements presented herein include the
accounts of Rent-A-Wreck of America, Inc. ("RAWA, Inc.") and its wholly-owned
subsidiaries, Rent-A-Wreck Operations, Inc. ("RAW OPS"), Rent-A-Wreck One Way,
Inc. ("RAW One Way") and Bundy American Corporation ("Bundy"), and Bundy's
subsidiaries, Rent-A- Wreck Leasing, Inc. ("RAW Leasing"), URM Corporation
("URM") and Central Life and Casualty Company, Limited ("CLC"). All of the above
entities are collectively referred to as the "Company" unless the context
provides or requires otherwise. All material intercompany balances and
transactions have been eliminated.
The Company markets and administers the Rent-A-Wreck vehicle rental
franchise program throughout the United States, as well as various foreign
countries.
CASH
Included in cash and cash equivalents is cash restricted for use in the
National Advertising Fund. Restricted cash totalled $159,253 as of March 31,
1996.
ACCOUNTS AND NOTES RECEIVABLE
Substantially all receivables derived from franchises granted by the
Company are personally guaranteed by the franchisees. Initial license fees are
collected upon execution of the contract or financed, generally over a
twelve-month period with interest.
PROPERTY AND EQUIPMENT
Depreciation and amortization are provided for in amounts sufficient to
relate the cost of depreciable assets to operations over their estimated service
lives, utilizing primarily the straight-line method for financial statement
purposes. Accelerated methods of depreciation are used for substantially all
assets for income tax purposes.
TRADEMARKS
Costs associated with trademarks are capitalized and amortized on the
straight-line method to operations over periods ranging from ten to forty years.
INCOME TAXES
Income taxes are provided for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Accordingly,
liabilities and assets are recognized for the deferred tax consequences of
temporary differences or carryforwards that will result in net taxable or
deductible amounts in future periods. Deferred tax expense or benefit is the
result of changes
20
<PAGE> 21
in the net asset or liability for deferred taxes. The principal items giving
rise to temporary differences are depreciation, reserves and accrued
liabilities.
REVENUE RECOGNITION
Initial License, Advertising and Continuing License Fees
Revenues are comprised primarily of initial license fees, continuing
license fees, and advertising fees. Franchisees have certain rights to use the
Company's trademarked name, "Rent-A- Wreck," in a specified territory. Although
the franchisee has continuing access to the use of certain of the Company's
resources, experience and knowledge, the Company recognizes the initial license
fee as revenue upon completion of an initial orientation and training course
since this represents substantially all of the initial services required. Many
franchisees have had prior business experience and, therefore, require little
assistance in commencing business. There is no obligation beyond the initial
training as related to the initial license fee. Continuing license and
advertising fees are recognized as revenues on a monthly basis over the contract
year based primarily on franchisees' reported gross revenues.
Direct Financing Leases
The Company offers, on a selective basis to qualified franchisees, the
opportunity to finance vehicles for their rental fleets under a direct financing
program. The Company recognizes the related interest, documentation and
administrative revenues as they are received. The Company accounts for the
financing of the vehicles with the franchisees as direct financing leases (see
Note 2).
21
<PAGE> 22
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
Other
Insurance administration and physical damage program revenues are
recognized ratably over the term of the coverage. Promotional material revenues
are recorded when shipped. Components of other revenues for the years ended
March 31, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Insurance administration
and physical damage
program................... $ 206,478 $ 199,357
Promotional materials....... 91,321 97,123
Other....................... 23,440 16,496
--------- ---------
$ 321,239 $ 312,976
========= =========
</TABLE>
ADVERTISING
Advertising costs are expensed as incurred and are classified as
advertising and promotion expenses.
EARNINGS PER COMMON SHARE
Earnings per common share for the years ended March 31, 1995 and 1996
are presented on a fully diluted basis and are based upon the combined weighted
average number of shares of common stock outstanding during each year. The
dilutive effect of stock options and warrants was considered in the computations
of earnings per common share, and preferred dividends for each year were
subtracted from net income to arrive at the earnings applicable to common
shareholders.
Primary earnings per common share for the years ended March 31, 1995
and 1996 were the same as fully diluted earnings per common share.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all
highly liquid financial instruments purchased with a maturity of three months or
less to be cash equivalents.
ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and
22
<PAGE> 23
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
reported revenues and expenses. Actual results could differ from those
estimates.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," must be adopted in 1997. The standard requires that impairment
losses be recognized when the carrying value of an asset exceeds its fair value.
The Company regularly assesses all of its long-lived assets for impairment and,
therefore, does not believe the adoption of the standard will have a material
effect on its financial position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation," must be
adopted in 1997. This standard encourages, but does not require, recognition of
compensation expense based on the fair value of equity instruments granted to
employees. As permitted by SFAS No. 123, the Company will continue to apply the
recognition and measurement provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and adapt the disclosure
requirements of SFAS No. 123 beginning in 1997. Accordingly, the issuance of
SFAS No. 123 will not impact the Company's consolidated financial statements.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
1996 presentation.
23
<PAGE> 24
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
2. DIRECT FINANCING LEASES
The components of the Company's net investment in direct financing
leases are as follows:
<TABLE>
<CAPTION>
March 31,
1996
----------
<S> <C>
Total Minimum Lease Payments to be Received... $ 105,149
Less Amounts Representing
Administration Costs Included in
Total Minimum Lease Payments....... 2,100
---------
Minimum Lease Payment Receivable.............. 103,049
Less Allowance for Uncollectibles.... 47,240
---------
Net Minimum Lease Payments Receivable......... 55,809
Less Unearned Income................. 7,926
---------
Net Investment in Direct Financing Leases..... $ 47,883
=========
Current Portion ......................... $ 33,872
Non-Current Portion...................... 14,011
---------
Net Investment in Direct Financing Leases..... $ 47,883
=========
</TABLE>
The total minimum lease payments receivable will be received
in the two succeeding fiscal years as follows:
<TABLE>
<S> <C>
1997..........................$ 90,389
1998.......................... 14,760
---------
Total $ 105,149
=========
</TABLE>
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
March
31, 1996
---------
<S> <C>
Accounts Payable......................... $ 119,780
National Advertising Fund................ 159,253
Payroll.................................. 29,565
Commissions and Royalties................ 130,802
Professional Fees........................ 75,582
Other.................................... 83,454
---------
$ 598,436
=========
</TABLE>
24
<PAGE> 25
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
4. CAPITAL LEASE OBLIGATIONS
Equipment leased under capital lease agreements are summarized below.
<TABLE>
<S> <C>
Equipment $ 71,663
Less accumulated amortization 16,810
---------
$ 54,853
=========
</TABLE>
Future minimum lease payments under the capital leases at March 31,
1996 are as follows:
<TABLE>
<CAPTION>
Year ended March 31,
--------------------
<S> <C>
1997 $ 22,964
1998 13,466
1999 13,466
2000 13,466
2001 7,644
---------
Total minimum lease payments 71,006
Less amount representing interest 18,476
---------
$ 52,530
=========
Current portion $ 16,603
Long-term portion 35,927
---------
$ 52,530
=========
</TABLE>
5. INCOME TAXES
The Company accounts for income taxes on the liability method, as
prescribed by Statement of Financial Accounting Standards 109, Accounting for
Income Taxes (SFAS 109). The provision for income taxes for the years ended
March 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Provision for income taxes - current.... $ 32,957 $ 30,250
--------- ---------
Total......................... $ 32,957 $ 30,250
========= =========
</TABLE>
The reconciliation of the provision for income taxes computed at
statutory rates to the provision for income taxes provided on pre-tax income for
the year ended March 31, 1995 and 1996 is as follows:
25
<PAGE> 26
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Federal taxes at statutory
rate........................ $ 141,000 $ 210,000
Utilization of tax loss
caryforward..................... (141,000) (207,200)
Federal alternative minimum tax... - 4,200
State and local taxes, net........ 32,957 23,250
--------- ---------
Total................... $ 32,957 $ 30,250
========= =========
</TABLE>
The significant components of the deferred income tax asset and
(liability), stated by source of the difference between financial accounting and
tax basis as of March 31, 1996 are as follows:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Deferred income tax assets:
Reserve for doubtful accounts........... $ 303,000
Accrued expenses........................ 69,000
Fixed assets............................ (10,000)
Operating loss carryforwards............ 151,000
Valuation allowance..................... (513,000)
---------
Net Deferred Income Taxes................ $ -0-
=========
</TABLE>
As of March 31, 1996, the Company had available, for tax purposes, a
Federal income tax net operating loss carryforward of approximately $444,000 to
offset future taxable income. The carryforwards will expire through 2009.
7. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company's corporate offices are occupied under the terms of
operating leases from both related and non-related parties, the longest of which
expires in November, 1999. Future minimum lease payments under non-cancelable
agreements are as follows:
<TABLE>
<CAPTION>
March 31,
---------
<S> <C>
1997.....................$ 62,875
1998.....................$ 64,132
1999.....................$ 66,713
2000.....................$ 45,359
</TABLE>
26
<PAGE> 27
Total rent expense for the years ended March 31, 1995 and 1996 was
$42,481 and $62,946, of which $29,636 and $25,814, respectively was to the
related party (see Note 8).
Litigation
The Company is party to legal proceedings incidental to its business
from time to time. Certain claims, suits and complaints arise in the ordinary
course of business and may be filed against the Company. Based on facts now
known to the Company, management believes all such matters are adequately
provided for, covered by insurance or, if not so covered or provided for, are
without merit, or involve such amounts that would not materially adversely
affect the consolidated results of operations or financial position of the
Company.
8. RELATED PARTY TRANSACTIONS
The Company has entered into a Management Agreement with K.A.B., Inc.
(KAB), a management consulting group controlled by and affiliated with Kenneth
L. Blum, Sr., Chairman of the Board of Directors and Chief Executive Officer of
the Company, which expires June 30, 1998. As a part of this agreement, KAB
provides direct overall management of the Company's operations. Total annual
fees paid to KAB under the management agreement were $200,000 in 1995 and 1996.
KAB has also been granted an option to purchase up to 2,250,000 shares of the
Company's common stock (see note 9). In April, 1996, the management agreement
and options were amended (see Note 12).
The Company leases a portion of its corporate offices under the terms
of a month-to-month operating lease with American Business Information Systems,
Inc. (ABIS), a related party of KAB. The Company paid $29,636 and $25,814 for
the years ended March 31, 1995 and 1996 to ABIS under this agreement.
In 1995, the Company entered into an agreement with ABIS, a related
party of KAB, to develop computer software and related documentation over a
five-year term. For the years ended March 31, 1995 and 1996, $30,919 and $77,005
have been paid to ABIS under this agreement.
In 1995, the Company retained Richter & Co., Inc., a related party, to
serve as exclusive financial advisor and placement agent for the Company. For
its role of placement agent and financial advisor, Richter & Co., Inc.'s fees
will be contingent and based upon transactions completed, as defined in the
agreement. For the years ended March 31, 1995 and 1996, there were no fees paid
to Richter & Co., Inc. pursuant to this agreement.
Richter & Co., Inc. provides substantial ongoing financial management
services to the Company at no charge. In the opinion of management, the terms of
the Company's agreements with Richter, KAB and ABIS taken as a whole are at
least as favorable to the Company as could be obtained from third parties.
27
<PAGE> 28
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
9. STOCK OPTION PLANS AND COMMON STOCK WARRANTS
Options and warrants to acquire shares of the Company's common stock
are granted at a value not less than 100% of the fair market value of the
underlying stock on the date of issuance.
Under the Company's stock option plans, 300,000 shares of the Company's
common stock are reserved for issuance upon the exercise of options granted to
employees, including officers and directors. Certain options granted are not
qualified as incentive stock options.
At March 31, 1996, options have been granted and are outstanding for a
total of 55,000 shares under the plan. As of March 31, 1996, options for 245,000
shares are available under this plan.
The Company has issued stock options to acquire 2,250,000 shares of its
common stock to KAB in conjunction with its management agreement. During the
year ended March 31, 1995, this option agreement was amended so that options for
1,000,000 shares became vested and the balance of the options become exercisable
on April 1, 1998 (or earlier, based upon Company profitability and stock price
performance requirements as defined). During the year ended March 31, 1996, KAB
transferred (a) 483,333 and 604,167 vested and unvested options, respectively,
to each of Kenneth L. Blum Jr., the Company's president, and Mr. Blum's sister,
Robin Cohn; (b) 20,000 and 25,000 vested and unvested options, respectively, to
Richter & Co., Inc., an affiliate of William L. Richter, a director of the
Company; and (c) 13,333 and 16,666 vested and unvested options, respectively, to
Mr. Richter. These options are included in the outstanding options below;
however, the 2,250,000 options are not a part of the stock option plan. These
options were further amended in April, 1996 (see Note 12).
A summary of the changes in total outstanding options for the year
ended March 31, 1996 is as follows:
<TABLE>
<CAPTION>
Number of Exercise Price
Options per Option
----------- --------------
<S> <C> <C>
Outstanding, beginning of year... 2,305,000 $1.00 - $1.15
Issued........................... -
Cancelled........................ -
-----------
Outstanding, end of year......... 2,305,000 $1.00 - $1.15
===========
</TABLE>
In consideration of services rendered in connection with the
negotiation of the management agreement with KAB, the Company granted Richter &
Co., Inc. five-year warrants, expiring June 30, 1998, to purchase 155,000 shares
of the Company's Common Stock for its services as investment banker. The
exercise price of 20,000 of such warrants was $.80, with the exercise price of
the remaining 135,000 warrants tied to the exercise and vesting provisions of
the options issued to KAB in connection with the management agreement. Richter &
Co., Inc. assigned 62,000 of these warrants to William L.
28
<PAGE> 29
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
Richter. During the year ended March 31, 1995, in connection with the amendment
of the KAB options described above, the exercise price of 36,000 and 24,000
warrants held by Richter & Co., Inc. and William L. Richter, respectively, was
fixed at $1.00 per share, and an outside vesting date of April 1, 1998 was
established for the balance of the 135,000 warrants. These warrants were further
amended in April, 1996 (see Note 12).
Warrants for 30,000 shares of the Company's common stock exercisable at
$.80 per share have been issued to Richter & Co., Inc. in connection with
previous private placement transactions for which Richter & Co., Inc. acted as
agent. Richter & Co., Inc. has assigned 12,000 of these warrants to William L.
Richter and 4,000 warrants to Richter & Co., Inc. employees.
On September 30, 1994, the Company issued warrants for 100,000 shares
of the Company's common stock to Whale Securities Co., L.P. for consulting
services. The exercise price is $1.25 per share.
A summary of changes in outstanding warrants for the year ended March
31, 1996 is as follows:
<TABLE>
<CAPTION>
Number of Exercise Price
Warrants per Warrant
--------- --------------
<S> <C> <C>
Outstanding, beginning of year.. 396,750 $.80 - $1.50
Issued.......................... -
Cancelled....................... -
---------
Outstanding, end of year........ 396,750 $.80 - $1.50
=========
</TABLE>
10. PREFERRED STOCK
The terms of the outstanding preferred stock provide that the Company
may not declare or pay dividends, whether in cash or in property, on the common
stock unless all dividends on the preferred stock for all past dividend periods
and the then current dividend period shall have been paid or declared and a sum
set aside for payment thereof. Holders of Preferred Stock, voting as a class,
are entitled to elect up to four members of a seven member Board of Directors
and are also entitled to vote as a class on other significant corporate actions.
Pursuant to the terms of a voting trust, Richter Investment Corp. holds a proxy
to vote approximately 80% of the Preferred Stock and by virtue of his control
over Richter Investment Corp., William L. Richter can be deemed to have voting
control over such shares. The holders of the Series A Preferred are entitled to
cumulative dividends at an annual rate of eight cents per share. The Series A
Preferred is convertible, at the option of the holder, into common shares on the
basis of one share of common for each share of Series A Preferred.
During the year ended March 31, 1996, the Company repurchased and
retired 89,375 shares of preferred stock, reducing the total outstanding
preferred shares from 1,655,750 to 1,566,375. At March
29
<PAGE> 30
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
31, 1996, undeclared and unpaid cumulative preferred dividends amounted to
$328,584. During the year ended March 31, 1996, the Company declared preferred
dividends totaling $130,122, plus $18,307 of dividend arrearages, and at March
31, 1996, unpaid declared preferred dividends totaled $31,327.
11. CONCENTRATIONS OF CREDIT RISK - CASH
The Company maintains its cash balances in a financial institution
located in Maryland, which at times may exceed federally insured limits. The
Company has not experienced any losses in such accounts, and management believes
the Company is not exposed to significant credit risk.
12. SUBSEQUENT EVENTS
Effective April 8, 1996, the Company approved the repurchase of up to
an additional 250,000 shares of the Company's outstanding common or preferred
stock, subject to the terms and conditions of the 250,000-share repurchase
program initiated in the year ended March 31, 1996. The Company also approved
the extension of the term of the KAB Management Agreement for five years, the
extension of the options originally granted to KAB by five years (with a
corresponding delay in the fixed vesting date until July 1, 2002), an increase
in the annual cash payment to $250,000 (effective April 1, 1996), and the
addition of a cashless exercise feature to the options held by KAB.
The Company also extended 135,000 of the warrants originally issued to
Richter & Co., Inc. for an additional five years in consideration of services
rendered in connection with the renegotiation of the KAB management agreement
and related services.
