U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission File Number 0-14819
RENT-A-WRECK OF AMERICA, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its Charter)
Delaware 95-3926056
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
11460 Cronridge Drive, Suite 120, Owings Mills, MD 21117
- -------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (410) 581-5755
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,943,217 shares as of July
23, 1999.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
FORM 10-QSB - JUNE 30, 1999
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1999 and June 30, 1999 (Unaudited) 2-3
Consolidated Statements of Earnings for
the Three Months ended June 30, 1998 and 1999 (Unaudited) 4
Consolidated Statements of Cash Flows for
the Three Months ended June 30, 1998 and 1999 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-10
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, June 30,
1999 1999
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and Cash Equivalents $ 861,794 $ 1,152,602
Restricted Cash 718,543 720,565
Accounts Receivable, net of allowance
for doubtful accounts of $655,418 and $733,547 at
March 31, 1999 and June 30, 1999, respectively:
Continuing License Fees and Advertising Fees 336,242 350,511
Current Portion of Notes Receivable 388,812 393,689
Current Portion of Direct Financing Leases 7,850 3,408
Insurance Premiums Receivable 635,532 721
Other 61,081 80,107
Prepaid Expenses 166,421 160,293
Deferred Taxes 199,028 227,690
----------- -----------
TOTAL CURRENT ASSETS 3,375,303 3,089,586
----------- -----------
PROPERTY AND EQUIPMENT:
Furniture 93,505 93,505
Computer Hardware and Software 370,012 373,243
Machinery and Equipment 82,650 82,650
Leasehold Improvements 37,896 37,896
Vehicles 90,507 92,310
----------- -----------
674,570 679,604
Less: Accumulated Depreciation and Amortization (388,887) (415,705)
----------- -----------
NET PROPERTY AND EQUIPMENT 285,683 263,899
----------- -----------
OTHER ASSETS:
Intangible Assets, net of accumulated
amortization of $126,192 and $131,510 at
March 31, 1999 and June 30, 1999, respectively 192,872 203,413
Long-term Portion of Notes and Direct Financing
Lease Receivables 32,088 59,581
----------- -----------
224,960 262,994
TOTAL ASSETS $ 3,885,946 $ 3,616,479
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, June 30,
1999 1999
----------- -----------
(Unaudited)
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 709,506 $ 588,055
Dividends Payable 22,782 22,600
Insurance Financing Payable 564,684 472,581
Insurance Loss Reserves 366,022 418,453
Income Taxes Payable 181,662 9,984
----------- -----------
TOTAL CURRENT LIABILITIES 1,844,656 1,511,673
----------- -----------
TOTAL LIABILITIES 1,844,656 1,511,673
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Convertible Cumulative Series A Preferred Stock,
$.01 par value; authorized 10,000,000 shares;
issued and outstanding 1,139,125 and 1,130,000
shares at March 31, 1999 and at June 30, 1999
(aggregate liquidation preference $911,300
and $904,000 at March 31, 1999 and June 30, 1999) 11,391 11,300
Common Stock, $.01 par value; authorized
25,000,000 shares; issued and outstanding
3,934,092 shares at March 31, 1999 and
3,943,217 shares at June 30, 1999 39,340 39,432
Additional Paid-In Capital 2,209,182 2,209,182
Accumulated Deficit (218,623) (155,108)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 2,041,290 2,104,806
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,885,946 $ 3,616,479
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended June 30,
----------------------------
1998 1999
---------- -----------
REVENUES:
Initial License Fees $ 312,000 $ 362,001
Continuing License Fees 582,578 679,305
Advertising Fees 191,455 220,784
Insurance Premiums 162,043 175,849
Other 37,533 41,222
---------- ----------
1,285,609 1,479,161
EXPENSES:
Salaries, Consulting Fees and
Employee Benefits 204,187 246,437
Advertising and Promotion 285,171 322,019
Insurance Underwriting Expenses 137,060 144,954
Sales and Marketing 169,830 178,364
General and Administrative 245,456 234,361
Depreciation and Amortization 34,019 32,135
---------- ----------
1,075,723 1,158,270
OPERATING INCOME 209,886 320,891
OTHER INCOME (EXPENSE)
Interest Income 21,286 24,393
Interest Expense (5,166) (6,614)
---------- ----------
16,120 17,779
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 226,006 338,670
INCOME TAX EXPENSE 59,342 105,639
---------- ----------
NET INCOME $ 166,664 $ 233,031
DIVIDENDS ON CONVERTIBLE CUMULATIVE
PREFERRED STOCK 27,320 22,600
---------- ----------
NET INCOME AFTER DIVIDENDS ON CONVERTIBLE
CUMULATIVE PREFERRED STOCK $ 139,344 $ 210,431
---------- ----------
EARNINGS PER COMMON SHARE
Basic $ .03 $ .05
---------- ----------
Weighted average common shares 4,162,888 3,940,409
========== ==========
Diluted $ .03 $ .04
---------- ----------
Weighted average common shares plus
options and warrants 5,631,968 5,893,288
========== ==========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended June 30,
--------------------------
1998 1999
----------- -----------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income $ 166,664 $ 233,031
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 34,019 32,135
Deferred income taxes -- (28,665)
Provision for doubtful accounts 44,091 78,129
Changes in assets and liabilities:
Accounts and notes receivable 428,332 495,459
Prepaid expenses (4,753) 6,128
Accounts payable and accrued
expenses (100,786) (121,633)
Income taxes payable (251,864) (171,678)
Insurance loss reserves (56,404) 52,431
---------- ----------
Net cash provided by operating activities 259,299 575,337
---------- ----------
Cash flows from investing activities:
(Increase) decrease in restricted cash (354,949) (2,022)
Acquisition of property and equipment (55,771) (5,892)
Additions to intangible assets (2,005) (14,815)
---------- ----------
Net cash used in investing activities (412,725) (22,729)
---------- ----------
Cash flow from financing activities:
Decrease in insurance financing payable (23,256) (92,103)
Issuance of common stock 16,000 --
Retirement of common stock (84,543) --
Preferred dividends paid (71,622) (169,697)
---------- ----------
Net cash used in financing activities (163,421) (261,800)
---------- ----------
Net increase (decrease) in cash and cash
equivalents (316,847) 290,808
Cash and cash equivalents at beginning of period 1,215,615 861,794
---------- ----------
Cash and cash equivalents at end of period $ 898,768 $1,152,602
---------- ----------
Supplemental disclosure of cash flow information:
Interest paid $ 5,166 6,614
Taxes paid $ 307,100 $ 301,700
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. CONSOLIDATED FINANCIAL STATEMENTS
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"), Consolidated American Rental Insurance Company, LTD ("CAR
Insurance") and Bundy American Corporation ("Bundy"), and Bundy's subsidiaries,
Rent-A-Wreck Leasing, Inc. ("RAW Leasing").
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 in the consolidated financial
statements.
The consolidated balance sheet as of June 30, 1999, and the consolidated
statements of earnings and cash flows for the three-month periods ended June 30,
1998 and 1999 have been prepared by the Company without audit. In the opinion of
management, all adjustments which are necessary to present a fair statement of
the results of operations for the interim periods have been made, and all such
adjustments are of a normal recurring nature. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's March 31, 1999 audited
financial statements. The results of operations for the interim periods are not
necessarily indicative of the results for a full year.
2. PREFERRED STOCK
On May 7, 1999, the Company paid 100% of remaining dividend arrearages
($146,915) on the Company's Convertible Cumulative Series A Preferred Stock. For
the quarter ended June 30, 1999, the Company declared dividends on the Preferred
Stock totaling $22,600 which are expected to be paid during the second quarter
of the Company's fiscal year.
