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EXHIBIT 10.6
SUPPLY AGREEMENT
This Agreement is made on this _____ day of ____, 1997, by and among
Ford Motor Company, a Delaware corporation ("Ford"), and Team Rental Group,
Inc., a Delaware Corporation ("Team"), and Budget Rent A Car Corporation, A
Delaware corporation ("Budget").
WHEREAS the parties hereto desire to set forth the terms and conditions
where under Budget and its affiliates will acquire Ford vehicles for use in or
in support of businesses conducted by Budget and its affiliates at various
locations in the United States and outside of the United States.
Ford and Budget agree as follows:
1. Term of Agreement. This agreement shall be effective for the period
beginning as of September 1, 1997, and ending August 31, 2007.
2. Definitions. The terms set forth below shall have the following
meanings:
Acquire -- to obtain, by purchase or lease, Vehicles for use in or in
support of operations at Budget Locations.
Acquisition -- the act of Acquiring Vehicles.
Acquisition Year -- each period of 12 months from and including
September 1 to and including the next following August 31 during the term of
this Agreement (or such other customary period in countries outside the United
States). Each such Acquisition Year shall be referred to by the calendar year
next following the commencement of the Acquisition Year. For example, the 1998
Acquisition Year shall commence on September 1, 1997, and end on August 31,
1998.
Annual Acquisition Plan -- defined in Paragraph 5.1 of this Agreement.
Budget Affiliate -- with respect to Budget, any other corporation or
legal entity directly or indirectly controlling, controlled by, or under common
control with Budget, including, without limitation, Team and its subsidiaries,
but specifically excluding any Budget Licensee. For purposes of this definition
and Paragraphs 4.6 and 4.7, "control" (including "controlling," "controlled
by," and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a corporation or other legal entity, whether through the ownership
of voting securities, by contract, or otherwise.
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Budget Corporate Location -- a Budget Location that is owned and
operated by Budget or a Budget Affiliate.
Budget Licensee -- any legal entity not controlled by Budget or a
Budget Affiliate that is authorized by Budget, a Budget Affiliate or another
Budget Licensee to conduct a business under any trademark of Budget.
Budget Location -- a place or geographic area except in the European
Union ("EU") where Budget, a Budget Affiliate, or a Budget Licensee now or
hereafter conducts a business under any trademark of Budget.
Canadian Ford Vehicles -- defined in Paragraph 4.4.
Confidential Material -- defined in Paragraph 19.
Ford Affiliate -- with respect to Ford, any other corporation or legal
entity directly or indirectly controlling, controlled by, or under common
control with Ford. For purposes of this definition "control" (including
"controlling," "controlled by," and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a corporation or other legal entity,
whether through the ownership of voting securities, by contract, or otherwise.
Ford Dealer -- a legal entity authorized by Ford or a Ford Affiliate to
sell Ford Vehicles under one or more sales and service or dealer agreements.
Ford Fleet Programs -- price discount, guaranteed resale or repurchase
incentives or similar programs offered by Ford and Ford Affiliates whose primary
business is the sale or manufacture and sale of Vehicles.
Ford Vehicles -- any new and unused Vehicles as from time to time are
offered for sale by Ford or any Ford Affiliate to its Ford Dealers for resale,
but specifically Vehicles excluding sold under the "Mazda" or "Jaguar" name.
Ford Vehicle Share -- the percentage that Ford Vehicle Acquisitions
represents of total Vehicle Acquisitions by Budget and Budget Affiliates within
each of the following considered separately: the United States, Canada, the EU
and all other locations.
Licensee Ford Vehicle Share -- defined in Paragraph 11.
Vehicle -- any new and unused passenger car, van or truck.
3. Ford's Fleet Programs. In accordance with past practices, Ford and
Ford Affiliates will offer to Budget, Budget
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Affiliates and Budget Licensees, as soon as practicable prior to the
commencement of the Acquisition Year, the Ford Fleet Programs then being
offered to daily rental companies for the upcoming Acquisition Year. Such Ford
Fleet Programs may be amended, supplemented, or modified by Ford or Ford
Affiliates, from time to time, prior to or after commencement of such
Acquisition Year.