The Company declared a special dividend equal to 10% of dividend
arrearages on all preferred shares outstanding as of March 31, 1996, totaling
$32,859, payable with the regular quarterly preferred dividend on May 15, 1996,
which will reduce undeclared and unpaid cumulative preferred dividends to
$295,726.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable. (The Company need not provide the disclosure called for by this
Item because it has been previously reported, as that term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended).
30
<PAGE> 31
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF EXCHANGE ACT OF THE REGISTRANT
Reference is made to Company's 1996 Proxy Statement under the caption
"Election of Directors."
ITEM 10. EXECUTIVE COMPENSATION
Reference is made to the Company's 1996 Proxy Statement under the
caption "Executive Compensation."
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Reference is made to the Company's 1996 Proxy Statement under the
caption "Security Ownership of Certain Beneficial Owners and Management."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the Company's 1996 Proxy Statement under the
caption "Certain Transactions."
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. The financial statements, notes thereto and Report of
Independent Public Accountants listed in the Index to
Consolidated Financial Statements set forth in Item 7.
2. The Exhibits listed in the Exhibit Index.
3. Financial Statement Schedules for the years in the period
ended March 31, 1995 and 1996, as applicable.
Schedule II - Valuation and Qualifying
Reserves
31
<PAGE> 32
SCHEDULE II
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING RESERVES
YEARS ENDED MARCH 31, 1995 and 1996
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS OF PERIOD
- ----------- ---------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
MARCH 31, 1995
Allowance for
doubtful accounts $ 561,946 $ 237,864 $ - $ 153,248 (1) $ 646,562
MARCH 31, 1996
Allowance for
doubtful accounts $ 646,562 $ 272,518 $ - $ 126,100 (1) $ 792,980
</TABLE>
(1) Accounts written off
32
<PAGE> 33
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
33
<PAGE> 34
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Rent-A-Wreck of America, Inc. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized:
Rent-A-Wreck of America, Inc.
Registrant
By: Date:
/s/ Mithra Khosravi June 15, 1996
- ------------------------- -----------------
Mithra Khosravi
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates as indicated:
Signature and Title Date
- ------------------- ----
/s/ Kenneth L. Blum, Sr. June 15, 1996
- ------------------------- ----------------
Kenneth L. Blum, Sr.
Chairman of the Board
and Director
/s/ Mithra Khosravi June 15, 1996
- ------------------------- ----------------
Mithra Khosravi
Chief Accounting Officer
/s/ David Schwartz June 15, 1996
- ------------------------- ----------------
David Schwartz
Vice Chairman of the Board
/s/ William L. Richter June 15, 1996
- ------------------------- ----------------
William L. Richter
Vice Chairman of the Board
/s/ Alan Aufzien June 15, 1996
- ------------------------- ----------------
Alan Aufzien, Director
34
<PAGE> 35
EXHIBIT INDEX
-------------
Incorporated
Exhibit No. Exhibit by Reference from
- ----------- ------- -----------------
3.1 Certificate of Form 10-K for the
Incorporation, fiscal year ended
as amended March 31, 1986, in
which the Certificate
of Incorporation,
as amended, is
incorporated by
reference.
3.2 Bylaws, Form 10-K
as amended for the fiscal
year ended
March 31, 1986,
in which the Bylaws,
are incorporated by
reference and
amendments to Bylaws
are filed therein.
9 Voting Trust Form 10-K for the fiscal
Agreement year ended March 31, 1990
is incorporated by reference.
10.1 Commercial Installment Form 8-K, Dated
Sales and Finance February 21, 1992 and is
Agreement, as Amended incorporated by reference;
Amendment filed with Form 10-KSB
for the fiscal year ended
March 31, 1995 and is incorporated
by reference.
10.2 Promissory Note - Form 10-K for the fiscal
David Schwartz, year ended March 31, 1993
Shareholder as Amended is incorporated by reference.
10.4 Option Plan Form 10-K for the fiscal
year ended March 31, 1993
is incorporated by reference.
10.5 * Management Agreement - Form 8-K, dated June 30, 1993
K.A.B., Inc.,Related and is incorporated by
party dated June 30, reference.
1993
10.6 Sales Commission Form 8-K, dated June 30, 1993
Agreement - K.A.B., and is incorporated by
Inc. date August 1, reference.
1993
10.7 Stock Option Grant to Form 8-K, dated June 30, 1993
K.A.B., Inc. dated and is incorporated by
June 30, 1993 reference.
35
<PAGE> 36
10.8 Registration Rights Form 8-K, dated June 30, 1993
Agreement dated June and is incorporated by
30, 1993, among K.A.B., reference.
Inc., Kenneth L. Blum,
Jr., Alan S. Cohn and
the Company
10.10 Commercial Installment Form 10-KSB for the
Sales and Finance fiscal year ending
Agreement-K.A.B., Inc. March 31, 1994.
dated August 1, 1993
10.11 Franchise Agreement - Form 10-KSB for the
standard form fiscal year ending
March 31, 1994.
10.12 Warrant Agreement - Form 8-K, dated June 30, 1993
Richter & Co., Inc. and is incorporated by
reference.
10.13 Software Development Form 10-KSB for the
and Computer Usage fiscal year ending
Agreement effective March 31, 1995.
January 1, 1995 between
National Computer
Services, Inc. and
the Company.
10.14 Financial Advisory Form 10-KSB for the
Agreement between fiscal year ending
the Company and Richter, March 31, 1995.
& Co., Inc. dated March
20, 1995.
10.15 Lease between the Filed herewith.
Company and Owings
Mills Commerce
Centre Limited
Partnership dated
September 19, 1995 and
Subordination, Attornment
and Non-Disturbance
Agreement.
10.16 Franchise Agreement - Filed herewith.
standard form as of
August 3, 1995
21 List of Subsidiaries Filed herewith.
27 Financial Data Schedule Filed herewith.
* Management contract or compensatory plan or arrangement.
36
<PAGE> 1
Exhibit 10.15
LANDLORD:
OWINGS MILLS COMMERCE CENTRE
LIMITED PARTNERSHIP, a Maryland
Limited Partnership
TENANT:
RENT A WRECK, INC.
-----------------
LEASE
-----------------
Dated: September 19, 1995
Owings Mills Commerce Centre
11460 Cronridge Drive, Suite 120
Owings Mills, Maryland 21117
8/25/95
<PAGE> 2
OWINGS MILLS COMMERCE CENTRE
TABLE OF CONTENTS
1. RENT PAYMENTS....................... 1
2. USE................................. 1
3. UTILITIES........................... 2
4. COMPLIANCE WITH LAWS................ 2
5. ASSIGNMENT/SUBLETTING............... 2
6. FLOOR LOAD.......................... 2
7. TENANT INSURANCE, INDEMNITY......... 2
8. ALTERATIONS......................... 3
9. END OF TERM......................... 3
10. MAINTENANCE......................... 3
11. TAX ESCALATOR....................... 3
12. INSURANCE ESCALATOR................. 4
13. DEFAULT............................. 4
14. CASUALTY............................ 4
15. RECEIVERSHIP........................ 5
16. POSSESSION.......................... 5
17. SIGNS, ETC.......................... 5
18. RULES & REGULATIONS................. 5
19. LANDLORD ACCESS..................... 5
20. LANDLORD LIABILITY.................. 5
21. ACCESS.............................. 5
22. EXPIRATION.......................... 5
23. CONDEMNATION........................ 6
24. SUBORDINATION....................... 6
25. COMMON AREAS........................ 7
26. SECURITY DEPOSIT.................... 7
27. NOTICES............................. 7
28. TENANT BUILD-OUT.................... 7
29. RELOCATION.......................... 7
30. HAZARDOUS SUBSTANCES................ 8
31. BROKERAGE COMMISSIONS............... 9
32. RECORDING........................... 9
33. WAIVER OF JURY TRIAL................ 9
34. CONTINGENCIES...................... 10
Exhibit A - Site Plan
Exhibit B - Space Plan - Deleted
Exhibit C - Building Standard Finishes - Deleted
Exhibit D - Rules and Regulations
8/25/95
<PAGE> 3
LEASE AGREEMENT
THIS LEASE AGREEMENT, made on the 7th day of September, 1995, by and between
OWINGS MILLS COMMERCE CENTRE LIMITED PARTNERSHIP, a Maryland limited
partnership, having an office at P.O. Box 10147, Baltimore, Maryland 21285
(hereinafter called Landlord) and RENT- A-WRECK, INC., having an office at 11460
Cronridge Drive, Suite 120, Owings Mills, Maryland 21117 (hereinafter
collectively called "Tenant").
WITNESSETH: That in consideration of the rents, covenants and agreements herein
contained, on the part of Tenant to be performed, Landlord does hereby lease
unto the said Tenant the premises known as Suite No. 120, located in Owings
Mills Commerce Centre, 11460 Cronridge Drive, Baltimore County, Maryland 21117
("Centre"), as shown on Exhibit A, space plan, containing approximately 6,790
total square feet ("Premises").
TERM
The term of the Lease shall be for four (4) years two (2) months commencing
October 1, 1995 and terminating November 30, 1999.
RENT
Tenant shall pay rent, to Landlord at the rental rate of Nine Dollars Twenty-six
Cents ($9.26) per square foot of floor space in the Premises, or Sixty-two
Thousand Eight Hundred Seventy-five Dollars Forty Cents ($62,875.40) per annum
for the first and second years of the term of this Lease; at the rental rate of
Nine Dollars Sixty-three Cents ($9.63) per square foot of floor space in the
Premises, or Sixty-five Thousand Three Hundred Eighty-seven Dollars Seventy
Cents ($65,387.70) for the third year of the term of this Lease; and, at the
annual rate of Ten Dollars Two Cents ($10.02) per square foot of floor space in
the Premises, or Sixty-eight Thousand Thirty-five Dollars Eighty Cents
($68,035.80) for the remainder of the term of the Lease, to be paid in equal
monthly installments, in advance, on the first day of the month as follows: Rent
shall be paid to Landlord at the office of its agent, Continental Realty Corp.,
P.O. Box 10147, Baltimore, Maryland 21285, or to such other appointee as
Landlord may from time to time designate in writing.
THE TENANT COVENANTS AND AGREES WITH THE LANDLORD AS FOLLOWS:
1. RENT PAYMENTS. Tenant shall pay rent when due, without deduction or set off.
2. USE. Tenant shall use and occupy the Premises solely for the following
purposes: administrative offices for computer software companies and a car
rental company, laser printing services, and for no other purpose or purposes.
3. UTILITIES, TRASH, JANITORIAL. (a) Tenant shall pay for all gas, electricity,
telephone and other utilities used in or about the Premises for the aforesaid
permitted purpose. Accounts must be opened in Tenant's name with the company
that supplies the utilities, except with respect to water and sewer (if no
separate meter is provided) Landlord will bill Tenant monthly or quarterly on
the basis of a meter reading and Tenant will pay Landlord directly for said
water and sewer charges within ten (10) days after receipt of Landlord's
billing.
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<PAGE> 4
The parties acknowledge that the Premises is served by a separate meter for
water and sewer.
(b) Tenant hereby covenants, at its expense, to provide its own janitorial
service, and keep the Premises, both inside and out, clean at all times and
agrees that it will at all times keep such Premises in a clean, neat and orderly
manner and that it will remove all refuse, garbage and trash from the interior
of the Premises and the adjacent areas and will see that the same is removed
daily, at its expense. Tenant shall provide at its expense, trash receptacles
required by Landlord, including but not limited to commercial trash dumpsters or
similar receptacles. All trash receptacles must be approved by Landlord and
shall be located in such places as Landlord shall designate. Tenant shall
maintain such receptacles and the designated location thereof in a neat, clean
and secure condition at all times. Tenant shall, at its expense, provide for the
pickup and removal of its trash. In the event Tenant's trash is not removed in
the manner aforesaid, Landlord shall be entitled to remove or cause to be
removed the trash of Tenant and Tenant shall pay to Landlord as additional rent
the cost incurred by Landlord for such removal, plus twenty percent (20%)
overhead and administrative expenses.
4. COMPLIANCE WITH LAWS. Tenant shall observe, comply with and execute at its
expense, all laws and valid and lawful rules, requirements and regulations of
the United States, City and County in which the Premises are located, and of any
and all governmental authorities or agencies and of any board of fire
underwriters or other similar organization, respecting the Premises hereby
leased and the manner in which said Premises are or should be used by Tenant.
5. ASSIGNMENT/SUBLETTING. Tenant shall not assign this Lease, in whole or in
part, nor sublet the Premises, or any part or portion thereof, without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. If such assignment or subletting is permitted, Tenant shall not be
relieved from any liability whatsoever under this Lease. Any transfer of a
majority of ownership in Tenant, if Tenant is a corporation or a partnership,
even by merger or consolidation, shall be deemed an assignment pursuant to this
Section.
6. FLOOR LOAD. Tenant shall not load the Premises hereby leased beyond its
present carrying capacity. Any damage resulting from overloading the floors or
walls of the Premises will be charged to Tenant.
THE PARTIES HERETO FURTHER COVENANT AND AGREE WITH EACH OTHER AS FOLLOWS:
7. TENANT'S INSURANCE; INDEMNITY. (a) Tenant shall indemnify and save harmless
Landlord, its successors or assigns, from all claims and demands of every kind
that may be brought against it, them, or any of them for or on account of any
damage, loss or injury to persons or property in or about the Premises during
the continuance of this tenancy, or during the time of any alterations, repairs
or improvements or restorations to said property by Tenant and arising in
connection therewith, and from any and all costs and expenses and other charges
which may be imposed upon Landlord, its successors or assigns, or which it or
they may be obligated to incur in consequence thereof. Tenant shall at all times
carry and pay for a public liability insurance policy protecting Landlord and
specifically
8/25/95
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<PAGE> 5
covering the above indemnity agreement on the part of Tenant, with limits of
$1,000,000.00 and $3,000,000.00 for personal injury and $100,000.00 for property
damage, and will furnish Landlord with certificate of such policy and any
renewal thereof, naming Landlord as a certificate holder and an Additional
Insured. Such policy shall provide that Landlord will be given ten (10) days'
notice of any cancellation, modification or surrender. All personal property and
fixtures in the Premises shall remain at Tenant's sole risk. Tenant shall insure
such property and fixtures against loss or damage by fire and casualties
ordinarily included in the extended coverage endorsement in use in Maryland in
an amount equal to 100% of the replacement value thereof. Landlord shall not be
liable for any damage or loss arising from the bursting, overflowing, or leaking
of the roof or of water, sprinkler, sewer, or steam pipes, or for malfunctioning
heating, air conditioning or plumbing fixtures or from electric wire or fixtures
or arising from any other cause whatsoever, unless caused by Landlord's
negligent or willful misconduct.
(b) Tenant shall not do anything in or about said Premises that will contravene
or affect any policy of insurance against loss by fire or other hazards,
including but not limited to public liability, now existing or which Landlord
may hereafter place thereon, or which will prevent Landlord from procuring such
policies in companies acceptable to Landlord; and Tenant shall do everything
reasonably possible and consistent with the conduct of Tenant's business, as
above limited, so as to obtain the greatest possible reduction in the insurance
rates for Landlord on the Centre of which the Premises hereby leased are a part,
and Tenant further agrees to pay, as additional rental, any increase in the
premium of any insurance on the Premises hereby leased (or if the Premises
hereby leased are a part of a complex, then any increase in the premium of any
insurance on said entire complex) caused by the occupancy of Tenant, the nature
of the business carried on by Tenant in said Premises, or otherwise resulting
from any act of Tenant, its agents, servants, employees or customers.
(c) Tenant hereby releases Landlord from all liability or responsibility to
Tenant or any person claiming by, through or under Tenant by way of subrogation
or otherwise, for any injury, loss or damage to the Premises or any part thereof
or any property of Tenant in or around the Premises, or to Tenant's business
irrespective of the cause of such injury, loss or damage, and tenant shall
require its insurer(s) to include in all Tenant's insurance policies which could
give rise to a right of subrogation against Landlord a clause or endorsement
whereby the insurer(s) shall waive any rights of subrogation against Landlord.
8. ALTERATIONS. Tenant shall not make any alterations (which term shall include
floor and wall coverings) to the Premises without the written consent of
Landlord. If tenant desires to make any such alterations, the same shall first
be submitted to and approved by Landlord, which approval shall not be
unreasonably withheld, and shall be done by Tenant at its own expense, and
tenant agrees that all such work shall be done in a good and workmanlike manner,
that the structural integrity of the Premises shall not be impaired, and that no
liens shall attach to the Premises by reason thereof.
9. END OF TERM. Unless Landlord shall elect that all or any part of the
alterations, referred to in or contemplated by the provisions of Section 8,
shall remain, the Premises shall be restored to their
8/25/95
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<PAGE> 6
original condition (except as to any part of said alterations which Landlord
shall elect to remain) by Tenant before the expiration of its tenancy, at its
own expense, and Tenant shall repair any damage resulting from the installation
or removal of such alterations.
Notwithstanding the right of Landlord to require the removal thereof, any such
alterations shall become the property of Landlord as soon as they are affixed to
the Premises and all right, title and interest therein of Tenant shall
immediately cease, unless otherwise agreed to in writing. The Landlord shall
have the sole right to collect any insurance for damage of any kind to any of
such alterations upon the said Premises by Tenant. If the making of any such
alterations, or the obtaining of permits or franchise therefor, shall directly
or indirectly result in a franchise, minor privilege, tangible personal property
or other similar tax or assessment, such tax or assessment shall be paid,
immediately upon its levy, by Tenant.
