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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File No: 333-20397
RYDER TRS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 38-331-3542
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1560 Broadway, Suite 1800, Denver, Colorado 80202
(Address of Principal Executive Offices)
(303) 376-7003
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes (X) No ( )
There is no established public trading market for any class of the
Company's common equity.
As of March 15, 1998 the number of outstanding shares of (i) Class A
Common Stock, par value $.01 per share, of the registrant was 109,090, (ii)
Class B Common Stock, par value $.01 per share, of the registrant was 13,910,
and (iii) Class C Common Stock, par value $.01 per share, of the registrant was
975.
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RYDER TRS, INC.
TABLE OF CONTENTS
Page
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PART I
Important Factors Relating to Forward Looking Statements........... 1
Item 1. Business........................................................... 1
Item 2. Properties......................................................... 7
Item 3. Legal Proceedings.................................................. 7
Item 4. Submission of Matters to a Vote of Security Holders................ 7
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters............................................................ 8
Item 6. Selected Financial Data............................................ 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 11
Item 8. Financial Statements and Supplementary Data........................ 14
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.............................................. 14
PART III
Item 10. Directors and Executive Officers of the Registrant................. 15
Item 11. Executive Compensation............................................. 17
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 19
Item 13. Certain Relationships and Related Transactions..................... 21
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 23
Signatures.................................................................. 27
(i)
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PART I
IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS
This Form 10-K contains certain forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations and business of Ryder TRS, Inc.
and its subsidiaries, including statements under Item 1 - Business and Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations. These forward looking statements involve certain risks and
uncertainties. No assurance can be given that any of such matters will be
realized. Factors that may cause actual results to differ materially from those
contemplated by such forward looking statements include, among others, the
following: (i) the success of initiatives undertaken by Ryder TRS, Inc. to
increase its revenues and improve its profitability; (ii) competitive pressure
in the industry; and (iii) general economic conditions.
ITEM 1. BUSINESS
General Development of Business
As used in this Report, the term the "Company" refers (i) for periods prior
to the Acquisition (as defined below), to the Consumer Truck Rental Division
(the "Division") of Ryder Truck Rental, Inc. ("RTR"), a subsidiary of Ryder
System, Inc. ("RSI"), and (ii) for periods after the Acquisition, to Ryder TRS,
Inc. and its subsidiaries as constituted after giving effect to the Acquisition.
Ryder(R) is a registered trademark of RSI and is used throughout this report
pursuant to a license.
The Company was incorporated under the laws of the State of Delaware on
September 5, 1996. On October 17, 1996 (the "Acquisition Closing Date"),
pursuant to an Asset and Stock Purchase Agreement and other related agreements
(collectively, the "Acquisition Agreements"), the Company acquired from RTR
substantially all of the assets of the Division (the "Acquisition"). The
aggregate adjusted cash purchase price was $573.3 million. The assets acquired
included trucks, moving equipment and related accessories, prepaid advertising,
license fees and certain hardware and management information systems. The assets
also included the royalty-free right to use the 1-800-GO-RYDER telephone number
and other Ryder trademarks. The Company also acquired four subsidiaries of RTR:
(i) Ryder Move Management Inc. ("RMM"), (ii) Ryder Truck Rental One-Way, Inc.,
(iii) The Move Shop, Inc. and (iv) Ryder Relocation Services, Inc. See "--
Narrative Description of Business--Relationships with RSI." Pursuant to the
Acquisition Agreements, the Company agreed to assume all liabilities and
obligations arising out of the conduct of business by the Company on or after
the Acquisition Closing Date. RTR and the Company agreed that the Company would
not be liable for environmental conditions existing prior to the Acquisition
Closing Date, whether discovered or undiscovered.
Financing for the Acquisition, and for related fees and expenses, consisted
of (i) $123.0 million of equity capital provided by Questor Partners Fund, L.P.
and Questor Side-by-Side Partners, L.P. (collectively, "Questor") and certain
other investors; (ii) $350.0 million of term loans (the "Term Facility") and
$31.0 million of revolving loans (the "Revolving Credit Facility") borrowed
under a $500.0 million senior secured credit facility; and (iii) $100.0 million
of loans borrowed under a senior subordinated loan facility. The Acquisition,
the financing thereof, and the payment of related transaction fees and expenses
are referred to herein as the "Transactions." The Company used the net proceeds
from an offering (the "Offering") of $175.0 million of the Company's 10% Senior
Subordinated Notes (the "Notes") issued and sold in November, 1996 to repay
certain indebtedness.
During 1997, the Company's special purpose subsidiary, FCTR, Inc. ("Finco")
entered into a commercial paper program that permits the issuance of up to
$450.0 million in commercial paper notes. In conjunction with the commercial
paper program, the Company refinanced the amounts outstanding under its Term
Facility and Revolving Credit Facility. In addition, the Company entered into an
agreement pursuant to which the Company has established a five year, $40.0
million secured revolving credit facility. The Company has also entered into a
$50.0 million facility for the issuance of cash collateralized letters of
credit.
Subsequent Event -- On March 4, 1998, the Company and Budget Group, Inc.
("Budget") announced the signing of a merger agreement under which the Company
is to be acquired by Budget and is to become a separate wholly-owned subsidiary
of
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Budget. Budget also operates Budget Car and Truck Rental. Under the merger
agreement, Company shareholders will receive approximately $264 million
comprised of $125 million of cash, $119 million of Budget Group Class A common
stock, and up to $20 million of contingent additional consideration. Subject to
the receipt of all necessary governmental approvals, closing is expected to
occur in the second quarter of 1998.
Narrative Description of Business
The Company competes in two primary markets of the truck rental industry.
The consumer market consists of people who rent trucks primarily to move
household goods (the "consumer market"). These customers generally rent trucks
from one location and return them either to the same location (a "local" rental)
or to a different location (a "one-way" rental). The light commercial market
serves a wide range of businesses that rent light- and medium-duty trucks (i.e.,
trucks with a gross vehicle weight of less than 26,000 pounds) for a variety of
commercial applications (the "light commercial market"). Commercial customers
range from small local businesses, such as florists, package delivery companies
and local private moving companies, to large national companies that rent trucks
primarily for the transportation and delivery of inventory and packages. The
light commercial segment complements the Company's consumer rental business by
enabling the Company to improve utilization of its trucks on weekdays, when
consumer demand is typically lower than it is on weekends. The Company is the
second largest provider of truck rentals and related moving supplies and
services to the consumer and light commercial markets in the United States, with
a fleet of approximately 29,000 trucks as of December 31, 1997.
The Company supplements its truck rental business with a range of other
products and services. The Company rents automobile towing equipment and other
moving accessories such as hand trucks and furniture pads and sells moving
supplies such as boxes, tape and packing materials. The Company also offers
customers a range of liability-limiting products such as physical damage
waivers, personal accident and cargo protection and supplemental liability
protection. These accessory products enhance the Company's appeal to consumers
by offering customers "one-stop" moving services.
The Company also offers comprehensive household goods relocation services
to corporate employee relocation departments through RMM.
The following table sets forth the percentage of total revenues that each
of the Company's products and/or services represents for each of the last three
fiscal years:
1995 1996 1997
---- ---- ----
One-Way Truck Rentals........................... 41.0% 41.4% 41.3%
Local Truck Rentals............................. 39.2 39.5 38.4
Accessory Rentals and Product Sales. ........... 16.0 16.0 16.6
Ryder Move Management, Inc. .................... 3.8 3.1 3.7
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Total 100.0% 100.0% 100.0%
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Sales, Marketing and Advertising
The Company's marketing and promotional activities are designed to build
brand awareness and preference by positioning the Company as the high-quality
truck rental provider and emphasizing the convenience and ease of doing business
with the Company. A substantial portion of the Company's advertising budget is
devoted to Yellow Pages advertising, which management believes is the most
effective advertising medium for truck rentals. The Company also utilizes
national television advertising, local radio and print and direct mail to
support specific market objectives. The Company also uses a number of other
advertising media to target potential customers just before they move.
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Vehicle Acquisition and Disposition
The Company purchases the chassis for its trucks primarily from Ford,
General Motors and Navistar, and purchases the "boxes" (the storage compartment
on the back of the truck) from Morgan Body Company, UtiliMaster, Grumman Olson
and Supreme Corporation.