4. Ford Vehicle Share of Acquisitions.
4.1. In years prior to the effective date of this Agreement, Budget,
Budget Affiliates and Budget Licensees have purchased, in the aggregate, Ford
Vehicles in substantial quantities in the United States, Canada, Australia and
EU. In that connection, Budget acknowledges that Ford Vehicles and Ford Fleet
Programs made available to Budget, Budget Affiliates and Budget Licensees in
such years have been competitive, considered in the aggregate, when compared
with the Vehicles and fleet programs offered by other automobile manufacturers
as to price, delivery dates, quality, durability, design, reputation,
suitability for the Budget business, model availability, guaranteed
depreciation, resale value, turn back costs and other repurchase terms. In
accordance with past practices, Ford agrees that Ford Vehicles and Ford Fleet
Programs to be offered to Budget, Budget Affiliates and Budget Licensees
generally shall be competitive with the Vehicles and fleet programs of other
automotive manufacturers to an extent similar to that of past years. Further,
Budget acknowledges that from time to time in such past years the demand for
Ford Vehicles for retail and fleet sales in the United States, Canada, Australia
and the EU has been at levels that require Ford and Ford Affiliates to limit the
allocation of such Vehicles available to fleet buyers such as Budget, Budget
Affiliates and Budget Licensees. Accordingly, Budget agrees that it is in the
long-term interest of Budget and Budget Affiliates for Budget to make the
undertakings set forth in this Paragraph 4.
4.2. In each Acquisition Year, Budget shall Acquire or cause the
Acquisition by Budget Affiliates of Ford Vehicles in such quantity (a) in the
United States, (b) Canada and (c) all other locations outside the EU that the
Ford Vehicle Share in each country shall be at least 70 percent; provided,
however, that in no event shall the total of Acquisitions of Ford Vehicles by
Budget, Budget Affiliates and Budget Licensees in the United States be less than
80,000 Ford Vehicles ("Base U.S. Volume") in each Acquisition Year, subject to
the qualifications of Paragraphs 6.1 and 6.4 hereof.
4.3. To attain the respective Ford Vehicle Shares in each country and
the Base U.S. Volume required by Paragraph 4.2 in each Acquisition Year, Ford
and Budget agree to cooperate in developing Ford Vehicle delivery schedules by
Ford Vehicle line.
4.4. Ford Vehicles which have been sold by Ford Motor Company of Canada
Limited to its Ford Dealers ("Canadian Ford
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Vehicles") and Acquired by Budget and Budget Affiliates in Canada shall be
counted toward achievement of the Ford Vehicle Share (or the Licensee Ford
Vehicle Share) in Canada, but no Canadian Ford Vehicles, no matter how Acquired
by Budget, Budget Affiliates or Budget Licensees for use in the United States,
shall be counted toward achievement of the Ford Vehicle Share (or the Licensee
Ford Vehicle Share) in the United States or the Base U.S. Volume.
4.5. Any failure to achieve the respective Ford Vehicle Share in any
country or the Base U.S. Volume required by Paragraph 4.2 by the end of any
Acquisition Year shall be presumed to be a default by Budget under this
Agreement, subject to challenge by Budget.
4.6. If Budget or any Budget Affiliate should, directly or indirectly,
convey, sell, assign, franchise, license, transfer or otherwise dispose of
(collectively "Transfer") all or any portion of any Budget Corporate Location,
that had an average fleet size of 150 vehicles or more for the twelve-month
period prior to the Transfer, or any fixed assets, real properties, or other
property or assets a reasonably necessary for the conduct of the Budget Rent A
Car or Budget Rent A Truck business at such Budget Corporate Location
(collectively "Assets") to any party ("Transferee"), Budget or such Budget
Affiliate shall use reasonable best efforts to ensure that the Transferee (i) in
each Acquisition Year will Acquire Ford Vehicles in such quantity that the Ford
Vehicle Share of Acquisitions for such Budget Location shall remain at least 70
percent for the remainder of the term of this Agreement; and (ii) will require
any subsequent Transferee of such Assets or a substantial portion thereof to
agree to terms identical to those in this clause.
4.7. If, despite the reasonable best efforts of Budget or a Budget
Affiliate, as applicable, as required under Paragraph 4.6 above, the Transferee
does not Acquire Ford Vehicles in such quantity that the Ford Vehicle Share of
Acquisition for such Budget Location shall remain at least 70 percent for the
remainder of the term of this Agreement, then, during the term of this
Agreement, the total number of Vehicles Acquired and the number of Ford Vehicles
Acquired by Transferee for use at such Budget Location shall continue to be
included in the calculation of the Ford Vehicle Share required under Paragraph
4.2. Accordingly, Budget shall increase the number of Ford Vehicles Acquired by
Budget to the extent necessary to cover any shortfall below a Ford Vehicle
Share, as calculated hereunder, of 70 percent caused by Transferee's failure to
Acquire Ford Vehicles. Within a reasonable period of time before any proposed
Transfer of a Budget Corporate Location (but no later than 10 business days
prior thereto), Budget shall notify Ford in writing of such proposed Transfer.