10. MAINTENANCE. Tenant shall, during the term of this Lease, keep said Premises
and appurtenances (including all appliances and facilities, doors and doorways,
windows, window frames, plate glass, and the heating and air conditioning
system) in good order and condition and will make all necessary repairs thereto
at its own expense, and further, with respect to the heating and air
conditioning system, while Landlord will make available to Tenant any warranties
with respect to said equipment which Landlord receives, Tenant will be
responsible at the expiration of the warranty period, if any, for maintaining a
maintenance contract on said equipment with a heating/air conditioning
contractor acceptable to Landlord. While Tenant is responsible for keeping its
Premises in good order and repair, Landlord specifically agrees that it will
make any necessary repairs to the exterior walls of the building of which the
Premises are a part, and to the roof of said building, and further, that
Landlord will maintain the plumbing and electrical systems serving said building
to the point of entry into the Premises, after being notified of the need for
such repairs by Tenant, and provided that none of the required repairs have been
caused by the negligence or omission of Tenant, its employees or agents.
Landlord may enter the Tenant's Premises at all reasonable times to make repairs
required hereunder, or to inspect the Premises in order to ascertain that Tenant
is carrying out its obligations with respect to maintenance/repair. Tenant will
also not obstruct any walkways made available to it. The Tenant will, at the
expiration of the term or at the sooner termination thereof by any forfeiture or
otherwise, deliver up the Premises in the same good order and condition as they
were at the beginning of the tenancy, reasonable wear and tear excepted.
11. TAX ESCALATOR. Tenant shall pay as additional rent Tenant's proportionate
share of any increases in real estate taxes assessed against the land and/or
building(s) of the Centre, in excess of the taxes for the 1995/1996 tax year.
Increases in real estate taxes shall be deemed to include any increases assessed
against the land and/or buildings generally, and not resulting from improvements
placed therein by Tenant. In the event of any increases in real estate taxes
resulting from improvements, alterations or additions as made by Tenant, Tenant
shall pay one hundred percent (100%) of the amount of said increase. If this
Lease shall be in effect for less than a full fiscal year, Tenant shall pay its
proportionate share of the increase in taxes, based upon the number of months
that this Lease is in effect. If Tenant pays its proportionate share of the
increase in
8/25/95
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<PAGE> 7
taxes based on a bill that is appealed by Landlord and later reduced, then
Tenant shall be entitled to a credit equal to its proportionate share of any
refund, after all costs or fees incurred by Landlord in contesting the real
estate tax assessment are deducted. For purposes of calculating Tenant's
"proportionate share," the increase in the real estate tax bill will be
multiplied by a fraction, the numerator of which shall be the square footage
occupied by Tenant for the real estate tax year in question, and the denominator
of which shall be the total leasable square footage of the Centre, occupied or
ready for occupancy. "Taxes" or "real estate taxes" as used herein shall
include, but not by way of limitation, all paving taxes, special paving taxes,
Metropolitan District Charges, and any and all other benefits or assessments
which may be levied on the Premises or the land and/or building(s) in which the
same are situate, as well as any and all costs or fees incurred by Landlord in
contesting any real estate tax assessment, but shall not include any income tax
on the income or rent payable hereunder. Any payment due hereunder shall be
deemed to be additional rental pursuant to this Lease and shall be paid within
ten (10) days of Landlord's billing.
12. INSURANCE ESCALATOR. Landlord may, in its reasonable business judgment,
maintain insurance on the property including but not limited to equipment and
systems in or pertaining to the building or property and including but not
limited to public liability insurance, property damage insurance, automobile
insurance, sign insurance, fire and extended coverage insurance, rent insurance,
boiler liability and casualty insurance, flood and earthquake insurance, and
plate glass insurance. For any insurance maintained by Landlord with respect to
the property and/or its equipment, Tenant agrees to pay as additional rent
Tenant's proportionate share of any increases in said premiums for any insurance
carried on the property or any portion thereof, in excess of the insurance
premiums paid for the base year October 1, 1995, through September 30, 1996. If
this Lease shall be in effect for less than a full insurance year, Tenant shall
pay as additional rent its proportionate share of the increase in the insurance
premium based upon the number of months that this Lease is in effect. For
purposes of calculating Tenant's "proportionate share," the increase in the
insurance premium bill will be multiplied by a fraction, the numerator of which
shall be the square footage occupied by Tenant for the insurance year in
question, and the denominator of which shall be the average of all the leasable
square footage in the building occupied by Tenant.
13. DEFAULT. If Tenant fails to pay fixed rental or any other sum required by
the terms of this Lease to be paid by Tenant when the same shall be due, or if
Tenant shall abandon the Premises, then Landlord shall have the immediate right,
without notice, to make distress therefor and, upon such distress, in the
Landlord's discretion, this tenancy shall terminate. If any fixed rental or
other sum required to be paid by Tenant shall be in arrears more than ten (10)
days, Tenant shall be liable for a late charge of fifteen percent (15%) of the
amount in arrears, which charge shall be collectable as rent. In case Tenant
shall fail to comply with any of the other provisions, covenants or conditions
of this Lease on its part to be kept and performed, and such default shall
continue for a period of ten (10) days after written notice thereof shall have
been given to Tenant by Landlord, or if Tenant fails to pay any sum of money due
to Landlord or others under the terms hereof, when and as such payment is due,
then upon the happening of any such events, the term of this Lease, at
8/25/95
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<PAGE> 8
the option of Landlord, shall cease and determine and, from thenceforth, it
shall and may be lawful for Landlord to re-enter into and upon the Premises, or
any part thereof, and to repossess and hold the same as if this Lease had never
been executed. If Landlord incurs any expenses in proceeding against Tenant for
any default under this Lease, then Tenant shall pay Landlord all reasonable
expenses, including counsel and court costs fees incurred with respect to such
default.
In addition to the preceding, if Tenant fails to comply with any of the other
provisions, covenants or conditions of this Lease, and Tenant has been given
notice by Landlord and reasonable opportunity to cure, then thereafter and
notwithstanding anything in this Lease to the contrary, Landlord may cure
Tenant's default and Tenant shall owe Landlord any monies which Landlord spends
as a result of Landlord curing Tenant's default, plus fifteen percent (15%)
administrative/overhead costs.
14. CASUALTY. In case of the total destruction of the Premises by fire, the
elements or other cause, or of such damage thereto as shall render the same
totally unfit for occupancy by Tenant, the payment of the rent due hereunder
shall be abated for the period of untenantability, or, at Landlord's option,
Landlord may declare that this Lease, together with the payment of rent then due
and a proportionate part thereof to the date of surrender, shall terminate and
be at an end. If any cause mentioned in the preceding sentence shall render the
Premises partly untenantable, then Landlord shall, at its own expense, restore
the Premises with all reasonable diligence, and the rent shall be abated
proportionately for the period of untenantability and the part of the Premises
untenantable until such improvements shall have been fully restored; provided
that, if neither the Premises nor any part thereof shall be rendered either
wholly or partly untenantable, Landlord shall, at its own expense, restore the
Premises with all reasonable diligence, but the rent shall not be abated to any
extent whatsoever; and provided further that if the cost of restoration of any
such damage to the Premises (based on the estimate of Landlord's insurance
adjuster) exceeds one-half (1/2) of the rent reserved hereunder from the date of
the occurrence of the damage to the expiration of the then current term of this
Lease, then Landlord may, at its option, cancel this Lease.
15. RECEIVERSHIP. In the event of the appointment of a receiver or trustee for
Tenant by any court, Federal or State, in any legal proceedings instituted by or
against it, including proceedings under any provisions of the Bankruptcy Act, if
the appointment of such receiver or such trustee is not vacated within thirty
(30) days, or if Tenant be adjudicated bankrupt or insolvent, or shall make an
assignment for the benefit of its creditors; then, and in any of said events,
Landlord may, at its option, terminate this Lease by ten (10) days' written
notice, and re-enter upon the Premises.
16. POSSESSION. In case possession of or the right to use the Premises, in whole
or in part, cannot be given to Tenant for any reason whatever (including
inability to obtain any occupancy or other necessary permit) on or before the
date specified for the beginning of the term, then Landlord agrees to abate the
rent proportionately until possession is given to Tenant, and Tenant agrees to
accept such pro rata abatement as liquidated damages for the failure to obtain
possession. If Landlord is unable to give Tenant possession of or the
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<PAGE> 9
right to use the Premises for more than one hundred eighty (180) days after the
date specified for the beginning of the term, then either party may cancel this
Lease by written notice to the other party, and there shall be no further
liability of either party with respect to this Lease.
17. SIGNS, ETC. Tenant shall not place or permit any signs, lights, awnings or
poles on or about the exterior of the Premises without the written consent of
Landlord, and, if such consent is given, then Tenant agrees to pay any permit
fees and minor privilege or other tax therefor. At its own cost and expense,
Tenant shall install exterior signage over its front and rear entrances to the
Premises. Such signage shall be of Landlord/building standard color, material,
and size, and the placement of such signage shall be subject to Landlord's
approval. Tenant further covenants and agrees that it will not paint or make any
change in or on the outside of the Premises without the permission of Landlord
in writing. Tenant agrees that it will do nothing on the outside of the Premises
to change the uniform architecture, paint or appearance of said Premises,
without the consent of Landlord in writing. In the event of any violation of
this Section 17 by Tenant, then Landlord may take such action as it sees fit to
abate such violation, and Tenant shall pay to Landlord all expenses incurred by
Landlord in taking such action.
18. RULES AND REGULATIONS. Tenant covenants and agrees to abide by the rules and
regulations set forth below in this Lease, and any reasonable changes and
additions thereto; and the same shall be deemed to be covenants of this Lease.
19. LANDLORD ACCESS. Landlord shall have the right to place a "For Sale" or "For
Rent" sign on any portion of the Premises for one hundred eighty (180) days
prior to the final termination of this Lease, and may show the Premises at all
reasonable times to prospective Tenants and purchasers.
20. LANDLORD LIABILITY. Tenant shall carry standard fire and extended coverage
insurance on those parts of the Premises and the facilities therein which were
originally constructed and/or installed by Tenant or at Tenant's expense and on
all other leasehold improvements made by it, and on its trade fixtures,
merchandise and other personal property in the Premises for their full
replacement value. Landlord shall not be liable to Tenant for any damage to any
such property from any cause, unless (i) such damage is due to Landlord's
negligence, and (ii) such damage is caused by an occurrence which is not an
insured hazard under the standard fire and extended coverage insurance which is
available for insuring such property of Tenant at the time of the loss; it being
understood that it is not the intention of the parties that Landlord be relieved
from liability to Tenant for negligence contrary to any statute or public policy
of the State of Maryland, but rather that Tenant avail itself of available
insurance coverage without subjecting Landlord to liability for losses that
could have been insured, and without subjecting Landlord to subrogation claims
of any insurer. The Landlord shall not be liable to Tenant for damage to
Tenant's property due to the negligent or intentional acts of any other tenant
in the complex of which the Premises is a part, or to any condition existing on
or emanating from the Premises of any other tenant which is not caused by
Landlord or its agents or contractors, nor shall Tenant be entitled to an
abatement of rent or to claim an actual or constructive eviction, whole or
partial, permanent or
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temporary, by reason of any such condition on or emanating from such other
tenant's Premises.
21. ACCESS. Subject to Landlord not unreasonably interfering with Tenant's
business, Landlord, and its agents, servants and employees, including any
builder or contractor employed by Landlord, shall have, and Tenant hereby gives
them and each of them, the absolute and unconditional right, license and
permission, at any and all reasonable times, and for any reasonable purpose
whatsoever, to enter through, across and upon the Premises hereby leased or any
part thereof and, at the option of Landlord, to make such reasonable repairs to
or changes in the Premises as Landlord shall deem necessary or proper.
22. EXPIRATION. The term of this Lease shall expire on November 30, 1999 without
the necessity of any notice by or to any of the parties hereto. If Tenant shall
occupy the Premises after such expiration, in the absence of any written
agreement to the contrary, Tenant shall hold the Premises as a tenant from month
to month, subject to all the other terms and conditions of this Lease, except
that the fixed rent shall be one and one-half (1-1/2) times the highest monthly
rental reserved in this Lease; provided that Landlord shall, upon such
expiration be entitled to the benefit of all public general or public local laws
relating to the speedy recovery of the possession of lands and tenements held
over by tenants that may be now in force or may hereafter be enacted, tenant
hereby waiving the necessity of any written notice as a condition precedent to
the institution of any action for speedy recovery of the Premises by Landlord.
23. CONDEMNATION. If condemnation proceedings are instituted against the
premises and title taken by any federal, state or municipal body, then this
Lease shall terminate as of the date possession vests in the condemning
authority. Tenant shall not be entitled to share in any part of the Award which
may be received by Landlord for the taking of the fee and Tenant's leasehold
estate. This Section 23 shall apply also in case of any sale of the Premises by
Landlord to a condemning authority under threat of the exercise of the power of
eminent domain.
24. SUBORDINATION. Landlord shall have the right to place a mortgage or
mortgages on the Premises and the property of which the Premises is a part, and
this Lease shall be subordinate to any such mortgage or mortgages or superior
thereto, as the mortgagee(s) may elect from time to time. Notice of such
election shall be given to Tenant in connection with any mortgage foreclosure.
25. COMMON AREAS. (a) Tenant, its agents, servants, employees, customers and
invitees, shall have the non-exclusive right to use, in common with others, the
automobile parking areas, driveways, and pedestrian walkways, and all other
areas, space, facilities, equipment and signs, to the extent made available by
Landlord for the common and joint non-exclusive use and benefit of Landlord,
Tenant and other tenants and occupants of the Centre and their respective
employees, agents, subtenants, customers and other invitees (hereinafter
collectively called "common areas") from time to time made available by
Landlord in the complex of which the Premises are a part, subject to such
rules and regulations as the Landlord may prescribe. All employees of Tenant
shall park only in spaces designated by Landlord for employee parking, if
Landlord so requires; and Tenant shall furnish to Landlord, promptly upon
request, license numbers, makes and colors of vehicles used by Tenant's
employees. If any employee of
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Tenant parks a vehicle in an area other than that designated for employee
parking, Tenant shall pay Landlord $10.00 per day (or part) for each vehicle so
parked if Landlord shall have given written notice or oral notice of such
parking violation to a responsible official of Tenant on the Premises, and such
violation is not immediately corrected. Landlord reserves the right to limit the
number of parking spaces and the location of said spaces, in Landlord's sole
discretion.
(b) Landlord shall have the exclusive management and control over the common
areas; shall keep the parking areas and driveways substantially free of ice,
snow and debris; shall keep the common areas in reasonable repair and shall care
for all landscaping; and may change the arrangement and location of parking and
driveways as it sees fit.
(c) Landlord (subject to reimbursement as hereinafter set forth in this section)
will at its expense operate and maintain, or cause to be operated and
maintained, the common areas (hereinabove defined) and the Centre in a manner
deemed reasonable and appropriate by Landlord. For purposes of this Lease,
"common area costs" shall be those costs of operating and maintaining or of
causing the operation and maintenance of the common areas and the Centre of
which the Premises form a part in a manner deemed by Landlord to be reasonable
and appropriate, including, but not limited to, all costs and expenses, whether
expended or incurred, of repairing, lighting, cleaning, landscaping, painting
and maintaining (including, but not limited to, preventive maintenance);
removing snow, ice, rubbish and debris, including dumpster rental and/or pick-up
charges, inspecting, policing, providing security and regulating traffic; rental
and depreciation of machinery and equipment and other non-real estate assets
used in the operation and maintenance of the property; repairing and/or
replacing of paving, curbs, walkways, landscaping, drainage, on-site water
lines, sanitary sewer lines, storm water lines, electrical lines and other
equipment serving the Complex from which the Premises or any part thereof is
constructed or is to be constructed; electricity, steam, water and/or other fuel
used in the common areas; heating, ventilating and air conditioning in enclosed
common areas, if any; cleaning and janitorial supplies including equipment,
uniforms, supplies and sundries used in connection therewith, if such services
are provided; sales or use taxes on supplies or services; any parking surcharges
that may result from any environmental or other laws, rules, regulations,
guidelines or orders; the gross compensation (including fringe benefit expenses
and related payroll taxes) of all personnel required to supervise and accomplish
the foregoing, together with an administrative charge equal to 15% of the total
of all common area costs (exclusive of such administrative charge). Common area
costs shall not include depreciation other than as specifically referred to
above. In the event of any dispute as to whether an item represents an expense
or a capital item, Landlord's accounting practices shall be determinative and
binding on the parties.
(d) Tenant shall pay as additional rent, Tenant's proportionate share of the
common area costs incurred by Landlord. For purposes of calculating Tenant's
"proportionate share," the common area costs incurred by Landlord will be
multiplied by a fraction, the numerator of which shall be the square footage
occupied by Tenant for the common area cost year in question and the denominator
of which shall be the total leasable square footage of the Centre, occupied or
ready for occupancy. Any payment due hereunder shall be deemed to be additional
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rental pursuant to this Lease and shall be paid within fifteen (15) days of
Landlord's billing. Additional rent payable by Tenant pursuant to this section
shall be pro-rated for any fractional part of the year during the last year of
the Lease. Unless Tenant shall have given Landlord written notice of exception
to any billing by Landlord within thirty (30) days after delivery thereof, the
same shall be deemed conclusive and binding on Tenant. Landlord shall supply
Tenant with a statement showing the amount and computation of such additional
rent upon written request therefore by Tenant delivered within fifteen (15) days
of receipt of the Landlord's billing provided for in this subsection.
