Franchise Agreement

The original documents were scanned as an image. The original file can be downloaded at the link above.


Sample Franchise Agreement

1800FLY1800 FRANCHISE AGREEMENT

THIS FRANCHISE AGREEMENT ("Agreement") is made this _______ day of

____________, 200_ (the "Effective Date"), by and between 1800FLY1800, Inc., a

California corporation ("Franchisor"), and ________________________, a(n)

_______________________("Franchisee"), with reference to the following facts:

A.         Franchisor owns certain proprietary and other property rights and interests in and to the "1800FLY1800" name and such other trademarks, trade names, service marks, colors, logotypes, insignias, trade dress and designs which Franchisor may from time to time authorize or direct Franchisee to use (the "Trademarks") in connection with the operation of one Vehicle in accordance the terms of this Agreement (the "Business").

B.         Franchisor has developed a system (the "System") for the establishment, development, management and operation of a system providing authorized Transportation Services under the Trademarks. The System does not include ordinary taxi services. The System includes certain Vehicle specification designs, color schemes, signage, equipment and materials, and certain uniform systems, procedures, methods, standards, specifications, marketing techniques and advertising programs.

C.         If Franchisee is required by law to have its own license or permit in order to perform hereunder, prior to entering into this Agreement, Franchisee shall have obtained such requisite permits in the Market Area, or has investigated the procedure for doing so and understands that it shall be Franchisee's responsibility to obtain them. Franchisee has represented that it is fully familiar with and understands such governmental authorities' rules and regulations governing the operation of the System.

D.        Franchisee desires to obtain a franchise and license to use the System and Trademarks in conjunction with the operation of one (1) Vehicle, and Franchisor desires to grant to Franchisee said franchise and license in accordance with the terms and conditions of this Agreement, and the Operations Manual (as defined below) pertaining thereto.

WHEREFORE IT IS AGREED:

I. CERTAIN TERMS AND DEFINITIONS

1.1 Certain Definitions and Applicable Information. Capitalized terms used herein shall have the meanings set forth below, unless otherwise set forth herein.

(a) "Designated Driver(s)" means _________________________________

(b) "Initial Fee" means $

LOSANGELES 227986vl2 62148-00001

1


(c) "Market Area" means the geographical area consisting of the following counties (as their boundaries are constituted on the Effective Date) (CHECK ONE): [ ] Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura;

[] ____________________________________________________________________:_______

(d) "Vehicle Identification Number" means_____________________.

□ Replacement Vehicle Required (see Section 3.5) [check if applicable]

1.2 Other Definitions. Capitalized terms used herein shall have the meanings set forth below, unless otherwise set forth herein.

"Affiliate" when used herein in connection with Franchisor or Franchisee, includes each Business Entity which directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with Franchisor or Franchisee, as applicable. Without limiting the foregoing, the term "Affiliate" when used herein in connection with Franchisee includes any Business Entity more than 50% of whose stock; membership interests; Partnership Rights; or other equity ownership interests (collectively "Equity") or voting control, is held by person(s) or Business Entities who, jointly or severally, hold more than 50% of the Equity or voting control of Franchisee. For purposes of this definition, control of a person or Business Entity means the power, direct or indirect, to direct or cause the direction of the management and policies of such person or Business Entity whether by contract or otherwise. Notwithstanding the foregoing definition, if Franchisor or its Affiliate has any ownership interest in Franchisee, the term "Affiliate" shall not include or refer to the Franchisor or that Affiliate (the "Franchisor Affiliate"), and no obligation or restriction upon an "Affiliate" of Franchisee, shall bind Franchisor, or said Franchisor Affiliate or their respective officers, directors, or managers.

"Applicable Law" shall mean and include applicable common law and all applicable statutes, rules, regulations, ordinances, policies and procedures established by any Governmental Authority, as in effect on the Effective Date hereof, and as may be amended from time to time.

"Assignment" shall have the meaning set forth in Section 10.2.1.

"Available Times" shall have the meaning set forth in Section 3.6.1.

"Business Entity" shall mean any limited liability partnership, general partnership or limited partnership (each of which shall be referred to as a "Partnership"), and any trust, association, corporation, limited liability company or other entity which is not an individual.

"Commission" shall have the meaning set forth in Section 5.2.2.

"Dispatch Equipment" shall have the meaning set forth in Section 3.3.1.

"Effective Date" shall mean the effective date of this Agreement as first above written.

"Financial Records" shall have the meaning set forth set forth in Section 8.11.2..

LOSANGELES 227986vl2 62148-00001

2


"Franchisor Customer" means any person or Business Entity (a) who then has, or previously has had, an account or contract with Franchisor, or who is affiliated with any such person or Business Entity, (b) who has arranged for Transportation Services through the Operations Center, excluding only those customers who were procured by Franchisee or its Designated Driver solely and exclusively through Franchisee's or such Designated Driver's own efforts during Unavailable Times without the use of any of Company's Marks and who are not otherwise "Franchisor Customers" under either subsection (a) or (b), and (c) all other persons or Business Entities who are employees of, or who have obtained Transportation Services under the account or contract of any Franchisor Customer described in subsection (a) or (b) above.

"Governmental Authority" shall mean and include all Federal, state, county, municipal and local governmental and quasi-governmental agencies, commissions and authorities, including the state public utilities commission, department of motor vehicles, police department and highway patrol, the department of airports and all other airport and port authorities.

"Marketing Fee" shall have the meaning set forth in Section 5.2.3.

"Net Fares" as used herein shall mean all sums (other than Special Fares for Transportation Services performed during Available Times) actually received by Franchisor on account of Transportation Services performed using the Vehicle, whether paid in cash or by credit card or otherwise. There shall be deducted from Net Fares for purposes of said computation (but only to the extent that they have been included) tips, airport fees, parking charges, tolls and port fees, and the amount of all sales or service tax receipts or similar tax receipts which, by law, are chargeable to customers, if such taxes are separately stated when the customer is charged. There shall also be deducted from Net Fares an amount equal to the Transaction Fee for each Transportation Services transaction performed using the Vehicle. Net Fares shall include all sums (including Special Fares) received for Transportation Services performed during Unavailable Times, whether received by Franchisor or by Franchisee.

"Non-Proprietary Products and Services" shall have the meaning set forth in Section 8.14.2.

"Operations Center" shall mean a central reservation system, operated at one or more facilities

by Franchisor or Franchisor's designee, pursuant to which customer reservations, routing instructions, and/or dispatching for Transportation Services are transmitted by Franchisor or such designee to a qualified employee, licensed, franchised or otherwise authorized "1800FLY1800" driver selected by Franchisor, or such designee, in its sole and absolute discretion, subject to requirements, if any, imposed by Applicable Law.