Budget shall, from time to time, provide Ford with such information regarding
any Transfer of a Budget Corporate Location as Ford may reasonably request to
facilitate calculation of the Ford Vehicle Share hereunder.
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4.8. Except as otherwise provided in Paragraphs 4.6 and 4.7, and
subject to the provisions thereof, if a change of control occurs with respect to
Budget or any Budget Affiliate and such change of control would affect the
applicability of this Agreement to any then existing Budget Location, then
Budget shall require the person or entity acquiring control of Budget or such
Budget Affiliate to enter into an agreement with Ford containing substantially
the same terms and conditions as are contained in this Agreement with respect to
all Budget Locations affected by such change of control.
5. Annual Acquisition Plan, etc.
5.1. On or before July 1 of each Acquisition Year, Budget shall prepare
and submit to Ford a plan for Acquisitions by Budget and Budget Affiliates in
the United States, including Ford Vehicles, for the following Acquisition Year
(the "Annual Acquisition Plan"). Such Plan shall specify, in reasonable
detail, the volume, models, and delivery dates of Ford Vehicles, and shall show
how the Ford Vehicle Share and Base U.S. Volume shall be achieved as required by
Paragraph 4.2. In addition, such Plan shall include a good faith estimate of the
volume, models and delivery dates of Ford Vehicles to be Acquired by Budget
Licensees.
5.2. Monthly, Budget shall prepare and submit to Ford a revision of the
Annual Acquisition Plan showing total Acquisitions (including Ford Vehicles) in
the United States for the Acquisition Year to date as of 30 or fewer days prior
to the due date of such revised Annual Acquisition Plan, and proposed Vehicle
Acquisition in the United States (including Ford Vehicles) for the remainder of
the Acquisition Year.
5.3. Budget shall also prepare or cause to be prepared and submit to
Ford, or the appropriate Ford Affiliate, Annual Acquisition Plans for Canada and
all other countries outside the EU in the manner set forth above for
Acquisitions within the United States.
6. Ford Vehicle Acquisitions.
6.1. In consideration of the obligations undertaken by Budget, Ford
shall, and shall cause Ford Affiliates to, cooperate with Ford Dealers with
which Budget or Budget Affiliates or Budget Licensees negotiate the Acquisition
of Ford Vehicles, consistent with the sales and service or dealer agreements
between Ford or Ford Affiliates, on the one hand, and its or their respective
Ford Dealers, on the other hand, to make reasonable allocations of Ford Vehicles
for resale to Budget or Budget Affiliates or Budget Licensees and to process
Ford Vehicle orders and to arrange delivery of Ford Vehicles as agreed by Budget
or Budget Affiliates or Budget Licensees and such Dealers. Subject to any
production disruption described in Paragraph 6.4(a)-(d) below, such reasonable
allocation of Ford Vehicles
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made available by Ford for Acquisition under the Ford Fleet Programs by Budget,
Budget Affiliates and Budget Licensees (in the aggregate) in the United States
in any Acquisition Year shall not be fewer than 80,000 Ford Vehicles in such
allocations by vehicle class and Fleet Program as Ford may, in consultation with
Budget, establish; provided, however, that Ford may allocate fewer than 80,000
Ford Vehicles in an Acquisition Year if Ford and Budget reasonably agree that
the terms of the applicable Fleet Programs are such that the lower allocation
provides the equivalent rental usage of 80,000 Ford Vehicles under prior year
Fleet Programs.
6.2. In countries other than the U.S. to which this Agreement applies,
Ford shall make reasonable efforts to encourage Ford Affiliates to make Ford
Vehicles available to Budget and Budget Affiliates in sufficient quantities to
permit Budget and Budget Affiliates to achieve the Ford Vehicle Share by country
specified herein.
6.3. The following provisions shall apply with respect to any
allocation above the Base U.S. Volume of 80,000 Ford Vehicles: (a) Ford and Ford
Affiliates shall make reasonable efforts to fill orders for Ford Vehicles to be
Acquired by Budget or Budget Affiliates or Budget Licensees, it being understood
that Ford and Ford Affiliates also are subject to concurrent commitments to
provide Ford Vehicles to Ford Dealers for other purposes. In the event such
commitments cannot be satisfied from existing Ford Vehicle production capacity,
Ford and Ford Affiliates shall have the right to allocate available Ford Vehicle
production to balance these commitments in the manner they deem most appropriate
in their reasonable business judgment.
(b) Ford and Ford Affiliates similarly may allocate production between
retail and fleet sales for any reason including, without limitation, demand for
Ford Vehicles for retail sales.