Purchasing of trucks is coordinated through the Company's headquarters in
Denver, Colorado. Orders are generally placed in the fall for delivery primarily
in time for the busy summer season. The Company believes that its purchasing
expertise and the volume of its purchases enable it to buy vehicles on terms
that are more favorable than those available to its smaller competitors. The
Company disposes of its used vehicles through several outlets, including
trade-ins through manufacturers, sales through RTR's truck sales operations and
sales through the Company's dealers. The Company disposes of its trucks
throughout the year, with a larger proportion being sold or traded in during the
first and fourth quarters.
Operations
The Company is headquartered in Denver, Colorado and operates under the
Ryder name through a national network of approximately 3,900 dealers at December
31, 1997. The Company maintains regional marketing offices, each of which is
headed by a Director and General Manager ("DGM") who reports to the Vice
President and General Manager, Field Operations. DGMs are primarily responsible
for overall business development and recruiting, training and managing the
dealers. Each geographic area also has a team of dealer coordinators, based in
the respective area centers, who are collectively responsible for the operation
and management of the fleet and who report to the Vice President of Operations.
In addition, each DGM also supervises Sales Executives who are responsible for
RMM's sales and account management.
Trucks are shared among the members of each market team, and dealers have
access through their point-of-sale systems to information concerning inventory
levels at all dealers within their team. The Company involves its dealers in
business planning through local, regional and national dealer councils which
meet on a regular basis to provide the Company with input regarding operating
and marketing issues.
Dealer Network
The Company's truck rental services are offered nationwide through
approximately 3,900 independent dealers, and approximately 20 retail outlets
owned and operated by the Company. The number of dealers peaked above 5,000 in
1995 and has now been reduced to the current level as a result of the Company's
efforts to rationalize its distribution network. Management continually
evaluates its distribution network.
Dealerships consist primarily of auto sales and service retailers, rental
centers, self storage centers, car rental locations and other vehicle-related
businesses that are owned by independent parties. These dealers rent the
Company's trucks in addition to operating their principal lines of business.
Dealers owned and operated by RTR rent trucks on behalf of the Company under
substantially the same terms and conditions as for other dealers.
Dealership agreements can be terminated by either party upon 30 to 90 days'
prior written notice, depending on dealer tenure. RTR dealership arrangements
can be terminated at certain times depending on dealer revenues. See
"--Relationships with RSI."
Seasonality
Truck rentals display some seasonality, with generally higher levels of
demand occurring during the summer months and the third quarter typically being
the Company's strongest quarter. On average, approximately 50% of the Company's
annual revenues are earned from May through September, with August being the
strongest month.
The Company's cash flows also display seasonality due to the timing of
truck purchases and dispositions. The Company typically receives delivery of
trucks between March and June of each year, resulting in additional borrowing
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needs during that period. Dispositions are spread more evenly throughout the
year, with greater dispositions occurring during the first and fourth quarters.
Competition
The truck rental industry is highly competitive, with U-Haul being the
principal competitor with a greater market share than the Company. U-Haul has
more dealers and operates a significantly greater number of its own stores than
does the Company. However, management believes that the Company's fleet of
trucks is younger than U-Haul's fleet. Other competitors include Budget
Rent-A-Car and Penske Truck Leasing, among others. Competition in the industry
is generally based on price, product quality, brand name recognition, service,
convenience and availability.
Employees
As of December 31, 1997, the Company had approximately 700 full-time
employees, none of whom was represented by a union. The Company also engages
part-time drivers to transfer trucks among dealers. The Company believes that
its relationship with its employees is satisfactory and that its employees, many
of whom have long experiences with the Company, represent a valuable resource.
Intellectual Property
The Company has the royalty-free right to use certain Ryder trademarks,
subject to certain restrictions until October 17, 2006. After October 17, 2001,
the Company must begin using these trademarks in conjunction with a successor
name. On October 17, 2006, the Company will no longer be permitted to use the
Ryder name in any manner. The Company has the royalty-free right to use the
1-800-GO-RYDER number, subject to certain restrictions, for a period of up to 13
years. The Company also has the royalty-free right to use the Ryder signature
color scheme in perpetuity, subject to certain restrictions. Ryder's material
trademarks have been registered with the United States Patent and Trademark
Office. The unexpected loss of such trademarks prior to the expiration of the
ten-year period could have a material adverse effect on the Company's business.
Insurance
The Company has retained a portion of its risk under automobile and general
liability insurance and other insurance programs for activities subsequent to
the Acquisition. Coverage varies, but generally the Company retains a
significant portion of the per occurrence claims under $1 million. The Company
has excess liability insurance per occurrence for claims between $1 million and
$100 million. The reserves for these claims are based on actuarial or other
estimates. There can be no assurance that the estimates will not change as a
result of limitations inherent in the estimation process.
Governmental Regulation
The Company and its operations are subject to various federal, state and
local laws and regulations, including those relating to taxing and licensing of
vehicles, transportation and vehicle safety, consumer protection, insurance,
advertising, used vehicle sales and labor matters. The Company believes that it
is in substantial compliance with applicable laws and regulations. However, the
Company may be affected by the adoption of additional laws or regulations
and/or changes, from time to time, in existing laws and regulations and/or the
interpretation thereof. In addition, the Company's operations, as well as those
of its competitors, could be affected by any limitation in fuel supply or any
rationing of fuel.
The Company offers for sale, in addition to the rental of trucks, certain
liability-limiting products, such as physical damage waivers pursuant to which
the Company agrees to waive its right to recovery from a renter for damage to
the truck. Certain states have enacted legislation, generally applicable to
automobile rentals, which limits the rates that may be charged for collision
damage waivers, limits potential customer liability for damage to rented
vehicles and/or restricts or regulates the sale of such liability-limiting
products. In addition, Congress has from time to time considered legislation to
regulate the sale of collision damage waivers by rental companies, but no such
legislation has been enacted to date. The adoption of additional state or
federal legislation applicable to truck rentals that would restrict the sale, or
limit the rates, or
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otherwise regulate the sale of collision damage waivers or other liability-
limiting products, or would limit potential customer liability could adversely
affect sales of these products by the Company.
A number of states currently hold a vehicle owner, including vehicle rental
companies, vicariously liable, regardless of fault, for the actions of any
person lawfully driving such owned vehicle.
Environmental Matters
The Company and its operations are subject to various federal, state and
local environmental laws and regulations, including laws and regulations which
relate to the ownership or use of tanks for the storage of petroleum products,
the management and removal of asbestos-containing materials in buildings, and
the disposal of solid or liquid wastes. The Company believes that it is in
substantial compliance with applicable environmental laws and regulations. Such
laws and regulations impose liability on responsible parties to remediate, or
contribute to the costs of remediating, sites at which petroleum products or
hazardous wastes or substances were disposed of or released, which may include
sites operated by the Company or to which it may have sent waste products for
disposal, treatment or recycling. Such remediation requirements may be imposed
without regard to fault or legality at the time of disposal or release. The
Company may be affected by the adoption of additional laws or regulations
related to environmental matters and/or changes from time to time in existing
laws and regulations and/or the interpretation thereof.
RSI has remediated contamination at one property pursuant to such
remediation laws, and there can be no assurance that contamination requiring
remediation will not be found in the future at other properties leased by the
Company. Also, there can be no assurance that asbestos-containing building
materials, such as asbestos-containing floor and ceiling materials, do not exist
in one or more of the Company's leased buildings. RSI, however, has agreed,
pursuant to the Acquisition Agreements, to retain liability for, and to
indemnify the Company against, certain environmental conditions existing at the
properties at the time the Company assumed the leases from RSI. Therefore, the
Company believes that it will not incur material liability in the event that
such environmental conditions are found to exist. However, there can be no
assurance that if recourse to the indemnification for environmental matters
provided in the Acquisition Agreements becomes necessary that it will be
available or uncontested.
The Company also maintains aboveground storage tanks at one property for
the storage of petroleum products, and performs light vehicle maintenance at
some of its leased properties. There can be no assurance that underground
storage tanks do not exist on one or more of the Company's leased properties.
While RSI has agreed to retain liability for, and to indemnify the Company
against, claims relating to environmental conditions existing prior to the date
of the Acquisition, whether discovered or undiscovered, there can be no
assurance that present or future activities undertaken by the Company will not
result in environmentally related expenditures for which the Company may be
responsible. The Company believes, however, that such expenditures would not
have a material adverse effect on its financial condition.
Relationship with RSI
In connection with the Acquisition, the Company entered into a number of
agreements with RSI, which are summarized below.
