Under what circumstances can Budget operate or grant others the right to operate Budget franchises inside a franchisee's licensed territory?

merging with or acquiring other corporations or entities, or being acquired by another corporation or entity (including a corporation or entity that owns or operates systems or chains that may be competitive with or similar to the Network).

Budget reserves all rights not expressly granted to you under your Budget License Agreement, including the rights of Budget and its affiliates to: (1) operate, and grant others the right to operate Budget Franchises outside your licensed territory and, under certain circumstances (for National Accounts or if

you fail to comply with the Budget License Agreement, as described below), inside the licensed territory, on any terms and conditions Budget deems appropriate; (2) hire and/or appoint sales persons and general sales agents and negotiate and enter into local, regional, national, and international sales and marketing agreements with persons or entities located within your licensed territory; (3) use Budget's Proprietary Marks for any purpose within your licensed territory, other than for the operation of a Budget Rent A Car business location offering for rental the vehicles offered through your Budget Franchise ("Vehicles"), subject to Budget's rights under the Budget License Agreement; and (4) operate, and grant others the right to operate, businesses (including businesses that offer for rent or sale Vehicles and other motorized and non-motorized equipment and parking business) outside and within the licensed territory under trademarks different than Budget's Proprietary Marks.

Budget and its affiliates have established, and may in the future establish, other franchises or company-owned outlets or other channels of distribution selling or leasing products or services similar to those of a Budget Franchise under different trademarks or under Budget's Proprietary Marks. You may not use alternative distribution channels to make sales and you will receive no compensation for our sales through alternative distribution channels.

As described in Item 1, our affiliates currently operate and grant franchises for businesses that rent vehicles without drivers to the general public. Such affiliates' business locations might be located in your licensed territory, and these locations (whether within or outside your licensed territory) may solicit and accept orders from customers within your licensed territory. Likewise, your Budget Franchise may solicit and accept orders from customers and potential customers of our affiliates' business locations, without compensation to you. Budget is under no obligation to take any action if conflicts arise concerning Budget Franchise owners and our affiliates' business operators.

If you fail to: (i) open and continue operating the required minimum number of locations for your Budget Franchise, including requirements to develop additional rental offices at Budget's request; (ii) achieve and/or maintain average market penetration quotas Budget periodically establishes in the Budget License Agreement for automobile penetration; or (iii) participate in and comply with mandatory programs; then Budget may, in lieu of terminating your Budget License Agreement and in its sole discretion on 30 days' notice to you: (a) terminate the Budget License Agreement with respect to the portion of the licensed territory that Budget determines you have failed to develop; or (b) convert your exclusive rights in the geographic market that Budget determines is underdeveloped, and/or your rights with respect to those products and services that Budget determines are underdeveloped, to become non-exclusive in nature.

You may serve any customer without regard to his or her domicile. You may not operate your Budget Franchise or any part of it from a location outside the licensed territory. You may not pick up customers who reside outside your Budget Franchise's territory unless authorized by Budget in writing. Otherwise, there are no restrictions on your accepting customers who reside outside your licensed territory or on other Network members' accepting customers who reside inside your licensed territory. You must obtain Budget's prior written consent for your initial location, any change in your location, or construction of additional facilities (see Item 11).

Source: Item 12 — TERRITORY (FDD pages 61–63)