6
<PAGE>
3. EARNINGS PER SHARE
A reconciliation of the numerators and denominators utilized in the
computation of basic and diluted earnings per share for the three-month periods
ended June 30, 1998 and 1999 is as follows:
1998 1999
---------- ----------
BASIC EPS COMPUTATION
Numerator:
Net income applicable to common shares $ 139,344 $ 210,431
Denominator:
Weighted average common shares 4,162,888 3,940,409
---------- ----------
Basic EPS $ .03 $ .05
========== ==========
DILUTED EPS COMPUTATION
Numerator:
Net income applicable to common shares $ 139,344 $ 210,431
Dividends on convertible preferred stock 27,320 22,600
---------- ----------
166,664 233,031
---------- ----------
Denominator
Weighted average common shares 4,162,888 3,940,409
Weighted average convertible preferred stock 1,366,000 1,132,808
Weighted average options and warrants 103,080 820,071
---------- ----------
5,631,968 5,893,288
---------- ----------
Diluted EPS $ .03 $ .04
========== ==========
4. 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.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO JUNE 30, 1998
Revenue from franchising operations, which includes initial license fees,
continuing license fees and advertising fees, increased by $176,057 (16%) over
the 1998 three months results ended June 30, 1998. Initial license fees
increased by $50,001 (16%) due to the addition of new franchises. Continuing
license fees increased by $96,727 (17%), and advertising fees increased by
$29,329 (15%). These increases resulted primarily from fleet growth at existing
franchises.
Revenues from insurance premiums increased by $13,806 (9%) due to higher
participation by the Company's franchisees in the Company's CAR Insurance
program offered by a subsidiary that commenced operations in March 1997.
Other revenue increased by $3,689 (10%) due primarily to an increase in
promotional material purchased by the Company's franchisees.
Total operating expenses increased by $82,547 (8%) in this period compared
to the same period in the prior year. Salary expense increased by $42,250 (21%)
primarily as a result of hiring additional employees in response to the growth
of the Company. Advertising and promotion expenses increased by $36,848 (13%),
which resulted primarily from an increase in national advertising expense to
promote the Company. Insurance underwriting expenses increased by $7,894 (6%)
due to an increase in paid losses and loss reserves for future claims in
connection with higher participation of the Company's franchisees in its CAR
Insurance program. Sales and marketing expenses increased by $8,534 (5%), which
resulted primarily from a larger amount of franchise sales made in this period
compared to the same period in the prior year. General and administrative
expenses decreased by $11,095 (5%), which resulted primarily from a reduction in
legal and other professional fees.
Depreciation and amortization expense decreased by $1,884 (6%) in this
period compared to the same period in the prior year. This decrease was
primarily due to disposal of assets offset by additional investment in computer
software and hardware.
The Company realized operating income of $320,891, before taxes and
interest, for the three-month period ended June 30, 1999 compared to operating
income of $209,886 for the same period in the prior year, reflecting an increase
of $111,005 (53%). This increase resulted primarily from the increase in initial
license fees and continuing license fees due to the addition of new franchises
and fleet growth at existing franchises.
8
<PAGE>
Net interest income increased $1,659 (10%). This increase was primarily due
to interest earned on the increased cash deposits which are held in interest
bearing accounts.
Income tax expense for the three-month period ended June 30, 1999 increased
by $46,297 (78%) compared to the three-month period ended June 30, 1998 due to
higher pre-tax earnings, partially offset by a reduction in the deferred tax
asset valuation allowance. The valuation allowance has been reduced in light of
favorable earnings and expected future earnings and is re-assessed quarterly.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had working capital of $1,577,913 compared to
$1,530,647 at March 31, 1999. This increase of $47,266 resulted primarily from
the net profit earned during the three-month period ended June 30, 1999, reduced
by the payoff of all dividend arrearages on the Company's Preferred Stock.
The Company has finalized a $1,000,000 letter of credit with The Chase
Manhattan Bank ("Chase") in connection with the Company's CAR Insurance
subsidiary. This letter of credit is part of the reinsurance agreement with
American International Group ("AIG") to secure payment of claims. Funds drawn
against the letter of credit bear interest at 3% plus Chase's prime commercial
lending rate (which prime rate was 8% on July 23, 1999). For the quarter ended
June 30, 1999, AIG has not drawn any funds from the letter of credit. This
letter of credit is secured by a pledge of all of the Company's assets.
The Company rents its office facilities under the terms of an operating
lease. The monthly office facilities lease commitments were $5,449 and $5,670 at
June 30, 1998 and 1999, respectively.
Property and equipment increased by $5,034 (.8%) from March 31, 1999 to
June 30, 1999. This increase occurred primarily due to additional investment in
computer software and hardware.
Cash provided by operations was $575,337, resulting primarily from net
income before depreciation plus the decrease in accounts and notes receivable
and prepaid expenses and the increase in insurance loss reserves, offset by the
decrease in the Company's accounts payable and accrued expenses and income taxes
payable. Accounts and notes receivable decreased primarily due to funds received
from AIG in connection with the reinsurance program. Accounts payable and
accrued expenses decreased primarily due to the payment of professional fees in
connection with the reinsurance program. Income taxes payable decreased
primarily due to estimated income taxes paid for the year ended March 31, 1999.
9
<PAGE>
Cash used in investing activities of $22,729 related primarily to the
acquisition of computer software, hardware, annual costs associated with
renewing trademarks and an increase in restricted cash due to the Company's
additional liability to the national advertising fund.
Cash used in financing activities during the same period was $261,800,
resulting from a decrease in insurance financing payable and the payment of
preferred dividends.
The Company believes it has sufficient working capital to support its
business plan through fiscal 2000.
IMPACT OF INFLATION
Inflation has had no material impact on the operations and financial
condition of the Company.
The statements regarding anticipated future performance of the Company
contained in this report are 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, the Company's limited experience in
the reinsurance business and the potential for negative claims experience, the
effects of government regulation of the Company's franchise and insurance
programs including maintaining properly registered franchise 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 trademarks, and the dependence on the Company's
relationships with its franchisees. These risks and uncertainties are more fully
described under the caption, "Item 6 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Important Factors" in the
Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999.
All forward-looking statements should be considered in light of these risks and
uncertainties.
YEAR 2000 ISSUE
The Year 2000 issue is a result of computer programs being written using
two digits rather than four to define the applicable year. The Company's
computer equipment, software and devices with embedded technology that are time
sensitive may recognize the date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruption of operations, including, among other things, a temporary inability
to process transactions or engage in ordinary business activities.
The Company has undertaken various initiatives intended to ensure that its
computer equipment and software will function properly with respect to the year
2000 and thereafter. For this purpose, the term "computer equipment and
software" includes systems that are commonly thought of as information
technology systems, including accounting, data processing, telephone and PBX
systems as well as alarm systems, fax machines and other miscellaneous systems.
Both information technology and non-information technology systems may contain
embedded technology which complicates the year 2000 identification, assessment,
remediation and testing efforts.
10
<PAGE>
Using both internal and external resources to identify the needed Year 2000
remediation, the Company currently believes that its Year 2000 identification,
assessment, remediation and testing efforts which began in 1998 are completed
and any additional equipment purchased hereafter will be Year 2000 compliant.
Consequently, and based upon independent experts' review, the Company believes
that it is Year 2000 compliant.