26. SECURITY DEPOSIT. Tenant shall deposit with the Landlord the sum of Three
Thousand One Hundred Forty-three Dollars Fifty Cents ($3,143.50) to be held by
Landlord as security for the payment of rent and the performance of Tenant's
other obligations under this Lease. Landlord may (but need not) invest the
deposit in interest bearing securities or accounts, and interest earned thereon,
if any, shall belong to Landlord. The deposit shall be returned to Tenant within
sixty (60) days after the termination of this Lease if all of Tenant's
obligations hereunder are performed to the date of termination. If Tenant
defaults in the performance or observance of any obligation on its part under
this Lease, Landlord may apply the deposit to payment of the rent in default or
other money arrearage, and/or to the damages and costs incurred by Landlord as a
result of any default, and/or to the costs incurred by Landlord in rectifying
any default, and/or to the prepayment of rent for any subsequent period of the
term, and tenant shall promptly thereafter restore the security deposit to the
original amount above specified. The right of Landlord to apply the security
deposit as above specified shall not be construed as a limitation upon
Landlord's right to invoke any other remedy available under this Lease or at law
or equity for breach of this Lease, or to collect the full amount of damages
owing by Tenant on account of such breach. If, by reason of Tenant's default
under this Lease, Landlord terminates this lease either before or after the
commencement of the term or re-enters the Premises or if Tenant holds over at
the end of the term, Landlord may retain the security deposit as liquidated
damages (applying it against the damages which it suffers but without waiving
its right to recovery of additional damages to which it may be entitled) or
apply it to the monthly installments of rent hereunder in inverse order of
accrual.
27. NOTICES. Any notice, demand, consent, approval, request or other
communication or document to be provided hereunder to a party hereto shall be
(a) in writing, and (b) deemed to have been provided (i)(1) 48 hours after being
sent as certified or registered first class mail in the United States mails,
postage prepaid, return receipt requested, or (2) the next business day after
having been deposited (in time for delivery by such service on such business
day) with Federal Express or another national courier service, in each case to
the address of such parties set forth herein or to such address in the United
States of America as such party may designate from time to time by notice to the
other party hereto, (ii) (if such party's receipt thereof is acknowledged in
writing) upon being given by hand or other actual delivery to such party, or
(iii) upon being sent by telecopier to such telecopier number as such party may
designate from time to time by notice to the other party hereto.
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28. TENANT BUILD-OUT. Upon the commencement of this Lease, Tenant will accept
delivery of the Premises from Landlord "As Is."
29. RELOCATION. Landlord reserves the right to relocate Tenant at Landlord's
cost to comparably sized Premises within the Centre. Landlord will provide
Tenant with no less than 120 days written notice of its intention to relocate
Tenant to new Premises. Any notice to relocate Tenant shall be subject to the
following terms and conditions:
(a) This Lease will be amended effective as of the date of such relocation by
deleting the description of the original Premises and substituting for it a
description of the new Premises.
(b) Tenant will pay rent and additional rent/charges for the new Premises at the
same rate per square foot that is then payable for such charges hereunder.
(c) Landlord shall bear the reasonable costs of moving Tenant to the new
Premises, and shall also bear the cost of constructing the new Premises in a
manner identical or substantially identical to Landlord's construction
obligations with respect to the original Premises, and Landlord shall complete
its construction obligations and deliver the new Premises to Tenant as of the
date specified in Landlord's notice.
30. HAZARDOUS SUBSTANCES. (a) The term "Hazardous Substances" as used in this
Lease is defined to mean any substance defined as a "hazardous substance" or
"hazardous material" under either the Comprehensive Environmental Response,
Compensation and Liability Act of 1989, as amended (42 USC 9601, et seq.), or
substances declared to be hazardous or toxic under any other federal, state or
municipal law or regulation now or hereafter enacted or promulgated by any
governmental authority having jurisdiction, and including asbestos and
underground and above ground storage tanks.
(b) Tenant shall have no responsibility or liability whatsoever to Landlord or
any third person for any Hazardous Substances or any other environmental hazards
which were created and/or existed on or in the Premises prior to the date of
this Lease. Landlord shall indemnify and save harmless Tenant, its successors
and assigns, from all claims and demands of every kind, that may be brought
against Tenant, before or on account of any damage, loss or injury to persons or
property arising from connection with any such Hazardous Substance or any other
environmental hazard created or existing on or before this Lease, and from any
and all costs and expense and other charges which may be imposed upon Tenant,
its successors and assigns, or which Tenant may be obligated to incur in
consequence thereof.
(c) Tenant shall not cause or permit to occur:
(i) Any violation of any federal, state or local law, ordinance or regulation
now or hereafter enacted, related to environmental conditions on, under or about
the Premises and arising from Tenant's use or occupancy of the Premises,
including, but not limited to soil and ground water conditions; or
(ii) The use, generation, release, manufacture, refining, production,
processing, storage or disposal of any Hazardous Substance on, under
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or about the Premises or the transportation to or from the Premises of any
Hazardous Substance.
Further, it is agreed that:
(iii) Tenant shall, at Tenant's own expense, comply with all laws regulating the
use, generation, storage, transportation or disposal of Hazardous Substances
("Laws").
(iv) Tenant shall, at Tenant's own expense, make all submissions to, provide all
information required by, and comply with all requirements of all governmental
authorities (the "Authorities") under the Laws.
(v) Should any Authority or any third party demand that a cleanup plan be
prepared and that a clean-up be undertaken because of any deposit, spill,
discharge or other release of Hazardous Substances that occurs during the term
of this Lease, at or from the Premises, or which arises at any time from
Tenant's use or occupancy of the Premises, then Tenant shall, at Tenant's own
expense, prepare and submit the required plans and all related bonds and other
financial assurances; and Tenant shall carry out all such cleanup plans.
(vi) Tenant shall promptly provide all information regarding the use,
generation, storage, transportation or disposal of Hazardous Substances that is
requested by Landlord. If Tenant fails to fulfill any duty imposed under this
Section within a reasonable time, Landlord may do so; and in such case, Tenant
shall cooperate with Landlord in order to prepare all documents Landlord deems
necessary or appropriate to determine the applicability of the Laws to the
Premises and Tenant's use thereof, and for compliance therewith, and tenant
shall execute all documents promptly upon Landlord's request. No such action by
Landlord and no attempt made by Landlord to mitigate damages under any Law shall
constitute a waiver of any of Tenant's obligations under this Section.
(vii) Tenant's obligations and liabilities under this Section shall survive the
expiration of this Lease.
(d) Tenant shall indemnify, defend and hold harmless Landlord, the manager of
Landlord's Buildings and their respective officers, directors, beneficiaries,
shareholders, partners, agents and employees from all fines, suits, procedures,
claims and actions of every kind, and all costs associated therewith (including
attorneys' and consultants' fees) arising out of or in any way connected with
any deposit, spill, discharge or other release of Hazardous Substances that
occurs during the term of this Lease, at or from Tenant's failure to provide all
information, make all submissions, and take all steps required by all
Authorities under the Laws and all other environmental laws. Tenant's
obligations and liabilities under this Section shall survive the expiration of
the Lease.
31. BROKERAGE COMMISSIONS. Each of the parties represents and warrants that
there are no claims for brokerage commissions or finder's fees in connection
with the execution of this Lease, and each of the parties agrees to indemnify
and save harmless the other party from and against all liabilities arising from
any such claim including, without limitation, the cost of attorney's fees in
connection therewith.
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32. RECORDING. Tenant shall not record this Lease. The parties agree that at or
prior to the commencement of the Lease term, or at a later date, if requested by
either party, they will, upon the written request of either party, execute,
acknowledge and deliver a short form of lease setting forth the date, a
description of the Premises, term, renewal option and restrictive covenants, if
any, contained and found to exist in this Lease. If the short form of lease
herein referred to is recorded, all costs incident thereto shall be paid by the
party requesting such information. The cost of recording any financing statement
required by Landlord as security for the rent or other payments due hereunder
shall be at Tenant's expense. Such short form lease shall not change the rights
and obligations of the respective parties.
33. WAIVER OF JURY TRIAL. Landlord and Tenant shall and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other. Said waiver is effective as to all matters,
including but not limited to any matters arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant, Tenant's use or
occupancy of the Premises, and any emergency or other statutory remedy. Tenant
further agrees that it shall not interpose any counterclaim(s) in a summary
proceeding or in any action based on holdover or non-payment of Rent and/or
Additional Charges.
34. MISCELLANEOUS. (a) For the purpose of any suit brought or based on this
Lease, this Lease shall be constructed to be a divisible contract, to the end
that successive actions may be maintained as successive periodic sums shall
mature under this Lease, and failure to include in any suit or action any sum or
sums then matured shall not be a bar to the maintenance of any suit or action
for the recovery of said sum or sums so omitted. Tenant shall not in any suit or
suits brought on this Lease for a matured sum, for which judgment has not
previously been received, plead, rely on or urge as a bar to said suit or suits,
the defenses of res adjudicata, former recovery, extinguishment, merger,
election of remedies or other similar defenses.
(b) Nothing shall be construed to be a waiver of any of the terms, covenants and
conditions herein contained, unless the same be in writing signed by the party
to be charged with such waiver, and no waiver of the breach of any covenant
shall be construed as a waiver of the covenant or any subsequent breach thereof.
(c) The failure of Landlord to insist in any one or more instances upon a strict
performance of any covenant of this Lease or to exercise any right herein
contained shall not be construed as a waiver or relinquishment for the future of
such covenant or right, but the same shall remain in full force and effect,
unless the contrary is expressed in writing by Landlord.
(d) If this Lease is executed by two or more individuals, as Tenant, the
liability for all obligations on Tenant's part to be performed hereunder,
specifically including but not limited to the obligation to pay all rent and
additional rent provided for herein, shall be deemed to be joint and several.
(e) Landlord covenants that Tenant, on paying the Rent and Additional Rent due
hereunder and performing Tenant's obligations under this
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Lease, shall peacefully and quietly have, hold and enjoy the Premises throughout
the term without hindrance, ejection or molestation by any person lawfully
claiming under Landlord, subject to the terms and provisions of this Lease and
to all mortgages and underlying leases of record to which this Lease may be or
becomes subject and subordinate, unless a non-disturbance agreement has been
granted by mortgagee or ground lessor.
(f) Any and all sums of money required to be paid by Tenant under this Lease,
whether or not designated as "additional rent" shall nevertheless be deemed as
"additional rent" and shall be collectible as rent.
(g) Nothing contained in this Lease shall be deemed, construed or interpreted to
imply any consent or agreement on the part of Landlord to subject Landlord's
interest or estate to any liability under any mechanic's or other lien law. If
Landlord receives any notice to file a mechanic's or other lien against the
Centre, or any part thereof, or the Premises, or any part thereof, for any work,
labor, services or materials claimed to have been performed or furnished for or
on behalf of Tenant or anyone holding any part of the Premises through or under
Tenant, then Tenant shall act promptly to have such notice withdrawn and to
settle any dispute that is the subject of such notice. If any petition to
establish a mechanic's or other lien is filed, or if any mechanic's or other
lien is actually established, against the Centre, or any part thereof, or the
Premises, or any part thereof, or if any mechanic's or other lien is actually
established, for any work, labor, services or materials claimed to have been
performed or furnished for or on behalf of Tenant or anyone holding any part of
the Premises through or under Tenant, then Tenant shall cause the same to be
canceled and discharged of record by payment, bond or order of court within 20
days after notice by Landlord to Tenant. Tenant shall, at Landlord's request,
give written notice to all of Tenant's laborers and materialmen that Landlord
shall not be responsible for labor on the Premises not at the time of said
notice performed, or for materials which have been furnished. Tenant shall be
responsible for paying, as additional rent, any attorneys fees that Landlord
actually incurs as a result of Landlord receiving any notice of intent to file a
mechanic's, or other, lien described herein; as a result of any such petition to
file a mechanic's, or other, lien; or as a result of any such mechanic's, or
other, lien being established against the Centre, or any part thereof, or
against the Premises, or any part thereof.
35. CONTINGENCIES. Tenant's right to lease Suite No. 120 is contingent upon the
termination of that certain Lease Agreement dated July 15, 1991 between Landlord
and GBK, Inc., as amended by Letter Agreement dated June 17, 1991 and assigned
to Medi-Mail, Inc. by Assignment and Assumption of Lease dated April 30, 1993.
IN WITNESS WHEREOF, the parties hereto have executed this Lease under their
respective hands and seals as of the day and year first above written:
WITNESS: LANDLORD:
OWINGS MILLS COMMERCE CENTRE
LIMITED PARTNERSHIP
By: Continental Realty Corp., Agent
Patricia R. Grove John A. Luetkemeyer, Jr., President
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WITNESS: TENANT:
RENT A WRECK, INC.
Kathleen M. Pilkerton Kenneth L. Blum, Jr., President
STATE OF MARYLAND, COUNTY OF BALTIMORE, to wit:
On this 19th day of September, 1995, before me, the subscriber, a Notary Public
of the State of Maryland, personally appeared JOHN A. LUETKEMEYER, JR. President
of the above-named Agent for Landlord, and he acknowledged the above Lease to be
the act of said Landlord. IN WITNESS WHEREOF, I hereunto set my hand and
Notarial Seal.
Patricia R. Grove
Notary Public
My commission expires 5/23/98
STATE OF MARYLAND, CITY/COUNTY OF CARROLL, to wit:
On this 7th day of September, 1995, before me, the subscriber, a Notary Public
of the State aforesaid, personally appeared KENNETH L. BLUM, JR., PRESIDENT
(Name & Title must be filled in) of RENT A WRECK, INC., and he/she acknowledged
the above Lease to be the act of said Tenant. IN WITNESS WHEREOF, I hereunto set
my hand and Notarial Seal.
Dee Wallace
Notary Public
My commission expires 2/27/98
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EXHIBIT A
Floor Plan
Existing Conditions
[Graphic Description:
This drawing depicts the floor plan of the leased property.]
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OWINGS MILLS COMMERCE CENTRE
EXHIBIT B
Space Plan
Deleted
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OWINGS MILLS COMMERCE CENTRE
EXHIBIT C
Building Standard Finishes
Deleted
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OWINGS MILLS COMMERCE CENTRE
EXHIBIT D
Rules and Regulations
Tenant shall, at all times during the term of this Lease:
1. Use, maintain and occupy the Premises, in a careful, safe, proper and lawful
manner, keep the Premises and its appurtenances, including adjoining sidewalks,
in a clean and safe condition;
2. Keep all glass in the doors and windows of the Premises clean and repaired;
3. Not place, maintain or sell any merchandise in any vestibule or entry
to the Premises, on the sidewalks adjacent to the Premises, or elsewhere on the
outside of the Premises;
4. Not permit undue accumulations of garbage, trash, rubbish or other refuse in
the Premises, keep refuse in closed containers within the interior or at the
rear of the Premises until removed, and make use of any central trash service
facilities which Landlord may elect to provide;
If governmental regulations require recycling of any or all of the trash
generated in the Premises, Tenant hereby agrees to participate in any recycling
program and to assume any obligation for recycling which may be imposed upon
Landlord as the property owner, with respect to the refuse, garbage and trash
generated by the Premises' operation;
5. Not use, permit or suffer the use of any apparatus or instruments for musical
or other sound reproduction or transmission in such manner that the sound
emanating therefrom or caused thereby shall be audible beyond the interior of
the Premises;
6. Set the thermostat in the Premises during nights, weekends and holidays as
follows: During the heating season designated by the Landlord 55 degrees, and
during the cooling season designated by the Landlord 80 degrees;
7. Keep all mechanical apparatus free of vibration and noise which may be
transmitted beyond the confines of the Premises;
8. Not cause or permit objectionable odors to emanate or be dispelled from the
Premises;
9. Not overload the floor or electrical wiring and not install any additional
electrical wiring or plumbing without Landlord's prior written consent;
10. Not conduct, permit, or suffer any public or private auction sale to be
conducted on or from the Premises;
11. Not solicit business in the common areas or distribute hand bills or other
advertising materials in the common areas, and if this provision is violated
Tenant shall pay Landlord the cost of collecting same from the common areas for
trash disposal.
12. Comply with any other rules and regulations which Landlord may from time to
time formulate for the tenants occupying the Centre.
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SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT
This SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT (this "Agreement"),
is made as of the 2nd day of January, 1996 between Fleet Real Estate Capital,
Inc., and its successors and assigns ("Mortgagee"), Owings Mills Commerce Centre
Limited Partnership ("Landlord") and Rent-A-Wreck, Inc. ("Tenant").