"Operations Manual" shall mean and refer to Franchisor's operations manual(s) described in Section 8.4, whether in tangible form or electronic media as the same may be amended and revised from time to time, including all bulletins, supplements and ancillary manuals.

"Renewal Franchise Agreement" shall have the meaning set forth in Section 4.2.1.

"Renewal Right" shall have the meaning set forth in Section 4.3.

LOSANGELES 227986vl2 62148-00001

3


"Partnership Right" shall have the meaning set forth in Section 10.2.3.

"Permits" shall mean and include all applicable franchises, licenses, permits, registrations, certificates and other operating authority required by Applicable Law, vehicle registration, state drivers license, and documentation evidencing title to Franchisee's Vehicle.

"Proprietary Products and Services" shall have the meaning set forth in Section 8.14.1.

"Reporting Date" shall mean the day(s) and time(s) each week that Franchisor appoints from time to time on which Franchisee shall visit Franchisor's offices and report and reconcile all of Transportation Services performed by Franchisee's Designated Driver(s) using the Vehicle transactions and Net Fares for the preceding period (i.e., since the last Reporting Date).

"Semi-Monthly Payment Date" shall mean the 5th day and the 20th day of each month, or the next business day if such date falls on a weekend or holiday, on which date Franchisee or Franchisor, as applicable, shall remit to the other the net sums then due, if any, pursuant to Section 5.6.

"Semi-Monthly Payment Period" shall mean, as applicable, (i) the period starting 1st day of each month and ending on the 15th day of the same month, and (ii) the period starting on the 15th day of each month and ending on the last day of the same month.

"Service Fee" shall have the meaning set forth in Section 5.2.1.

"Special Fares" mean all sums actually received on account of Transportation Services performed using the Vehicle, whether paid in cash or by credit card or otherwise, as a result of flat rate or fixed rate (i.e., other than hourly) Transportation Services.

"Term" shall the meaning set forth in Section 4.1.

"Trade Secrets" shall have the meaning set forth in Section 6.10.1.

"Transaction Fee" shall have the meaning set forth in Section 5.2.4.

"Transfer Fee" shall have the meaning set forth in Section 10.2.2(g).

"Transportation Services" means and includes providing demand responsive and/or scheduled fixed-route luxury sedan or luxury sport utility vehicle transportation services performed by Franchisee for passengers traveling to and from or among destinations within a specified metropolitan area, in accordance with the Operations Manual using Vehicles authorized by Franchisor, and such other Transportation Services as Franchisor may authorize from time to time, and expressly not including ordinary taxi services.

"Unavailable Times" shall have the meaning set forth in Section 3.6.1.

LOSANGELES 227986vl2 62148-00001

4


"Vehicle" means the luxury sedan or luxury sport utility vehicle purchased or leased by Franchisee in accordance with Section 3.1, or a subsequent replacement Vehicle approved in writing by Franchisor.

"Vehicle Inspection Fee" shall have the meaning given such term in Section 5.4.

"Vehicle Maintenance Program" shall have the meaning given such term in Section 5.4.

"Week" shall mean a 7 day period beginning at 12:00 A.M. Monday and ending at 11:59 P.M. on the following Sunday.

II. GRANT OF FRANCHISE AND LICENSE

2.1      Grant of Franchise and License. Franchisor hereby grants to Franchisee and Franchisee hereby accepts, a sublicense to use and display the Trademarks, and the right to use the System, in connection with the operation of one (1) Vehicle within the Market Area, in accordance with the System, and upon the terms and subject to the provisions of this Agreement and all ancillary documents thereto, during the term hereof.

2.2     No Sublicensing Rights. Notwithstanding anything to the contrary herein, only the Designated Driver(s) may operate the Vehicle, and Franchisee shall not sublicense the right nor otherwise permit anyone other than the Designated Driver(s) to operate the Vehicle or the System.

2.3     No Territorial Rights. The license granted to Franchisee under this Agreement is nonexclusive, and the Franchisor expressly reserves the exclusive, unrestricted right, in its sole and absolute discretion, directly and indirectly, through its employees, Affiliates, representatives, franchisees, assigns, agents and others to own or operate, and to franchise or license others (which may include its Affiliates and joint ventures in which it or its Affiliates are participants) to own or operate "1800FLY1800" Vehicles, cars, vans, buses and other vehicles operating under the Marks, and cars, vans, buses and other vehicles operating under names other than "1800FLY1800" (or any other of the Marks) at and from any location, and within any geographic area whatsoever, whether within or outside the Market Area.

III. VEHICLE; TRANSPORTATION SERVICES

3.1 Purchase or Lease of Vehicle.

3.1.1 If Franchisee does not own a Vehicle meeting Franchisor's standards and specifications at the time of execution of this Agreement, Franchisee shall acquire through purchase or lease within one month following the execution hereof a Vehicle meeting Franchisor's then-current standards and specifications. Such Vehicle shall be the Vehicle used by Franchisee pursuant hereto throughout the Term, unless Franchisor shall consent to the replacement thereof.

LOSANGELES 227986vl2 62148-00001

5


3.1.2 Franchisee shall identify the Vehicle by using the Vehicle Identification Number. Except in exceptional circumstances prescribed by Franchisor, and then only with Franchisor's prior written consent, the Vehicle may be used only by the Designated Drivers specified under this Agreement.

3.2     Vehicle Customizing and Detailing.

3.2.1     If at the time of execution of this Agreement the Vehicle has not been equipped, detailed, and otherwise customized in compliance with Franchisor's standards and specifications in effect for new "1800FLY1800" Vehicles at the time of the execution of this Agreement, Franchisee shall at its sole cost and expense promptly cause the Vehicle to be equipped, detailed, and customized in accordance with such standards and specifications. Following the execution hereof, and prior to Franchisee's customization of the Vehicle, Franchisor shall provide Franchisee with copies of Franchisor's specifications for the design and customization of the Vehicle and required equipment, color, decor, and signage. Unless Franchisor shall, in writing, agree to modifications thereof, when completed, said Vehicle shall in all respects comply with the Franchisor's specifications therefor.

3.2.2    Unless Franchisor otherwise agrees in writing, Franchisee shall acquire the Vehicle and complete the customization described above as soon as possible, but in no event later than two months after the date of execution of this Agreement. The time period for the completion of customization is of the essence of this Agreement. If Franchisee fails to perform its obligations contained in this Section 3.2. Franchisor may deem Franchisee's failure to so perform its obligations as aforesaid to constitute a material breach of this Agreement.

3.2.3    Franchisor shall have at all times, including during said customization, the right to inspect and examine the Vehicle, all equipment, color, decals and other signage used on or in connection with the Vehicle, for the purpose of insuring compliance with Franchisor's standards and specifications.