Most of the information the Company receives in the ordinary course is in
written form and entered by the Company into its computer records. For example,
reports from franchisees and others are prepared in written form and not
received electronically. The Company has orally confirmed with key vendors that
they either have addressed or expect to address all significant Year 2000 issues
on a timely basis.
The Company believes that the cost of its Year 2000 identification,
assessment, remediation and testing efforts as well as those current and
anticipated costs to be incurred by the Company with respect to Year 2000 issues
of third parties will not exceed $5,000, which expenditures will be funded from
operating cash flows. As of June 30, 1999, the Company had incurred costs of
approximately $1,000. The Company presently believes that the Year 2000 issue
will not pose significant operational problems for the Company; however, if all
Year 2000 issues are not properly identified or if assessment, remediation and
testing are not effected timely, there can be no assurances that the Year 2000
issue will not materially adversely affect the Company's results of operations
or adversely affect the Company's relationship with customers, vendors or
others. Additionally, there can be no assurances that the Year 2000 issues of
other entities will not have a material adverse effect on the Company's systems
or results of operations.
Because the Company believes that all items have been resolved, the Company
has not begun or completed an analysis of the operational problems and costs
(including lost revenues) that would be reasonably likely to result from a
failure of the Company and certain third parties to complete efforts to achieve
Year 2000 compliance on a timely basis, nor has a contingency plan been
developed for dealing with the most reasonably likely worst-case scenario, and
such scenario has not been clearly identified. The Company does not plan to
complete analysis and contingency plans because it believes it is Year 2000
compliant.
During early 1998, the Company engaged an independent expert to evaluate
its Year 2000 identification, assessment, remediation and testing efforts, and
such fees have been included in the amount spent to date.
The above information is based upon management's best estimates and was
derived using numerous assumptions regarding future events, including the
continued availability of third party remediation plans and other factors. There
can be no assurances that these estimates will prove to be accurate, and actual
results could differ materially from those currently anticipated. Specific
factors that could cause such material differences include, but are not limited
to, availability and cost of personnel trained in Year 2000 issues, the ability
to identify, assess and remediate and test all relevant computer codes and
imbedded technology and similar uncertainties.
11
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected financial data with respect to the
consolidated statements of earnings of the Company and its subsidiaries for the
fiscal quarters ended June 30, 1998 and 1999 and with respect to the balance
sheets thereof at June 30 in each of those years.
The selected financial data have been derived from the Company's unaudited
consolidated financial statements and should be read in conjunction with the
financial statements and related notes thereto and other financial information
appearing elsewhere herein.
Three Months ended June 30,
---------------------------
1998 1999
-------- --------
(in thousands except per share
amounts and number of franchises)
(Unaudited)
FRANCHISEES' RESULTS
Franchisees' revenue (1) $9,710 $11,322
Number of franchised locations 568 655
RESULTS OF OPERATIONS
Total revenue $1,286 $ 1,479
Total expense 1,076 1,158
Income before income taxes 226 339
Net income 167 233
Earnings per common share
Basic $ .03 $ .05
Weighted average common shares 4,163 3,940
Diluted $ .03 $ .04
Weighted average common shares plus
convertible preferred stock, and options
and warrants 5,632 5,893
BALANCE SHEET DATA
Working capital $1,532 $ 1,578
Total assets $3,258 $ 3,616
Shareholders' Equity $2,055 $ 2,105
(1) The franchisees' revenue data have been derived from unaudited reports
provided by franchisees in paying license fees.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 29, 1999, a shareholder converted 9,125 shares of preferred stock
to common stock. See also Item 5 below.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
During the quarter ended June 30, 1999, a shareholder converted 9,125
shares of preferred stock to common stock reducing total outstanding preferred
shares from 1,139,125 to 1,130,000 and increasing total outstanding common
shares from 3,934,092 to 3,943,217.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index following the Signatures page, which is incorporated
herein by reference.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant 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/ Mitra Ghahramanlou August 11, 1999
- -------------------------- ----------------------
Mitra Ghahramanlou
Chief Accounting Officer
/s/ Kenneth L. Blum, Sr. August 11, 1999
- -------------------------- ----------------------
Kenneth L. Blum, Sr.
CEO and Chairman of
the Board
15
<PAGE>
EXHIBIT INDEX
TO
RENT-A-WRECK of AMERICA, INC.
FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1999
Exhibit No. Description
----------- -----------
10.12 Franchise Agreement - Rent-A-Wreck Standard Filed herewith.
form as of June 30, 1999.
10.13 Franchise Agreement - Priceless Auto Rental Filed herewith.
Standard form as of June 30, 1999.
27 Financial Data Schedule Filed herewith.
RENT-A-WRECK
FRANCHISE AGREEMENT
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. THE FRANCHISE..........................................................1
2. DEVELOPMENT AND OPENING OF THE BUSINESS................................2
3. FLEET REQUIREMENTS.....................................................3
4. FEES...................................................................3
5. TRAINING AND GUIDANCE..................................................5
6. BUSINESS IMAGE AND OPERATING STANDARDS.................................5
7. ADVERTISING AND PROMOTION..............................................8
8. MARKS..................................................................9
9. KNOW-HOW..............................................................11
10. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION...........................11
11. RECORDS AND REPORTS...................................................12
12. COMPANY'S RIGHT TO INSPECT AND AUDIT THE BUSINESS.....................13
13. ASSIGNMENT............................................................13
14. TERMINATION OF THE FRANCHISE BY COMPANY...............................15
15. RIGHTS OF COMPANY AND OBLIGATIONS OF FRANCHISEE
UPON TERMINATION OR EXPIRATION OF THE FRANCHISE.......................17
16. ENFORCEMENT...........................................................19
17. NOTICES AND PAYMENTS..................................................22
EXHIBITS AND ATTACHMENTS
STATE SPECIFIC RIDERS TO THE FRANCHISE AGREEMENT
EXHIBIT A - AGREEMENT TERMS
EXHIBIT B - ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS
GUARANTY AND ASSUMPTIONS OF OBLIGATIONS
<PAGE>
RENT-A-WRECK
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of ____________, 19_
by and between BUNDY AMERICAN CORPORATION, a Maryland corporation, with its
principal office at 11460 Cronridge Drive, Suite 120, Owings Mills, Maryland
21117 ("COMPANY") and __________________________________________________________
________________________________________________________________________________
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.
FRANCHISEE acknowledges that COMPANY may enter into national account contracts
and, subject to FRANCHISEE's qualification for participation in such accounts,
FRANCHISEE will be offered the opportunity to service such accounts. If
FRANCHISEE is not qualified to participate, COMPANY shall have the right to use
other sources to service such accounts, wherever located.
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C. RENEWAL.
FRANCHISEE shall have the right to obtain a renewal franchise ("Renewal
Franchise"), and successive renewal franchises thereafter, each for a term of
five (5) 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 his 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.
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, EQUIPMENT AND FORMS.
FRANCHISEE must prominently display on or near the Premises, a sign
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. FRANCHISEE also agrees to acquire:
(1) a fax machine capable of receiving transmissions 24 hours a day; and (2) at
such time as FRANCHISEE has a fleet of ten (10) or more Rental Vehicles, a
computer system meeting COMPANY's specifications and standards. FRANCHISEE also
agrees to purchase all rental agreement forms only from COMPANY.
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3. FLEET REQUIREMENTS.
A. DEFINITION OF "RENTAL VEHICLE".
As used in this Agreement, the term "Rental Vehicle" shall mean any
vehicle carried on or otherwise covered by an insurance policy of FRANCHISEE or
the BUSINESS. Rental Vehicle includes but is not limited to vehicles rented,
leased or sold on a rent to own basis.