WHEREAS, Mortgagee has agreed to make a loan to Landlord to be secured by a Deed
of Trust, Mortgage, Security Agreement and Assignment of Rents and Leases
(together with any UCC-1 Financing Statements in connection therewith, the
"Mortgage"), as well as by a separate Assignment of Rents and Leases (the
"Assignment and together with the Mortgage, the "Security Documents") covering
Landlord's interest in certain real and personal property located at Owings
Mills Commerce Centre (the "Property"); and
WHEREAS, Tenant has entered into a certain lease, as the same may have been
amended, modified or supplemented (the "Lease") dated September 19, 1995, with
Landlord, covering a certain portion of the Property (the "Premises"); and
WHEREAS, Mortgagee, Landlord and Tenant desire to confirm their understanding,
with respect to the Lease, the Mortgage and the Assignment;
NOW, THEREFORE, in consideration of the promises set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Subordination. Subject to the provisions hereof, Tenant agrees that the
Lease, as it may hereafter be amended from time to time, shall in all respects
be, and is hereby expressly made, subject and subordinate at all times to the
lien of the Security Documents and to all of the terms, conditions and
provisions thereof and to all advances and/or payments made or to be made
thereunder, and as the same may hereafter be amended from time to time. Nothing
contained in this Agreement shall in any way impair or affect the lien created
by the Security Documents except that tenant shall have the right of quiet
enjoyment of the premises upon payment of the rent required by the lease.
2. Attornments.
(a) In the event that Mortgagee acquires or succeeds to the interests of
Landlord under the Lease by reason of a foreclosure, deed-in-lieu of foreclosure
or otherwise (collectively, a "Foreclosure"), Tenant shall be bound to Mortgagee
under all of the terms, covenants and conditions of the Lease, except as
provided in this Agreement, for the balance of the term thereof remaining, with
the same force and effect as if Mortgagee were Landlord. Tenant hereby agrees in
such event to (i) attorn to Mortgagee as its landlord on such terms, (ii) affirm
its obligations under the Lease, and (iii) make payments of all sums thereafter
becoming due under the Lease to Mortgagee. Said attornment, affirmation and
agreement is to be effective and self-operative without the execution of any
further instruments upon Mortgagee succeeding to the interests of Landlord under
the Lease.
(b) Tenant agrees to execute and deliver at any time and from time to time, upon
the request of the Landlord or Mortgagee, any instrument or certificate deemed
to be necessary or appropriate to evidence such attornment.
<PAGE> 23
(c) If any act or omission of Landlord would give Tenant the right, immediately
or after a lapse of a period of time, to cancel or terminate the Lease or abate
the rent payable thereunder or to claim a partial or total eviction, Tenant
shall not exercise such right until (i) it has given written notice of such act
or omission to Landlord and Mortgagee, (ii) Landlord fails to remedy such act or
omission within the applicable time period stated in the Lease for effecting
such remedy and (iii) a reasonable period for remedying such act or omission
shall have elapsed following the failure of Landlord to effect such remedy and
following the time when Mortgagee shall have entitled under the Mortgage to
remedy the same (which reasonable period shall in no event be less then the
period to which Landlord is entitled under the Lease or otherwise, after similar
notice, to effect such remedy, plus two additional weeks.) In the case of an act
or omission which Mortgagee undertakes to remedy but which cannot practically be
remedied by Mortgagee without taking possession of the Premises (i) such
reasonable period shall not commence until Mortgagee has possession of the
Premises and (ii) Mortgagee shall proceed with reasonable diligence to obtain
possession of the Premises, and upon obtaining such possession shall with
reasonable diligence remedy such act or omission.
(d) From and under such attornment, Mortgagee shall be bound to Tenant under all
the terms, covenants and conditions of the Lease; provided, however, Mortgagee
shall not be:
(1) obligated to cure any defaults under the Lease of any prior landlord
(including Landlord) which occurred prior to the date Mortgagee obtained title
to or possession of the Property; but Mortgagee shall be obligated to cure any
default that continues after Mortgagee takes possession.
(2) liable for any act or omission of any prior landlord (including Landlord)
which occurred prior to the date Mortgagee obtained title or possession of the
Property; but shall be liable for any such act or omission that continues after
the date Mortgagee takes possession.
(3) subject to any offsets or defenses which Tenant might have against any prior
landlord (including Landlord); or
(4) bound by any base rental or additional rental or advance payment of rent
which Tenant paid for more than the current month to any prior landlord
(including Landlord).
(e) Anything herein or in the Lease to the contrary notwithstanding, in the
event that Mortgagee shall acquire title to the Premises by reason of a
Foreclosure, Mortgagee shall have no obligation, nor incur any liability, beyond
Mortgagee's then interest, if any, in the Property (including any title and
casualty insurance proceeds and condemnation awards actually paid to Mortgagee),
and Tenant shall look exclusively to such interest of Mortgagee in the Property
for payment and discharge of any obligations which may be imposed upon Mortgagee
hereunder under the Lease.
3. Non-Disturbance. Provided Tenant is not in default under the terms of the
Lease and complies with this Agreement, Mortgagee agrees that in the event
Mortgagee acquires title to the Property by reason of a Foreclosure, Tenant's
possession and occupancy of the Premises and Tenant's rights and privileges
under the Lease during the term thereof (including any renewal term) shall not
be disturbed, subject to limitations or conditions set forth in this Agreement
and Mortgagee
<PAGE> 24
shall recognize the Lease and Tenant's rights hereunder. Subject to the
limitations and conditions contained herein, Mortgagee upon Foreclosure shall be
deemed to be Landlord and shall assume the obligations of Landlord under the
Lease thereafter arising or accruing.
4. Notices.
(a) All notices, demands and requests (collectively, the "Notice") required or
permitted to be given under this Agreement must be in writing and shall be
deemed to have been given if personally delivered or deliverable by reliable
overnight courier or by confirmed facsimile transmission or mailed, first-class
postage prepaid and shall be deemed delivered as of the date of such Notice if
(i) delivered to the party intended; (ii) delivered to the then current address
of the party intended; or (iii) rejected at the then current address of the
party intended, provided such Notice was sent prepaid. The addresses of the
parties are:
If to Mortgagee: Fleet Real Estate Capital, Inc. 4275 Executive Square, Suite
200, LaJolla, California 92037, Facsimile No.
If to Tenant: 11460 Cronridge Drive, Suite 120, Owings Mills, Maryland 21117,
Facsimile No.
If to Landlord: Owings Mills Commerce Centre Limited Partnership, 17 West
Pennsylvania Avenue, Baltimore, Maryland 21204, Facsimile No. (410) 321-1860
(b) Upon at least ten (10) days prior written Notice, each party shall have the
right to change its address to any other address within the United States of
America.
5. Miscellaneous. This Agreement (i) contains the entire agreement with respect
to the subject matter hereof; (ii) may not be modified or terminated, nor may
any provision hereof be waived, orally or in any manner other than by an
agreement in writing signed by the parties hereto or their respective
successors, administrators or assigns; and (iii) shall inure to the benefit of,
and be binding upon, the parties hereto, and their successors and assigns
(including, without limitation, (a) Tenant's permitted assigns and (b) any
purchaser of the Property pursuant to a Foreclosure.
6. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is located.
IN WITNESS WHEREOF, Mortgagee, Landlord and Tenant have executed this Agreement
effective as of the day and year first above written.
Fleet Real Estate Capital, Inc. Rent-A-Wreck of America, Inc.
By: James M. Dick By: Kenneth A. Blum, Jr.
Its Vice President Its President
Address: 4275 Executive Square Address: 11460 Cronridge Drive
Suite 200 Suite 120
LaJolla, California 92037 Owings Mills, MD 21117
Owings Mills Commerce Centre
Limited Partnership
By: Continental Realty Corp., Agent
By: John A. Luetkemeyer, Jr., President
Address: 17 West Pennsylvania Avenue
Towson, Maryland 21204
<PAGE> 25
STATE OF MARYLAND, CITY/COUNTY OF CARROLL, to wit:
I HEREBY CERTIFY that on this 7th day of December, 1995, before me, a Notary
Public of the State aforesaid, personally appeared Kenneth L. Blum, Jr., who
acknowledged himself to be President of the above-named Tenant and that he/she
executed the foregoing instrument as such on behalf of the Tenant.
WITNESS my hand and Notarial Seal.
Dee Wallace
Notary Public
My Commission expires 12/27/98
STATE OF MARYLAND, COUNTY OF BALTIMORE, to wit:
I HEREBY CERTIFY that on this 11th day of December, 1995, before me, a Notary
Public of the State aforesaid, personally appeared John A. Luetkemeyer, Jr., who
acknowledged himself to be President of Continental Realty, Agent for the
above-named Landlord, and that he executed the foregoing instrument as such
Agent on behalf of the Landlord.
WITNESS my hand and Notarial Seal.
Patricia R. Headley
Notary Public
My Commission expires 5/23/98
STATE OF CALIFORNIA, CITY/COUNTY OF SAN DIEGO, to wit:
I HEREBY CERTIFY that on this 8th day of April, 1996, before me, a Notary Public
of the State aforesaid, personally appeared James M. Dick who acknowledged
himself to be the Vice President of the above-named Mortgagee and that he/she
executed the foregoing instrument as such Vice President on behalf of Mortgagee.
WITNESS my hand and Notarial Seal.
Lisa Chiapetta
Notary Public
My Commission expires June 21, 1997
<PAGE> 1
Exhibit 10.16
RENT-A-WRECK
------------
AGREEMENT
------------
THIS AGREEMENT is made and entered into this____ day of______, 1996 by and
between BUNDY AMERICAN CORPORATION, a California corporation, with its principal
office at 11460 Cronridge Drive, Suite 120, Owings Mills, Maryland 21117
("COMPANY") and ___________or Corporate Assignee whose principal address
is_______________________ ("FRANCHISEE").
1. THE FRANCHISE.
A. PREAMBLES.
COMPANY has developed a system for the operation of a vehicle rental
and leasing business under the name "RENT-A-WRECK". Company uses and licenses
the trade and service mark "RENT-A-WRECK" and related logo, and other marks
which Company has developed and may develop in the future (the "Marks").
FRANCHISEE has applied for a franchise to own and operate a RENT-A-WRECK
business and such application has been approved by Company in reliance upon all
of the representations made therein.
COMPANY expressly disclaims the making of, and FRANCHISEE acknowledges
that he has not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, profits or success of the business venture
contemplated by this Agreement. FRANCHISEE acknowledges that he has read this
Agreement and COMPANY's Franchise Offering Circular and that he has no knowledge
of any representations by Company, or its officers, directors, shareholders,
employees or agents that are contrary to the statements made in COMPANY's
Franchise Offering Circular or to the terms herein.
B. GRANT.
Subject to the provisions of this Agreement, Company hereby grants to
FRANCHISEE a franchise (the "Franchise") to operate a RENT-A-WRECK business (the
"BUSINESS") offering vehicles for rental and utilizing COMPANY's formats,
methods, standards, operating procedures and the Marks at (and only at) the
premises (the "Premises") identified in Section 1 of Exhibit A, which is
attached hereto and made a part hereof by this reference, for a term of ten (10)
years commencing on the date of execution hereof. Termination or expiration of
this Agreement constitutes termination or expiration of the franchise. Provided
that Franchisee is in compliance with this Agreement, Company shall not operate
or grant a franchise for the operation of another RENT-A-WRECK Business within
FRANCHISEE's primary service area (the "Primary Service Area"), as described in
Section 2 of Exhibit A. FRANCHISEE may not regularly deliver vehicles to,
transport customers to or pick-up customers at locations within the primary
service area of another RENT-A-WRECK business during the term of this Agreement.
<PAGE> 2
C. RENEWAL.
FRANCHISEE shall have the right to obtain a renewal franchise ("Renewal
Franchise"), and successive renewal franchises thereafter, each for a term of
ten (10) years, at FRANCHISEE's sole option, if Franchisee is in complete
compliance with the terms and conditions of the Franchise Agreement, notifies
Company in writing of its desire to obtain a Renewal Franchise no later than
ninety (90) days but no earlier than one hundred eighty (180) days prior to the
expiration of this Agreement, releases Company of any and all possible claims
related to this Agreement and/or FRANCHISEE's relationship with Company,
terminates this Agreement and executes COMPANY's then-current form of franchise
agreement containing the then-current terms, conditions, fees and contributions
for the operation of the BUSINESS modified to reflect that Franchisee is
receiving a Renewal Franchise and such ancillary agreements as are then
customarily used by Company in granting Renewal Franchises. There is no initial
fee for the renewal period.
2. DEVELOPMENT AND OPENING OF THE BUSINESS.
A. LOCATION OF THE BUSINESS PREMISES.
FRANCHISEE may operate the BUSINESS only at the Premises or at a
substitute location and premises hereafter approved by Company in writing. On or
before the execution of this Agreement, Franchisee shall provide at COMPANY's
request: (1) evidence of FRANCHISEE's ownership of premises for the BUSINESS; or
(2) a copy of a lease for the premises of the BUSINESS on terms satisfactory to
Company and which shall be executed prior to the opening of the BUSINESS.
B. DEVELOPMENT AND OPENING OF THE BUSINESS.
FRANCHISEE agrees to develop the BUSINESS and have the BUSINESS open
and operating within ninety (90) days of the date of this Agreement.
C. SIGNS.
FRANCHISEE agrees to use in the operation of the BUSINESS signs that
Company has approved as meeting its specifications and standards for design and
appearance. FRANCHISEE agrees to purchase, install and prominently display an
illuminated sign on or near the Premises.
3. FLEET REQUIREMENTS.
A. DEFINITION OF "RENTAL VEHICLE".
As used in this Agreement, the term "Rental Vehicle" shall mean any
vehicle rented or leased or available for rental or lease to customers of
Franchisee.
B. DEFINITION OF "AGREEMENT YEAR".
As used in this Agreement, the term "Agreement Year" shall mean a
one-year period of time commencing on an anniversary date of the
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<PAGE> 3
execution of this Agreement and ending on the day before the next anniversary
date. The first Agreement Year commences on the date of execution hereof.
C. THE FLEET.
FRANCHISEE agrees to have the minimum number of Rental Vehicles
available for lease or rental in the Rental Vehicle fleet of the BUSINESS (the
"Fleet") as specified in Section 3 of Exhibit A.
4. FEES.
A. INITIAL FEE.
FRANCHISEE agrees to pay to Company a nonrecurring initial franchise
fee in the amount specified in Section 4 of Exhibit A which shall be payable to
Company upon the execution of this Agreement. The initial franchise fee shall be
fully earned by Company and nonrefundable.
B. CONTINUING FEE.
1. MONTHLY FEE. FRANCHISEE agrees to pay to Company a monthly continuing
franchise fee (the "Monthly Fee") or six percent (6%) of FRANCHISEE's monthly
Gross Revenues for the preceding calendar month. "Gross Revenues" means all sums
received or receivable, whether for cash or credit, constituting payments made
by or due from customers of Franchisee which are derived from the BUSINESS,
including, without limitation, rental of cars, trucks and vans and rental of
vehicles under rent-to-own, leasing and/or other similar programs; but excluding
payments for the repair of damage to vehicles, vehicle sales, charges for
miscellaneous equipment specified in COMPANY's operating manual and state and
local taxes. Each month Franchisee shall pay the Monthly Fee to Company on all
rental agreements closed during the preceding calendar month and shall calculate
and pay the Monthly Fee to Company on all rental agreements which have been open
for more than thirty (30) days and which remain open on the last day of the
preceding calendar month. The Monthly Fee must be received by Company on or
before the tenth (10th) day of each month for the immediately preceding calendar
month. The amount of Monthly Fees payable to Franchisee shall be subject to the
minimum fee schedule provided in Section 4B(2) of this Agreement. Company shall
have the right, in its discretion and upon written notice to Franchisee, to
change the timing of FRANCHISEE's payment of Monthly Fees and contributions to
the Funds (as defined below in Section 7), provided that Company shall not make
such payments due more frequently than twice each calendar month, as long as
payment is made on a timely basis the payment will only be due on the 10th of
each month.
2. MINIMUM FEE. The annual minimum continuing franchise fee (the "Minimum
Fee") shall be as specified in Section 5 of Exhibit A. If in any Agreement Year,
the total Monthly Fees paid by Franchisee in such Agreement Year are less than
the Minimum Fee for such Agreement Year provided herein, Franchisee agrees to
pay to Company an amount equal to the difference between the Monthly Fees paid
and the Minimum Fee for such Agreement Year. Such amount shall be paid by
Franchisee
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<PAGE> 4
to Company within thirty (30) days after the last day of such Agreement Year.
3. MONTHLY FEE INCREASES. COMPANY shall have the right, after the
expiration of the first ten (10) Agreement Years hereof, to increase the Monthly
Fee to seven percent (7%) of FRANCHISEE's Gross Revenues.
C. LATE PAYMENT FEES AND INTEREST ON LATE PAYMENTS.
Monthly Fees owed by Franchisee may be assessed a late payment fee on
the first business day after their due date, which late payment shall be
immediately due and payable and equal to five percent (5%) of the amount owed.
Additionally, all amounts owed Company shall bear interest after their due date
accruing at the highest applicable rate for open account business credit, not to
exceed two percent (2%) per month. Franchisee acknowledges that this Section 4C
shall not constitute COMPANY's agreement to accept such payments after same are
due or a commitment by Company to extend credit to the BUSINESS and that
FRANCHISEE's failure to pay all amounts when due shall constitute grounds for
termination of this Agreement. As long as payment is made within a 30 day period
there will be no late charge assessed.
D. APPLICATION OF PAYMENTS.
Notwithstanding any designation by Franchisee, Company shall have sole
discretion to apply any payments received from Franchisee or any indebtedness of
Company to Franchisee, to any past due indebtedness of Franchisee for Monthly
Fees, (defined below in Section 7B) contributions to the Funds (as defined below
in Section 7A), purchases from Company or its Affiliates, late payment fees,
interest, or any other indebtedness of Franchisee to Company or its Affiliates.
As mutually agreed by Franchisor and Franchisee.