3.3     Communication Equipment.

3.3.1     The Vehicle, whether new or used, shall at all times be equipped (and Franchisee shall purchase) with such communication and dispatch equipment ("Dispatch Equipment") as Franchisor shall from time to time designate, which will permit two-way communication between the Vehicle's driver and the Operations Center or other dispatching facility designated by Franchisor. Such communication and dispatch equipment will meet certain reasonable minimum standards of performance as may be prescribed by Franchisor in writing from time to time, and Franchisee shall maintain the same in good condition and repair and upgrade or replace the same from time to time as Franchisor deems necessary, at Franchisee's expense.

3.3.2    Franchisee agrees that upon not less than 60 days prior written notice, Franchisor shall have the right to require Franchisee to acquire through purchase or lease a mobile data and communications terminal to enable Franchisor to transmit dispatching, routing instructions and other information to Franchisee electronically, and Franchisee to transmit customer and other information to Franchisor. Franchisee acknowledges that such mobile data

LOSANGELES 227986vl2 62148-00001

6


and communications terminal may continuously or periodically transmit the location and speed of the Vehicle and other information to Franchisor. Franchisee further acknowledges that this requirement will involve capital expenditures by Franchisee. Franchisee shall maintain the mobile data communications terminal in good condition and repair and upgrade or replace the same from time to time as Franchisor deems necessary, at Franchisee's expense. Franchisee agrees that it shall not tamper with the mobile data and communications terminal or any communications to or from such terminal.

3.4     Vehicle Lease Provisions. Franchisee shall not enter into any Vehicle lease agreement unless Franchisee shall have first provided Franchisor with a true and correct copy of the proposed Vehicle lease as well as any and all information which Franchisor may request concerning such Vehicle, and Franchisor shall have approved the terms thereof. As a condition of its approval of the lease, Franchisor may require that the lease contain language satisfactory to Franchisor providing: (i) that Franchisor or its designee shall have an option, without cost or expense to Franchisor, to assume the lease in the event of termination or expiration of the Agreement for any reason; (ii) that the lease may, at Franchisor's request, be assigned to Franchisor or a "1800FLY1800" franchisee approved by Franchisor during the initial term or any renewal term of the lease; (iii) that Franchisor will be given prior written notice of and have the right, but not the obligation, within 10 days of such notice to cure any default of Franchisee under the lease; and (iv) that upon expiration or termination of the lease for any reason, Franchisee shall, upon Franchisor's demand, remove all of Franchisor's Trademarks and Dispatch Equipment from the Vehicle. If Franchisee shall fail to make such alterations to the Vehicle, Franchisor will be given written notice and the right to have unrestricted access to the Vehicle to make such alterations, without liability to Franchisee or the leasing company, including any claim whether for trespass, conversion, or other tort or otherwise; and (v) such other lease terms as Franchisor deems necessary for the benefit of Franchisor and the "1800FLY1800" System. Franchisee's shall deliver a fully executed copy of said Vehicle lease to Franchisor promptly following execution thereof, and Franchisee shall duly and timely perform all of the terms, conditions, covenants and obligations imposed upon Franchisee under said lease.

3.5     Vehicle Specifications and Maintenance.

3.5.1    At all times throughout the Term, Franchisee's Vehicle (i) shall not be older than 5 years old (based on the dated that that the Vehicle was sold by the manufacturer's dealer or distributor); (ii) shall not have been used to drive in excess of 250,000 miles; and (iii) shall be either the same body style of the same model vehicle being manufactured at the relevant time or the immediately preceding body style of such model of vehicle. If at any time during the Term, the Vehicle shall fail to satisfy each of the requirements set forth in the preceding sentence, then Franchisee shall promptly (but not latter than 60 days following such failure) replace the Vehicle with a vehicle which complies with this Section. Except as required by Applicable Law or to comply with safety standards established by Governmental Authorities, and subject to Franchisee's obligations under Section 3.5.3 below, Franchisee shall not be required to replace the Vehicle more frequently than once every 5 years.

3.5.2    If the box in box in Section 1.1 indicating "Replacement Vehicle Required" is checked, then Franchisee shall, upon not less than 60 days written notice from

LOSANGELES 227986vl2 62148-00001

7


Franchisor, replace the Vehicle with a similar vehicle of a body style current as of the <jate of said notice and which otherwise satisfies all of the terms and conditions of this Agreement and the Operations Manuals.

3.5.3 Franchisee shall at all times maintain its Vehicle in good condition and repair, shall perform periodic maintenance, when and as necessary or required, but no less frequently than as set forth in the Operations Manual, and shall not cause or allow the Vehicle to be placed into service at any time that it is not clean, and free of dents, scratches or other damage or mechanical problems which materially and adversely affect its appearance or which render such Vehicle unsafe, excessively noisy or uncomfortable in which to ride. Without limiting the foregoing, Franchisee's Vehicle shall comply with all safety, maintenance and appearance regulations all Governmental Authorities.

3.6 Transportation Services.

3.6.1     Franchisee shall advise Franchisor periodically, at the times and in the manner prescribed by the Operations Manual, of the days and hours during which Franchisee desires to accept Transportation Services transactions. Those days and hours during which Franchisee advises Franchisor that Franchisee desires to accept Transportation Services transactions are referred to herein as "Available Times," and all other times are "Unavailable Times." Franchisor shall use commercially reasonable efforts to obtain and refer Transportation Services transactions to Franchisee during Available Times provided Franchisee is not then in default under this Agreement. Franchisee, however, acknowledges that Franchisor may not necessarily obtain and refer Transportation Services transactions during all (or any) Available Times, and shall have the right to allocate available Transportation Services to and among Franchisee, other franchisees, and drivers employed by Franchisor and its Affiliates as it deems appropriate.

3.6.2    Franchisee shall not be obligated to accept any Transportation Services transaction offered by Franchisor (or referred by the Operations Center) if the price negotiated by Franchisor (with the customer) therefor is unacceptable to Franchisee. If Franchisee agrees to accept a Transportation Services transaction, it shall perform the Transportation Services in accordance with the accepted terms negotiated by Franchisor, subject to the terms of this Agreement, and in accordance with the Operations Manual.

3.6.3    If and to the extent that Franchisee wishes to provide Transportation Services during Unavailable Times, (a) Franchisee shall not provide such Transportation Services. to any Franchisor Customer, and (b) Franchisee shall cause all reservations and appointments for such Transportation Services to be arranged and made by the Operations Center. Franchisee shall not accept or provide Transportation Services at any time unless the reservation or appointment for such Transportation Services is made or arranged by the Operations Center, Neither Franchisee, nor any Designated Driver, shall solicit or seek to provide Transportation Services during Unavailable Times to any Franchisor Customer. Subject to the foregoing and the other policies, terms and conditions as Franchisor may establish from time to time, Franchisee may provide Transportation Services to any person or Business Entity during Unavailable Times.

