1
EXHIBIT 10C
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN
OMITTED AND FILED SEPARATELY PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE
SYMBOL "****" HAS BEEN INSERTED IN PLACE OF
THE PORTIONS SO OMITTED.
February 20, 1997
Hertz System, Inc.
000 Xxxx Xxxxxxxxx
Xxxx Xxxxx, Xxx Xxxxxx 00000
Dear Sirs:
The purpose of this letter is to set forth the terms and conditions of
the agreement between HERTZ SYSTEM, INC. ("Hertz") and FORD MOTOR COMPANY
("Ford") for a joint advertising program in which Hertz and its affiliates
(hereinafter sometimes collectively referred to as "Hertz") will promote the
rental and leasing of vehicles manufactured by or for Ford and its affiliated
companies ("Ford Vehicles"). According to the understanding of the parties:
1. The joint advertising program (i) will be for a term commencing as
of September 1, 1997, and subject to Paragraph 15 hereof, ending on August 31,
2007, (ii) will be conducted primarily in the United States of America, and
also in other countries, and (iii) will be conducted in such media or manner as
Hertz may select, provided that not more than 10% of the expense of the program
per year will be in purely local advertising and not more than 15% of the
expense of the program per year will be in collateral material, such as direct
mail literature, primarily associated with the Hertz # 1 Club Gold and related
programs. Each period of September 1 to and including the next following
August 31 shall be called an Advertising Year hereunder.
2. Subject to the provisions of Paragraph 3(a), Ford will pay
one-half of the costs of such joint advertising to the extent that it is
considered Eligible Advertising under Paragraph 4 hereof. Without prior
discussion with and approval by Ford, Ford's share of such costs (the "Base
Amount") will not exceed $39.0 million in the Advertising Year ending on August
31, 1998 (the "1998 Advertising Year"). For each of the Advertising Years
beginning after August 31, 1998, the Base Amounts shall be calculated as
follows:
(a) for the 1999 Advertising Year, an amount equal to $39.0 million
multiplied by: (i) a fraction, the numerator of which is the CPI for April 1998
and the denominator of which shall be the CPI for April 1997, or (ii) ****,
whichever is smaller.
(b) for the 2000 Advertising Year, an amount equal to the 1999 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 1999 and the denominator of which shall be the CPI for April 1998, or
(ii) ****, whichever is smaller.
2
Page 2
(c) for the 2001 Advertising Year, an amount equal to the 2000 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 2000 and the denominator of which shall be the CPI for April 1999, or
(ii) ****, whichever is smaller.
(d) for the 2002 Advertising Year, an amount equal to the 2001 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 2001 and the denominator of which shall be the CPI for April 2000, or
(ii) ****, whichever is smaller.
(e) for the 2003 Advertising Year, an amount equal to the 2002 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 2002 and the denominator of which shall be the CPI for April 2001, or
(ii) ****, whichever is smaller.
(f) for the 2004 Advertising Year, an amount equal to the 2003 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 2003 and the denominator of which shall be the CPI for April 2002, or
(ii) ****, whichever is smaller.
(g) for the 2005 Advertising Year, an amount equal to the 2004 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 2004 and the denominator of which shall be the CPI for April 2003, or
(ii) ****, whichever is smaller.
(h) for the 2006 Advertising Year, an amount equal to the 2005 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 2005 and the denominator of which shall be the CPI for April 2004, or
(ii) ****, whichever is smaller.
(i) for the 2007 Advertising Year, an amount equal to the 2006 Base
Amount multiplied by: (i) a fraction, the numerator of which is the CPI for
April 2006 and the denominator of which shall be the CPI for April 2005, or
(ii) ****, which ever is smaller.
As used herein, "CPI" means the United States Department of Labor's Bureau of
Labor Statistics Revised Consumer Price Index for All Urban Consumers, or the
successor of such Index. The costs of such joint advertising shall include
Hertz s direct costs, including costs of materials, of preparing and
distributing Hertz charge cards or Hertz-sponsored credit cards and related
materials (but not other costs of Hertz's charge card department), of preparing
and distributing direct mail advertising material (advertising which is
contemplated by this Agreement), and of administering the Hertz advertising
department.
3. (a) As it is the express purpose and intent of the joint
advertising program (and the payments provided thereunder) to increase the
demand for the rental of, and thereby increase the demand for the purchase by
retail buyers of, Ford Vehicles, it is the understanding and agreement of the
parties hereto that, during each Advertising Year, Ford will not be required to
pay Hertz any amounts under Paragraph 2 if the Ford Vehicle Share is not at
least 55%; provided, however, that Ford will be required to pay such amounts to
the extent that Hertz's failure to achieve a 55% Ford Vehicle Share was
attributable to (i) Ford s failure to make Ford Vehicles available for
acquisition by Hertz in quantities sufficient to achieve a 55% Ford
3
Page 3.