6.4. If, because of (a) shortage or curtailment of material, labor,
transportation, or utility service; (b) any labor or production difficulty; (c)
any governmental action; or (d) any cause beyond the reasonable control of Ford
or Ford Affiliates, Ford Vehicle production is disrupted and material deliveries
of Ford Vehicles to be Acquired by Budget, Budget Affiliates or Budget Licensees
are delayed as a result, then Budget and/or appropriate Budget Affiliates and
Ford and/or appropriate Ford Affiliates shall make good faith, reasonable
efforts to revise the affected Annual Acquisition Plan or Plans, as modified
under Paragraph 5.2, so that the respective Ford Vehicle Share and Base U.S.
Volume shall be attained as required by Paragraph 4.2; provided, however, that
Budget shall not be required to increase its Ford vehicle Share in the U.S. in
excess of 80% with respect to any Vehicle Acquisitions to be made for the
remainder of any Acquisition Year to which this Paragraph 6.4 applies in order
to achieve the Ford Vehicle Share or the Base
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U.S. Volume. If the respective Ford Vehicle Share or Base U.S. Volume is not
attained despite the good faith, reasonable efforts of Budget and/or the
appropriate Budget Affiliates to revise the Annual Acquisition Plan, then the
liquidated damages of Paragraph 9 shall not apply to the extent that Budget's
failure to attain the Ford Vehicle Share or Base U.S. Volume is solely
attributable to a production disruption described in this Paragraph.
7. Royalty. Team will pay, or cause Budget to pay, Ford a Royalty in
accordance with the provisions of Exhibit A attached hereto.
8. Budget Certificates on Acquisitions. As soon as practicable after
each Acquisition Year, but not later than four months after such Acquisition
Year, Budget shall deliver to Ford or the Ford Affiliate designated by Ford a
certificate signed by an executive officer of Budget certifying for such
Acquisition Year total Vehicle Acquisitions and total Ford Vehicle Acquisitions
at Budget Locations and the resulting Ford Vehicle Share and, to the best
knowledge of such officer, the resulting Licensee Ford Vehicle Share.
9. Remedy for Ford Vehicle Share Shortfall.
9.1. Except as otherwise provided in this Agreement, in the event
Budget shall fail to attain in any country the Ford Vehicle Share or Base U.S.
Volume specified in Paragraph 4.2 for any Acquisition Year, Budget and Ford
agree that Ford would be harmed by the consequent loss of profit, production and
exposure of Ford Vehicles to rental customers of Budget and Budget Affiliates
who are potential purchasers of Ford Vehicles, and that the damages to Ford
would be difficult to ascertain. Accordingly, Budget and Ford adopt the
following provision for payment of liquidated damages in lieu of all other
rights and remedies:
For each Acquisition Year in which Budget shall fail to attain in any
country the Ford Vehicle Share or the Base U.S. Volume required by this
Agreement, Budget or a Budget Affiliate shall pay to Ford or the damaged Ford
Affiliate, as applicable, a sum equal to (a) $XXX (or the equivalent in local
currency), multiplied by (b) the number of additional Ford Vehicles that would
be necessary to attain the required Ford Vehicle Share in such country or Base
U.S. Volume for the Acquisition year in question. In calculating the shortfall
of Ford Vehicle Acquisitions for an Acquisition Year in such country for the
purpose of computing the liquidated damages payable by Budget, Ford will give
Budget credit for the additional number of Ford Vehicles Acquired by Budget and
Budget Affiliates in such country in the prior Acquisition Year (over and above
the number of Ford Vehicles necessary to achieve the respective Ford Vehicle
Share of 70 percent in such country in such prior Acquisition Year), except
that no credit shall be given in the U.S. unless the Ford Vehicle Share of 70
percent exceeds 80,000 Ford Vehicles, and
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then the credit shall be only as to the excess over 80,000 Ford Vehicles.
9.2. Such payment shall become due 15 days after the delivery of the
officer's certificate required by paragraph 8 of this Agreement. Upon 30 days'
notice, Ford may offset the amount of any such damages against any payments then
due or thereafter becoming due from Ford to Budget or Budget Affiliates, without
limiting any right or remedy Ford may have to collect such liquidated
damages from Budget.
9.3. The foregoing provisions shall not apply to the extent Budget's
failure to achieve the Ford Vehicle Share in any country as required under
Paragraph 4.2 is solely attributable to Ford's failure to allocate quantities of
Ford Vehicles for Acquisition by Budget sufficient to achieve such Ford Vehicle
Share in such country.