LOSANGELES 227986vl2 62148-00001

8


IV. TERM OF FRANCHISE AGREEMENT

4.1      Term. Unless sooner terminated in accordance herewith, the term of this Agreement shall commence upon the execution hereof and shall terminate 5 years after the date hereof (the "Term"). Notwithstanding the foregoing, if this Agreement is executed by Franchisee in connection with Franchisee's purchase of an existing franchise from another franchisee, the Term hereof shall be equal to the then remaining term of the franchise agreement for that franchise.

4.2     Renewal.

4.2.1     Subject to Section 4.4, Franchisee shall have the right, but not the obligation, at the expiration of the Term, to enter into a new franchise agreement in the form then generally being offered to prospective "1800FLY1800" franchisees operating in the state in which the Market Area is located, as modified pursuant to Section 4.2.2 hereof (the "Renewal Franchise Agreement") for a term equal to 5 years. The term of such Renewal Franchise Agreement shall commence upon the date of expiration of the Term hereof.

4.2.2    Notwithstanding anything herein contained to the contrary, the Renewal Franchise Agreement, if executed by parties hereto, shall differ and be modified from Franchisor'sthen-current form of Franchise Agreement in the following respects:

(a)        Franchisee shall pay a renewal fee equal to one-half of the initial fee (or similar fee) in effect at the expiration of the Term; and

(b)        The Renewal Franchise Agreement shall not provide Franchisee any further right to renew or enter into any additional franchise agreement at its expiration.

4.3     Form and Manner of Renewal. If Franchisee desires to exercise its right to enter into the Renewal Franchise Agreement (the "Renewal Right"), such right shall be exercised in the following manner:

4.3.1     Not less than 8 months nor more than 12 months prior to the expiration of the Term, Franchisee shall request from Franchisor in writing a copy of its then-current Offering Circular (including its then-current franchise agreement).

4.3.2    Within 30 days after receipt of Franchisee's said written request, - Franchisor shall deliver to Franchisee a copy of its Offering Circular (if required by law) and 2

copies of its Renewal Franchise Agreement, and, promptly upon receipt of same, Franchisee shall, in writing, acknowledge receipt thereof by executing and returning to Franchisor the form prescribed in said Offering Circular.

4.3.3    No sooner than the date of expiration of any waiting period prescribed by Applicable Law and no more than 30 days after Franchisee receives Franchisor's then-current Offering Circular, if applicable, and said copies of the Renewal Franchise Agreement,

9

LOSANGELES 227986vl2 62148-00001


Franchisee shall execute 2 copies of said Renewal Franchise Agreement and return same to Franchisor.

4.3.4    If Franchisee shall fail to perform any of the acts, or deliver any of the notices required pursuant to the provisions of this Section 4.3. in a timely fashion, such failure shall be deemed an election by Franchisee not to exercise its right and option to enter into the Renewal Franchise Agreement, and such failure shall cause Franchisee's said right and option to automatically lapse and expire.

4.3.5    Provided that Franchisee shall have exercised its Renewal Right, in the form and manner herein described, and shall have complied with all of the conditions contained in Section 4.4, Franchisor shall execute the Renewal Franchise Agreement executed by Franchisee and shall, promptly at the expiration of the Term hereof, deliver one fully executed copy of the Renewal Franchise Agreement to Franchisee.

4.4     Conditions Precedent to Renewal. Franchisee's right to enter into the Renewal Franchise Agreement, in accordance with the provisions of Section 4.2, is conditioned upon Franchisee's fulfillment of each and all of the following conditions precedent:

4.4.1     At the time Franchisee notifies Franchisor of its election to renew pursuant to Section 4.3.1 above and at all times from such notification to the time of the commencement of the term of the Renewal Franchise Agreement, Franchisee shall have fully performed all of its obligations under this Agreement, the Operations Manual and all other agreements which may during said period be in effect between Franchisee and Franchisor.

4.4.2    Franchisee shall have not committed 2 or more material breaches of this Agreement during any 24 month period during the Term or 4 or more material breaches of this Agreement at any time during the Term, for which Franchisor shall have delivered notices of default, whether or not such defaults were cured.

4.4.3    Prior to the expiration of this Agreement, Franchisee shall have leased or acquired a replacement Vehicle satisfactory to Franchisor, and customized and detailed such vehicle in the manner contemplated by Section 3.2 in accordance with Franchisor's then current standards and specifications for new "1800FLY1800" Vehicles.

4.5     Non-Applicability of Renewal Provision. If Franchisee has executed this Agreement as a Renewal Franchise Agreement, Sections 4.2. 4.3, and 4A hereof shall not be applicable, and Franchisee shall have no further right to renew upon the expiration of the Term hereof.

4.6     Notice Required by Law. If Applicable Law requires that Franchisor give notice to Franchisee prior to the expiration of the Term, this Agreement shall remain in effect on a week to week basis until the Franchisor has given the notice required by such Applicable Law. If Franchisor is not offering new franchises, is in the process of revising, amending or renewing its form of franchise agreement or offering circular, or is not lawfully able to offer Franchisee its then-current form of franchise agreement, at the time Franchisee advises Franchisor pursuant to Section 4.3.1 hereof that Franchisee desires to renew, Franchisor may, in its sole subjective discretion, (i) offer to renew this Agreement upon the same terms set forth herein for a renewal

10

LOSANGELES 227986vI2 62148-00001


term determined in accordance with Section 4.2 hereof, or (ii) offer to extend the Term Jiereof on a month to month basis following the expiration of the Term hereof for as long as it deems necessary or appropriate so that it may lawfully offer its then-current form of franchise agreement.

V. PAYMENTS

5.1      Initial Franchise Fee. Unless the Agreement is executed in connection with the transfer of an existing franchise, upon the execution of this Agreement, Franchisee shall pay to Franchisor $5,000.00 of the Initial Fee, and the remaining balance of the Initial Fee, in 60 equal monthly installments on the first day of each month thereafter in good funds. Except as herein expressly provided, the Initial Fee is not refundable in whole or in part and shall be deemed fully earned upon the execution hereof. If Franchisee has executed this Agreement in connection with a transfer of an existing franchise from another franchisee, no Initial Fee shall be payable, however, Franchisee's assignor shall have paid Franchisor the transfer fee specified in the assignor's agreement with Franchisor.

5.2     Service Fee; Commission; Transaction Fee; Marketing Fee; Unavailable Times Royalty.

5.2.1    Franchisee shall pay to Franchisor, in the manner described in Section 5.6, a fee (the "Service Fee") equal to $100 per Week if there is one Designated Driver during such Week and $125 per Week if there are two Designated Drivers during such Week.