Vehicle Share, or (ii) the fact that Ford Fleet Programs were not competitive
with those similar fleet programs offered by other automotive manufacturers, as
to terms and conditions; provided further, however, that in no event shall Ford
be required to pay Hertz under Paragraph 2 should the Ford Vehicle Share be
less than 40%.
Notwithstanding the preceding sentence, if Ford's failure to make available
sufficient quantities of Ford Vehicles is caused by a production disruption of
more than one year due to (i) a shortage or curtailment of material, labor,
transportation or utility service; (ii) any labor or production difficulty;
(iii) any governmental action; or (iv) any cause beyond the reasonable control
of Ford, then the parties will negotiate in good faith to reduce the amounts
under Paragraph 2 above by amounts reflective of the nature, extent and
duration of the production disruption and the Ford Vehicle Share actually
achieved. For the purposes of this Agreement, (i) "Ford Vehicle Share" means
the percentage that new Ford Vehicles acquired in an Advertising Year for Hertz
s domestic U.S. corporate fleet represent of the total vehicles acquired for
such domestic U.S. corporate fleet in such Advertising Year,(ii) "Ford Fleet
Programs" mean the price discount, guaranteed resale or repurchase, incentive
or similar programs offered by Ford and Ford affiliates whose primary business
is the sale or manufacture and sale of vehicles, and (iii) Hertz's domestic
U.S. corporate fleet shall not include the fleets of independent businesses or
individuals licensed by Hertz for the daily car rental business as part of the
Hertz System.
(b) In addition to the Base Amount payments for joint advertising
under Paragraph 2 above, Ford will pay Hertz 100% of the cost of Eligible
Advertising in excess of those costs qualifying for the maximum contribution
under Paragraph 2, related solely to corporate car rental programs during each
Advertising Year in accordance with the schedule below:
If the FordVehicle Share Ford's additional payment for Eligible
Should Reach: Advertising of Corporate Car Rental
Programs will be (in millions):
58% ****
**** ****
**** ****
**** ****
**** ****
**** ****
**** ****
**** ****
**** ****
**** ****
**** ****
**** ****
**** ****
4
Page 4.
Ford's additional payments will be subject to the same annual increases, based
on the CPI, as defined in Paragraph 2 above.
Ford shall be required to make additional payments hereunder only to the extent
that Hertz's total expenditure for Eligible Advertising in an Advertising Year
exceeds those costs subject to Ford s one-half contribution under Paragraph 2.
By way of example:
Eligible Advertising
Costs & Ford Contribution Amount of Hertz
Hertz Total under Paragraph 2 Entitlement to
Expenditure for Supplemental Support
Eligible Advertising Eligible Adv. Based Upon **** Ford
In Advertising Year Adv. Payment Vehicle Share
(Mils) (Mils) (Mils) (Mils)
Example A **** **** **** ****
Example B **** **** **** ****
Example C **** **** **** ****
The calculation of such additional payments for Hertz's corporate advertising
costs will be subject to the following terms:
(i) By no later than August 15 of each Advertising Year, Hertz will
submit to Ford a written estimate of the Ford Vehicles to be delivered
to Hertz and its Ford Vehicle Share for the following Advertising
Year.
(ii) On the first day of each quarter, of each Advertising Year, Ford
will pay Hertz one quarter of that year's amount of supplemental
support as calculated from the schedule in this Paragraph 3(b) based on
the written estimate of Ford Vehicle Share for its domestic U.S.
corporate fleet submitted by Hertz in accordance with Paragraph 3(b)(i)
above.
(iii) By no later than August 15 of each Advertising Year, Hertz will
provide Ford with a reconciliation of Hertz's total vehicle deliveries
to its domestic U.S.corporate fleet and Ford Vehicles delivered to its
domestic U.S. corporate fleet during that Advertising Year. If Hertz's
Ford Vehicle Share falls short of the Ford Vehicle Share estimated
pursuant to Paragraph 3(b)(i), the September 1 payment in the following
5
Page 5.
