-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DWRKgrOqhP6X2Io2zDNZxWN9hXLN02S0oKef/dX87TEl8EwsMXHWqsYVjPUaW4/C GsoU+jnVqg8LHp6mLQZ7cw== 0000950147-99-000896.txt : 19990817 0000950147-99-000896.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950147-99-000896 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENT A WRECK OF AMERICA INC CENTRAL INDEX KEY: 0000763567 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 953926056 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14819 FILM NUMBER: 99693783 BUSINESS ADDRESS: STREET 1: 11460 CRONRIDGE DRIVE SUITE 118 CITY: OWINGS MILLS STATE: MD ZIP: 21117 BUSINESS PHONE: 4105815755 MAIL ADDRESS: STREET 1: 11460 CRONRIDGE DRIVE STE 118 CITY: OWINGS MILLS STATE: MD ZIP: 21117 10QSB 1 QUARTERLY REPORT FOR THE QTR ENDED 6/30/99 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] 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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. EX-10.12 2 STANDARD FRANCHISE AGREEMENT RENT-A-WRECK FRANCHISE AGREEMENT 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 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. 1 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. 2 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 3 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. 4 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. 5 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 6 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 7 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. 8 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. 8 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. 10 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. 11 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. 12 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: 13 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 14 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; 15 (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. 16 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; 17 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. 18 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 19 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. 20 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 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. 22 IN WITNESS WHEREOF the parties hereto have executed, sealed and delivered this Agreement in multiple originals on the day and year first above written. COMPANY: FRANCHISEE: BUNDY AMERICAN CORPORATION, a IF AN INDIVIDUAL: 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: _________________________ 22 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. A-1 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 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 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 B-1 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 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 EX-10.13 3 FRANCHISE AGREEMENT - PRICELESS AUTO RENTAL PRICELE$$ AUTO RENTAL FRANCHISE AGREEMENT THIS PAGE INTENTIONALLY LEFT BLANK 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 PRICELE$$ AUTO RENTAL FRANCHISE AGREEMENT THIS AGREEMENT is made and entered into this _____ day of ____________, 19_ by and between BUNDY AMERICAN CORPORATION, a Maryland corporation, with its principal office at 11460 Cronridge Drive, Suite 120, Owings Mills, Maryland 21117 ("COMPANY") and __________________________________________________________ ________________________________________________________________________________ whose principal address is _____________________________________________________ ________________________________ ("FRANCHISEE"). 1. THE FRANCHISE. A. PREAMBLES. COMPANY has developed a system for the operation of a vehicle rental and leasing business under the name "PRICELE$$". 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. 1 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. 2 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 3 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. 4 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. 5 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 6 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 7 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. 8 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. 9 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. 10 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. 11 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. 12 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: 13 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 14 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; 15 (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. 16 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; 17 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. 18 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 19 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. 20 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 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. 22 IN WITNESS WHEREOF the parties hereto have executed, sealed and delivered this Agreement in multiple originals on the day and year first above written. COMPANY: FRANCHISEE: BUNDY AMERICAN CORPORATION, a IF AN INDIVIDUAL: 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: _________________________ 22 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 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 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 THIS PAGE INTENTIONALL LEFT BLANK 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 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 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 25 THIS PAGE INTENTIONALL LEFT BLANK EX-27 4 FINANCIAL DATA SCHEDULE
5 U.S. DOLLARS 3-MOS MAR-31-2000 APR-01-1999 JUN-30-1999 1 1,873,167 0 1,541,457 733,547 0 3,089,586 679,604 415,705 3,616,479 1,511,673 0 11,300 0 39,432 2,054,074 3,616,479 0 1,479,161 0 570,708 512,933 74,629 6,614 338,670 105,639 233,031 0 0 0 233,031 .05 .04
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