5.2.2    Franchisor shall pay to Franchisee, in the manner described in Section 5.6. a commission (the "Commission") equal to 62% of Franchisee's Net Fares each Week on account of Transportation Services performed during Available Times, other than those for which a Special Fare applies.

5.2.3    Franchisor shall pay to Franchisee, in the manner described in Section 5.6, a fixed amount, as specified in the Operations Manual or as otherwise established by Franchisor from time to time, on account of Transportation Services transactions performed during Available Times for .which Franchisor has established a Special Fare.

5.2.4    Franchisee shall pay to Franchisor a dispatch fee (the "Transaction Fee") equal to (a) $1.00 for each order confirmation number issued by the Operations Center for each Transportation Services transaction performed during Available Times, and (b) $5.00, for each order confirmation number issued by the Operations Center for each Transportation Services transaction performed during Unavailable Times.

5.2.5    Upon 30 days prior written notice to Franchisee, Franchisor may establish a Marketing Fund (to be administered in accordance with Section 7.2 below), upon which Franchisee shall pay to Franchisor each Week, a marketing fee (the "Marketing Fee") equal to 1% of Franchisee's. Net Fares during the Week, in the manner described in Section 5.6. Notwithstanding the foregoing, from time to time, Franchisor may increase or decrease the Marketing Fee, provided that the Marketing Fee shall not exceed 3% of Franchisee's Net Fares.

LOSANGELES 227986vl2 62148-00001

11


5.2.6 Franchisee shall pay to Franchisor, in the manner described in Section 5.6.1, a royalty (the "Unavailable Times Royalty") equal to 20% of Franchisee's Net Fares each Week on account of Transportation Services performed during Unavailable Times.

5.3     Parking, Tolls, Airport and Port Fees. Unless otherwise instructed, Franchisee shall pay all parking charges, tolls, airport fees and port fees incurred in the operation of the Vehicle. Franchisee shall pay the parking, toll, airport and port fees when due, and such payments shall be made directly to the appropriate authority. Franchisee acknowledges that such fees and charges are subject to change by the charging entity. If the applicable Government Authority requests Franchisor to remit such fees on its franchisees' behalf, Franchisee remit such amounts to Franchisor on demand.

5.4     Vehicle Inspection Fees. To insure that the Vehicle complies with the Franchisor's standards and requirements and Applicable Law, Franchisor intends to establish arrangements with one or more designated vehicle maintenance and repair facilities who will provide monthly inspections of Franchisee's Vehicle, at rates and upon such terms and conditions as Franchisor may from time to time establish in good faith ("Vehicle Inspection Fee"). At this time, Franchisor does not charge a Vehicle Inspection Fee unless the Vehicle fails the inspection. Such facilities may also offer a vehicle maintenance program pursuant to which it will provide periodic oil change, lubrication, tire rotation and other ordinary and routine vehicle maintenance services ("Vehicle Maintenance Program"). Franchisee is not required to participate in such Vehicle Maintenance Program, however, Franchisor intends to require each designated facility to waive the Vehicle Inspection Fee for Franchisees who participate in the Vehicle Maintenance Program.

5.5     Other Payments. In addition to all other payments provided herein, Franchisee shall pay to Franchisor, its Affiliates and designees, as applicable, promptly when due:

5.5.1     The amount of all sales or service taxes, use taxes, personal property taxes and similar taxes, imposed upon Franchisee and required to be collected or paid by Franchisor on account of goods or services furnished by Franchisee by sale, lease or otherwise or on account of royalties or initial franchise fees collected by Franchisor from Franchisee.

5.5.2    All amounts advanced by Franchisor or which Franchisor has paid, or for which Franchisor has become obligated to pay on behalf of Franchisee for any reason whatsoever.

5.5.3    All sums due on account of the purchase of products or services by or for the account of Franchisee.

5.6     Manner of Payment; Payment of Excess to Franchisee.

5.6.1 Subject to Section 5.6.3, Franchisee shall pay to Franchisor the Service Fee, Transaction Fees, Vehicle Inspection Fee, Marketing Fee, and Unavailable Times Royalty, for each Semi-Monthly Payment Period and any other sums then due and owing by Franchisee to Franchisor on the next Semi-Monthly Payment Date.

LOSANGELES 227986vl2 62148-00001

12


5.6.2    Franchisee acknowledges that for convenience and efficiency Franchisor shall collect all fares (and other charges) paid by customers for Transportation Services performed by Franchisee during Available Times. Upon Franchisee's request, Franchisor may collect fares (and other charges) paid by customers for Transportation Services performed by Franchisee during Unavailable Times.

5.6.3    Franchisor shall cause the Service Fee, the Transaction Fee, Vehicle Inspection Fees, Marketing Fee, Unavailable Times Royalty, and any other sums due and owing by Franchisee to Franchisor to be debited from Commissions due to Franchisee. If the Commissions due by Franchisor to Franchisee exceed the aggregate Service Fee, Transaction Fees, Vehicle Inspection Fees, Marketing Fee, Unavailable Times Royalty, and any other sums due and owing by Franchisee to Franchisor, Franchisor shall remit such excess to Franchisee on each Semi-Monthly Payment Date with respect to the immediately preceding Semi-Monthly Payment Period, provided Franchisee shall have timely submitted all Day Sheets and other reports on or prior to the next preceding Semi-Monthly Payment Date. If Franchisee shall not have timely submitted all Day Sheets and other reports as required, then Franchisor may withhold paying such excess to Franchisee until such time as Franchisee shall have submitted all required reports.

5.7     Application of Funds. If Franchisee shall be delinquent in the payment of any obligation to Franchisor hereunder, or under any other agreement with Franchisor, Franchisor shall have the absolute right to apply any payments received from Franchisee to any obligation owed, whether under this Agreement or otherwise, notwithstanding any contrary designation by Franchisee as to application. If Franchisor's (or its designee's) Operations Center is used, it will collect customer fares and remit such amounts to Franchisor, net of any sums due it by Franchisor, and Franchisor shall in turn remit such amounts to Franchisee, net of any amounts due from time to time by Franchisee to Franchisor.

5.8     Interest on Late Payments. If Franchisee shall fail to pay to Franchisor any sums owed to Franchisor, promptly when due, Franchisee shall pay to Franchisor, in addition to all other amounts which are due but unpaid, interest on the unpaid amounts, from the due date thereof, at the rate of 1.5% per month, or the highest rate allowable under Applicable Law,

whichever is less.

5.9     Reporting.

5.9.1     Once each day, Franchisee shall deliver to Franchisor a "Day Sheet" for each day during such Week on a form prescribed by Franchisor which shall report, among other things, all fares, Transportation Services transactions and the number of cash and credit card transactions, for the applicable day, together with all credit card receipts, and coupons.