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 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.
D. COMPANY VEHICLES.
COMPANY may place Rental Vehicles at the BUSINESS and FRANCHISEE must
make such vehicles available to customers. COMPANY will pay the costs of
maintenance and insurance on such vehicles. COMPANY will pay FRANCHISEE a
commission on all rentals of these vehicles. Such vehicles will not be subject
to Monthly Fees (defined below) or advertising contributions.
4. FEES.
A. INITIAL FRANCHISE 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 FRANCHISE FEE.
1. MONTHLY FEE. FRANCHISEE agrees to pay to COMPANY a monthly
continuing franchise fee (the "Monthly Fee") in the amount of thirty
dollars ($30.00) for each Rental Vehicle in the Fleet. The Monthly Fee
must be received by COMPANY on or before the tenth (10th) day of each
month for the average total number of Rental Vehicles in the Fleet during
the immediately preceding calendar month. In order to verify the number of
Rental Vehicles in FRANCHISEE's Fleet
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each month, FRANCHISEE will submit to COMPANY (along with the Monthly Fee)
a copy of each of FRANCHISEE's monthly insurance statements for the
preceding month showing the number of Rental Vehicles. The amount of
Monthly Fees paid by FRANCHISEE shall be subject to the minimum fee
schedule provided in Section 4B(2) of this Agreement.
2. MINIMUM FEE. The minimum annual total of Monthly Fees paid by
FRANCHISEE (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 to COMPANY within thirty (30) days after the last day of such
Agreement Year.
3. MONTHLY FEE AND MINIMUM FEE INCREASES. COMPANY shall have the
right to increase the Monthly Fee once per Agreement Year. The amount of
such increase shall not exceed ten percent (10%) of the Monthly Fee
charged as of the date of such increase. Additionally, the maximum Monthly
Fee COMPANY will charge during the initial term of this Agreement is
Forty-Five Dollars ($45) per Rental Vehicle per month. COMPANY shall have
the right to increase the Minimum Fee once per Agreement Year. The
increase in Minimum Fee shall not exceed ten percent (10%) of the Minimum
Fee specified in the Minimum Fee schedule in Exhibit A for that Agreement
Year. For each subsequent Agreement Year, the increase in the Minimum Fee
shall not exceed ten percent (10%) of the Minimum Fee for the preceding
Agreement Year.
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.
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, 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.
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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 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 acquire, at FRANCHISEE's sole
expense, computer hardware and software programs meeting COMPANY's
specifications to assist in the operation of the BUSINESS.
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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.
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. 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
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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 any vehicle owned, rented or leased by FRANCHISEE or the BUSINESS and any
other vehicle which is rented, leased, or sold on a rent-to-own basis, or is
available for rental, lease or sale to customers of FRANCHISEE. 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. COMPANY may designate one or more suppliers of
rental vehicle liability insurance, and the designated supplier may be COMPANY
or an affiliate, and FRANCHISEE must purchase such coverage from the designated
supplier. 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 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 claim's arising from the operation of the Business.
FRANCHISEE appoints COMPANY its attorney-in-fact to direct any and all
of FRANCHISEE's insurers to provide COMPANY, upon COMPANY's request, with
information showing the number of vehicles FRANCHISEE has insured at any time.
F. COMPANY PROGRAMS.
FRANCHISEE shall subscribe to, participate in and comply with 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
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COMPANY rental location in the area concerned. FRANCHISEE also shall provide a
24-hour emergency road service. If COMPANY offers a national program, FRANCHISEE
may be required to participate in such program. 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 its customers.
7. ADVERTISING AND PROMOTION.
A. BY COMPANY.
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. FRANCHISEE shall contribute to the National
Fund seven dollars ($7.00) for each Rental Vehicle in the Fleet. Such
contribution is due and payable by the tenth (10th) day of each month on the
average total number of Rental Vehicles in the Fleet during the immediately
preceding month. In order to verify the number of Rental Vehicles in the Fleet
each month, FRANCHISEE will submit to COMPANY (along with the advertising
contribution) a copy of FRANCHISEE's monthly insurance statements for the
preceding month showing the number of Rental Vehicles. 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.
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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 "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 amount of such
increase will not exceed ten percent (10%) of the contribution charged as of the
date of such increase. 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. Except as expressly provided in this Section,
COMPANY assumes no direct or indirect liability or obligation to FRANCHISEE with
respect to the maintenance, direction or administration of the Funds. FRANCHISEE
acknowledges and agrees that COMPANY has no fiduciary obligation to FRANCHISEE
or any other RENT-A-WRECK business in connection with the collection, control or
administration of monies paid into the Fund.
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 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.
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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, (i) as part of any corporate
or trade name, (ii) with any prefix, suffix or other modifying words, terms,
designs or symbols (other than logos licensed to FRANCHISEE hereunder), (iii) in
any modified form, (iv) as part of any domain name, website, home page,
electronic address, or other interactive site maintained on the internet, the
world wide web, or any other similar proprietary or common carrier electronic
delivery system, or (v) 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 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.
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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, consultant, 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 or PRICELE$$ 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 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.
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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. COMPANY may require that specified information be
compiled by FRANCHISEE in a computerized database. 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.
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) months, and such other data, information
and records as COMPANY may from time to time require. COMPANY may require that
FRANCHISEE submit reports via e-mail or other computerized form and/or that
COMPANY have access to FRANCHISEE's computer system to obtain such reportable
information.
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.
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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 FRANCHISEE 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, in addition to all other remedies and rights available to COMPANY,
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)), shall be borne by FRANCHISEE. COMPANY's rights under this Section 12
shall apply only to the operation of the BUSINESS.
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. 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:
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<PAGE>
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 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 Competitive
Business (as defined in Section 9) located within the Primary Service Area
or within five miles of the border of the Primary Service Area.
D. DEATH OR DISABILITY OF FRANCHISEE.
Upon the death or permanent disability of FRANCHISEE or a principal
owner 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.
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
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<PAGE>
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. 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 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;
(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
petition or other pleading filed in any such proceeding;
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<PAGE>
(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 Rental Vehicles in
the Fleet or Gross Revenues generated by the BUSINESS by more than ten
percent (10%);
(11) fails on two (2) 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 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;
(12) fails to maintain the insurance coverage required by Section 6E
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; or
(13) entered into a PRICELE$$ Franchise Agreement for substantially
the same primary service area as the RENT-A-WRECK Primary Service Area and
such PRICELE$$ Franchise Agreement is terminated or expires without
renewal.
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.
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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;
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. 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;
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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, 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 association 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. COVENANT NOT TO COMPETE.
FRANCHISEE agrees that upon termination of the Franchise prior to its
expiration, for a period of two (2) years, commencing 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 Competitive Business
(as defined in Section 9) located within the Primary Service Area or within five
miles of the border of the Primary Service Area.
D. 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.
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16. ENFORCEMENT.
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Each section, paragraph, term and provision of this Agreement 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.
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 TRADEMARK ACT OF
1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), THIS AGREEMENT AND THE
FRANCHISE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MARYLAND. FRANCHISEE
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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. ARBITRATION.