Non-Competition Covenants
In connection with the Acquisition, RTR and the Company each
agreed not to engage in certain types of rental transactions after the
Acquisition Closing Date. For a period of ten years after such date, RTR agreed
not to engage in the "one-way" consumer and "one-way" light commercial truck
rental businesses. For a period of two years following the Acquisition Closing
Date, RTR agreed to refer to the Company all customers in the one-way consumer
and one-way light commercial rental businesses.
For as long as the Company is using the Ryder name, the Company has agreed
not to engage in leasing (generally defined as the renting of a truck for a
period in excess of ninety days, which can be extended up to one year) or heavy
duty truck rentals. Until October 17, 1998, the Company has agreed to refer to
RTR all customers of leasing or heavy duty truck rentals.
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The Company and RTR each engage in the local consumer rental business and
the local light commercial rental business. For this purpose RTR will serve as a
dealer for the rental of the Company's trucks. However, during RTR's non-compete
period, RTR has agreed not to advertise with respect to the local consumer
rental business or to engage through third party dealers, agents or franchisees
in the local consumer rental business.
Except as described in the second paragraph of "Dealer and Cooperation
Arrangements" below, neither party is restricted from engaging in the local
light commercial rental business (defined as the rental of trucks with a
manufacturer's gross vehicle weight of under 26,000 pounds for a business
purpose). Pursuant to the Acquisition Agreements, the Company and RTR have
agreed to cooperate with each other to develop a joint marketing and truck
rental program with respect to certain large customers in the light commercial
rental business.
Dealer and Cooperation Arrangements
Pursuant to the Dealer Agreement, RTR agreed to act as a dealer for the
rental of the Company's trucks and accessory equipment at certain of the RTR
branch locations for a commission slightly lower than the standard commission.
This commission will be adjusted to match the Company's standard commission rate
beginning in 1999. Each party may, upon 60 days' notice to the other party,
remove RTR's dealer locations as dealers of the Company's trucks without cause
(based on rental revenues for such dealers for the immediately preceding year)
according to an agreed upon schedule. RTR or the Company may terminate the
Dealer Agreement with respect to any dealer location upon a material breach of
the terms of such agreement not cured within 30 days after notice thereof. RTR
agreed to limit the size of its vehicle fleet of light duty trucks (i.e., trucks
having a manufacturer's gross vehicle weight of 16,000 pounds or less) to 6,500
trucks in 1997 and 7,500 trucks in 1998, so long as the Company (i) makes an
agreed upon number of trucks available to RTR and (ii) does not open any new
dealers within a two-mile radius of any branch of RTR during such period.
Pursuant to the Acquisition Agreements, the Company and RTR also agreed for
a period of up to ten years to cooperate with each other in structuring a joint
program for Yellow Pages advertising in phone books. RTR also agreed to sell to
the Company, through RTR's affiliate, Network Sales, Inc., truck parts and
components at wholesale cost for so long as such affiliate is a distributor of
repair parts and components.
Service Agreements
RTR continues to provide the Company with various services, including
acting as agent in the sale of used trucks and providing maintenance on the
Company's trucks.
RTR has agreed to act as the Company's agent in selling the Company's used
trucks at RTR's Used Truck Centers and other RTR branch locations. In
consideration for such services, the Company has agreed to pay RTR a fixed
amount per vehicle sold, plus a per vehicle sales commission in accordance with
RTR's used truck representative sales compensation plan consistent with past
practice. The Company also agreed to reimburse RTR for a fixed amount per truck
sold for advertising expenses. The Company agreed to consign to RTR a certain
percentage of the total number of used vehicles it trades or sells in each of
the years from 1997 through 2001. After December 31, 2001, either party may
terminate the agreement upon 60 days' notice.
RTR has agreed, pursuant to the Vehicle Maintenance Agreement, to provide
maintenance for the Company's vehicles at a rate that is intended to approximate
the rate RTR charged the Company prior to the Acquisition Closing Date. The
Company has agreed to order a minimum amount of labor hours of repairs each year
from RTR, which each party has the unilateral right to reduce in 1998 and
thereafter by an amount up to 20% of the minimum amount of labor hours for that
year.
RTR has agreed, pursuant to the Administrative Services Agreement and the
MIS Support Agreement, to provide the Company, at its request, for a period of
up to two years after the Acquisition Closing Date, with certain administrative
and management information systems support services related to it operations.
Services currently provided under these agreements include those relating to
accounting and tax functions, payroll administration, vehicle administration and
computer systems support. Pursuant to the Administrative Services Agreement, the
Company is charged a rate that is intended to approximate the internal transfer
pricing rate charged by RTR to the Company prior to the Acquisition Closing
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Date, plus a markup with respect to certain services. Any or all services may be
discontinued upon 60 days' notice from the Company.
Pursuant to the MIS Support Agreement, the Company is charged a rate that
is intended to approximate the internal transfer pricing rate charged the
Company by RTR prior to the Acquisition Closing Date, which rate is fixed for
the term of the contract, provided that the Company's usage of such services
does not increase from the Company's usage prior to the Acquisition Closing
Date. Any or all services may be discontinued upon 90 days' notice from the
Company.
Intellectual Property
RTR has assigned certain patents, including patents relating to loading
ramps, to the Company. Pursuant to the Patent License Agreement, the Company has
granted RTR the right to use these patents.
Pursuant to the Copyright License Agreement, RTR has granted the Company
the royalty-free right to use written promotional materials, which were
developed and copyrighted by RTR prior to the Acquisition Closing Date, in
connection with marketing the Company's business for ten years, subject to
certain restrictions. The Company may grant sublicenses of its rights to its
dealers, subject to certain restrictions. See "--Narrative Description of
Business--Intellectual Property."
Pursuant to the Software License Agreement, RTR has granted the Company a
royalty-free perpetual right to use certain computer software necessary for the
operation of the Company's business that was not transferred to the Company by
RTR in the Acquisition.
The Company believes that the overall arrangement with RSI is adequate, in
all material respects, to provide for an effective transition of the Company to
an independently operating entity.
ITEM 2. PROPERTIES
The Company leases all of its office and retail locations and owns no real
property. The Company has granted a security interest in all of its leases.
Significant office operations are located in the metropolitan area of
Denver, Colorado, where the Company presently maintains its headquarters. The
Company entered into an agreement in March 1997 pursuant to which it leased
office space in downtown Denver for a minimum term of 10 years and a minimum
annual rent commitment ranging from $0.9 million to $1.4 million. The Company's
independent dealers generally operate out of facilities owned or leased by them
for their principal businesses.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. While any proceeding or litigation
has an element of uncertainty, management believes that the disposition of these
matters will not have a material impact on the financial condition, liquidity or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for any class of the
Company's common equity.
As of March 15, 1998 there were 7 holders of record of the Company's Class
A Common Stock, par value $.01 per share (the "Class A Common Stock"), 2 holders
of record of the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common Stock") and approximately 25 holders of record of the Company's
Class C Common Stock ("Class C Common Stock"). The Company has never paid any
dividends on its common equity. The Company's present policy is to reinvest
earnings in the business and not to pay any dividends on its common equity.
The Company's Credit Agreement prohibits payment of cash dividends by the
Company, except under specific circumstances.
The Company's 10% Senior Subordinated Notes due 2006 restrict the payment
of cash dividends based upon a formula and limit the amount of dividends and
other distributions generally to no more than 50% of the Company's consolidated
net income as defined, subsequent to November 25, 1996, plus the proceeds of any
stock issuances.
During 1997 the Company sold to certain management employees, a Director
and a consultant, 1,640 shares of its Class C Common Stock for $1,000 per share
(being the price paid by all existing shareholders for the Company's Class A and
Class B Common Stock issued in connection with the Acquisition). Of these, 500
shares were redeemed in 1997 in accordance with the provisions of a
subscription agreement. See Item 11 "Executive Compensation."
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial and other data
of the Company for each of the five years in the period ended December 31, 1997,
and certain pro forma financial and other data for the year ended December 31,
1996. The pro forma financial data gives effect to the Transactions, Offering
and the application of the proceeds therefrom, as if they had occurred on
January 1, 1996. The historical financial information for each of the years
ended December 31, 1994 and 1995 and for the period January 1, 1996 through
October 16, 1996 and October 17, 1996 through December 31, 1996 has been derived
from the audited combined or consolidated financial statements of the Company.