5.9.2    To the extent that customers shall pay for Transportation Services performed by Franchisee by credit card (or debit card), Franchisee, and each of its Designated Drivers, shall follow and comply with such rules and regulations regarding the acceptance of credit card (or debit card) payments, including, card imprints, receipts, delivery of merchant copy of credit card receipts, as are prescribed from time to time by Franchisor in the Operations Manual.

LOSANGELES 227986vl2 62148-00001

13


5.9.3 On each Reporting Date, Franchisee shall also submit to Franchisor such other report or reports (certified as correct and complete by Franchisee) as specified from time to time by Franchisor, in such manner (which may be electronically) and by such means as may be prescribed by Franchisor.

VI. TRADEMARKS AND TRADE SECRETS

6.1     Non-ownership of Trademarks. Nothing herein shall give Franchisee any right, title or interest in or to any of the Trademarks, except a mere privilege and license during the term hereof to display and use the same according to the terms and conditions herein contained.

6.2     Use of Trademarks. Subject to Section 6.7, the Business herein licensed and franchised shall bear the name "1800FLY1800" without any suffix or prefix attached thereto and Franchisee shall use and display such of the Trademarks and such signs, advertising and slogans as Franchisor may from time to time prescribe or approve. Upon expiration or sooner termination of this Agreement, Franchisor may, if Franchisee does not do so, execute in Franchisee's name and on Franchisee's behalf, any and all documents necessary in Franchisor's judgment to end and cause the discontinuance of Franchisee's use of the Trademarks, and Franchisor is hereby irrevocably appointed and designated as Franchisee's attorney-in-fact so to do.

6.3     Non-Use of Trade Name. If Franchisee is a Business Entity, it shall not use the Trademarks, or the word "1800FLY1800" or any words or symbols which are confusingly similar to the Trademarks, as all or part of Franchisee's name.

6.4     Use of Other Trademarks. Franchisee shall not display the trademark, service mark, trade name, insignia or logotype of any other person or Business Entity in connection with the operation of the Vehicle without the express prior written consent of Franchisor, which may be withheld in its sole subjective discretion.

6.5     Defense of Trademarks. If Franchisee receives notice, or is informed, of any claim, suit or demand against Franchisee on account of any alleged infringement, unfair competition, or similar matter on account of its use of the Trademarks in accordance with the terms of this Agreement, Franchisee shall promptly notify Franchisor of any such claim, suit or demand. Thereupon, Franchisor shall take such action as it may deem necessary and appropriate to protect and defend Franchisee against any such claim by any third party and shall indemnify Franchisee against all losses, costs or expenses incurred in connection therewith. Franchisee shall not settle or compromise any such claim by a third party without the prior written consent of Franchisor. Franchisor shall have the sole right to defend, compromise or settle any such claim, in its discretion, at Franchisor's sole cost and expense, using attorneys of its own choosing, and Franchisee agrees to cooperate fully with Franchisor in connection with the defense of any such claim. Franchisee may participate at its own expense in such defense or settlement, but Franchisor's decisions with regard thereto shall be final.

6.6     Prosecution of Infringers. If Franchisee shall receive notice or is informed or learns that any third party, which he believes to be unauthorized to use the Trademarks, is using

LOSANGELES 227986vl2 62148-00001

14


the Trademarks or any variant thereof, Franchisee shall promptly notify Franchisor of the facts relating to such alleged infringing use. Thereupon, Franchisor shall, in its sole discretion, determine whether or not it wishes to take any action against such third party on account of such alleged infringement of the Trademarks. Franchisee shall have no right to make any demand against any such alleged infringer or to prosecute any claim of any kind or nature whatsoever against such alleged infringer for or on account of such infringement.

6.7     Modification of Trademarks. From time to time, in the Operations Manual or in directives or bulletins supplemental thereto, Franchisor may add to, delete or modify any or all of the Trademarks. Franchisee, at Franchisee's sole expense, shall use, or cease using, as may be applicable, the Trademarks, including but not limited to, any such modified or additional trade names, trademarks, service marks, logotypes and commercial symbols, in strict accordance with the procedures, policies, rules and regulations contained in the Operations Manual or in written directives issued by Franchisor to Franchisee, as though they were specifically set forth in this Agreement.

6.8     Acts in Derogation of the Trademarks. Franchisee agrees that the Trademarks are the exclusive property of Franchisor, and Franchisee now asserts no claim and will hereafter assert no claim to any goodwill, reputation or ownership thereof by virtue of Franchisee's licensed use thereof, or otherwise. Franchisee agrees that it will not do or permit any act or thing to be done in derogation of any of the rights of Franchisor in connection with the same, either during the Term of this Agreement or thereafter, and that it will use the Trademarks only for the uses and in the manner licensed and/or franchised hereunder and as herein provided.

6.9     Assumed Name Registration. If Franchisee is required to do so by any statute or ordinance, Franchisee shall promptly upon the execution of this Agreement file with applicable government agencies or offices, a notice of its intent to conduct its business under the name "1800FLY1800". Promptly upon the expiration or termination of this Agreement for any reason whatsoever, Franchisee shall promptly execute and file such documents as may be necessary to revoke or terminate such assumed name registration, and, if Franchisee shall fail to promptly execute and file such documents as may be necessary to effectively revoke and terminate such assumed name registration, Franchisee hereby irrevocably appoints Franchisor as its attorney-in-fact to do so for and on behalf of Franchisee.

6.10   Trade Secrets.

6.10.1 Non-disclosure. Franchisor possesses and will continue to possess and develop confidential information which may include proprietary computer software; customer names, lists, and other information (including credit card information, telephone numbers, email addresses and physical addresses); and certain confidential specifications, procedures, concepts and methods of marketing and operating the Business (the "Trade Secrets"). Franchisor will disclose certain of its Trade Secrets to Franchisee in the Operating Manual, bulletins, supplements, confidential correspondence, or other confidential communications, and through the Franchisor's training program and other guidance and management assistance, and in performing Franchisor's other obligations and exercising Franchisor's rights under this Agreement.

LOSANGELES 227986vl2 62148-00001

15


6.10.2 Limits on use. Franchisee shall acquire no interest in the Trade Secrets other than the right to use them in developing and operating the Vehicle and Business during the Term of this Agreement. Franchisee's duplication or use of the Trade Secrets in any other endeavor or business shall constitute an unfair method of competition. Franchisee shall: (i) not use the Trade Secrets in any business or other endeavor other than in connection with the Vehicle and Business; (ii) maintain absolute confidentiality of the Trade Secrets during and after the Term of this Agreement; (iii) make no unauthorized copy of any portion of the Trade Secrets, including without limitation, the Operating Manual, bulletins, supplements, confidential correspondence, or other confidential communications, whether written or oral; and (iv) operate and implement all reasonable procedures prescribed from time to time by Franchisor to prevent unauthorized use and disclosure of the Trade Secrets, including without limitation, restrictions on disclosure to Designated Drivers and employees, and use of non-disclosure and non-competition provisions as Franchisor prescribes in employment agreements with employees who may have access to the Trade Secrets. Promptly upon Franchisor's request, Franchisee shall deliver executed copies of such agreements to Franchisor.