Except for controversies, disputes or claims related to or based on
FRANCHISEE'S use of the Marks after this Agreement expires of terminates, all
controversies, disputes or claims between COMPANY and its shareholders,
officers, directors, agents and employees and FRANCHISEE (its owners,
guarantors, affiliates and employees, if applicable) arising out of or related
to:
1. this Agreement or any other agreement between FRANCHISEE and
COMPANY or any provision of any of these agreements;
2. COMPANY's relationship with FRANCHISEE;
3. the validity of this Agreement or any other agreement between
COMPANY and FRANCHISEE or any provision of any of these agreements; or
4. any System Standards relating to establishing or operating the
BUSINESS;
must be submitted for arbitration, on demand of either party, to the Baltimore,
Maryland office of the American Arbitration Association. The arbitration
proceedings will be conducted at that American Arbitration Association office
and, except as this Agreement otherwise provides, heard by one arbitrator
according to the then current commercial arbitration rules of the American
Arbitration Association. All matters relating to arbitration will be governed by
the Federal Arbitration Act (9 U.S.C.ss.ss. 1 et seq.) and not by any state
arbitration law.
The arbitrator has the right to award or include in his or her award
any relief which he or she deems proper in the circumstances, including, without
limitation, money damages (with interest on unpaid amounts from the date due),
specific performance, injunctive relief and attorneys' fees and costs, provided
that the arbitrator may not declare any Mark generic or otherwise invalid or,
except as Subsection G below otherwise provides, award exemplary or punitive
damages. The arbitrator's award and decision are conclusive and binding upon all
parties, and judgment upon the award may be entered in any court of competent
jurisdiction.
COMPANY and FRANCHISEE agree to be bound by the provisions of any
limitation on the period of time in which claims must be brought under
applicable law or this Agreement, whichever expires earlier. COMPANY and
FRANCHISEE further agree that, in any arbitration proceeding, each must submit
or file any claim which would constitute a compulsory counterclaim (as defined
by Rule 13 of the Federal Rules of Civil Procedure) within the same proceeding
as the claim to which it relates. Any claim which is not submitted or filed as
required is forever barred.
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COMPANY and FRANCHISEE agree that arbitration will be conducted on an
individual, not a class-wide, basis, and that an arbitration proceeding between
COMPANY and its shareholders, officers, directors, agents and employees and
FRANCHISEE (and/or FRANCHISEE's owners, guarantors, affiliates and employees, if
applicable) may not be consolidated with any other arbitration proceeding
between COMPANY and any other person, corporation, limited liability entity or
partnership.
Despite COMPANY's agreement to arbitrate, COMPANY and FRANCHISEE each
have the right in a proper case to seek temporary restraining orders and
temporary or preliminary injunctive relief from a court of competent
jurisdiction; provided, however, that COMPANY and FRANCHISEE must
contemporaneously submit COMPANY's dispute for arbitration on the merits as
provided in this Subsection.
The provisions of this Subsection are intended to benefit and bind
certain third party non-signatories and will continue in full force and effect
subsequent to and notwithstanding this Agreement's expiration or termination.
G. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
EXCEPT FOR CLAIMS COMPANY MAY BRING AGAINST FRANCHISEE FOR HIS
UNAUTHORIZED USE OF THE MARKS OR UNAUTHORIZED USE OR DISCLOSURE OF ANY
CONFIDENTIAL INFORMATION, COMPANY AND FRANCHISEE AND THEIR RESPECTIVE OWNERS
WAIVE TO THE FULLEST EXTENT THE LAW PERMITS ANY RIGHT TO OR CLAIM FOR ANY
PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF
A DISPUTE BETWEEN COMPANY AND FRANCHISEE, THE PARTY MAKING A CLAIM WILL BE
LIMITED TO EQUITABLE RELIEF AND RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
HOWEVER, IF FRANCHISEE IS REQUIRED TO INDEMNIFY COMPANY FOR ANY CLAIM OR
LIABILITY UNDER SECTION 10, FRANCHISEE SHALL INDEMNIFY COMPANY FOR THE FULL
AMOUNT OF ANY SUCH CLAIM OR LIABILITY, INCLUDING ANY PUNITIVE DAMAGES.
COMPANY AND FRANCHISEE IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF
THEM.
H. BINDING EFFECT.
This Agreement is binding upon COMPANY and FRANCHISEE and their
respective executors, administrators, heirs, beneficiaries, assigns and
successors in interest and may not be modified except by a written agreement
signed by both COMPANY and FRANCHISEE.
I. LIMITATIONS OF CLAIMS.
Except for claims arising from FRANCHISEE's non-payment or underpayment
of amounts FRANCHISEE owes COMPANY under this Agreement or otherwise, any and
all claims arising out of or relating to this Agreement or COMPANY's
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relationship with FRANCHISEE will be barred unless a judicial or arbitration
proceeding is commenced within twelve (12) months from the date on which the
party asserting the claim knew or should have known of the facts giving rise to
the claims.
J. 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 (2) days prior
thereto, shall be deemed delinquent.
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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:
Maryland corporation
______________________, an individual
By:____________________________
Title:_________________________ By:____________________________
Date: _________________________ Date:__________________________
IF A CORPORATION:
_______________________________,
a _______________________ corporation
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
IF A PARTNERSHIP:
_______________________________,
a _______________________ partnership
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
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EXHIBIT A TO THE
RENT-A-WRECK FRANCHISE AGREEMENT
BY AND BETWEEN BUNDY AMERICAN CORPORATION
AND ________________________________
DATED:_____________, _____
AGREEMENT TERMS
1. PREMISES. The Premises referred to in Section I B 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:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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.
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4. INITIAL FRANCHISE FEE: The initial franchise fee referred to in Section 4A of
the above- captioned agreement shall be _________________________________
Dollars ($_______________ ).
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
_________________________________ Dollars ($_________).
6. GENERAL MANAGER(S). The initial general manager(s) referred to in Section 6D
of the above-captioned agreement shall be:
NAME ADDRESS TITLE
---- ------- -----
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COMPANY: FRANCHISEE:
BUNDY AMERICAN CORPORATION, a IF AN INDIVIDUAL:
Maryland corporation
______________________, an individual
By:____________________________
Title:_________________________ By:____________________________
Date: _________________________ Date:__________________________
IF A CORPORATION:
_______________________________,
a _______________________ corporation
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
IF A PARTNERSHIP:
_______________________________,
a _______________________ partnership
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
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<PAGE>
EXHIBIT B TO THE
RENT-A-WRECK FRANCHISE AGREEMENT
BY AND BETWEEN BUNDY AMERICAN CORPORATION
AND _______________________________
DATED _______________________
ASSIGNMENT OF
TELEPHONE NUMBERS AND LISTINGS
In accordance with the terms of the RENT-A-WRECK Franchise Agreement
between _________________________________________________ ("FRANCHISEE") and
Bundy American Corporation, a Maryland 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 execute
the Telephone Company's assignment forms or other documentation at the time of
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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
Franchise Agreement.