5. TRAINING AND GUIDANCE.
A. TRAINING.
COMPANY shall furnish to Franchisee a training program for
the operation of the BUSINESS as designated by Company prior to
the opening of the BUSINESS. The training program shall be
furnished at COMPANY's principal office and/or at such other
location designated by Company. Franchisee may attend additional
initial training at a location designated by Company which is
within driving distance of the Premises of the BUSINESS.
Franchisee shall be responsible for any travel and living
expenses which he or his employees incur in connection with such
training. Franchisee and FRANCHISEE's general manager (the
person(s) identified in Section 6D) shall be required to complete
the training program to the satisfaction of Company.
B. HIRING AND TRAINING OF EMPLOYEES BY FRANCHISEE.
FRANCHISEE shall hire all employees of the BUSINESS, be
exclusively responsible for the terms of their employment and
compensation and for the proper training of such employees in the
operation of the BUSINESS, provided that supervisory employees
hired
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<PAGE> 5
by Franchisee after the opening of the BUSINESS may, subject to reasonable
limitations prescribed by Company and at FRANCHISEE's expense for travel and
living costs, enroll in training programs conducted by Company.
C. GUIDANCE.
COMPANY shall furnish to Franchisee guidance in connection with the
operation of the BUSINESS. Such guidance shall be furnished in the form of
COMPANY's operating manual (the "Operating Manual"), bulletins, other written
materials, group meetings and consultations by telephone and/or consultants at
the offices of Company or at the BUSINESS.
6. BUSINESS IMAGE AND OPERATING STANDARDS.
A. BUSINESS IMAGE, OPERATING STANDARDS
AND COMPANY PROGRAMS.
FRANCHISEE agrees to maintain the appearance of the BUSINESS consistent
with the image of a BUSINESS as a clean, attractive and efficiently operated
business for the rental and lease of vehicles. Franchisee further agrees to
conspicuously identify himself at the Premises and in all dealings with
customers, suppliers, public officials and others as the owner of the BUSINESS
under a franchise from Company. Franchisee agrees not to use this Agreement or
the franchise as collateral to secure any personal or corporate obligation.
Franchisee, if requested by Company, agrees to lease, at FRANCHISEE's sole
expense, a computerized software program meeting COMPANY's and the FRANCHISEE's
specifications to assist in the operation of the BUSINESS.
B. UNIFORM IMAGE AND SPECIFICATIONS,
STANDARDS AND PROCEDURES.
The presentation of a uniform image to the public is an essential
element of a successful franchise system and Franchisee agrees to operate the
BUSINESS in accordance with the specifications, standards and procedures
prescribed by Company, including without limitation: (1) mechanical condition,
running order, safety, repair, age and appearance of Rental Vehicles; (2) the
safety, maintenance and appearance of the Premises; (3) appearance and training
of employees; (4) use of standard rental and leasing agreements and forms;
(5) minimum standards with respect to customers and hours of operation of the
BUSINESS; (6) compliance with and participation in COMPANY's
programs;(7) compliance with all reasonable insurance policy requirements of
Company; (8) establishment of minimum daily business hours for the BUSINESS;
(9) proper display of the Marks; (10) quality business and advertising practices
and controls; and (11) obtain an automobile dealer's license, where possible.
Mandatory specifications, standards and operating procedures prescribed
from time to time by Company in the Operating Manual for the BUSINESSES or
communicated to Franchisee in writing, shall constitute provisions of this
Agreement as if set forth herein. All references herein to this Agreement shall
include all such mandatory specifications, standards and operating procedures.
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<PAGE> 6
COMPANY will loan to Franchisee during the term of the franchise one
copy of the Operating Manual. Company shall have the right to add to and
otherwise modify the Operating Manual from time to time to reflect changes in
the specifications, standards or operating procedures for a RENT-A-WRECK
business. FRANCHISEE shall keep his copy of the Operating Manual current. The
master copy of the Operating Manual shall be maintained by Company at its
principal office and shall be controlling in the event of a dispute.
C. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
FRANCHISEE shall secure and maintain in force all required licenses,
permits and certificates relating to the operation of the BUSINESS and shall
operate the BUSINESS in full compliance with all applicable laws, ordinances and
regulations. The BUSINESS shall in all dealings with its customers, suppliers,
Company and the public adhere to the highest standards of honesty, integrity,
fair dealing and ethical conduct to the best of his/her ability. Franchisee
agrees to refrain from any business or advertising practice which may be
injurious to Company and the goodwill associated with the Marks and other
RENT-A-WRECK businesses. Franchisee shall notify Company in writing within five
(5) days of the commencement of any action, suit or proceeding which may
adversely affect the operation or financial condition of Franchisee or the
BUSINESS.
D. MANAGEMENT OF THE BUSINESS.
The BUSINESS shall, at all times during the term of this Agreement, be
under the direct, on-premises supervision of a trained and competent general
manager who has completed COMPANY's training program or equivalent training to
COMPANY's satisfaction, and who is employed on a full-time basis to work for
and at the BUSINESS. The person(s) specified in Section 6 of Exhibit A will
initially exercise the functions of general manager with respect to all elements
of the BUSINESS. Franchisee shall keep Company informed at all times of the
identity of the general manager of the BUSINESS.
E. INSURANCE.
FRANCHISEE shall maintain reasonable coverage for the rental or lease
of Rental Vehicles. Such insurance shall provide coverage against bodily and
personal injury, death and property damage caused by or occurring in conjunction
with the rental or lease of vehicles, the operation of the BUSINESS or otherwise
in conjunction with the conduct of business by Franchisee pursuant to the
franchise with such minimum limits as Company specifies in writing from time to
time. Such insurance coverage shall be maintained under one or more policies of
insurance issued by carriers rated "A" or better by Alfred M. Best & Company,
Inc., unless otherwise approved in writing by Company. All liability insurance
policies required hereunder shall name Company (and its officers, directors and
employees) as an additional insured, contain a waiver by the insurance carrier
of all subrogation rights against Company and shall provide that Company receive
thirty (30) days prior written notice of termination, expiration or cancellation
or modification of any such policy. Franchisee shall furnish to Company annually
a copy of the certificate of or other evidence of the
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<PAGE> 7
renewal or extension of each such insurance policy. Company may reasonably
increase the minimum protection requirement as of the renewal date of any
policy, and reasonably require different or additional kinds of insurance at any
time, including excess liability (umbrella) insurance, which Company deems, in
COMPANY's sole discretion, to be necessary or advantageous to Franchisee or
COMPANY's system of franchises. Franchisee shall at all times during the term of
the franchise maintain in force at his sole expense comprehensive general
liability insurance coverage (including, but not limited to, coverage for
personal injury, property damage and product and motor vehicle liability)
against claims arising from the operation of the Business.
F. COMPANY PROGRAMS.
FRANCHISEE shall subscribe to, participate in and comply within reason
any of the programs, promotions, campaigns or activities which Company enters
into, engages in or reasonably prescribes (e.g., credit card programs, telephone
service programs or advertising programs). Franchisee shall supervise and
service such programs, promotions and activities pursuant to the terms thereof.
Franchisee shall contribute to the expenses thereof, if any, on the same pro
rata basis as other franchisees. Franchisee shall encourage and solicit vehicle
rental customers to patronize other RENT-A-WRECK businesses, and will
exclusively refer, commission free, all vehicle reservations to other
franchisees or Company rental locations, when there is such a Franchisee or
Company rental location in the area concerned. Franchisee also shall participate
in a 24-hour emergency road service program which provides nationwide service
through a toll-free telephone number to all customers of Franchisee. Franchisee
shall provide Company with information about FRANCHISEE's emergency service
providers and shall keep such information current so that Company can make
arrangements when and if necessary. Franchisee is authorized to expend up to
Seventy Dollars ($70) on behalf of another Franchisee without his authorization.
Any amount in excess of Seventy Dollars ($70) shall require the oral
authorization from the other Franchisee. Franchisee agrees to bill the
Franchisee from whom such car was rented, only for the actual out-of-pocket cost
of such servicing, and to promptly pay other franchisees who assist one of their
customers - provided the cost of such programs are reasonable with franchisees
operations.
7. ADVERTISING AND PROMOTION.
A. BY COMPANY.
FRANCHISEE at his discretion may request and obtain a report
of summary detailing the operation and plans of the National Ad
Fund. Recognizing the value of uniform advertising and promotion
to the goodwill and public image of RENT-A-WRECK businesses of
Company, Company agrees to maintain and administer an advertising
fund (the "National Fund") for the preparation of advertising
materials and such advertising programs as Company may deem
necessary or appropriate and agreed to by Ad Council. Franchisee
shall contribute to the National Fund two percent (2%) of Gross
Revenues for the preceding calendar month. Such contribution is
due and payable by the tenth (10th) day
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<PAGE> 8
of each month for the immediately preceding month. Additionally, Franchisee
agrees to contribute, as specified from time to time by Company, to a regional
advertising fund (the "Regional Fund"); provided, however, that such
contribution may not exceed FRANCHISEE's payment to the National Fund. If
FRANCHISEE's advertising contributions are not current, then Franchisee may be
excluded from participating in any program paid for by the National Fund.
FRANCHISEE agrees that the National and Regional Funds (the "Funds")
may be used to meet any and all costs of maintaining, administering, directing
and preparing national, regional or local advertising, sales promotion and
public relations activities, including, without limitation, the costs of
preparing and conducting television, radio, magazine, billboard, newspaper and
other media programs and activities, and employing advertising agencies. Company
may spend in any fiscal year an amount greater or less than the aggregate
contributions of RENT-A-WRECK businesses to the Funds in that year and Company
may make loans to the Funds bearing reasonable interest to cover any deficits of
the Funds and cause the Funds to invest any surplus for future use by the Funds.
Franchisee shall have no right, claim or interest of any kind in or to any of
the contributions paid by Franchisee, or any other entity, or to any allocation
of or use of the National Fund or Regional Fund. The Funds shall be accounted
for separately from the other funds of Company and shall not be used to defray
any of COMPANY's general operating expenses not associated with or attributable
to the activities of the Funds. A report of the operations of the Funds shall be
prepared annually by Company and shall be made available to Franchisee upon
request.
Franchisee's contribution to either or both the Funds may be increased
if: (i) the majority of the duly elected or appointed members of COMPANY's
Franchisee Advisory Council (the "elected Advisory Council") recommends an
increase; and (ii) Company, in its sole discretion, approves the Advisory
Council's recommendation; provided, however, that such increase shall only occur
once during any Agreement Year; and, provided further that the contribution will
not increase above the two and one-half percent (2.5%) of gross revenues. If
COMPANY's Franchise Advisory Council has been disbanded or terminated, Company
may in its sole discretion increase Franchisee's contributions to the Funds,
subject to the above restrictions, provided that Company increases the
contributions of all other franchisees in cases where Company has the
contractual right to do so. Franchisee understands and acknowledges that the
Funds are intended to maximize general public recognition and patronage of the
Marks and the entire system for the benefit of all RENT-A-WRECK businesses and
that Company undertakes no obligation in administering the Funds to ensure that
expenditures which are proportionate or equivalent to FRANCHISEE's contributions
are made for the market area of the BUSINESS or that any RENT-A-WRECK businesses
benefit directly or pro-rata from the placement of advertising.
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<PAGE> 9
B. BY FRANCHISEE.
FRANCHISEE agrees to list and advertise the BUSINESS in conformance
with the requirements specified in COMPANY's Operating Manual. Additionally,
Franchisee shall maintain at least two (2) telephone numbers, one of which shall
be a local number and the other a toll free (1-800) number. The numbers shall be
listed and identified exclusively with the BUSINESS and shall be separate and
distinct from all other telephone numbers maintained for or by Franchisee.
Franchisee shall register all of its telephone numbers used in connection with
the BUSINESS with Company within five (5) days of first use, to provide updates
if any changes to such numbers occur and execute COMPANY's form of Assignment of
Telephone Numbers and Listings which is attached to this Agreement as Exhibit B.
8. MARKS.
A. OWNERSHIP AND GOODWILL OF MARKS.
FRANCHISEE acknowledges that Company is the owner of the Marks licensed
to Franchisee by this Agreement, that FRANCHISEE's right to use the Marks is
derived solely from this Agreement and is limited to the conduct of business by
Franchisee pursuant to and in compliance with this Agreement and all applicable
specifications, standards and operating procedures prescribed by Company from
time to time during the term of the Franchise. Any unauthorized use of the Marks
by Franchisee shall constitute an infringement of the rights of Company in and
to the Marks. Franchisee agrees that all usage of the Marks by the Franchisee
and any goodwill established thereby shall inure to the exclusive benefit of
Company and Franchisee acknowledges that this Agreement does not confer any
goodwill or other interests in the Marks upon Franchisee.
B. LIMITATIONS ON FRANCHISEE'S USE OF MARKS.
FRANCHISEE agrees to use the Marks as the sole identification of the
BUSINESS, provided that Franchisee shall identify himself as the independent
owner thereof in the manner prescribed by Company. Franchisee shall not use any
Mark or any corporate or business name of Company, as part of any corporate or
trade name or with any prefix, suffix or other modifying words, terms, designs
or symbols (other than logos licensed to Franchisee hereunder), or in any
modified form or in any manner not expressly authorized in writing by Company.
Franchisee agrees to prominently display the Marks on or in connection with all
advertising, rental agreements, stationery, forms and any other materials
designated by Company, and in the manner prescribed by Company, to give such
notices of trade and service mark registrations and copyrights as Company
specifies and to obtain such fictitious or assumed name registrations as may be
required under applicable law.
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
FRANCHISEE shall immediately notify Company of any apparent
infringement of or challenge to FRANCHISEE'S use of any Mark. Company shall have
sole discretion to take such action as it deems appropriate and the right to
exclusively control any litigation or proceeding
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arising out of any such infringement or challenge and Franchisee agrees to
render such assistance in connection therewith as Company deems necessary or
advisable.
D. INDEMNIFICATION OF FRANCHISEE.
COMPANY agrees to indemnify Franchisee against and to reimburse
Franchisee for all damages for which he is held liable in any proceeding arising
out of his authorized use of any Mark pursuant to and in compliance with this
Agreement and for all costs reasonably incurred by Franchisee in such proceeding
in which Franchisee is named as a party, provided that Franchisee has timely
notified Company of such claim or proceeding and has otherwise complied with
this Agreement. If it becomes advisable at any time in COMPANY'S sole discretion
for Company and/or Franchisee to modify or discontinue use of any Mark, and/or
use one or more additional or substitute trade or service marks, Franchisee
agrees to comply with COMPANY's direction within a reasonable time after notice
thereof. Company will pay for FRANCHISEE's out of pocket expenses incurred in
complying with such direction.
9. KNOW-HOW.
COMPANY possesses proprietary know-how comprising methods, techniques,
specifications, procedures, information, systems and knowledge of and experience
in the development and operation of RENT-A-WRECK businesses (the "Know-How").
Company will disclose the Know-How to Franchisee in the training program, the
Operating Manual and in guidance furnished to Franchisee during the term of the
Franchise. Franchisee acknowledges that the Know-How is proprietary and a trade
secret of Company and disclosed to Franchisee solely for use by Franchisee in
the operation of the BUSINESS during the term of the Franchise.
FRANCHISEE acknowledges that it would not be possible for Company to
protect its trade secrets against unauthorized use or disclosure if Franchisee
holds an interest in a business similar to the BUSINESS. Franchisee therefore
agrees that all employees of the BUSINESS shall execute COMPANY's then current
form of confidentiality and non-competition agreement and FRANCHISEE,
FRANCHISEE's general manager and FRANCHISEE's immediate family members and
owners will not during the term of the Franchise have any interest as an owner,
director, officer, employee, con- sultant, representative or agent, or in any
other capacity, in any Competitive Business. As used in this Agreement,
"Competitive Business" means any business or enterprise other than a
RENT-A-WRECK business that rents or leases automobiles, vans or trucks, or any
other vehicles.
10. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
The parties agree that this Agreement does not create a
fiduciary relationship between them, that the parties are and
shall be independent contractors and that nothing in this
Agreement is intended to make either party a general or special
agent, legal representative, subsidiary, joint venturer, partner,
employee or servant of the other for any purpose. Company shall
not be obligated for any damages to
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any person or property directly or indirectly arising out of the operation of
the BUSINESS, whether caused by FRANCHISEE's negligent or willful action or
failure to act. Company shall have no liability for any sales, use, excise,
gross receipts, income, property or other taxes, whether levied upon Franchisee,
the BUSINESS or its assets, or upon Company, in connection with the business
conducted by Franchisee, or any fees, contributions or other payments made by
Franchisee to Company.
FRANCHISEE shall indemnify, defend and hold Company, its subsidiaries,
affiliates, stockholders, directors, officers, employees, agents, successors and
assignees harmless against any liability for any claims, actual and
consequential damages, taxes, attorneys' fees and costs incurred in defending
any claim against any of them, directly or indirectly arising out of the
operation of the BUSINESS. The indemnities and assumptions of liabilities and
obligations herein shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.
11. RECORDS AND REPORTS.
A. RECORDS.
During the term of the Franchise, Franchisee agrees, at his expense, to
use the rental agreement numbering system assigned to him by Company and the
then current standard rental agreement specified by Company in the Operating
Manual, and to maintain at FRANCHISEE's principal office and preserve for three
(3) years from the date of their preparation any and all rental agreements,
records of Rental Vehicles and such other documents, supporting records and
forms designated by Company. Franchisee shall provide Company on or before the
tenth (10th) day of each month with copies of each rental agreement entered into
during the preceding calendar month. Franchisee shall pay Company a One Hundred
Dollar ($100.00) fee for each rental agreement which is missing or which
Franchisee fails to provide to Company as required herein. If a rental agreement
is misplaced a note will suffice, as long as not a repetitive situation.