The historical financial information for the year ended December 31, 1993 is
unaudited but, in the opinion of management, includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such information. The pro forma information does not purport to
represent what the Company's results would have actually been if the
Transactions and the Offering had occurred at the date indicated, nor
does such information purport to project the results of the Company for any
future period. The selected financial information should be read in conjunction
with Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Item 8 "Financial Statements and Supplementary Data."
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<CAPTION>
January 1, October 17,
1996 1996
through through Year Ended
October 16, December 31, Pro Forma December 31,
Year Ended December 31, 1996 (m) 1996 1996 (m)(n) 1997
---------------------------------- ----------- ------------ ----------- ------------
1993 (m) 1994 (m) 1995 (m)
--------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
One-way truck rentals.............. $ 184,875 $ 218,881 $ 224,369 $ 187,931 $ 36,861 $ 224,792 $ 225,416
Local truck rentals................ 209,049 229,053 214,520 167,140 47,343 214,483 209,487
Accessory rentals and product
sales(a).......................... 68,378 75,782 87,211 70,994 15,879 86,873 90,372
Other revenues(b).................. 17,625 25,917 20,621 13,714 2,928 16,642 20,445
------- --------- --------- -------- ------- ------- --------
Total revenues........................ 479,927 549,633 546,721 439,779 103,011 542,790 545,720
Operating expense..................... 171,297 192,830 174,795 146,379 32,908 176,944 191,537
Selling, general and administrative
expense............................ 189,915 211,844 216,267 167,258 39,317 209,591 225,850
Depreciation expense (net of gains)
and amortization(c)................ 94,192 99,594 113,040 93,834 21,222 122,079(d) 112,171
Restructuring and other charges(e).... -- -- 6,370 1,891 -- 1,891 --
------- --------- --------- -------- ------- ------- --------
Operating income...................... 24,523 45,365 36,249 30,417 9,564 32,285 16,162
Interest expense(f)................... 20,049 24,256 29,663 20,291 9,159 44,641 39,178
------- --------- --------- -------- ------- ------- --------
Earnings (loss) before income taxes
and extraordinary item............. 4,474 21,109 6,586 10,126 405 (12,356) (23,016)
Provision (benefit) for income taxes.. 1,994 8,800 2,984 4,304 156 (4,351) (8,861)
------- --------- --------- -------- ------- ------- --------
Earnings (loss) before extraordinary
item.................................. $ 2,480 $ 12,309 $ 3,602 $ 5,822 $ 249 $ (8,005) $ (14,155)
Extraordinary loss on debt
extinguishment, net of taxes....... -- -- -- -- (3,138) -- (4,611)
------- --------- --------- -------- ------- ------- --------
Net earnings (loss) $ 2,480 $ 12,309 $ 3,602 $ 5,822 $ (2,889) $ (8,005) $ (18,766)
======= ========= ========= ======== ======= ======= ========
Basic and diluted amounts per common
share:
Earnings (loss) before extraordinary
item $ 3.16 $ (114.09)
Extraordinary item, net of tax $ (39.80) $ (37.17)
Net loss $ (36.64) $ (151.26)
Other Financial Data:
EBITDA(g)............................. $ 118,715 $ 144,959 $ 149,289 $ 124,251 $ 30,786 $ 154,364 $ 128,333
EBITDA margin......................... 24.7% 26.4% 27.3% 28.3% 30.0% 28.4% 23.5%
Adjusted EBITDA(h).................... $ 118,715 $ 144,959 $ 155,659 $ 126,142 $ 30,786 $ 156,255 $ 128,333
Adjusted EBITDA margin................ 24.7% 26.4% 28.5% 28.7% 30.0% 28.8% 23.5%
Capital expenditures(i)............... $ 204,928 $ 201,304 $ 232,531 $ 78,113 $ 1,955 $ 80,068 $ 129,385
Proceeds from disposition of trucks... 50,215 50,030 72,211 45,428 10,876 56,304 52,290
Statement of Cash Flows Data:
Net cash provided by operating
activities......................... $ 87,307 $ 124,011 $ 88,115 $ 125,728 $ 46,251 $ 106,986
Net cash used in investing activities. (157,362) (153,137) (162,113) (34,318) (586,790) (71,666)
Net cash provided by (used in)
financing activities............... 69,924 30,285 74,777 (87,699) 558,046 (52,827)
Fleet Data:
Average operating fleet(j)............ 31,078 32,814 34,110 31,693 30,227
Utilization(k)........................ 39.8% 44.1% 41.8% 44.6% 46.9%
Average age in months (end of period). 32 31 29 36 39
Average number of dealers............. 4,477 4,765 5,031 4,516 4,077
Balance Sheet Data (end of period):
Total assets.......................... 506,501 575,933 629,817 555,267 617,818 583,427
Total debt(m)......................... $ -- -- -- -- 440,619 395,905
Total shareholders' equity(l)......... $ 369,464 412,058 490,437 408,560 120,111 101,554
</TABLE>
See Notes to Selected Financial Data
9
<PAGE>
NOTES TO SELECTED FINANCIAL DATA
(a) Includes rental of automobile towing equipment and moving accessories;
sales of moving supplies; and sales of liability-limiting products such as
physical damage waivers, personal accident and cargo protection, and
supplemental liability protection.
(b) Other revenues represent household relocation services provided by RMM.
(c) Gains on the disposition of trucks, net of vehicle disposition costs and
other adjustments, have been reported as reductions of depreciation expense
by the Company.
(d) On a pro-forma basis, the Company changed the estimated useful lives and
residual values used to calculate depreciation expense on certain types of
trucks in order to better reflect recent experience. This accounting change
was treated as a change in estimate and accounted for on a prospective
basis from January 1, 1996. As a result of this change, depreciation
expense was decreased by approximately $6.0 million for the period January
1, 1996 through October 16, 1996.
(e) The Company recorded restructuring and other charges of $6.4 million and
$1.9 million for the year ended December 31, 1995 and the period January 1,
1996 through October 16, 1996, respectively. In the third quarter of 1995,
the Company consolidated its 20 administrative locations into two area
centers. As a result, the Company incurred restructuring and other charges
for lease termination, employee severance and employee relocation costs. In
1996, additional consolidating and restructuring actions were taken by RSI
which impacted the Company; these actions included management and staff
reductions and elimination of the company-owned car benefit program.
(f) Prior to October 17, 1996, historical interest expense consists of interest
on advances from RSI.
(g) EBITDA represents earnings before interest expense, income taxes,
depreciation (net of gains on the disposition of trucks) and amortization.
EBITDA does not include gains on the disposition of trucks. The Company
includes information concerning EBITDA because it is used by certain
investors as a measure of the Company's ability to service and/or incur
debt. EBITDA should not be considered in isolation or as a substitute for
net income or cash flows from operating activities presented in accordance
with generally accepted accounting principles or as a measure of a
company's profitability or liquidity.
(h) Adjusted EBITDA represents EBITDA plus restructuring and other charges.
(i) Capital expenditures for rental trucks totaled $189.0 million, $182.0
million, $210.8 million, $62.9 million and $100.8 million for the years
ended December 31, 1993, 1994, 1995, 1996 (pro forma), and 1997,
respectively. Capital expenditures for the year ended December 31, 1995
includes $10.3 million to purchase approximately 1,200 trucks that were
added to the fleet in 1992 under operating leases.
(j) Average operating fleet includes those trucks undergoing maintenance and
excludes those trucks removed from the rental fleet for disposition.
(k) Utilization represents the total number of truck rental days generated by
the fleet for the period divided by the total number of calendar days which
were available for the average operating fleet for the period.
(l) Prior to October 17, 1996, shareholders' equity represents the investment
by and interest-bearing advances from RSI. See Combined Financial
Statements and related notes thereto.
(m) Certain reclassifications have been made to the 1993, 1994, 1995 and 1996
financial data to conform to 1997 presentations.
(n) The Pro Forma 1996 results do not represent the sum of the two 1996
periods. The Pro Forma 1996 results reflect the Transactions, Offering and
the application of the proceeds therefrom, as if they had occurred on
January 1, 1996. As a result, the purchase price was allocated to the
assets and liabilities assumed based on their estimated fair values, and
lives and residual values on certain types of trucks have been changed.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion and analysis of the financial condition and
results of operations covers periods both before and subsequent to completion of
the Transactions. As a result of the Acquisition, the purchase price was
allocated to the Company's assets and liabilities assumed based on their
estimated fair values as of October 17, 1996. The Company also changed the
estimated lives and residual values used to calculate the provision for
depreciation on certain types of trucks. In addition, the Company entered into
new financing arrangements and has its own capital structure. Accordingly, the
results of operations for periods subsequent to October 17, 1996 are not
comparable to prior periods. For further discussion relating to the impact that
the Transactions may have on the Company, see Item 6 "Selected Financial Data,"
and Item 8 "Financial Statements and Supplementary Data."