ASSIGNOR:
_______________________________ ________________________________
Date: (FRANCHISEE)
________________________________
________________________________
ASSIGNEE:
BUNDY AMERICAN CORPORATION
By:_____________________________
Its:____________________________
APPROVED AND ACCEPTED BY:
_______________________________
(Telephone Company Authorized
Representative)
_______________________________
(Name of Telephone Company)
B-2
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OWNER'S GUARANTY AND
ASSUMPTION OF FRANCHISEE'S OBLIGATIONS
This Guaranty must be signed by the principal owners ("Guarantor(s)")
of __________________________________ ("FRANCHISEE") under the foregoing
RENT-A-WRECK Franchise 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
- ------------ -----------------------
_______________________________ __________%
_______________________________ __________%
_______________________________ __________%
G-1
PRICELE$$ AUTO RENTAL
FRANCHISE AGREEMENT
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TABLE OF CONTENTS
SECTION Page
1. THE FRANCHISE.....................................................1
2. DEVELOPMENT AND OPENING OF THE BUSINESS...........................2
3. FLEET REQUIREMENTS................................................3
4. FEES..............................................................4
5. TRAINING AND GUIDANCE.............................................5
6. BUSINESS IMAGE AND OPERATING STANDARDS............................6
7. ADVERTISING AND PROMOTION.........................................9
8. MARKS............................................................10
9. KNOW-HOW.........................................................12
10. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION......................12
11. RECORDS AND REPORTS..............................................13
12. COMPANY'S RIGHT TO INSPECT AND AUDIT THE BUSINESS................14
13. ASSIGNMENT.......................................................14
14. TERMINATION OF THE FRANCHISE BY COMPANY..........................17
15. RIGHTS OF COMPANY AND OBLIGATIONS OF FRANCHISEE
UPON TERMINATION OR EXPIRATION OF THE FRANCHISE..................19
16. ENFORCEMENT......................................................21
17. NOTICES AND PAYMENTS.............................................25
EXHIBITS AND ATTACHMENTS
STATE SPECIFIC RIDERS TO THE FRANCHISE AGREEMENT
EXHIBIT A - AGREEMENT TERMS
EXHIBIT B - ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS
GUARANTY AND ASSUMPTIONS OF OBLIGATIONS
<PAGE>
PRICELE$$ AUTO RENTAL
FRANCHISE AGREEMENT
<PAGE>
THIS AGREEMENT is made and entered into this _____ day of ____________, 19_
by and between BUNDY AMERICAN CORPORATION, a Maryland corporation, with its
principal office at 11460 Cronridge Drive, Suite 120, Owings Mills, Maryland
21117 ("COMPANY") and __________________________________________________________
________________________________________________________________________________
whose principal address is _____________________________________________________
________________________________ ("FRANCHISEE").
1. THE FRANCHISE.
A. PREAMBLES.
COMPANY has developed a system for the operation of a vehicle rental
and leasing business under the name "PRICELE$$". COMPANY uses and licenses the
trade and service mark "PRICELE$$" and related logo, and other marks which
COMPANY has developed and may develop in the future (the "Marks"). FRANCHISEE
has applied for a franchise to own and operate a PRICELE$$ 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 PRICELE$$ business (the
"BUSINESS") offering vehicles for rental and utilizing COMPANY's formats,
methods, standards, operating procedures and the Marks at (and only at) the
premises (the "Premises") identified in Section 1 of Exhibit A, which is
attached hereto and made a part hereof by this reference, for a term of ten (10)
years commencing on the date of execution hereof. Termination or expiration of
this Agreement constitutes termination or expiration of the Franchise. Provided
that FRANCHISEE is in compliance with this Agreement, COMPANY shall not operate
or grant a franchise for the operation of another PRICELE$$ 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 PRICELE$$ business during the term of this Agreement.
FRANCHISEE acknowledges that COMPANY may enter into national account contracts
and, subject to FRANCHISEE's qualification for participation in such accounts,
FRANCHISEE will be offered the opportunity to service such accounts. If
FRANCHISEE is not qualified to participate, COMPANY shall have the right to use
other sources to service such accounts, wherever located.
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C. RENEWAL.
FRANCHISEE shall have the right to obtain a renewal franchise ("Renewal
Franchise"), and successive renewal franchises thereafter, each for a term of
five (5) 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 his 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.
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, EQUIPMENT AND FORMS.
FRANCHISEE must prominently display on or near the Premises, a sign
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. FRANCHISEE also agrees to acquire:
(1) a fax machine capable of receiving transmissions 24 hours a day; and (2) at
such time as FRANCHISEE has a fleet of ten (10) or more Rental Vehicles, a
computer system meeting COMPANY's specifications and standards. FRANCHISEE also
agrees to purchase all rental agreement forms only from COMPANY.
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3. FLEET REQUIREMENTS.
A. DEFINITION OF "RENTAL VEHICLE".
As used in this Agreement, the term "Rental Vehicle" shall mean any
vehicle carried on or otherwise covered by an insurance policy of FRANCHISEE or
the BUSINESS. Rental Vehicle includes but is not limited to vehicles rented,
leased or sold on a rent to own basis.
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 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.
D. COMPANY VEHICLES.
COMPANY may place Rental Vehicles at the BUSINESS and FRANCHISEE must
make such vehicles available to customers. COMPANY will pay the costs of
maintenance and insurance on such vehicles. COMPANY will pay FRANCHISEE a
commission on all rentals of these vehicles. Such vehicles will not be subject
to Monthly Fees (defined below) or advertising contributions.
4. FEES.
A. INITIAL FRANCHISE 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 FRANCHISE FEE.
1. MONTHLY FEE. FRANCHISEE agrees to pay to COMPANY a monthly
continuing franchise fee (the "Monthly Fee") in the amount of thirty
dollars ($30.00) for each Rental Vehicle in the Fleet. The Monthly Fee
must be received by COMPANY on or before the tenth (10th) day of each
month for the average total number of Rental Vehicles in the Fleet during
the immediately preceding calendar month. In order to verify the number of
Rental Vehicles in FRANCHISEE's Fleet
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each month, FRANCHISEE will submit to COMPANY (along with the Monthly Fee)
a copy of each of FRANCHISEE's monthly insurance statements for the
preceding month showing the number of Rental Vehicles. The amount of
Monthly Fees paid by FRANCHISEE shall be subject to the minimum fee
schedule provided in Section 4B(2) of this Agreement.
2. MINIMUM FEE. The minimum annual total of Monthly Fees paid by
FRANCHISEE (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 to COMPANY within thirty (30) days after the last day of such
Agreement Year.
3. MONTHLY FEE AND MINIMUM FEE INCREASES. COMPANY shall have the
right to increase the Monthly Fee once per Agreement Year. The amount of
such increase shall not exceed ten percent (10%) of the Monthly Fee
charged as of the date of such increase. Additionally, the maximum Monthly
Fee COMPANY will charge during the initial term of this Agreement is
Forty-Five Dollars ($45) per Rental Vehicle per month. COMPANY shall have
the right to increase the Minimum Fee once per Agreement Year. The
increase in Minimum Fee shall not exceed ten percent (10%) of the Minimum
Fee specified in the Minimum Fee schedule in Exhibit A for that Agreement
Year. For each subsequent Agreement Year, the increase in the Minimum Fee
shall not exceed ten percent (10%) of the Minimum Fee for the preceding
Agreement Year.
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.
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, 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.
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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 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 acquire, at FRANCHISEE's sole
expense, computer hardware and software programs meeting COMPANY's
specifications to assist in the operation of the BUSINESS.
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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.
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. 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 PRICELE$$ 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
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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 any vehicle owned, rented or leased by FRANCHISEE or the BUSINESS and any
other vehicle which is rented, leased, or sold on a rent-to-own basis, or is
available for rental, lease or sale to customers of FRANCHISEE. 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. COMPANY may designate one or more suppliers of
rental vehicle liability insurance, and the designated supplier may be COMPANY
or an affiliate, and FRANCHISEE must purchase such coverage from the designated
supplier. 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 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 claim's arising from the operation of the Business.
FRANCHISEE appoints COMPANY its attorney-in-fact to direct any and all
of FRANCHISEE's insurers to provide COMPANY, upon COMPANY's request, with
information showing the number of vehicles FRANCHISEE has insured at any time.
F. COMPANY PROGRAMS.
FRANCHISEE shall subscribe to, participate in and comply with 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
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COMPANY rental location in the area concerned. FRANCHISEE also shall provide a
24-hour emergency road service. If COMPANY offers a national program, FRANCHISEE
may be required to participate in such program. 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 its customers.