Advertising Year will be reduced by any amounts prepaid by Ford
pursuant to Paragraph 3(b)(ii) based on the actual Ford Vehicle Share
attained; provided however, that no reduction in such payment shall be
required if Hertz s failure to achieve the estimated Ford Vehicle
Share was attributable to a failure by Ford to make Ford Vehicles
available in quantities sufficient to achieve the estimated Ford
Vehicle Share. Notwithstanding the preceding sentence, if Ford's
failure to make available sufficient quantities of Ford Vehicles is
caused by a production disruption of more than one year due to (i) a
shortage or curtailment of material, labor, transportation or utility
service; (ii) any labor or production difficulty; (iii) any
governmental action; or (iv) any cause beyond the reasonable control
of Ford, then the parties will negotiate in good faith to reduce the
amounts under Paragraph 2 above by amounts reflective of the nature,
extent and duration of the production disruption and the Ford Vehicle
Share actually achieved. If any refund is due Ford, pursuant to this
provision with respect to the Advertising Year ending on August 31,
2007, Hertz will make payment of such amount to Ford no later than
September 15, 2007.
4. To be considered Eligible Advertising under the joint
advertising program, advertising must:
a. be published, or placed or controlled by Hertz or its
affiliates; and
b. indicate that Hertz features Ford Vehicles or refer to
Ford Vehicles at least once in a phrase, such as
"Hertz rents Fords and other fine cars (or in a
manner with a leadership and influence value)," and
with a prominence that is reasonably satisfactory to
Ford; and
c. where feasible, use or contain a pictorial
representation of a Ford Vehicle approved by Ford, in
a manner and with a prominence reasonably
satisfactory to Ford; and
d. not contain any pictorial representation, trade name
or endorsement of, or testimonial to, any vehicle
other than a Ford Vehicle, or any reference by name
to any vehicle manufacturer other than Ford or one of
its affiliates, except as Ford may otherwise consent,
it being understood that vehicles other than Ford
Vehicles may be mentioned and pictured (i) in Hertz's
tariffs, directories or rate sheets distributed
outside the continental United States or distributed
inside the continental United States for rentals
outside the continental United States, (ii) in the
6
Page 6.
advertising with Ford's consent, which shall not be
unreasonably withheld, of a vehicle for which, at the
time, there is no comparable Ford Vehicle, and (iii)
in advertising with Ford's consent, which shall not be
unreasonably withheld, in any country in which Ford
Vehicles represent less than 25% of the total Hertz
corporate fleet in such country; and
e. comply with the provisions of Paragraphs 5 and 6
hereof.
5. While this Agreement is in effect, Hertz will not use, and to the
extent practicable will not permit any of its affiliates to use, and will use
its best efforts to prevent its licensees and affiliates from using, any
advertising that contains the Ford script-in-oval trademark, the word "Ford" in
script or any statement that is detrimental to Ford or any of Ford's
affiliates, or to the good name of Ford or any of its affiliates, or to any
product made or sold by Ford or its affiliates.
6. Ford will furnish Hertz, from time to time, pictorial
representations and vehicles for Hertz-sponsored photo shoots of Ford Vehicles
for use in Eligible Advertising. Each pictorial representation of a Ford
Vehicle used in an Eligible Advertisement originally released more than one
month after the public introduction of a new model of such Ford Vehicle will,
if practicable, be a pictorial representation of such new model.
7. Hertz will hold in confidence all pictorial representations of
Ford Vehicles, and all information and data disclosed by Ford to Hertz
hereunder; and will not use or disclose the same to others except as required
to carry out the purpose of this Agreement or as authorized by Ford in writing.
Hertz will impose, insofar as practicable, a similar restriction on Ford's
behalf on its parent and on its affiliates and will use its best efforts to
cause its licensees and the licensees of its parent and affiliates and all
others to whom it discloses any of such material to hold such representations,
information and data in confidence.
8. Hertz will use all reasonable efforts to obtain all Eligible
Advertising at competitive rates and charges and will notify Ford in writing of
the agency or agencies handling the same from time to time. Hertz will furnish
to Ford upon request, during the term hereof, copies or examples of all
advertising, including, without limitation, print advertisements, collateral
material, mat services, telecommunication material, and outdoor displays
prepared for Hertz or on Hertz's behalf and placed by or through its
advertising agencies during the month preceding such request.
7
Page 7.