VII. ADVERTISING AND PROMOTION

7-1 General. Franchisee shall conduct all local advertising and promotion, if any, in accordance with such provisions with respect to format, content and media as are from time to time contained in the Operations Manual, or as otherwise directed by Franchisor in writing. No advertising material may be used by Franchisee without Franchisor's prior written approval.

7.2 Marketing Fund.

7.2.1     Upon establishment of a Marketing Fund by Franchisor, Franchisor shall administratively segregate on its books and records all Marketing Fees received from Franchisee and all other franchisees of Franchisor which are required to contribute to the Marketing Fund. Nothing herein shall be deemed to create a trust fund, and Franchisor may commingle advertising fees with its general operating funds and expend such sums in the manner herein provided. For each Vehicle that Franchisor or any of its Affiliates operate, Franchisor or such affiliate will similarly allocate to the Marketing Fund the amount that would be required to be contributed to the Marketing Fund if it were a franchised Vehicle.

7.2.2    If less than the total of all contributions and allocations to the Marketing Fund are expended during any fiscal year, such excess may be accumulated for use during subsequent years. If Franchisor advances money to the Marketing Fund, Franchisor will be entitled to be reimbursed for such advances.

7.2.3    An amount equal to all Marketing Fund revenues and allocations shall be expended for national, regional, or local advertising, public relations or promotional campaigns or programs designed to promote and enhance the image, identity or patronage of the Transportation Services Business operated under the Trademarks. Uses for such expenditures may include (a) conducting marketing studies, and producing and purchasing advertising art, commercials, musical jingles, print advertisements, point of sale materials, media advertising, outdoor advertising art, vehicle decals, and direct mail pamphlets and literature; and (b) payment

LOSANGELES 227986vl2 62148-00001

16


to Franchisor or its affiliates, for internal expenses incurred in connection with the operation of its marketing/advertising department(s), if any, and the administration of the Marketing Fund. Franchisor shall determine, in its final and subjective discretion, exercised in good faith, the cost, media, content, format, style, timing, allocation and all other matters relating to such advertising, public relations and promotional campaigns. Although the Franchisor will attempt to allocate marketing expenditures fairly and in good faith, nothing herein shall be construed to require Franchisor to allocate or expend Marketing Fees so as to benefit any particular franchisee or group of franchisees on a pro rata or proportional basis or otherwise. Franchisor may make copies of marketing materials available to Franchisee with or without additional reasonable charge, as determined by Franchisor. Any additional marketing shall be at the sole cost and expense of Franchisee

7.2.4 Upon written request, Franchisor shall furnish to Franchisee within 120 days after the end of each calendar year, a report for the preceding year, prepared and certified as correct by an officer of the Franchisor containing the calculations of the amount in the Marketing Fund which Franchisor actually expended during such calendar year and the amount remaining in the Marketing Fund which shall be carried over for use during the following year(s).

7.3      Vehicle Advertising; License Plate.

7.3.1     Franchisor shall have the sole and exclusive right to sell and place advertising or promotional materials of any kind on the exterior or interior of the Vehicle, and Franchisee shall place and display all such advertising material as Franchisor may direct from time to time. Except with the Franchisor's prior written consent (which may be withheld in its sole discretion), Franchisee may not advertise services or products or display or affix signs or decals to the exterior or interior of Vehicles in its fleet other than those required by Franchisor. Franchisor, in its marketing and promotional efforts and at its own expense, may periodically produce flyers, promotional handouts, signage, etc., for display. Franchisee agrees to display all current Franchisor promotional materials in or on the exterior of the Vehicle.

7.3.2    Franchisee shall apply for, obtain (if issued), and thereafter renew, a "personalized" license plate as required by Franchisor and Applicable Law. From time to time, upon Franchisor's request, Franchisee shall execute and deliver to Franchisor such documents and instruments as may be necessary to transfer such license plates to Franchisor or its designee upon the termination of this Agreement.

7.4     Promotional Campaigns. From time to time during the term hereof, Franchisor shall have the right to establish and conduct promotional campaigns on a national or regional basis, which may, by way of illustration and not limitation, promote particular products, services or marketing themes. If Franchisee elects to participate in such promotional campaigns, it shall do so upon such terms and conditions as the Franchisor may establish. Franchisee acknowledges and agrees that such participation may require Franchisee to purchase advertising material, posters, flyers, displays and other promotional materials.

7.5      Telephone Numbers, Directory Advertising, and Business Cards. Without Franchisor's prior written consent, which Franchisor shall not unreasonably withhold, but subject to such reasonable conditions as Franchisor may prescribe, Franchisee shall not

LOSANGELES 227986vI2 62148-00001

17


subscribe for or maintain any telephone numbers in the white pages and yellow pages of any telephone directory or directories in connection with the Vehicle or Franchisee's Business. Business cards and other promotional materials used by Franchisee shall be issued solely by Franchisor in accordance with its standards and specifications and may contain only the telephone number "1-800-359-1800," or other telephone number designated or permitted for use by Franchisor.

VIII. OPERATION OF THE BUSINESS

8.1      Standards of Operation. Franchisee at all times shall provide prompt, courteous, and efficient service to the public, competently and in a professional manner, and in all business dealings with members of the public. Franchisee will conform to the highest standards of honesty, integrity, fair dealing and ethical conduct. Franchisor's decision to grant a license to use the Trademarks to Franchisee is specifically conditioned upon Franchisee's agreement to conduct operations that meet Franchisor's high standards of customer service, vehicle and equipment cleanliness and maintenance and performance and Franchisee's agreement to refrain from doing anything which would tend to discredit, dishonor, reflect adversely upon, or in any manner injure the reputation and goodwill associated with Franchisor and the Trademarks.

8.2     Designated Driver of the Vehicle. Only the Designated Driver(s) may operate the Vehicle pursuant to this Agreement. Each Designated Driver must at all times own and control at least 50% of all equity interest and voting power of Franchisee. At no time may there be more than 2 Designated Drivers. Each Designated Driver shall possess and maintain all required Permits necessary for lawful operations of the Vehicle including a current driver license for the state in which the Market Area is located.