7. ADVERTISING AND PROMOTION.
A. BY COMPANY.
Recognizing the value of uniform advertising and promotion to the
goodwill and public image of PRICELE$$ businesses of COMPANY, COMPANY agrees to
maintain and administer an advertising fund (the "National Fund") for the
preparation of advertising materials and such advertising programs as COMPANY
may deem necessary or appropriate. FRANCHISEE shall contribute to the National
Fund seven dollars ($7.00) for each Rental Vehicle in the Fleet. Such
contribution is due and payable by the tenth (10th) day of each month on the
average total number of Rental Vehicles in the Fleet during the immediately
preceding month. In order to verify the number of Rental Vehicles in the Fleet
each month, FRANCHISEE will submit to COMPANY (along with the advertising
contribution) a copy of FRANCHISEE's monthly insurance statements for the
preceding month showing the number of Rental Vehicles. Additionally, FRANCHISEE
agrees to contribute, as specified from time to time by COMPANY, to a regional
advertising fund (the "Regional Fund"); provided, however, that such
contribution may not exceed FRANCHISEE's payment to the National Fund. If
FRANCHISEE's advertising contributions are not current, then FRANCHISEE may be
excluded from participating in any program paid for by the National Fund.
FRANCHISEE agrees that the National and Regional Funds (the "Funds")
may be used to meet any and all costs of maintaining, administering, directing
and preparing national, regional or local advertising, sales promotion and
public relations activities, including, without limitation, the costs of
preparing and conducting television, radio, magazine, billboard, newspaper and
other media programs and activities, and employing advertising agencies. COMPANY
may spend in any fiscal year an amount greater or less than the aggregate
contributions of PRICELE$$ 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 N ational 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.
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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 "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 amount of such
increase will not exceed ten percent (10%) of the contribution charged as of the
date of such increase. 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 PRICELE$$ businesses and that COMPANY undertakes no obligation in
administering the Funds to ensure that expenditures which are proportionate or
equivalent to FRANCHISEE's contributions are made for the market area of the
BUSINESS or that any PRICELE$$ businesses benefit directly or pro-rata from the
placement of advertising. Except as expressly provided in this Section, COMPANY
assumes no direct or indirect liability or obligation to FRANCHISEE with respect
to the maintenance, direction or administration of the Funds. FRANCHISEE
acknowledges and agrees that COMPANY has no fiduciary obligation to FRANCHISEE
or any other PRICELE$$ business in connection with the collection, control or
administration of monies paid into the Fund.
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 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.
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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, (i) as part of any corporate
or trade name, (ii) with any prefix, suffix or other modifying words, terms,
designs or symbols (other than logos licensed to FRANCHISEE hereunder), (iii) in
any modified form, (iv) as part of any domain name, website, home page,
electronic address, or other interactive site maintained on the internet, the
world wide web, or any other similar proprietary or common carrier electronic
delivery system, or (v) 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 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.
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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 PRICELE$$ 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, consultant, 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 PRICELE$$
or 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 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.
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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. COMPANY may require that specified information be
compiled by FRANCHISEE in a computerized database. 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.
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) months, and such other data, information
and records as COMPANY may from time to time require. COMPANY may require that
FRANCHISEE submit reports via e-mail or other computerized form and/or that
COMPANY have access to FRANCHISEE's computer system to obtain such reportable
information.
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.
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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 FRANCHISEE 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, in addition to all other remedies and rights available to COMPANY,
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)), shall be borne by FRANCHISEE. COMPANY's rights under this Section 12
shall apply only to the operation of the BUSINESS.
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. 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:
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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 PRICELE$$ businesses of COMPANY;
5. FRANCHISEE or the assignee shall have paid a reasonable transfer
fee 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 Competitive
Business (as defined in Section 9) located within the Primary Service Area
or within five miles of the border of the Primary Service Area.
D. DEATH OR DISABILITY OF FRANCHISEE.
Upon the death or permanent disability of FRANCHISEE or a principal
owner 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.
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
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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. 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 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;
(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
petition or other pleading filed in any such proceeding;
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(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 Rental Vehicles in
the Fleet or Gross Revenues generated by the BUSINESS by more than ten
percent (10%);
(11) fails on two (2) 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 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;
(12) fails to maintain the insurance coverage required by Section 6E
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; or
(13) entered into a RENT-A-WRECK Franchise Agreement for
substantially the same primary service area as the PRICELE$$ Primary
Service Area and such RENT-A-WRECK Franchise Agreement is terminated or
expires without renewal.
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.
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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;
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. 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;
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5. not directly or indirectly at any time or in any manner identify
himself or any business as a current or former PRICELE$$ business, 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
PRICELE$$ business in any manner or for any purpose, or utilize for any
purpose any trade name, trade or service mark or other commercial symbol
that suggests or indicates a connection or association with COMPANY or use
any of COMPANY's trade secrets, forms, slogans, signs, symbols, devices or
materials that indicate an association with COMPANY or that is or was used
by COMPANY and/or other PRICELE$$ 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. COVENANT NOT TO COMPETE.
FRANCHISEE agrees that upon termination of the Franchise prior to its
expiration, for a period of two (2) years, commencing 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 Competitive Business
(as defined in Section 9) located within the Primary Service Area or within five
miles of the border of the Primary Service Area.
D. 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.
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16. ENFORCEMENT.
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Each section, paragraph, term and provision of this Agreement 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
PRICELE$$ 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.
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 TRADEMARK ACT OF
1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), THIS AGREEMENT AND THE
FRANCHISE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MARYLAND. FRANCHISEE
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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. ARBITRATION.
Except for controversies, disputes or claims related to or based on
FRANCHISEE'S use of the Marks after this Agreement expires of terminates, all
controversies, disputes or claims between COMPANY and its shareholders,
officers, directors, agents and employees and FRANCHISEE (its owners,
guarantors, affiliates and employees, if applicable) arising out of or related
to:
1. this Agreement or any other agreement between FRANCHISEE and
COMPANY or any provision of any of these agreements;
2. COMPANY's relationship with FRANCHISEE;
3. the validity of this Agreement or any other agreement between
COMPANY and FRANCHISEE or any provision of any of these agreements; or
4. any System Standards relating to establishing or operating the
BUSINESS;
must be submitted for arbitration, on demand of either party, to the Baltimore,
Maryland office of the American Arbitration Association. The arbitration
proceedings will be conducted at that American Arbitration Association office
and, except as this Agreement otherwise provides, heard by one arbitrator
according to the then current commercial arbitration rules of the American
Arbitration Association. All matters relating to arbitration will be governed by
the Federal Arbitration Act (9 U.S.C.ss.ss. 1 et seq.) and not by any state
arbitration law.
The arbitrator has the right to award or include in his or her award
any relief which he or she deems proper in the circumstances, including, without
limitation, money damages (with interest on unpaid amounts from the date due),
specific performance, injunctive relief and attorneys' fees and costs, provided
that the arbitrator may not declare any Mark generic or otherwise invalid or,
except as Subsection G below otherwise provides, award exemplary or punitive
damages. The arbitrator's award and decision are conclusive and binding upon all
parties, and judgment upon the award may be entered in any court of competent
jurisdiction.
COMPANY and FRANCHISEE agree to be bound by the provisions of any
limitation on the period of time in which claims must be brought under
applicable law or this Agreement, whichever expires earlier. COMPANY and
FRANCHISEE further agree that, in any arbitration proceeding, each must submit
or file any claim which would constitute a compulsory counterclaim (as defined
by Rule 13 of the Federal Rules of Civil Procedure) within the same proceeding
as the claim to which it relates. Any claim which is not submitted or filed as
required is forever barred.