10. Remedy for Base U.S. Volume Shortfall.
10.1. Except as otherwise provided in this Agreement, in the event Ford
shall fail to allocate at least 80,000 Ford Vehicles for Acquisition by Budget,
Budget Affiliates and Budget Licensees (in the aggregate) in the U.S. for any
Acquisition Year for any reason other than a production disruption described in
Paragraph 6.4, and Budget and Budget Affiliates would have Acquired such number
of Ford Vehicles but for Ford's failure to provide them, and the parties have
not otherwise agreed that any lower allocation would provide equivalent rental
usage as provided in Paragraph 6.1, then Budget and Ford agree that Budget would
be harmed by the consequent loss of business and profit attributable to such
reduced allocation and that the damages to Budget would be difficult to
ascertain. Accordingly, Budget and Ford adopt the following provision for
payment of liquidated damages in lieu of all other rights and remedies:
For each Acquisition Year in which the foregoing described failure to
allocate the Base U.S. Volume should occur, Ford or a Ford Affiliate shall pay
to Budget or the damaged Budget Affiliate, as applicable, a sum equal to (a)
$XXX, multiplied by (b) the number of additional Ford Vehicles that would be
necessary to attain the Base U.S. Volume for the Acquisition Year in question.
In calculating the shortfall of the Base U.S. Volume for an Acquisition Year for
the purpose of computing the liquidated damages payable by Ford, Budget will
give Ford credit for the additional number of Ford Vehicles allocated by Ford or
Ford Affiliates to Budget, Budget Affiliates and Budget Licensees in the U.S. in
the prior Acquisition Year (over and above the 80,000 Ford Vehicles necessary to
achieve the respective Base U.S. Volume in such prior Acquisition Year).
10.2. Such Payment shall become due 15 days after the delivery of the
officer's certificate required by Paragraph 8 of this Agreement. Upon 30 days'
notice, Budget may offset the
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amount of any such damages against any payments then due or thereafter becoming
due from Budget or Budget Affiliates, without limiting any right or remedy
Budget may have to collect such liquidated damages from Ford.
11. Licensee Ford Vehicle Share. With respect to Acquisitions by Budget
Licensees, Budget agrees that in each Acquisition Year it will promote the
acquisition and use of Ford Vehicles by Budget Licensees, in substantially the
same manner and to the same extent that Budget has historically promoted the
acquisition and use of Ford Vehicles by Budget Licensees (it being understood
that Budget does not control the type of vehicles Budget Licensees acquire and
use in their rental fleets) with a target of 70% of Ford Vehicles ("Licensee
Ford Vehicle Share"). Budget shall, with input and cooperation from Ford,
develop programs designed to increase the percentage of Ford Vehicles Acquired
by Budget Licensees with the objective of implementing the first of such
programs by the 1998 Acquisition Year.
12. Operations in Other Countries. To the extent that Budget shall
offer franchisee services to Budget Licensees in countries in which Budget
presently does not provide franchisee services, Budget and Ford will negotiate
arrangements similar to those set forth in Paragraph 11, including appropriate
targets.
13. Budget European Operations. With respect to Acquisitions by Budget
Affiliates and Budget Licensees within the EU, Budget shall recommend to such
Budget Affiliates and Budget Licensees that they acquire Ford Vehicles from Ford
Dealers or Ford Affiliates in their respective countries, with a target of
numbers sufficient to attain a Ford Vehicle Share or Licensee Ford Vehicle Share
of 70 percent.
14. Option Allocation Agreements. Budget agrees that so long as it
purchases Vehicles from Ford that are subject to Ford's Daily Rental Repurchase
Program (one of the Fleet Programs referenced in Paragraph 3 of this Agreement),
Budget will enter into an Option Allocation Agreement in substantially
similar form to those appended hereto as Exhibit B, in which the amount
allocated to the repurchase option shall equal the estimate, reasonably
determined by Ford, of any loss on the resale of such Vehicles. Each such
agreement will provide that the parties will reflect the allocations set forth
therein in all federal, state and local income tax returns.
15. Illegality of Agreement. If any provision of this Agreement is
rendered invalid, illegal or unenforceable by enactment of a statute or a final
decision by a court or governmental agency of competent jurisdiction, the
validity, legality and enforceability of the remaining provisions shall in no
way be affected or impaired.
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16. Inspection of Budget Records. Ford and Ford Affiliates engaged in
the manufacture or distribution of Ford Vehicles shall have the right, through
its or their duly authorized agents or representatives, to examine all pertinent
records of Budget or Budget Affiliates at any time and from time to time during
normal business hours and upon two days' prior written notice, to the extent
necessary to determine the accuracy of all statements that may be furnished by
Budget to Ford pursuant to Paragraph 8 hereof. Such records will include all
documents pertaining to the number of Ford Vehicles and other Vehicles included
in Budget's Vehicle Acquisitions.