The Pro Forma Condensed Statement of Operations for the year ended December
31, 1996, reflects the Transactions, Offering and the application of the
proceeds therefrom, as if they had occurred on January 1, 1996. The pro forma
results of operations do not purport to be indicative of the results that would
actually have been obtained if the Transactions, the Offering and the
application of the proceeds therefrom had occurred on January 1, 1996, or of the
results that may be obtained in the future. See Item 8 "Financial Statements and
Supplementary Data."
Results of Operations
The following table sets forth a comparison of the results of operations
for three years ended December 31, 1995, 1996 (pro forma) and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1995 1996 1997
<S> <C> <C> <C>
Truck rental and related revenue......................................... $546.7 $542.8 $545.7
Operating expense........................................................ 174.8 177.0 191.5
Selling, general and administrative expense.............................. 216.3 209.6 225.8
Depreciation expense (net of gains) and amortization..................... 113.0 122.1 112.2
Restructuring and other charges.......................................... 6.4 1.9 --
---- ------ -------
Operating income................................................. 36.2 32.2 16.2
Interest expense......................................................... 29.6 44.6 39.2
---- ------ -------
Earnings (loss) before income taxes and extraordinary item....... 6.6 (12.4) (23.0)
Income tax expense (benefit)............................................. 3.0 (4.4) (8.8)
---- ------ -------
Earnings (loss) before extraordinary item........................ 3.6 (8.0) (14.2)
Extraordinary loss, net of tax........................................... -- -- (4.6)
---- ------ -------
Net earnings (loss).............................................. $3.6 $(8.0) $(18.8)
==== ====== =======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 (Pro
Forma)
Revenues of $545.7 million were $2.9 million or 0.5% ahead of 1996 with
increased liability-limiting product sales and growth in relocation services
being partially offset by lower truck and towing equipment rentals.
Although truck rental revenue decreased, utilization increased from 44.6% in
1996 to 46.9% in 1997, and revenue per vehicle increased by 4.4%. This was a
direct result of management's decision to focus efforts on improving fleet
utilization. One-way truck rental transactions were 3.4% higher than in 1996
while local truck rental transactions were 3.6% lower. Revenues from relocation
services were 35.7% higher than last year driven by a growing customer base and
increased relocation activity.
Operating expense in 1997 increased by $14.5 million or 8.2% (35.1% of
revenue compared to 32.6% in 1996). The increase was driven by increased costs
associated with higher fleet transfer activity, higher physical damage expense
associated with the timing of repairs and variable costs associated with
increased relocation services revenue. Also contributing to a lesser extent were
higher maintenance costs associated with an increase in the number of miles
driven compared to 1996 and an increase in maintenance costs per mile associated
with an older
11
<PAGE>
fleet. In addition, bodily injury and property damage ("BIPD") costs were higher
than last year. In 1996, the Company participated in RSI's overall risk
management program under which the amount of BIPD reserves recorded by RTR was
based on a number of factors including: (i) undiscounted estimated liabilities
for the claims received in 1996; (ii) estimated claims incurred but not reported
for 1996; and (iii) changes in estimates of prior year reserves based upon
actual claims experience. In 1997, the Company operated its own risk management
program and has recorded its BIPD reserves based upon the undiscounted estimated
liabilities for the claims received and an estimate of claims incurred but not
reported for its first year of operations. Accordingly, the BIPD expense for
periods subsequent to the date of acquisition is not comparable to prior
periods. While management believes the amount of the 1997 reserves is adequate,
these reserves may need to be adjusted in the future based on actual claims
experience.
Selling, general and administrative expense increased in 1997 by $16.2
million or 7.7% (41.4% of revenue compared to 38.6% in 1996). The increase was
due to increased advertising and sales promotions, professional fees related to
the transition of the Company to a stand-alone business, costs associated with
upgrading the phone reservation process, an increase in the bad debt reserve
related to potential credit issues primarily associated with the transition to a
stand-alone business, and transition costs associated with the Company's move to
Denver, Colorado.
Depreciation (net of gains) and amortization expense decreased by $9.9
million largely as a result of a 4.6% decrease in the average fleet size.
Interest expense of $39.2 million, including the amortization of deferred
financing costs, was $5.4 million below 1996 due primarily to lower debt levels
and a reduction in interest rates associated with the commercial paper program.
The effective income tax rate was 38.5% for 1997 compared to a pro forma
effective rate of 35.2% for 1996. The 1996 rate includes the effect of combining
the pre- and post-acquisition operations and the Transactions adjustments. Based
on current estimates of future earnings, the net deferred tax asset is expected
to be recovered within the next five to ten years.
An extraordinary item of $4.6 million, net of related income tax benefit,
was recognized in 1997 for the write off of financing costs related to the
extinguishment of the senior bank facilities.
Year Ended December 31, 1996 (Pro Forma) Compared to Year Ended December
31, 1995
Revenues of $542.8 million were $3.9 million or 0.7% below 1995. One-way
and local truck rentals and accessory rentals and product sales were essentially
flat while revenues from relocation services declined.
Operating expense of $177.0 million was $2.2 million or 1.3% higher than
1995 (32.6% of revenue compared to 32.0% in 1995). Higher vehicle maintenance
costs, which were primarily the result of an increase in the average age of the
fleet from 29 months to 36 months, were partially offset by a reduction in
vehicle operating lease expense due to the purchase of approximately 1,200
trucks in late 1995 that had been leased in 1992.
Selling, general and administrative expense decreased $6.7 million or 3.1%
to $209.6 million (38.6% of revenue compared to 39.6% in 1995). The decrease
resulted from a combination of cost savings generated from the consolidation of
administrative functions in late 1995 as well as lower advertising expenses.
Depreciation (net of gains) and amortization expense increased $9.1 million
or 8.1% to $122.1 million primarily as a result of the step-up of revenue
earning equipment, software development costs and intangible assets to their
estimated fair value in connection with the acquisition. The pro forma effect of
these changes is reflected in 1996 but not in 1995. The Company did not
recognize any vehicle gains or losses for the period from October 17, 1996
through December 31, 1996 as a result of acquired vehicles being adjusted to
their fair market values at the date of the acquisition.
Restructuring charges were $1.9 million in 1996 compared with $6.4 million
in 1995. The 1996 charge reflects costs associated with the elimination of the
Company-owned car benefit program and employee severance costs resulting from
actions taken by RSI during the second and third quarters of 1996. The 1995
charge reflect the
12
<PAGE>
Company's consolidation of 20 administrative locations into two area centers and
includes lease termination costs, employee severance costs and employee
relocation costs.
Interest expense of $44.6 million was $15.0 million or 50.7% higher than
1995 due to changes in the Company's financing structure. On a pro forma basis,
interest expense in 1996 reflects the impact of borrowings associated with the
Transactions while 1995 reflects charges from RSI based upon its overall
interest expense.
Inflation
The Company does not believe that inflation has had a material impact on
its financial position or results of operations during the periods covered by
the Consolidated Financial Statements included herein.
Liquidity and Capital Resources
The Company's liquidity needs subsequent to the Acquisition arise primarily
from debt service, working capital needs and the funding of capital
expenditures. The Company's principal sources of cash to fund these liquidity
needs have been net cash from operating activities, proceeds from sales of
revenue earning equipment and borrowings under the Company's commercial paper
program.
The components of net cash from operating activities are detailed in the
Consolidated Financial Statements included herein and include net loss adjusted
for (i) depreciation (net of gains) and amortization expense, (ii) deferred
income taxes, (iii) extraordinary loss, and (iv) changes in operating assets and
liabilities. Net cash flows from operating activities for the year ended
December 31, 1997 amounted to $107.0 million.
The Company's capital expenditures, primarily for the purchase of revenue
earning equipment, net of disposal proceeds, were $77.1 million in 1997 compared
with $23.8 million for the same period in 1996. The Company disposes of vehicles
through several outlets, including trade-ins through manufacturers, sales
through RTR's truck sales operations and sales through the Company's independent
dealers. The Company also disposes of other property and equipment in the
ordinary course of business. The Company estimates that its total capital
expenditures for 1998 will range between $130.0 million and $180.0 million and
proceeds from dispositions will range between $30.0 million and $50.0 million.