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COMPANY and FRANCHISEE agree that arbitration will be conducted on an
individual, not a class-wide, basis, and that an arbitration proceeding between
COMPANY and its shareholders, officers, directors, agents and employees and
FRANCHISEE (and/or FRANCHISEE's owners, guarantors, affiliates and employees, if
applicable) may not be consolidated with any other arbitration proceeding
between COMPANY and any other person, corporation, limited liability entity or
partnership.
Despite COMPANY's agreement to arbitrate, COMPANY and FRANCHISEE each
have the right in a proper case to seek temporary restraining orders and
temporary or preliminary injunctive relief from a court of competent
jurisdiction; provided, however, that COMPANY and FRANCHISEE must
contemporaneously submit COMPANY's dispute for arbitration on the merits as
provided in this Subsection.
The provisions of this Subsection are intended to benefit and bind
certain third party non-signatories and will continue in full force and effect
subsequent to and notwithstanding this Agreement's expiration or termination.
G. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
EXCEPT FOR CLAIMS COMPANY MAY BRING AGAINST FRANCHISEE FOR HIS
UNAUTHORIZED USE OF THE MARKS OR UNAUTHORIZED USE OR DISCLOSURE OF ANY
CONFIDENTIAL INFORMATION, COMPANY AND FRANCHISEE AND THEIR RESPECTIVE OWNERS
WAIVE TO THE FULLEST EXTENT THE LAW PERMITS ANY RIGHT TO OR CLAIM FOR ANY
PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF
A DISPUTE BETWEEN COMPANY AND FRANCHISEE, THE PARTY MAKING A CLAIM WILL BE
LIMITED TO EQUITABLE RELIEF AND RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
HOWEVER, IF FRANCHISEE IS REQUIRED TO INDEMNIFY COMPANY FOR ANY CLAIM OR
LIABILITY UNDER SECTION 10, FRANCHISEE SHALL INDEMNIFY COMPANY FOR THE FULL
AMOUNT OF ANY SUCH CLAIM OR LIABILITY, INCLUDING ANY PUNITIVE DAMAGES.
COMPANY AND FRANCHISEE IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF
THEM.
H. BINDING EFFECT.
This Agreement is binding upon COMPANY and FRANCHISEE and their
respective executors, administrators, heirs, beneficiaries, assigns and
successors in interest and may not be modified except by a written agreement
signed by both COMPANY and FRANCHISEE.
I. LIMITATIONS OF CLAIMS.
Except for claims arising from FRANCHISEE's non-payment or underpayment
of amounts FRANCHISEE owes COMPANY under this Agreement or otherwise, any and
all claims arising out of or relating to this Agreement or COMPANY's
21
<PAGE>
relationship with FRANCHISEE will be barred unless a judicial or arbitration
proceeding is commenced within twelve (12) months from the date on which the
party asserting the claim knew or should have known of the facts giving rise to
the claims.
J. 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 (2) days prior
thereto, shall be deemed delinquent.
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<PAGE>
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:
Maryland corporation
______________________, an individual
By:____________________________
Title:_________________________ By:____________________________
Date: _________________________ Date:__________________________
IF A CORPORATION:
_______________________________,
a _______________________ corporation
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
IF A PARTNERSHIP:
_______________________________,
a _______________________ partnership
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
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<PAGE>
EXHIBIT A TO THE
PRICELE$$ FRANCHISE AGREEMENT
BY AND BETWEEN BUNDY AMERICAN CORPORATION
AND ________________________________
DATED:_____________, _____
AGREEMENT TERMS
1. PREMISES. The Premises referred to in Section I B 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:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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.
A-1
<PAGE>
4. INITIAL FRANCHISE FEE: The initial franchise fee referred to in Section 4A of
the above- captioned agreement shall be _________________________________
Dollars ($_______________ ).
5. MINIMUM FEE. The Minimum Fee referred to in Section 4B(2) of the
above-captioned agreement shall be as follows:
AGREEMENT YEAR MINIMUM FEE
- -------------- -----------
First (1st) _________________________________
Second (2nd) _________________________________
Third (3rd) _________________________________
After the end of the third (3rd) Agreement Year, the annual Minimum Fee shall be
_________________________________ Dollars ($_________).
6. GENERAL MANAGER(S). The initial general manager(s) referred to in Section 6D
of the above-captioned agreement shall be:
NAME ADDRESS TITLE
---- ------- -----
A-2
<PAGE>
COMPANY: FRANCHISEE:
BUNDY AMERICAN CORPORATION, a IF AN INDIVIDUAL:
Maryland corporation
______________________, an individual
By:____________________________
Title:_________________________ By:____________________________
Date: _________________________ Date:__________________________
IF A CORPORATION:
_______________________________,
a _______________________ corporation
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
IF A PARTNERSHIP:
_______________________________,
a _______________________ partnership
By:____________________________
Title:_________________________
Date: _________________________
By:____________________________
Title:_________________________
Date: _________________________
A-3
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EXHIBIT B TO THE
PRICELE$$ FRANCHISE AGREEMENT
BY AND BETWEEN BUNDY AMERICAN CORPORATION
AND _______________________________
DATED _______________________
ASSIGNMENT OF
TELEPHONE NUMBERS AND LISTINGS
In accordance with the terms of the PRICELE$$ Franchise Agreement
between _________________________________________________ ("FRANCHISEE") and
Bundy American Corporation, a Maryland corporation ("COMPANY"), executed
concurrently with this Assignment, under which COMPANY granted FRANCHISEE the
right to own and operate a PRICELE$$ 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 execute
the Telephone Company's assignment forms or other documentation at the time of
B-1
<PAGE>
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
Franchise Agreement.
ASSIGNOR:
_______________________________ ________________________________
Date: (FRANCHISEE)
________________________________
________________________________
ASSIGNEE:
BUNDY AMERICAN CORPORATION
By:_____________________________
Its:____________________________
APPROVED AND ACCEPTED BY:
_______________________________
(Telephone Company Authorized
Representative)
_______________________________
(Name of Telephone Company)
B-2
<PAGE>
OWNER'S GUARANTY AND
ASSUMPTION OF FRANCHISEE'S OBLIGATIONS
This Guaranty must be signed by the principal owners ("Guarantor(s)")
of __________________________________ ("FRANCHISEE") under the foregoing
PRICELE$$ Franchise 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
- ------------ -----------------------
_______________________________ __________%
_______________________________ __________%
_______________________________ __________%
G-1
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<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,873,167
<SECURITIES> 0
<RECEIVABLES> 1,541,457
<ALLOWANCES> 733,547
<INVENTORY> 0
<CURRENT-ASSETS> 3,089,586
<PP&E> 679,604
<DEPRECIATION> 415,705
<TOTAL-ASSETS> 3,616,479
<CURRENT-LIABILITIES> 1,511,673
<BONDS> 0
11,300
0
<COMMON> 39,432
<OTHER-SE> 2,054,074
<TOTAL-LIABILITY-AND-EQUITY> 3,616,479
<SALES> 0
<TOTAL-REVENUES> 1,479,161
<CGS> 0
<TOTAL-COSTS> 570,708
<OTHER-EXPENSES> 512,933
<LOSS-PROVISION> 74,629
<INTEREST-EXPENSE> 6,614
<INCOME-PRETAX> 338,670
<INCOME-TAX> 105,639
<INCOME-CONTINUING> 233,031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 233,031
<EPS-BASIC> .05
<EPS-DILUTED> .04
</TABLE>