B. REPORTS.
FRANCHISEE shall furnish Company on the tenth (10th) day of each month,
in the form prescribed by Company from time to time, a report signed and
verified by Franchisee (or, if a corporation or partnership, an officer or
managing partner of FRANCHISEE), if such statements are prepared by FRANCHISEE's
internal staff, or by a Certified Public Accountant, if such statements are
prepared by a Certified Public Accountant, accurately reflecting each Rental
Vehicle in the Fleet, the number of the rental agreements used, total Gross
Revenues for the preceding month, weekly and/or monthly summaries of daily
activity reports and such other data, information and supporting records as
Company from time to time requires. Franchisee shall also furnish Company
semi-annual reports, in such form as specified by Company, containing
information including but not limited to that supplied in FRANCHISEE's monthly
reports during the preceding six (6)
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months, and such other data, information and records as Company may from time to
time require.
C. STANDARD CHART OF ACCOUNTS.
FRANCHISEE shall establish a bookkeeping and accounting system which
utilizes, without violation, COMPANY's then current standard chart of accounts.
All bookkeeping and accounting records maintained by Franchisee, all financial
statements prepared by or for Franchisee and all reports submitted by Franchisee
to Company shall conform to COMPANY's then current standard chart of accounts as
described in the Operating Manual. All such bookkeeping and accounting records
and all financial statements, for such periods as may from time to time be
prescribed in the Operating Manual, shall be maintained available for inspection
by Company during normal business hours.
12. COMPANY'S RIGHT TO INSPECT AND AUDIT THE BUSINESS.
To determine whether Franchisee is complying with this Agreement,
Company shall have the right at any time during business hours, and without
prior notice to Franchisee, to inspect the BUSINESS, the Rental Vehicles in the
Fleet, all records of Rental Vehicles and all customer rental and lease
agreements. Franchisee also agrees to allow Company access to the federal, state
and local income tax returns of Franchisee and hereby waives any privilege
pertaining thereto. Franchisee shall fully cooperate with representatives of
Company making any such inspection and/or audit and shall permit representatives
of Company to take photographs, movies or videotapes of the BUSINESS and to
interview the employees of the BUSINESS. Company shall bear the cost of all such
inspections and audits, provided that if any such inspection or audit discloses
that Franchisee has failed to comply with any provision of this Agreement or the
Operating Manual in a manner that would permit Company to terminate this
Agreement pursuant to Section 15 of this Agreement, the cost of such inspection
and/or audit, including normal daily compensation, traveling expenses, room and
board (not to exceed Five Hundred Dollars ($500.00),only under (exceptional
circumstances) IRS, or problems to be found shall be borne by Franchisee.
COMPANY's rights under this Section 12 shall apply only to the operation of the
BUSINESS. Only under extreme circumstances.
13. ASSIGNMENT.
A. BY COMPANY.
This Agreement and the Franchise is fully assignable by Company and
shall inure to the benefit of any assignee(s) or other legal successor(s) to the
interest of Company herein.
B. FRANCHISEE MAY ASSIGN WITH THE APPROVAL OF COMPANY.
FRANCHISEE understands and acknowledges that the right and duties
created by this Agreement are personal to Franchisee or to its owner and that
Company has granted the Franchise in reliance upon the individual or collective
character, skill, aptitude, attitude, business ability and financial capacity of
Franchisee or its owner.
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<PAGE> 13
Therefore, the Franchise, the BUSINESS (or any interest therein) or any part or
all of the ownership of Franchisee may be assigned, sold, subdivided or
otherwise transferred by Franchisee or its owner only upon the prior written
approval of Company, and any such assignment or transfer without such approval
shall constitute a breach hereof and convey no rights to or interests in the
Franchise or the BUSINESS.
C. CONDITIONS FOR APPROVAL OF ASSIGNMENT.
If Franchisee and its owners are in full compliance with this
Agreement, Company shall not unreasonably withhold its approval of an
assignment, provided that the proposed assignee(s) are, in the opinion of
Company, individuals of good moral character who have sufficient business
experience, aptitude and financial resources to own and operate the BUSINESS and
otherwise meet COMPANY's then applicable standards for franchisees, and further
provided that the following conditions are met prior to, or concurrently with,
the effective date of the assignment:
1. all obligations of Franchisee and its owner
incurred in connection with this Agreement have been assumed
by the assignee;
2. FRANCHISEE shall have paid such continuing
Franchise and service fees, advertising contributions and
any other amounts owed to Company or its affiliates, or to
any other person or entity to which non-payment will affect
the ongoing operations of the BUSINESS, which are then due
and unpaid;
3. the assignee agrees to complete the training
program required of new franchisees;
4. the assignee and its owner shall have executed and
agreed to be bound by COMPANY's then current form of
Franchise Agreement and such ancillary agreements as are
then customarily used by Company in the grant of franchises
for RENT-A-WRECK businesses of Company;
5. FRANCHISEE or the assignee shall have paid a
reasonable transfer fee ($2,500 - $5,000) to Company in an
amount equal to the transfer fee then being charged by
Company;
6. COMPANY shall have approved the material terms and
conditions of such assignment; and
7. FRANCHISEE and its owner shall have executed a
release of Company of all possible liability to Franchisee
and its owner and a non-competition covenant in favor of
Company and the assignee, agreeing that for a period of not
less than two (2) years, commencing on the effective date of
the assignment, they will not have any interest as an owner,
investor, partner, director, officer, employee, consultant,
representative or agent, or in any other capacity, in any
business or activity located within the area of dominant
influence ("ADI") in which the BUSINESS is located,
involving, in significant part, the rental or leasing of
vehicles.
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<PAGE> 14
D. DEATH OR DISABILITY OF FRANCHISEE.
Upon the death or permanent disability ,that would prevent, of
Franchisee or a principal owner, from operating the business at previous
standards, of Franchisee, the executor, administrator, conservator or other
personal representative of such person shall, within six (6) months from the
date of death or disability, assign his interest in the Franchise and the
BUSINESS or Franchisee, to a third party approved by Company subject to the
conditions of Section 13C of this Agreement. Such approval by the Company shall
not be unreasonably withheld.
E. COMPANY'S RIGHT OF FIRST REFUSAL.
If FRANCHISEE or its owner(s) shall at any time determine to sell an
interest in the BUSINESS or an ownership interest in Franchisee, Franchisee or
its owner(s) shall obtain a bona fide, executed written offer and a reasonable
earnest money deposit from a responsible and fully disclosed purchaser and shall
submit an exact copy of such offer to Company. Company shall have the right,
exercisable by written notice delivered to Franchisee or its owner(s) within
thirty (30) days from the date of delivery of an exact copy of such offer to
Company, to purchase such interest in the BUSINESS or such ownership interest in
Franchisee for the price and on the terms and conditions contained in such
offer, provided that Company may substitute cash for any form of payment
proposed in such offer and shall have not less than thirty (30) days to prepare
for closing. If the proposed assignment or Franchise transfer includes assets of
Franchisee not strictly related to the BUSINESS, COMPANY shall not be required
to purchase such other assets, as long as offer from Franchisor or Company equal
to a bonafide offer from another party. IF COMPANY does not exercise its right
of first refusal, Franchisee or its owner(s) may complete the sale to such
purchaser pursuant to and on the terms of such offer, subject to COMPANY's
approval of the purchaser as provided in Sections 13B and 13C, provided that if
the sale to such purchaser is not completed within ninety (90) days after
delivery of such offer to Company, or if there is a material change in the terms
of the sale, Company shall again have the right of first refusal herein
provided.
F. DELEGATION BY COMPANY.
FRANCHISEE agrees that Company shall have the right, from time to time,
to delegate the performance of any portion or all of its obligations and duties
under this Agreement to designees, whether the same are agents of Company or
independent contractors with which Company has contracted to provide such
services.
14. TERMINATION OF THE FRANCHISE BY COMPANY.
If FRANCHISEE (or FRANCHISEE's owners): (a) fails to secure premises
for the BUSINESS as provided in Section 2A of this Agreement; (b) fails to
develop the BUSINESS and have the BUSINESS open and operating within ninety (90)
days of the date of this Agreement as provided in Section 2B of this Agreement;
(c) fails to meet the Fleet requirements provided in Section 3 of this
Agreement; or (d) fails to satisfactorily complete the training program as
provided in Section 5A
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<PAGE> 15
of this Agreement, Company shall have the right to terminate this Agreement,
effective fifteen (15) days after delivery of notice of termination to
Franchisee.
COMPANY shall have the further right to terminate this Agreement
effective upon delivery of notice of termination to Franchisee if Franchisee (or
FRANCHISEE's owners):
(1) makes an assignment for the benefit of creditors;
(2) makes a written admission of inability to pay debts
or obligations as they become due;
(3) files a voluntary petition in bankruptcy
(except for a reorganization as provided by the Bankruptcy Code);
(4) is adjudicated as bankrupt or insolvent;
(5) files a petition or other pleading seeking
reorganization, dissolution or any similar relief under
any statute, law or regulation or admits or fails to
immediately contest the material allegations of a peti-
tion or other pleading filed in any such proceeding;
(6) seeks, consents to or acquiesces in the
appointment of any trustee, receiver or liquidator of
the Business or all or a substantial part of any of its
assets, or fails to vacate the appointment of any
trustee, receiver or liquidator for any such purpose
within thirty (30) days of such appointment;
(7) has made any material misrepresentation or
omission in its application for a Franchise or is
convicted of or pleads no contest to a felony or any
crime or other offense likely to adversely affect the
goodwill or reputation of the BUSINESS or the Marks;
(8) abandons or fails to actively operate the
BUSINESS for a period of more than seven (7)
consecutive days without the prior written consent of
Company;
(9) attempts to transfer, or transfers control of
all or any interest in the BUSINESS or Franchise or
Franchisee, without the prior written permission of
Company;
(10) submits on three or more separate occasions
during the term of this Agreement reports which
understate the number of active Rental Vehicles in the
Fleet or Gross Revenues generated by the BUSINESS by
more than ten percent (10%);
(11) fails on four (4) (due to errors beyond
control) or more separate occasions within any six (6)
consecutive month period to submit when due, reports or
other data, information or records, and/or to pay when
due the continuing Franchise and service fees ,
advertising
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contributions or other payments due to
Company, and/or otherwise fails to comply with this
Agreement, whether or not such failures to comply are
corrected after notice to them; or
(12) fails to maintain the insurance coverage
required by Section 9E of this Agreement or experiences
an excessive loss ratio which is disproportionate to
industry standards applied on a regional basis in
connection with any liability insurance program
endorsed by Company.
COMPANY shall have the further right to terminate this Agreement
without further notice, such termination effective immediately upon the
expiration of any correction or cure period, if Franchisee, its owners or the
BUSINESS fails to comply with any other provision of this Agreement or any
mandatory specification, standard or operating procedure prescribed by Company
and do not correct such failure within thirty (30) days after written notice of
such failure to comply is delivered to them if a non-monetary matter is involved
and fifteen (15) days after written notice if a monetary matter is involved,
however, see (11) above which applies as specified therein.
15. RIGHTS OF COMPANY AND OBLIGATIONS OF FRANCHISEE
UPON TERMINATION OR EXPIRATION OF THE FRANCHISE .
A. PAYMENT OF AMOUNTS OWED TO COMPANY.
Within fifteen (15) days after the effective date of termination or
expiration of the Franchise, Franchisee agrees to pay to Company any unpaid
continuing Franchise fees, advertising contributions, interest due Company on
any of the foregoing and all other amounts owed to Company or its affiliates,
whether such obligations were incurred under this Agreement or otherwise in the
conduct of the BUSINESS, and pay other franchisees of Company or any other
person or entity any monies owed to them incurred in connection with the
operation of the BUSINESS (i.e., phone bills, rent).
B. DE-IDENTIFICATION.
FRANCHISEE agrees that after the termination or expiration of the
Franchise he will immediately:
1. return to Company all copies of the Operating
Manual and other items or materials which have been
loaned or furnished without charge by Company;
2. take such action as may be required to cancel
all fictitious or assumed name or equivalent
registrations relating to his use of any Mark;
3. remove from the Premises or take down all
signs, sign-faces, advertising materials, forms,
invoices and other materials containing any Mark or
otherwise identifying or relating to the BUSINESS,
unless Company exercises its option to purchase under
Section 15C;
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<PAGE> 17
4. notify the telephone company and all listing
agencies of the termination or expiration of
FRANCHISEE's right to use any telephone number and any
regular, classified or other telephone directory
listings associated with any Mark and to authorize
transfer of same to or at the direction of Company.
Franchisee acknowledges that as between Company and
Franchisee, Company has the sole rights to and interest
in all telephone numbers and directory listings
associated with any Mark and Franchisee authorizes
Company and any officer of Company as his attorney in
fact, to direct the telephone company and all listing
agencies to transfer same to Company under the
Telephone Numbers and Listings Assignment signed
concurrently with the Franchise Agreement. In the
event of transfer, the Terminated Franchisee will no
longer be financially responsible for telephone numbers
and listings as of the date of transfer. At COMPANY's
direction, should Franchisee fail to do so, the
telephone Company and all listing agencies may accept
such direction or this Agreement as conclusive proof of
the exclusive rights of Company in such telephone
numbers and directory listing and its authority to
direct their transfer, and take such other actions or
execute such other documents, including but not limited
to execution of COMPANY's telephone number transfer
form, as may be necessary or as Company requests;
5. not directly or indirectly at any time or in
any manner identify himself or any business as a
current or former RENT-A-WRECK business, except for it
not being in any marketing or promotional material, or
as a Franchisee, licensee or dealer of or as otherwise
associated with Company, or use any Mark, any colorable
imitation thereof or other indicia of a RENT-A-WRECK
business in any manner or for any purpose, or utilize
for any purpose any trade name, trade or service mark
or other commercial symbol that suggests or indicates a
connection or association with Company or use any of
COMPANY's trade secrets, forms, slogans, signs,
symbols, devices or materials that indicate an associa-
tion with Company or that is or was used by Company
and/or other RENT-A-WRECK businesses;
6. take any actions necessary to effectuate the
transfer to whomever Company directs or to attempt to
cancel or terminate, all at COMPANY's sole election,
any and all of the licenses, agreements and permits,
which were used in conjunction with the BUSINESS; and
7. furnish to Company within thirty (30) days
after the effective date of termination or expiration
evidence satisfactory to Company of FRANCHISEE's
compliance with the foregoing obligations.
C. COMPANY'S RIGHT TO PURCHASE ASSETS OF THE BUSINESS.
Upon termination or expiration of this Agreement (without
the grant of a Renewal Franchise), Company shall have the option,
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exercisable by giving written notice thereof within one hundred eighty (180)
days from the date of such expiration or termination, to purchase from
Franchisee all the assets used in the BUSINESS. As used in this Section 15C,
"assets" shall mean and include, without limitation, leasehold improvements,
equipment, vehicles, furnishings, fixtures, signs, inventory (non-perishable
products, materials and supplies) and the lease or sublease for the Premises.
Company shall have the unrestricted right to assign this option to purchase.
Company or its assignee shall be entitled to all customary warranties and
representations given by the seller of a business including, without limitation,
representations and warranties as to: (1) ownership, condition and title to
assets; (2) liens and encumbrances relating to the assets; and (3) validity of
contracts and liabilities, inuring to Company or affecting the assets,
contingent or otherwise. The purchase price for the assets of the BUSINESS shall
be their fair market value. If Company and Franchisee are unable to agree on the
fair market value of the assets within thirty (30) days after FRANCHISEE's
receipt of COMPANY's notice exercising its option hereunder, the fair market
value shall be determined by an independent appraiser selected by Company and
Franchisee, and if they are unable to agree on an independent appraiser within
ten (10) days after expiration of the thirty (30) day period described above,
Company and Franchisee shall each select one independent appraiser, who shall
select a third independent appraiser (the "Appraiser"), and the fair market
value shall be the value determined by the Appraiser. If either party fails to
select an appraiser and give notice to the other of the identity of such
appraiser within the ten (10) day period described above, the appraiser selected
by the other party shall select the Appraiser. The Appraiser so selected shall
be given full access to the BUSINESS, the Premises and FRANCHISEE's books and
records during customary business hours to conduct the appraisal and shall value
the leasehold improvements, equipment, furnishings, fixtures, signs and
inventory in accordance with the standards of this Section 15.C. The Appraiser's
fees and costs shall be borne equally by Company and Franchisee. The purchase
price shall be paid in cash, a cash equivalent, which shall take place no later
than ninety (90) days after receipt by Franchisee of notice of exercise of the
option to purchase, at which time Franchisee shall deliver instruments
transferring to Company or its assignee: (i) good and merchantable title to the
assets purchased, free and clear of all liens and encumbrances (other than liens
and security interests acceptable to Company or its assignee), with all sales
and other transfer taxes paid by Franchisee; (ii) all licenses and permits of
the BUSINESS which may be assigned or transferred; and (iii) the lease or
sublease for the Premises. In the event that Franchisee cannot deliver clear
title to all of the purchased assets as aforesaid, or in the event there shall
be other unresolved issues, the closing of the sale shall be accomplished
through an escrow. Further, Franchisee and Company shall, prior to closing,
comply with all applicable legal requirements, including the bulk sales
provisions of the Uniform Commercial Code of the state in which the BUSINESS is
located and the bulk sales provisions of any applicable tax laws and
regulations. Franchisee shall, prior to or simultaneously with the closing of
the purchase, pay all tax liabilities incurred in connection with the operation
of the BUSINESS. Company shall have the right to set off against and reduce the
purchase price by any and all
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amounts owed by Franchisee to Company, and the amount of any encumbrances or
liens against the assets or any obligations assumed by Company. If Company or
its assignee exercises the option to purchase, pending the closing of such
purchase as hereinabove provided, Company shall have the right to appoint a
manager to maintain the operation of the BUSINESS. Franchisee shall maintain in
force all insurance policies required pursuant to this Agreement until the date
of closing. If the Premises is leased, Company agrees to use reasonable efforts
to effect a termination of the existing lease for the Premises and enter into a
new lease on reasonable terms with the landlord. In the event Company is unable
to enter into a new lease and FRANCHISEE's rights under the lease for the
Premises are assigned to Company or Company subleases the Premises from
Franchisee, Company will indemnify and hold harmless Franchisee from any ongoing
liability under the lease from the date Company assumes possession of the
Premises. If Franchisee owns the Premises, upon purchase of the assets
Franchisee shall enter into a lease with Company under a standard form lease on
terms comparable to those for which similar commercial properties in the area
are then being leased, for a term of five (5) years and for a rental equal to
the fair market rental value of the Premises. If Franchisee and Company cannot
agree on the fair market rental value of the Premises, then the rental value
shall be determined by the Appraiser (selected in the manner described above).