During 1997, the Company's special purpose subsidiary, FCTR, Inc.
("Finco"), entered into a commercial paper program that permits the issuance of
up to $450.0 million in commercial paper notes subject to borrowing base
availability provided by the RCTR truck fleet. In conjunction with the
commercial paper program, the Company refinanced the amount outstanding on that
date under its senior bank facilities. In addition, the Company entered into an
agreement pursuant to which the Company has established a five-year, $40.0
million secured revolving credit facility. The Company has also entered into a
$50.0 million facility for the issuance of cash collateralized letters of
credit. All of the aforementioned agreements contain certain covenants and
restrictions, including, among other things, restrictions on the payment of
dividends and the incurrence of additional indebtedness.
Amounts available under the commercial paper program are subject to
borrowing base availability and may be generally used for the purchase of
trucks. The remaining availability under the commercial paper program on
December 31, 1997 was approximately $118.1 million. Amounts available under the
$40.0 million revolving credit facility are also subject to borrowing base
availability and may be generally used for working capital purposes. The
remaining availability under this facility on December 31, 1997 was $37.7
million. The Company generally manages the cash balances and working capital
position of the Company to minimize amounts outstanding under the debt
agreement.
During the third quarter, the Company recognized an extraordinary loss from
the early extinguishment of debt of $4.6 million, net of related income tax
benefit, associated with the refinancing of the senior bank facilities.
The Company believes that cash generated from operations and asset
dispositions, together with the amounts available under the aforementioned
facilities, will be adequate to meet its debt service, capital expenditure and
working capital requirements for the foreseeable future, although no assurance
can be given in this regard.
13
<PAGE>
Year 2000 Compliance
As part of the transition to a stand-alone entity, the Company has several
new technology initiatives under development which include modification of its
computer software for year 2000 compliance. Although it is not possible to
quantify the impact year 2000 compliance issues will have on the Company's
customers or suppliers, the Company does not anticipate any material adverse
effect on its financial condition, liquidity or results of operations.
Pending Merger
On March 4, 1998, the Company and Budget Group, Inc. ("Budget") announced
the signing of a merger agreement under which the Company is to be acquired by
Budget and is to become a separate wholly-owned subsidiary of Budget. Budget
also operates Budget Car and Truck Rental. Under the merger agreement, Company
shareholders will receive approximately $264 million comprised of $125 million
of cash, $119 million of Budget Class A common stock, and up to $20 million of
contingent additional consideration. Subject to the receipt of all necessary
governmental approvals, closing is expected to occur in the second quarter of
1998.
Recently Issued Financial Accounting Standards
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" in June
1997. This statement, which is required to be adopted in the first quarter of
1998, establishes standards for reporting comprehensive income and its
components. This statement is not expected to have a material effect on the
Company's financial statements.
The FASB also issued Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information," in June
1997. This statement, which is required to be adopted in the first quarter of
1998, establishes standards for the way that public companies report information
about operating segments in annual financial statements and requires those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This statement is not expected to have
a material effect on the Company's financial statements.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." This statement
addresses costs that are capitalizable and costs that must be expensed, and
provides guidance on amortization periods for internal use software. This SOP is
required to be adopted for fiscal years beginning after December 15, 1998 and
early adoption is encouraged for annual financial statements which had not been
issued at the time of the SOP's issuance. The Company's existing accounting
policy for software development costs is in conformity with the provisions of
this SOP. As such, the Company adopted this statement in the fourth quarter of
1997, resulting in no financial statement impact.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
An index to financial statements and supplementary data is set forth
immediately following the signature pages.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Ryder Truck Rental, Inc. ("RTR") is a subsidiary of Ryder System, Inc.
("RSI"). On October 17, 1996, the Company acquired the Consumer Truck Rental
Division of RTR.
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
Name Age Position
---- --- --------
Jay Alix..................... 42 Chairman of the Board and
Chief Executive Officer
Alfred A. Piergallini........ 51 Director
Thomas R. Reusche............ 43 Director
Ronald A. Rittenmeyer........ 51 President and Chief Operating Officer
and Director
Wallace L. Rueckel........... 54 Director
Edward L. Scarff............. 66 Director
J. William Schutzenhofer..... 61 Director
Gary L. Andrews.............. 56 Vice President, Technical Services
Thomas W. Arnst.............. 35 Vice President, General Counsel and
Secretary
Steven R. Davison............ 46 Vice President and Treasurer
Stephen T. D. Dixon.......... 38 Vice President, Revenue Management
James L. Gregory............. 37 Vice President, Marketing
Deborah L. Riston............ 47 Vice President, Human Resources
David S. Russell............. 38 Vice President and General Manager,
Field Operations
Larry D. Thogmartin.......... 49 Vice President, Finance
Michael A. Zawalski.......... 38 Vice President and Chief Financial Officer
The By-Laws of the Company provide that the Board of Directors shall
consist of such number of directors as shall be fixed from time to time by
resolution of the Board. The members of the Board were elected in accordance
with the provisions of a Shareholders' Agreement among the Company and all of
the voting shareholders of the Company pursuant to which Madison Dearborn has
the right to designate one director, with the other directors being designated
by Questor. See Item 12 "Security Ownership of Certain Beneficial Owners and
Management--Shareholders' Agreement."
Each director of the Company will hold office until replaced at a meeting
of shareholders of the Company or until his successor has been elected and
qualified. Officers of the Company are elected by the Board of Directors and
serve at the discretion of the Board of Directors.
Jay Alix has been a principal of Questor Principals, Inc. ("Questor
Principals") and Questor Management Company ("Questor Management") since 1995
and has been President of Jay Alix & Associates, Inc. ("JA&A"), a nationally
known turnaround management firm located in Southfield, Michigan, Chicago and
New York City, since 1981. From 1992 to 1995, Mr. Alix and JA&A were retained by
General Motors Corporation to direct the restructuring of its National Car
Rental subsidiary, and during that period Mr. Alix was the Chief Executive
Officer and a director of National Car Rental.
Alfred A. Piergallini has been President and Chief Executive Officer of
Gerber Products Co., which manufactures and sells baby food and offers life
insurance services, since April 1989. Mr. Piergallini is also a director of
Comerica Incorporated and Toy Biz Inc.
Thomas R. Reusche has been a principal of Madison Dearborn and a Vice
President of Madison Dearborn Partners, Inc., an investment firm, since their
inceptions in January 1993. From June 1983 to December 1992, he was a Senior
Investment Manager at First Chicago Venture Capital. He is also a director of
Hines Horticulture, Inc.
Ronald A. Rittenmeyer joined the Company in March 1998. Prior to that time,
Mr. Rittenmeyer served, under consulting contracts, as President and Chief
Operating Officer of the Company from October 1997 to February 1998 and as
Executive Vice President from June 1997 to October 1997. Mr. Rittenmeyer was a
principal with JA&A from
15
<PAGE>
January 1997 until his employment with the Company. Prior to his engagement with
the Company, Mr. Rittenmeyer was President and COO of Merisel, a $3 billion
dollar technology distribution company, from October 1995 to December 1996, and
prior to that was COO of Burlington Northern Railroad from May 1994 to October
1995. Prior to May 1994, Mr. Rittenmeyer served in various executive positions
with Frito Lay, Inc. and Pepsico Foods International for 19 years.
Wallace L. Rueckel has been Managing Director of Questor Principals and
Questor Management since October 1995. Mr. Rueckel has over 30 years experience
with several multi-national corporations including Hartmarx Corporation, where
he served as Executive Vice President and Chief Financial Officer, Guardian
Industries, Sundstrand Corporation and Cummins Engine Company.
Edward L. Scarff has been a principal of Questor Principals and Questor
Management since 1995 and the founder and a general partner of Scarff, Sears &
Associates in San Francisco, an investment firm, since 1983. Mr. Scarff has been
a private investment banker in San Francisco since 1971. Prior to establishing
his own business, Mr. Scarff was a Senior Industrial Economist at the Stanford
Research Institute from 1955 to 1959, Head of Investment Research at Investors
Diversified Services from 1959 to 1963, President of North American Securities
Corporation from 1964 to 1965 and President and Chief Operating Officer of
Transamerica Corporation from 1965 to 1970. Mr. Scarff is also a director of
Clorox Company.
J. William Schutzenhofer was with the Shell Oil Company from 1960 until
1995, most recently as Vice President of Marketing.