9. While this Agreement is in effect, Ford will pay Hertz, toward
Ford's share of the costs of Eligible Advertising, as provided in Paragraph 2
hereof, on the first day of each quarter (i.e., September 1, December 1, March
1 and June 1) in each Advertising Year during the term hereof, one-quarter of
the respective annual amounts specified in Paragraph 2.
a. In no event xxxx Xxxx be required hereunder to
contribute:
(i) any portion of funds paid by Hertz s
licensees (other than Hertz s parent or
affiliates) for local advertising, or
(ii) any portion of funds used directly or
indirectly for tariffs, directories or rate
sheets, to the extent used to advertise
vehicles other than Ford Vehicles, except as
Ford may otherwise consent, and
b. As soon as practicable after the end of each quarter
of each 12 month period beginning January 1 and
ending December 31 during the term of this Agreement
("Calendar Year"), and as soon as practicable after
the termination of this Agreement, Hertz will deliver
to Ford a statement in reasonable detail for such
quarter or for the final period preceding
termination, certified by Hertz' s treasurer,
controller, or an assistant treasurer or assistant
controller, setting forth the amount spent or
committed by Hertz during said period for Eligible
Advertising. Ford may at any time proportionately
reduce any quarterly payment if, during the year, the
sum of its quarterly payments thus far in such year
substantially exceeds 50% of the cost thus far for
Eligible Advertising, and may continue such reduction
as long as such excess exists.
c. As soon as practicable at the end of each Calendar
Year prior to the termination hereof, and in no event
later than April 1 of the following Calendar Year,
Hertz will deliver to Ford a statement in reasonable
detail for such Calendar Year, certified by its
treasurer, controller, assistant treasurer or
assistant controller, setting forth receipts for and
expenditures or commitments made, charged or
chargeable to said Calendar Year, and Hertz will pay
to Ford or charge to the next quarterly payment any
excess of Ford s payments in that Calendar Year over
50% of the total amount expended or committed for
Eligible Advertising for such Calendar Year. For
this purpose, Ford's payments
8
Page 8.
in any Advertising Year will be pro-rated equally over
each month in each Calendar Year as appropriate.
d. Within a reasonable time after any termination of
this Agreement, Hertz will deliver to Ford a
statement in reasonable detail, certified by its
treasurer, controller, assistant treasurer, or
assistant controller, setting forth its expenditures
for Eligible Advertising during the period between
the first day of the Calendar Year in which such
termination will have occurred and the date of such
termination, and also setting forth the amount held
in its advertising funds or the advertising funds of
its parent or affiliates as of the date of
termination of this Agreement, less all accrued
liabilities chargeable thereto, or commitments made
as of said date, plus prepaid expenses which may have
been charged to such funds, such as for non-Ford
components of spectacular outdoor displays (which
will have been amortized over the shorter of the term
of the applicable lease or five years from the date
such display commenced), which will be restored to
such funds on a prorata basis, plus the amount, if
any, by which expenditures are in excess of the
limitations agreed upon for local advertising and
collateral material (herein sometimes called "the
termination date balance of such funds") and Hertz
will simultaneously with the delivery of said
statement to Ford, pay the portion of the termination
date balance of such funds which Ford has theretofore
contributed, or Ford will pay to the funds any sum so
shown to be due, as the case may be.
10. Subject to Paragraph 11 hereof, Hertz will have sole discretion
and control over all copy, art work, editorial matter, media, and release dates
for all Eligible Advertising.
11. Hertz warrants that no Eligible Advertising, and no other item
released by Hertz or anyone under its control that contains any pictorial
representation of a Ford Vehicle or any reference to Ford or its affiliates,
will violate the copyright or right of privacy of, or constitute a libel or
slander or actionable derogation of, or violate any legal or equitable right
of, any person or entity.
12. Hertz will indemnify and hold harmless Ford, its dealers, its
affiliates and their dealers from and against all claims by third parties,
damages, liabilities, losses, costs and expenses arising out of or connected
with any Eligible Advertising or any other advertising, promotion or publicity
released by Hertz or under Hertz's control. Ford will indemnify and
9
Page 9.
hold harmless Hertz, its affiliates, and Hertz's licensees and the licensees of
its affiliates, from and against all claims by third parties, damages,
liabilities, losses, costs and expenses arising out of or connected with the
use, pursuant to this Agreement, of any pictorial representation, information
or data furnished by Ford hereunder.
13. This Agreement is not made in connection with or as part of any
transaction related to the sale of any Ford Vehicle or Vehicles, and nothing
contained herein will be construed as imposing, directly or indirectly, any
obligation on anyone to purchase or supply any Ford Vehicle or Vehicles.