D. COVENANT NOT TO COMPETE.
FRANCHISEE agrees that upon termination of the Franchise prior to its
expiration, for a period of two (2) years, commenc- ing on the effective date of
termination, or the date on which Franchisee ceases to conduct the business
conducted pursuant to this Agreement, whichever is later, Franchisee, its
general manager and FRANCHISEE's immediate family members and owners will not
have any interest as an owner, partner, director, officer, employee, consultant,
representative or agent, or in any other capacity, in any business or activity
located within the area of dominant influence in which the BUSINESS is located,
involving in significant part the rental or lease of vehicles.
E. CONTINUING OBLIGATIONS.
All obligations of Company and Franchisee which expressly or by their
nature survive the expiration or termination of this Agreement shall continue in
full force and effect subsequent to and notwithstanding its expiration or
termination and until they are satisfied in full or by their nature expire.
F. DELEGATION BY COMPANY.
FRANCHISEE agrees that Company shall have the right, from time to time,
to delegate the performance of any portion or all of its obligations and duties
under this Agreement to designees, whether the same are agents of Company or
independent contractors with which Company has contracted to provide such
services.
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16. ENFORCEMENT.
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Each section, paragraph, term and provision of this Agree- ment shall
be considered severable and if any such portion of this Agreement is held to be
invalid, contrary to, or in conflict with any applicable present or future law
or regulation, it shall not have any effect upon such other portions of this
Agreement as may remain otherwise intelligible. If any applicable and binding
law or rule of any jurisdiction requires a greater prior notice of the
termination of this Agreement or refusal to grant a Renewal Franchise than is
required hereunder, or the taking of some other action not required hereunder or
any provision of this Agreement or any specification, standard or operating
procedure prescribed by Company is invalid or unenforceable, the prior notice
and/or other action required by such law or rule shall be substituted for the
comparable provisions hereof, and Company shall have the right to modify such
invalid or unenforceable provision, specification, standard or operating
procedure to the extent required to be valid and enforceable. Franchisee agrees
to be bound by any such modification to this Agreement.
B. WAIVER OF OBLIGATIONS.
COMPANY and Franchisee may by written instrument unilaterally waive or
reduce any obligation of or restriction upon the other under this Agreement,
effective upon delivery of written notice thereof to the other, but this
Agreement may not be otherwise modified except by written agreement signed by
both parties. Company and Franchisee shall not be deemed to have waived or
impaired any right, power or option reserved by this Agreement by virtue of any
custom or practice of the parties at variance with the terms hereof; any
failure, refusal or neglect of Company or Franchisee to exercise any right under
this Agreement or to insist upon exact compliance by the other with its
obligations hereunder; any waiver, forbearance, delay, failure or omission by
Company to exercise any right, power or option with respect to any other
RENT-A-WRECK business(es); or the acceptance by Company of any payments due from
Franchisee after any breach of this Agreement.
C. FRANCHISEE MAY NOT WITHHOLD PAYMENTS.
FRANCHISEE agrees that he will not, on grounds of the alleged
nonperformance by Company of any of its obligations hereunder, withhold payment
of any continuing Franchise and service fees, advertising contributions or any
other amounts due Company or its affiliates.
-43-
<PAGE> 21
D. COSTS AND ATTORNEYS' FEES.
If a claim for amounts owed by Franchisee to Company or its affiliates
is asserted in any legal proceeding before a court or arbitrator, or if Company
or Franchisee is required to enforce this Agreement in a judicial or arbitration
proceeding, the party prevailing in such proceeding shall be entitled to
reimbursement of its costs and expenses, including but not limited to
attorneys' and accountants' fees.
E. GOVERNING LAW/CONSENT TO JURISDICTION.
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADE- MARK ACT OF
1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), THIS AGREEMENT AND THE SHALL
BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE BUSINESS IS LOCATED.
FRANCHISEE AGREES THAT COMPANY MAY INSTITUTE ANY ACTION AGAINST FRANCHISEE IN
ANY STATE OR FEDERAL COURT OF GENERAL JURISDICTION IN THE STATE OF MARYLAND AND
FRANCHISEE IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURT AND WAIVES ANY
OBJECTION HE MAY HAVE TO THE JURISDICTION OR VENUE OF SUCH COURT.
F. CONSTRUCTION.
The preambles and exhibit(s) are a part of this Agreement, which
constitutes the entire agreement of the parties, and there are no other oral or
written understandings or agreements between Company and Franchisee relating to
the subject matter of this Agreement. The term "FRANCHISEE" as used herein is
applicable to one or more persons, a corporation or a partnership and the
singular usage includes the plural and the masculine and neuter usages include
the other and the feminine. If two or more persons are at any time Franchisee
hereunder, their obligations and liabilities to Company shall be joint and
several. References to "FRANCHISEE" and "assignee" which are applicable to an
individual or individuals shall mean the principal owner or owners of the equity
or operating control of Franchisee or the assignee and the general manager(s) of
the Franchisee or the assignee, if Franchisee is a corporation or partnership.
17. NOTICES AND PAYMENTS.
All written notices and reports permitted or required to be delivered
by this Agreement or the operating manual shall be deemed so delivered at the
time delivered by hand, one (1) business day after sending by overnight delivery
service or electronic system or two (2) business 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 current principal business address.
All payments and reports required by this Agreement shall be directed to Company
at the address notified to Franchisee from time to time. Any required payment or
report not actually received by Company during regular business hours on the
date due and not postmarked by postal authorities at least two (days prior
thereto, shall be deemed delinquent.
-44-
<PAGE> 22
IN WITNESS WHEREOF the parties hereto have executed, sealed and
delivered this Agreement in multiple originals on the day and year first above
written.
COMPANY: FRANCHISEE:
BUNDY AMERICAN CORPORATION, a IF AN INDIVIDUAL:
California corporation
X____________________________________ ___________________________________,
ITS OFFICER AN INDIVIDUAL
IF A CORPORATION
_____________________________OR CORPORATE
ASSIGNEE
a _________________ corporation
By:X___________________________
-OWNER
-45-
<PAGE> 23
EXHIBIT A TO THE
RENT-A-WRECK AGREEMENT
BY AND BETWEEN BUNDY AMERICAN CORPORATION
AND______________OR CORPORATE ASSIGNEE
DATED: ___, 1996
AGREEMENT TERMS
1. PREMISES. The Premises referred to in Section 1B of the above captioned
agreement shall be located at and only at the following address or such other
address(es) as are approved in writing by Company:
2. PRIMARY SERVICE AREA. The Primary Service Area referred to in
Section 1B of the above captioned agreement shall be all of the area located
within:_______________________________________ , as constituted on this date.
3. FLEET. The minimum number of Rental Vehicles in the Fleet referred to
Section 3C of the above-captioned agreement throughout the following period
shall be:
TIME PERIOD NUMBER OF RENTAL VEHICLES
----------- -------------------------
On or before the last month
of the first Agreement Year ____________________ ( )
On or before the last month
of the second Agreement Year ____________________ ( )
On or before the last month
of the third Agreement Year ____________________ ( )
At no time after the end of the third Agreement Year shall there be less than
________________________ ( ) Rental Vehicles in the Fleet.
4. INITIAL FRANCHISE FEE: The initial Franchise fee referred to in Section
4a of the above-captioned agreement shall be __________________________($____ ).
-1-
<PAGE> 24
5. MINIMUM FEE. The Minimum Fee referred to in Section 4B(2) of the
above-captioned agreement shall be as follows:
AGREEMENT YEAR MINIMUM FEE
- -------------- -----------
First (1st) $
----------
Second (2nd) $
----------
Third (3rd) $
----------
After the end of the third (3rd) Agreement Year, the annual Minimum Fee
shall be _______________________________($__________).
6. GENERAL MANAGER(S). The initial general manager(s) referred to in
Section 6D of the above-captioned agreement shall be:
NAME ADDRESS
- --------------------------------------------------------------------------------
TITLE
- -----
COMPANY:
BUNDY AMERICAN CORPORATION,
A CALIFORNIA CORPORATION
BY:X______________________________________
ITS: OFFICER
FRANCHISEE:
OR CORPORATE ASSIGNEE
BY:X______________________________________
- OWNER
A-2
<PAGE> 25
EXHIBIT B TO THE
RENT-A-WRECK AGREEMENT
BY AND BETWEEN BUNDY AMERICAN CORPORATION
AND ____________OR CORPORATE ASSIGNEE
_______________________DATED _________________, 1996
ASSIGNMENT OF
TELEPHONE NUMBERS AND LISTINGS
------------------------------
In accordance with the terms of the RENT-A-WRECK AGREEMENT between______________
OR CORPORAATE ASSIGNEE, ("FRANCHISEE") and Bundy American Corporation, a
California corporation ("COMPANY"), executed concurrently with this Assignment,
under which Company granted Franchisee the right to own and operate a
RENT-A-WRECK business located at _______________________(THE "BUSINESS"),
Franchisee, for value received, hereby assigns to Company, all of FRANCHISEE's
right, title and interest in and to those certain telephone numbers and regular,
classified or other telephone directory listings (collectively, the "Telephone
Numbers and Listings") associated with COMPANY's trade and service marks and
used from time to time in connection with the operation of the BUSINESS. This
assignment is for collateral purposes only and, except as specified herein,
Company shall have no liability or obligation of any kind whatsoever arising
from or in connection with this Assignment unless Company shall notify the
telephone Company and all listing agencies (collectively, the "Telephone
Company") pursuant to the terms hereof to effectuate the assignment.
Upon termination or expiration of the Franchise Agreement (without
renewal or extension), Company shall have the right and is hereby empowered to
effectuate the assignment of the Telephone Numbers and Listings, and, in such
event, Franchisee shall have no further right, title or interest in the
Telephone Numbers and Listings and shall remain liable to the Telephone Company
for all past due fees owing to the Telephone Company on or before the effective
date of the assignment hereunder.
FRANCHISEE agrees and acknowledges that as between Company and
Franchisee, upon termination or expiration of the Franchise Agreement, Company
shall have the sole right to and interest in the Telephone Numbers and Listings,
and Franchisee appoints COMPANY as FRANCHISEE's true and lawful attorney-in-fact
to direct the Telephone Company to assign same to Company, and execute such
documents and take such actions as may be necessary to effectuate the
assignment. Upon such event, Franchisee shall immediately notify the Telephone
Company to assign the Telephone Numbers and Listings to Company. If Franchisee
fails to promptly direct the Telephone Company to assign the Telephone Numbers
and Listings to Company, Company shall direct the Telephone Company to
effectuate the assignment contemplated hereunder to Company. The parties agree
that the Telephone Company may accept COMPANY's written direction or this
Assignment as conclusive proof of COMPANY's exclusive rights in and to the
Telephone Numbers and Listings upon such termination or expiration. The parties
further agree that if the Telephone Company requires that the parties
A-3
<PAGE> 26
execute the Telephone Company's assignment forms or other documentation at the
time of termination or expiration, COMPANY's execution of such forms or
documentation shall effectuate FRANCHISEE's consent and agreement to the
assignment. The parties agree that at any time after the date hereof, they will
perform such acts and execute and deliver such documents as may be necessary to
assist in or accomplish the assignment described herein upon termination or
expiration of the Agreement.
ASSIGNOR:
---------
OR CORPORATE
-------------------------
ASSIGNEE
--------
(FRANCHISE)
BY:X
---------------------------------
- OWNER
ASSIGNEE:
---------
BUNDY AMERICAN CORPORATION
BY:X
--------------------------------
ITS: OFFICER
APPROVED AND ACCEPTED BY:
(Telephone Company Authorized
Representative)
(Name of Telephone Company)
A-4
<PAGE> 27
OWNER'S GUARANTY AND
ASSUMPTION OF FRANCHISEE'S OBLIGATIONS
This Guaranty must be signed by the principal owners ("Guarantor(s)")
of _______________________________ OR CORPORATE ASSIGNEE ("FRANCHISEE") under
the foregoing RENT-A-WRECK AGREEMENT (THE "AGREEMENT").
In consideration of and as an inducement to the execution of the
Agreement by Bundy American Corporation ("COMPANY") each Guarantor signing this
Guaranty hereby personally and unconditionally: (A) guarantees to Company and
COMPANY's successors and assigns that Franchisee will punctually pay and perform
each and every undertaking, agreement and covenant set forth in the Agreement;
and (B) agrees to be personally bound by, and personally liable for the breach
of, each and every provision in the Agreement.
Each Guarantor waives: (1) acceptance and notice of acceptance by
Company of Guarantor's obligations under this Guaranty; (2) notice of demand for
payment of any indebtedness or nonperformance of any obligation guaranteed by
Guarantor; (3) protest and notice of default to any party with respect to the
indebtedness or nonperformance of any obligations guaranteed by Guarantor;
(4) any right Guarantor may have to require that an action be brought against
Franchisee or any other person as a condition of Guarantor's liability; (5) all
rights to payment and claims for reimbursement or subrogation which any of the
undersigned Guarantor may have against Franchisee arising as a result of the
execution of and performance under this Guaranty by Guarantor; and (6) all other
notices and legal or equitable defenses to which Guarantor may be entitled in
Guarantor's capacity as guarantor(s).
Each Guarantor consents and agrees that: (a) Guarantor's direct and
immediate liability under this Guaranty shall be joint and several; (b)
Guarantor will make any payment or render any performance required under the
Agreement upon demand if Franchisee fails or refuses punctually to do so; (c)
Guarantor's liability will not be contingent or conditioned upon COMPANY's
pursuit of any remedies against Franchisee or any other person; (d) Guarantor's
liability will not be diminished, relieved or otherwise affected by any
extension of time, credit or other indulgence which Company may from time to
time grant to Franchisee or to any other person, including, for example, the
acceptance of any partial payment or performance or the compromise or release of
any claims and no such indulgence shall in any way modify or amend this
Guaranty; and (e) this Guaranty will continue and be irrevocable during the term
of the Agreement and, if required by the Agreement, after its termination or
expiration.
Each Guarantor now executes and delivers this Guaranty as of the date
of execution of the Agreement.
PERCENTAGE OF
GUARANTOR(S) OWNERSHIP IN FRANCHISEE
- ------------
%
- ----------------------------- ---------------
- OWNER
A-1
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
RENT-A-WRECK OF AMERICA, INC.
Jurisdiction of
Incorporation
- -------------
1. RENT A WRECK OF ONE WAY, INC. Maryland
2. BUNDY AMERICAN CORPORATION California
3. RENT A WRECK OPERATIONS, INC. California
4. RENT A WRECK LEASING, INC. California
5. U R M CORPORATION California
6. CENTRAL LIFE AND CASUALTY COMPANY, LIMITED British Virgin
Islands
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
RENT-A-WRECK OF AMERICA, INC.'S FORM 10-KSB FOR THE FISCAL YEAR ENDED MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 579,871
<SECURITIES> 0
<RECEIVABLES> 1,802,626
<ALLOWANCES> 792,980
<INVENTORY> 0
<CURRENT-ASSETS> 1,657,835
<PP&E> 681,964
<DEPRECIATION> (358,018)
<TOTAL-ASSETS> 2,164,381
<CURRENT-LIABILITIES> 756,061
<BONDS> 0
0
15,664
<COMMON> 41,216
<OTHER-SE> 1,315,513
<TOTAL-LIABILITY-AND-EQUITY> 2,164,381
<SALES> 0
<TOTAL-REVENUES> 3,454,786
<CGS> 0
<TOTAL-COSTS> 1,464,003
<OTHER-EXPENSES> 1,292,879
<LOSS-PROVISION> 272,518
<INTEREST-EXPENSE> 6,251
<INCOME-PRETAX> 488,822
<INCOME-TAX> 30,250
<INCOME-CONTINUING> 458,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 458,572
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