Gary L. Andrews joined RTR in 1963. Prior to becoming Vice President,
Technical Services, in September 1997, Mr. Andrews had been Vice President,
Maintenance and Fleet Purchasing since October 1996. Prior to October 1996, Mr.
Andrews was Director of Consumer Maintenance of RTR since June 1992 and Director
of Maintenance of RTR from September 1985 to June 1992.
Thomas W. Arnst joined RSI in 1987 and the Company in 1996. Prior to
becoming Vice President, General Counsel and Secretary for the Company, Mr.
Arnst was Division Counsel for RSI's Commercial Leasing and Services Division.
Prior to that, Mr. Arnst was Division Counsel for RSI's Consumer Truck Rental
Division.
Steven R. Davison joined the Company in January 1997. Immediately prior
thereto, Mr. Davison served as a consultant to Questor Management. Mr. Davison
was with Hartmarx Corporation, a high-quality apparel manufacturer, from January
1985 to September 1995, most recently as Treasurer.
Stephen T. D. Dixon joined RTR in 1986. Prior to becoming Vice President,
Revenue Management in October 1997, Mr. Dixon had been Chief Information Officer
for the Company since October 1996. Prior to October 1996, Mr. Dixon was
Director, Central Operations & Development and General Manager of RMM since
October 1995. From August 1993 to October 1995, Mr. Dixon served as Director of
Pricing and Inventory Management of RTR. From January 1990 to August 1993, Mr.
Dixon served as Senior Manager, Rental Pricing of RTR.
James L. Gregory joined the Company in July 1997 as Vice President,
Marketing. Immediately prior to joining the Company, Mr. Gregory was with
Hardee's Food Systems from 1991 to 1997, most recently as Vice President,
Marketing for the Roy Rogers Restaurant division.
Deborah L. Riston joined RSI in 1978. Ms. Riston has been Vice President,
Human Resources, of the Company since October 1995. From July 1991 to October
1995, Ms. Riston served as Director of Human Resources and, prior to that, as
Director of Employee Benefits of RSI.
David S. Russell joined RTR in 1982. Prior to becoming Vice President and
General Manager, Field Operations in September 1997, Mr. Russell had been Vice
President, Sales and Dealer Development since October 1996. Prior to October
1996, Mr. Russell served as Vice President, Sales since August 1995. From
November 1993 to August 1995, Mr. Russell served as Vice President, Operations &
Development of the RTR and General Manager of RMM. From September 1991 to
November 1993, Mr. Russell served as District Manager of RTR.
16
<PAGE>
Larry D. Thogmartin joined RTR in 1971. Prior to becoming Vice President,
Finance, of the Company in July 1997, Mr. Thogmartin served as Controller from
June 1991 to 1997. Prior to June 1991, Mr. Thogmartin served as the District and
Region Controller for RTR.
Michael A. Zawalski joined the Company in July 1997 as Vice President and
Chief Financial Officer. From February 1996 to July 1997, Mr. Zawalski was Vice
President, Finance for Coleman Company, an international manufacturer and
marketer of high quality recreation, hardware and safety products. Prior to
that, Mr. Zawalski was with the Quaker Oats Company, an international
manufacturer of food and beverage products, from January 1986 to September 1995
most recently as Vice President and General Manager in the Food Service
Division.
ITEM 11. EXECUTIVE COMPENSATION
The directors of the Company who are otherwise affiliated with the Company
do not receive any compensation for their board membership. The directors who
are not otherwise affiliated with the Company each receive $20,000 per year plus
$2,000 per board meeting, options and the opportunity to purchase stock.
Summary Compensation Table
The following table sets forth the annual and long-term compensation paid
by the Company for services rendered by certain of its executive officers
(collectively, the "Named Officers") during 1997, the first full fiscal year for
which the Named Officers received compensation from the Company, and amounts
received from the Company in 1996.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------------
Other Annual All Other
Salary Bonus Compensation(a) Compensation
Name and Principal Position Year $ $ $ $
- ------------------------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Gerald R. Riordan, Former President and COO 1997 $ 243,715 $ 0 $ 27,004 $ 225,931(b)
1996(d) 54,083 13,273 3,000 0
David S. Russell, Vice President and General Manager,
Field Operations 1997 141,000 100,000 15,751 0
1996(d) 30,958 16,608 1,041 0
Deborah L. Riston, Vice President, Human Resources 1997 140,875 85,000 16,018 0
1996(d) 28,875 17,420 1,041 0
Stephen T. D. Dixon, Vice President, Revenue Management 1997 115,833 35,000 10,551 152,282(c)
1996(d) 23,125 7,379 1,507 0
Michael A. Zawalski, Vice President and Chief Financial Officer 1997(e) 77,292 75,000 14 0
1996 0 0 0 0
</TABLE>
- -----------
(a) This column represents some or all of the following: perquisite allowance,
car allowance, cost of living allowance and imputed income for life
insurance.
(b) This amount represents $201,943 of reimbursed relocation costs and $23,988
of severance.
(c) This amount represents reimbursed relocation costs.
(d) This amount represents compensation for the period from October 16, 1996
(Acquisition Date) through December 31, 1996.
(e) This amount represents compensation for the period from July 23, 1997
through December 31, 1997.
Mr. Alix does not receive any compensation in his capacity as Chief
Executive Officer. See Item 13 "Certain Relationships and Related
Transactions--Transactions with Management and Others--Agreement with Jay Alix &
Associates, Inc. for Management Consulting Services."
17
<PAGE>
Option Grants
The following table sets forth information regarding grants of options to
the Named Officers to purchase stock of the Company during fiscal 1997.
Option Grants in Fiscal Year 1997 (a)
<TABLE>
<CAPTION>
% of Total
Options Potential Realized Value
Number of Granted to at Assumed Annual Rates
Securities Employees Exercise or of Stock Price
Underlying in Fiscal Base Price Expiration Appreciation for Option
Name Options Granted Year ($/Sh) Date Term
---- ----------------- ------------ ------------ ------------ --------------------------
5% 10%
------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gerald R. Riordan, Former
President and COO 1,050 18.17% $1,000 N/A (b) N/A (b) N/A (b)
David S. Russell, Vice
President and General Manager,
Field Operations 231 4.00% $1,000 March 31, 2007 $147,730 $375,817
144 2.49% $1,000 September 15, 2007 92,092 234,276
Deborah L. Riston, Vice
President, Human Resources 236 4.08% $1,000 March 31, 2007 150,928 383,952
130 2.25% $1,000 September 15, 2007 83,138 211,499
Stephen T. D. Dixon, Vice
President, Revenue Management 145 2.51% $1,000 March 31, 2007 92,731 235,903
70 1.21% $1,000 September 15, 2007 44,767 113,884
Michael A. Zawalski, Vice
President and Chief Financial 250 4.33% $1,000 July 23, 2007 160,104 407,424
Officer
</TABLE>
- -----------
(a) The options referred to above are exercisable for ten years (subject to
certain provisions for earlier termination) limited to 20% of the shares
covered thereby in 1998, and an additional 20% each year thereafter,
through 2002. The options are generally non-transferable, and the right to
exercise any unexercised portion thereof expires upon the occurrence of
certain events.
(b) All of Mr. Riordan's options were cancelled under the terms of a severance
agreement.
Aggregated Option Exercises and Fiscal Year End Option Values
The following table sets forth, on an aggregated basis, information
regarding stock of the Company underlying unexercised options during fiscal 1997
by the Named Officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of
Unexercised Unexercised In-the-
Options at Money Options at
Year End 1997 Year End 1997
---------------------- ----------------------
Shares Acquired Exercisable/ Exercisable/
Name On Exercise Value Realized Unexercisable Unexercisable (a)
---- ----------------- ---------------- ---------------------- ----------------------
<S> <C>
Gerald R. Riordan, Former
President and COO -- $ -- -- / -- $ -- / --
David S. Russell, Vice
President and General
Manager, Field Operations -- -- -- / 375 -- / --
Deborah L. Riston, Vice
President, Human Resources -- -- -- / 366 -- / --
Stephen T. D. Dixon, Vice
President, Revenue Management -- -- -- / 215 -- / --
Michael A. Zawalski, Vice
President and Chief Financial
Officer -- -- -- / 250 -- / --
</TABLE>
- -----------
18
<PAGE>
(a) As of December 31, 1997, there was no readily ascertainable fair market
value for the Company's common stock. Consequently, the Company used book
value as of December 31, 1997 to calculate the value of unexercised
in-the-money options.