17. Entire Agreement. This Agreement supersedes any prior agreements
and understandings, written and oral, between Team, Budget and Ford with respect
to the subject matter hereof; provided, however, that the agreement effective as
of November 1, 1988 ( the "1988 Agreement"), shall remain in full force and
effect to and including August 31, 1997, whereupon the 1988 Agreement shall
terminate as though August 31, 1997, were the date for the expiration thereof.
This Agreement may not be changed in any way except by an instrument signed and
delivered by the duly authorized representatives of Ford and Budget.
18. Notices. Any notice, consent, approval or other communication
required or permitted hereunder shall be in writing, shall be given by
registered or certified United States mail and shall be deemed given when
deposited in the mail, postage paid and addressed as follows:
(a) if to Ford:
Ford Motor Company
000 Xxxxxxxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxx, Xxxxxxxx 00000
Attention: Executive Director
Rental, Lease and Remarketing
Operations
with a copy to:
Ford Motor Company
Office of the Secretary
Xxx Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000; and
(b) if to Budget:
Budget Rent A Car Corporation
0000 Xxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
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(c) if to Team:
Team Rental Group, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Such addresses may be changed by notice given in like manner.
19. Confidentiality. This Agreement, or any part of the contents
hereof, and all records, statements and matters relating hereto including
information obtained or provided pursuant to Paragraph 16 (collectively
"Confidential Material") shall be treated as confidential and each of the
parties shall take or cause to be taken the same degree of care in preventing
disclosure of the Confidential Material as it does with its own confidential
trade or business information. Further, except as may otherwise be required by
law or by subpoena or civil investigative demand, neither party shall provide
the Confidential Material, or any part thereof, to any other person or legal
entity, without the prior written consent of the other, which consent shall not
be withheld unreasonably. In disclosing the Confidential Material to any person
or legal entity, the disclosing party will impose on the receiving party the
same degree of confidentially and care that the parties have undertaken in the
first sentence of this paragraph or, in the case of Confidential Material
supplied to any person or governmental agency pursuant to subpoena or civil
investigative demand, requirement of the Securities and Exchange Commission or
similar request, the disclosing party will seek an appropriate protective order
or confidential treatment, and will use its best efforts to assure that the
receiving party or entity returns all copies of all the Confidential Material
that shall have been furnished to it, promptly after the receiving party or
entity shall have completed its required analysis or review of such Confidential
Material.
20. Governing Law. This Agreement shall in all respects be governed by
and be construed in accordance with the laws of the State of Michigan without
giving effect to the principles of conflicts of laws thereof.
21. Dispute Resolution. If a dispute arises between the parties
relating to this Agreement, the following procedure shall be implemented, and
none of the parties shall pursue other available remedies, except that any party
may seek injunctive relief from a court where appropriate in order to maintain
the status quo while this procedure is being followed:
(a) Ford, Team and Budget shall hold a meeting promptly, attended
by persons with decision-making authority regarding the
dispute, to attempt in good faith to negotiate a resolution of
the dispute; provided, however, that no such meeting
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shall be deemed to vitiate or reduce the obligations and
liabilities of the parties hereunder or be deemed a waiver by
a party hereto of any remedies to which such party would
otherwise be entitled hereunder.
(b) If, within 30 days after such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, they
shall submit the dispute to mediation in accordance with the
then-current Model Procedure for Mediation of Business
Disputes of the Center for Public Resources and bear equally
the costs of mediation.
(c) The parties will jointly appoint a mutually acceptable
mediator, seeking assistance in such regard from the Center
for Public Resources if they have been unable to agree upon
such appointment within 20 days from the conclusion of the
negotiation period.
(d) The parties shall participate in good faith in the mediation
and negotiations related thereto for a period of 30 days. If
the parties are not successful in resolving the dispute
through the mediation, then the parties agree to submit the
matter to binding arbitration in accordance with the Center
for Public Resources Rules for Non-Administered Arbitration
of Business Disputes, by a sole arbitrator.
(e) Mediation or arbitration shall take place in Detroit,
Michigan, unless otherwise agreed by the parties. The
substantive and procedural law of the State of Michigan shall
apply to the proceedings. Equitable remedies shall be
available in any arbitration. Punitive damages shall not be
awarded. This Paragraph 21 is subject to the Federal
Arbitration Act, 9 U.S.C.A. Section 1 et. seq. and judgment
upon the award rendered by the arbitrator, if any, may be
entered by any court having jurisdiction thereof.
22. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Team, Budget and Ford and their respective successors
and assigns; provided, however, no assignment of the obligations of Team, Budget
or Ford hereunder shall release Team, Budget or Ford, as assignor, from
the performance of its obligations thereunder for the remainder of the term
hereof after any such assignment.
23. Headings. The paragraph headings herein are included for
convenience of reference only and shall not be deemed a part of this Agreement.
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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A
REQUEST FOR CONFIDENTIAL TREATMENT AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective as of the day and year first above written.
FORD MOTOR COMPANY BUDGET RENT A CAR CORPORATION
By: By:
--------------------------------- -------------------------------------
Its: Its:
-------------------------------- ------------------------------------
TEAM RENTAL GROUP, INC.
By:
---------------------------------
Its:
--------------------------------
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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A
REQUEST FOR CONFIDENTIAL TREATMENT AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION.
EXHIBIT A
ROYALTY PAYMENT
1. Royalty. (a) On or before September 1, 1998 and on each anniversary
thereof through September 1, 2004, Team shall pay or shall cause Budget to pay
to Ford an amount (the "Royalty") equal to the greater of (i) one percent of Net
Vehicle Revenue of Budget for the prior Acquisition Year; or (ii) the Minimum
Amount as defined in subparagraph 1(c). The Royalty payable with respect to an
Acquisition Year shall be reduced by $XXX for each Ford Vehicle purchased by
Budget, Budget Affiliates and Budget Licensees in such Acquisition Year in
excess of 123,000 Ford Vehicles. In no event shall the aggregate Royalty paid
hereunder exceed $100,000,000 (the "Cap").
(b) As used herein, the term "Net Vehicle Revenue" for an Acquisition
Year shall mean:
(i) gross revenue from mileage and time, LDW and vehicle class
upsells; less
(ii) revenue discounts, satisfaction guarantee allowance and intercity
rental revenue split.
(c) As used herein, the term "Minimum Amount" for an Acquisition Year
shall mean:
(i) For the 1998 Acquisition Year, payable September 1, 1998,
$9,900,000 (the "1998 Minimum Amount");
(ii) In the 1999 Acquisition Year, payable September 1, 1999, an
amount equal to the 1998 Minimum Amount multiplied by: (A) a fraction, the
numerator of which shall be the CPI for April 1999 and the denominator of
which shall be the CPI for April 1998, or (B) XXX, whichever is smaller
(the "1999 Minimum Amount");
(iii) In the 2000 Acquisition Year, payable September 1, 2000, an
amount equal to the 1999 Minimum Amount multiplied by: (A) a fraction, the
numerator of which shall be the CPI for April 2000 and the denominator of
which shall be the CPI for April 1999, or (B) XXX, whichever is smaller
(the "2000 Minimum Amount");
(iv) For the 2001 Acquisition Year, payable September 1, 2001, an
amount equal to the 2000 Minimum Amount multiplied by: (A) a fraction, the
numerator of which shall be the CPI for April 2001 and the denominator of
which shall be the CPI for April 2000, or (B) XXX, whichever is smaller
(the "2001 Minimum Amount");
(v) For the 2002 Acquisition Year, payable September 1, 2002, an
amount equal to the 2001 Minimum
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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A
REQUEST FOR CONFIDENTIAL TREATMENT AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION.
Amount multiplied by: (A) a fraction, the numerator of which shall be the
CPI for April 2002 and the denominator of which shall be the CPI for April
2001, or (B) XXX, whichever is smaller (the "2002 Minimum Amount");
(vi) In the 2003 Acquisition Year, payable September 1, 2003, an
amount equal to the 2002 Minimum Amount multiplied by: (A) a fraction, the
numerator of which shall be the CPI for April 2003 and the denominator of
which shall be the CPI for April 2002, or (B) XXX, whichever is smaller
(the "2003 Minimum Amount"); and
(vii) In the 2004 Acquisition Year, payable September 1, 2004, an
amount equal to the 2003 Minimum Amount multiplied by: (A) a fraction, the
numerator of which shall be the CPI for April 2004 and the denominator of
which shall be the CPI for April 2003, or (B) XXX, whichever is smaller
(the "2004 Minimum Amount").
(d) As used herein, the term "CPI" shall mean the United States
Department of Labor Statistics Revised Consumer Price Index for All Urban
Consumers, or the successor of such Index.
(e) The parties agree that calculation of the Royalty shall be
governed by the following principles:
(i) Net Vehicle Revenue of Budget shall be calculated consistently
with the calculation of Net Vehicle Revenue for Acquisition Year 1996.