8.3     Hours of Operation. Notwithstanding the foregoing, but subject to Applicable Law, Franchisee will operate during such additional hours as necessary to accommodate demand in the Market Area. Franchisee and each Designated Driver shall comply strictly with California Vehicle Code Section 21702 which sets limits on drivers' hours with respect to compensated passenger transport. The statute reads as follows;

(a) No person shall drive upon any highway any vehicle designed or used for transporting persons for compensation for more than 10 consecutive hours nor for more than 10 hours spread over a total of 15 consecutive hours. Thereafter, such person shall not drive any such vehicle until eight consecutive hours have elapsed. Regardless of aggregate driving time, no driver shall drive for more than 10 hours in any 24-hour period unless eight consecutive hours off duty have elapsed.

(b) No person shall drive upon any highway any vehicle designed or used for transporting merchandise, freight, materials or other property for more than 12 consecutive hours nor for more than 12 hours spread over a total of 15 consecutive hours. Thereafter, such person shall not drive any such vehicle until eight consecutive hours have elapsed. Regardless of aggregate driving time, no

LOSANGELES 227986vl2 62148-00001

18


driver shall drive for more than 12 hours in any 24-hour period unless eight consecutive hours off duty have elapsed.

8.4     Operations Manual.

8.4.1     Franchisee shall operate the Vehicle in strict compliance with the standard procedures, policies, rules and regulations established by Franchisor and incorporated in Franchisor's Operations Manual.

8.4.2    The subject matter of the Operations Manual may include, without limitation, matters such as: forms, information relating to Vehicle and other equipment specifications, cash control, general operations, scheduling, dispatching, port operating procedures, reports, training and accounting; safety; design, color and other specifications for uniforms; display of signs and notices; authorized and required equipment, including specifications therefor; Trademark usage; insurance requirements; Vehicle lease requirements; advertising formats; standards of maintenance, performance and appearance of the Vehicle; and required posting of notices to customers as to how to contact the Franchisor to submit complaints.

8.4.3    Franchisor may modify the Operations Manual at any time and from time to time by the addition, deletion or other modification to the provisions thereof. All such modifications shall be equally applicable to all similarly situated franchisees who are required by their franchise agreements to comply therewith, and no such modification shall alter Franchisee's fundamental status and rights under this Agreement. Modifications in the Operations Manual shall become effective upon delivery of written notice thereof to Franchisee unless a longer period is specified in such written notice. Upon the execution of this Agreement, Franchisor shall furnish to Franchisee one copy of the Operations Manual, unless Franchisee purchased the Vehicle from an existing franchisee or entered into this Agreement as a Renewal Franchise Agreement in which case, as the case may be, Franchisee shall obtain the Operations Manual from the existing franchisee or retain the original Operations Manual furnished to him or her. Upon the expiration or termination of this Agreement for any reason whatsoever, Franchisee shall immediately return the Operations Manual to Franchisor. Franchisee shall not make, or cause or allow to be made, any copies or reproductions of all or any portion of the Operations Manual without Franchisor's express prior written consent.

8.5     Reservation System. All of Franchisee's reservation calls shall be processed through a central reservations and dispatch system operated by Franchisor, or its Affiliate, located at one or more Operation Centers. Franchisee acknowledges that the Operation Centers may process reservations for Franchisor, its Affiliates and others, and may provide services to such persons, who may offer competitive services (except as otherwise prohibited hereunder) or other services under the Mark. At Franchisor's request, Franchisee must purchase or lease, and thereafter install in the Vehicle, use, maintain and upgrade such computer facilities, equipment, hardware, software and other such equipment, which may include a mobile data terminal as described in Section 3.3.2. as Franchisor may from time to time direct, for the purpose of performing Franchisee's obligations hereunder. All such computer facilities, modems, facsimile equipment, hardware, software and other equipment must be compatible with

LOSANGELES 227986vl2 62148-00001

19


Franchisor's system as modified from time to time and must meet and be maintained in compliance with Franchisor's specifications therefor as set forth in the Operations Manual.

8.6     No Marketing Sites. Franchisee shall not operate any transportation referral site such as hotel transportation desks with Franchisor's prior written consent which may be withheld in its sole and absolute discretion. Franchisee shall not operate or authorize any internet web site, web page, e-mail address utilizing the Trademarks, or any of them.

8.7     No Diversion of Business. Except on an emergency basis (as determined by Franchisor), Franchisee shall not refer or otherwise divert potential customers to any other transportation provider, including any other business which Franchisee operates. The circumstances which constitute an "emergency" qualifying for an exception to this prohibition shall be provided to Franchisee from time to time in the Operations Manual and other written bulletins and notices. Franchisee shall immediately report to Franchisor referrals made upon such forms as Franchisor shall require.

8.8     Signs and Collateral Sales Material. Franchisee shall at all times display all signs and decals as directed by Franchisor on the interior and exterior of the Vehicle. Franchisee will obtain the prior written approval of Franchisor (which may be withheld in Franchisor's sole discretion) of any collateral sales material related to Franchisee's operation of its Business, including, but not limited to, rate cards and any graphics used on such collateral sales material.

8.9     Insurance.

8.9.1     Franchisor shall, from time to time, prescribe minimum standards and limits for certain types of insurance coverage which Franchisee shall purchase, including driver liability coverage, business interruption coverage, workers compensation, medical/disability, vehicle liability; physical damage and collision, and employer's liability insurance. Said standards and limits shall be established in the Operations Manual, or in other bulletins or directives issued from time to time and may specify, among other things, the amounts and types of coverage, minimum qualifications and ratings for insurer(s) selected by Franchisee (who shall in any event be subject to Franchisor's approval), and the maximum allowable deductibles. Franchisee shall, at its sole cost and expense, purchase, maintain, and keep in full force and effect such insurance at Franchisee's own expense, for Franchisee's own benefit and for the benefit of any employees of Franchisee.

8.9.2    Franchisee shall purchase such insurance promptly after execution hereof and in any event prior to placing the Vehicle in such service and shall keep same in full force and effect during the entire Term and any extensions of this Agreement, amending said insurance from time to time as necessary in order to remain in compliance with Franchisor's standards and specifications. Franchisee may obtain, on Franchisee's own behalf, and at Franchisee's own cost and expense, such insurance as Franchisee may from time to time desire, in addition to the insurance required herein and the insurance obtained on Franchisee's behalf by Franchisor. All insurance as may be obtained by Franchisor for Franchisee may be amended, cancelled, terminated or modified at any time upon 10 days written notice to Franchisee. All insurance purchased by Franchisee shall name Franchisor as an additional insured and shall provide that Franchisor shall be given at-least 10 days prior written notice of any termination, amendment,

LOSANGELES 227986vl2 62148-00001

20


The original documents were scanned as an image. The original file can be downloaded at the link above.