14.(a) Except as otherwise specifically provided in this Agreement, if there
is published, placed or paid for by Hertz or anyone under its control, by its
parent or any of its affiliates, any advertising of any make of vehicle other
than a Ford Vehicle which Ford believes has reduced or may reduce the value to
Ford or its affiliates of the joint advertising program provided hereunder,
Ford in its sole discretion may, after thorough discussion with Hertz,
terminate this Agreement as of the end of any month by giving Hertz at least
twenty (20) days' prior notice of termination. However, Ford shall have no
right of termination with respect to (i) advertising published, placed, or paid
for by any of Hertz's licensees or any licensee of any of its affiliates,
unless such advertising is published or placed with the approval or consent of
Hertz or its affiliates, (ii) advertising published or placed with Ford's
consent of a vehicle for which, at the time, there is no comparable Ford
Vehicle, or (iii) advertising published or placed with Ford's consent in any
country in which Ford Vehicles represent less than 25% of the total Hertz
corporate fleet in such country.fp
(b) If either Hertz or Ford shall be in breach of any provision of
this Agreement, the other may terminate this Agreement as of the last day of
any succeeding month by giving at least twenty (20) days' prior notice of
termination to the party in breach unless such breach is cured within such
notice period, or, if not capable of being cured within said notice period, the
curing thereof is commenced and proceeds with all due diligence during said
notice period and is cured within sixty (60) days after such notice.
15. This Agreement will not terminate as provided in Paragraph 1,
unless either party has served the other not less than one (1) year prior
thereto (e.g., not later than September 1, 2006) with notice of its intent to
terminate this Agreement. In the absence of such notice, this Agreement will
continue from year to year thereafter until terminated by notice, in accordance
with the provisions hereof. Without limiting in any way the application of the
other provisions hereof, to the extent this Agreement continues past August 31,
2007, Ford's
10
Page 10.
payments to Hertz under Paragraphs 2 and 3 will be subject to adjustments for
inflation, if any, using the formula set forth in Paragraph 2.
16. If this Agreement is rendered illegal by enactment of a statute
or a final decision by a court or governmental agency of competent
jurisdiction, either party may terminate the Agreement after reasonable
consultation with the other party. If, during the term hereof, any federal or
state law is enacted which would require Ford, by reason of the existence of
this Agreement, to provide its franchised automobile dealers, operating as
such, with annual payments in an aggregate amount equal to or greater than
those provided to Hertz, either in the form of price reductions or otherwise,
then Ford, at its option, may terminate this Agreement, effective immediately,
without any further obligations by either party to the other except as to such
obligations that are due and payable as of the effective date of termination.
17. Ford, through its duly authorized agents or representatives, may
examine all pertinent records of Hertz, its parent, or its affiliates at any
and all reasonable times for the purposes of determining, and to the extent
necessary for the determination of, the accuracy of all statements that may be
furnished by Hertz to Ford hereunder. Such records will include all documents
pertaining to the advertising funds of Hertz or its affiliates, and to the
number of vehicles in Hertz's domestic U.S. corporate fleet.
18. At Ford's request from time to time and upon not less than ten
(10) days' prior notice to Hertz, Hertz's duly authorized officials shall meet
with Ford representatives at Hertz's headquarters for the purpose of discussing
the joint advertising program, particularly as it relates to Ford's name (or
Ford's affiliates names) and good will or any of its trade or service marks.
Hertz will use any such trade or service marks only in strict accordance with
written authorization received from Ford and will in good faith, when not
inconsistent with Hertz's objectives, seek to meet Ford's other requests or
objections. Major changes in advertising campaigns or strategy will be
discussed with Ford in advance of implementation.
19. This Agreement may not be changed in any way except in writing
signed and delivered by the duly authorized representatives of Ford and Hertz.
20. Any notice, consent, approval or other communication required or
permitted hereunder will be in writing, will be given by registered or
certified United States mail and will be deemed given when deposited in the
mail, postage paid and addressed as follows:
11
Page 11.
(a) if to Ford:
Ford Motor Company
Xxxxxx xx xxx Xxxxxxxxx
Xxx Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000; and
(b) if to Hertz:
Chairman of the Board
Hertz System, Inc.
000 Xxxx Xxxxxxxxx
Xxxx Xxxxx, Xxx Xxxxxx 00000
Such addresses may be changed by notice given in like manner.
21. This Agreement will be deemed to be a Michigan agreement and will
be construed and governed by the laws of the State of Michigan.
22. The joint advertising agreement dated as of January 1, 1988
("1988 Agreement"), between Ford and Hertz shall terminate as of midnight,
August 31, 1997, and this Agreement shall supersede the 1988 Agreement.
12
Page 12.
If the foregoing correctly states the understanding of both parties,
on this subject, please sign and return a copy of this letter.
Yours very truly,
FORD MOTOR COMPANY
By:/s/ X.X.Xxxxx
-----------------------------------
X. X. Xxxxx
Vice President - Marketing
& Sales
AGREED:
HERTZ SYSTEM, INC.
By:/s/ X.X. Xxxxx
-----------------------------
Xxxxx X. Xxxxx
Chairman of the Board