(ii) The Royalty is intended to reflect revenue generated from
Budget's corporate vehicle rental business as it existed as of the date of
acquisition by Team. To the extent that Budget's corporate structure changes
or its method of doing business changes so that Net Vehicle Revenue is
reduced, then Team shall prepare, or shall cause Budget to prepare, a
calculation of Net Vehicle Revenue that most accurately reflects the Net
Vehicle Revenue that would have been generated from Budget's vehicle rental
business had such changes not occurred.
2. Audit Rights; Royalty Adjustment. (a) At the time that Team is
obliged to make payment of the Royalty under Section 1, Team shall deliver to
Ford documentation in support of its calculation of Net Vehicle Revenue. Such
documentation shall consist of relevant excerpts from Budget's trial balance or
similar accounting records, and any other accounting material which Ford may
reasonably request to substantiate Team's calculation of Net Vehicle Revenue.
The truth and accuracy of any information provided by Team to Ford pursuant to
this Section shall be certified by the chief financial officer of Team.
(b) Ford and Ford's accountants shall, within 180 days after payment
of the Royalty pursuant to Section 1, complete
A-2
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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A
REQUEST FOR CONFIDENTIAL TREATMENT AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION.
their review of the calculation of Net Vehicle Revenue and the Royalty. During
such 180 day period, Team shall furnish, or cause Budget to furnish, to Ford all
information reasonably requested by Ford for its review of such calculation. In
the event that Ford determines that the Royalty or Net Vehicle Revenue has not
been determined in accordance with Section 1, Ford shall notify Team in writing
(the "Ford Objection"), setting forth the basis of the Ford Objection in
reasonable detail and to the extent practicable the adjustments to the Royalty
or Net Vehicle Revenue which Ford believes should be made, on or before the last
day of such 180 day period. Team shall have 30 days after its receipt of the
Ford Objection to review the Ford Objection, and shall notify Ford in writing
immediately upon completion of such review. If Ford and Team are unable to
resolve all of their disagreements with respect to the determination of the
disputed items within 30 days following receipt by Ford of the notice given by
Team in accordance with the preceding sentence, they shall refer their remaining
differences to an internationally recognized firm of independent public
accountants (as to whose identity Ford and Team shall agree after good faith
negotiation (the "CPA Firm")), which shall, acting as experts in accounting and
not as arbitrators, determine on the basis of the standards set forth in Section
1, and only with respect to the specific remaining accounting related
differences so submitted (the "Disputed Items"), whether and to what extent, if
any, the Royalty or Net Vehicle Revenue requires adjustment. Ford and Team shall
direct the CPA Firm to use its best efforts to render its determination within
45 days after its engagement. The CPA Firm's determination concerning the
Disputed Items shall be conclusive and binding upon Ford and Team. The fees and
disbursements of the CPA Firm shall be borne equally by the parties. Ford and
Team shall make readily available to the CPA Firm all relevant books and records
and any work papers (including those of the parties' respective accountants)
relating to resolution of the Disputed Items which are reasonably requested by
the CPA Firm. The "Adjusted Royalty" shall be (i) the Royalty in the event that
(x) no Ford Objection is delivered to Team during the applicable 180 day period,
or (y) Ford and Team agree as to the amount of the Royalty, (ii) the Royalty,
adjusted in accordance with the Ford Objection in the event that Team does not
respond to the Ford Objection within the 30-day period following receipt by Team
of the Ford Objection, or (iii) the Royalty, as adjusted by either (x) the
agreement of Ford and Team, or (y) the CPA Firm.
(c) Within 10 business days following determination of the Adjusted
Royalty, Team shall make, or cause Budget to make, a payment equal to (i) the
difference, if any (the "Adjustment Amount"), between (A) the greater of the
Royalty and the Adjusted Royalty and (B) the Royalty, plus (ii) interest on the
Adjustment Amount, for the period from and including the date payment of the
Royalty is required to be made under Section 1 to but excluding the date on
which payment of the Adjustment Amount is made (calculated on the basis of the
actual number of days elapsed in such period over 360 days), at a per annum rate
equal to the
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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A
REQUEST FOR CONFIDENTIAL TREATMENT AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION.
"base rate" publicly announced by Citibank, N.A. or any successor thereto in New
York, New York on the date payment is required to be made under Section 1. The
Adjustment Amount payable pursuant to this Section shall be paid by wire
transfer of immediately available funds to an account designated in writing by
Ford.
3. Unconditional Obligation. The obligation to pay the Royalty shall be
unconditional. Team shall have no right of set-off or deduction against the
Royalty.
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