Offering of Stock and Options to Management Employees
During 1997 the Company sold to certain management employees, a Director
and a consultant, 1,640 shares of its Class C Common Stock for $1,000 per share
(being the price paid by all existing shareholders for the Company's Class A and
Class B Common Stock issued in connection with the Acquisition). Of these, 500
shares were redeemed in accordance with the provisions of the subscription
agreement. In addition, certain management employees and the Director received
options to purchase, for the same price, a total of 5,780 shares. As of December
31, 1997, 4,487 of these options remained outstanding.
The subscription agreement under which these shares were issued to the
employees contains provisions requiring the Company to repurchase the shares
(and any other shares of Class C Common Stock acquired by the employees), and
the shareholder to sell, at fair market value in the case of an employee's death
and, depending on the circumstances, either fair market or book value in the
case of an employee's retirement or termination of employment. The agreement
under which 200 shares were issued to the Director and the consultant do not
contain provisions requiring the Company to repurchase the shares. The holders
of the shares have certain other rights, including rights to participate in
certain issuances of shares of capital stock to affiliates of the Company, the
right to sell shares in certain sales by Questor of its own shares of Common
Stock and the right to participate in certain other specified transactions. The
agreements provide further that it would be a condition of an initial public
offering of the Company's Common Stock that the Company's Restated and Amended
Certificate of Incorporation be amended to provide for the conversion of Class C
Common Stock into Common Stock of the kind held by Questor. The agreement would
terminate (except with respect to options granted thereunder) in the event of an
initial public offering.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has entered into employment agreements with certain executives,
including the Named Officers, pursuant to which each such employee will receive
a specified base salary and certain severance package, bonuses, stock options
and perquisites. Base salary for the Named Officers range from $129,000 to
$180,000. Severance for the Named Officers is from 9 to 12 months' salary.
The Company has entered into a severance agreement with Gerald R. Riordan,
its former President and Chief Operating Officer, pursuant to which Mr. Riordan
will receive severance payments of approximately $24,000 per month from
December, 1997 to July, 2000. In addition, Mr. Riordan will receive certain
medical and dental benefits, and reimbursement for certain relocation costs. Mr.
Riordan's agreement contains customary provisions dealing with confidentiality,
non-solicitation and non-competition.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee, which establishes the compensation and related
matters for the Company's executives, is comprised of Mr. Jay Alix and Mr.
Edward L. Scarff, each of whom are shareholders of Questor Principals and
Questor Management. Additionally, Mr. Alix is President of Jay Alix &
Associates, Inc. ("JA&A"). The Compensation Committee does not establish the
compensation arrangements in connection with the Company's agreements with
Questor Management and JA&A. See Item 13 "Certain Relationships and Related
Transactions--Transactions with Management and Others--Agreement with Jay Alix &
Associates, Inc. for Management Consulting Services."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF CAPITAL STOCK
The Company is authorized to issue 275,000 shares of Common Stock, par
value $.01 per share ("Common Stock"), of which 225,000 shares shall be Class A
Common Stock, 25,000 shares shall be Class B Common Stock and 25,000 shares
shall be Class C Common Stock. As of March 4, 1998, 109,090 shares of Class A
Common Stock, 13,910 shares of Class B Common Stock and 975 shares of Class C
Common Stock were issued and outstanding.
19
<PAGE>
The holders of Class A Common Stock are entitled to vote on all matters to
be voted upon by shareholders of the Company. Holders of Class B Common Stock
and Class C Common Stock have no voting rights other than as required by law and
with respect to certain mergers or other transactions in which such holders
would be treated differently from holders of Class A Common Stock. Shares of
Class A Common Stock are convertible into the same number of shares of Class B
Common Stock, and shares of Class B Common Stock are convertible into the same
number of shares of Class A Common Stock in connection with certain events,
including certain sales of securities, mergers or similar transactions that
would result in a change of control of the Company, as provided in the Company's
Restated and Amended Certificate of Incorporation. Shares of Class C Common
Stock are not convertible into shares of Class A Common Stock or Class B Common
Stock, except under the circumstances described under Item 11 "Executive
Compensation--Offering of Stock and Options to Management Employees."
The table below sets forth certain information, as of March 15, 1998,
regarding the ownership of (i) Class A Common Stock by each person who
beneficially owns five percent or more of the outstanding shares of such common
stock and (ii) Company common stock owned by (a) each director and named
executive officer of the Company and (b) all directors and executive officers of
the Company as a group. This table also gives effect to shares that may be
acquired pursuant to options, as described in the footnotes below.
<TABLE>
<CAPTION>
Class A Common Stock Class C Common Stock
------------------------------- -------------------------------
Number of Percentage Number of Percentage
Class A of Class A Class C of Class C
Name Shares Shares Shares Shares
- --------------------------------- Beneficially Beneficially Beneficially Beneficially
Owned Owned Owned Owned
-------------- -------------- -------------- --------------
All Five Percent Shareholders:
- ------------------------------
<S> <C> <C> <C> <C>
Questor Partners Fund, L.P. (1) 62,433 57.2% -- --
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
Questor Side-by-Side Partners, L.P. (1) 4,479 4.1% -- --
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
Madison Dearborn Capital Partners, L.P. (2) 24,600 22.6% -- --
Three First National Plaza Suite 3800
Chicago, Illinois 60602
All directors and executive officers as a group 91,512(3) 83.9% 818 66.6%
(16 in number)
All Directors and Named Executive Officers:
- ------------------------------------------
Jay Alix 66,912(1) 61.3% -- --
Alfred A. Piergallini -- -- 100 10.2%
Thomas R. Reusche 24,600(4) 22.6% -- --
Ronald A. Rittenmeyer -- -- -- --
Wallace L. Rueckel -- -- -- --
Edward L. Scarff 66,912(1) 61.3% -- --
J. William Schutzenhofer -- -- -- --
Gerald R. Riordan -- -- -- --
Stephen T.D. Dixon -- -- 59 (5) 5.9%
Deborah L. Riston -- -- 147 (6) 14.4%
David S. Russell -- -- 146 (7) 14.3%
Michael A. Zawalski -- -- -- --
</TABLE>
- -----------
(1) Questor Principals is the general partner of (i) Questor General Partner,
L.P., the general partner of Questor Partners Fund, L.P. ("Questor
Partners"), and (ii) Questor Side-by-Side. Questor Management has been
appointed to act on behalf of the general partners of Questor Partners and
Questor Side-by-Side with respect to matters relating to such partnerships.
Questor Partners and Questor Side-by-Side together own beneficially 66,912
shares of Class A Common Stock, representing 61.3%
20
<PAGE>
of the outstanding shares of such stock. Jay Alix, Melvyn N. Klein, Dan W.
Lufkin and Edward L. Scarff are the shareholders of each of Questor
Principals and Questor Management, with the power, jointly, to direct the
actions of such corporations, and may be deemed to share beneficial
ownership of the shares owned by Questor Partners and Questor Side-by-Side
by virtue of their status and rights as such shareholders, but each
expressly disclaims beneficial ownership of such shares by reason of such
status and rights.
(2) Thomas R. Reusche, a director of the Company, is the designee of Madison
Dearborn as a director of the Company.
(3) Consists of (i) the shares of Class A Common Stock owned by Questor
Partners and Questor Side-by-Side, as to which Messrs. Alix and Scarff,
directors of the Company, may be deemed to share beneficial ownership (see
note (1)), and (ii) the shares of Class A Common Stock owned by Madison
Dearborn, as to which Mr. Reusche, as the designee of Madison Dearborn as a
director of the Company, may be deemed to have beneficial ownership, but
Mr. Reusche expressly disclaims beneficial ownership of such shares by
reason of such status.
(4) Consists of the shares of Class A Common stock owned by Madison Dearborn,
as to which Mr. Reusche, as the designee of Madison Dearborn as director of
the Company, may be deemed to have beneficial ownership, but Mr. Reusche
expressly disclaims beneficial ownership of such shares by reason of such
status.
(5) Includes 29 shares of Class C Common Stock issuable upon the exercise of
options exercisable within 60 days of March 15, 1998.
(6) Includes 47 shares of Class C Common Stock issuable upon the exercise of
options options exercisable within 60 days of March 15, 1998.
(7) Includes 46 shares of Class C Common Stock issuable upon the exercise of
options options exercisable within 60 days of March 15, 1998.
Each of Societe Generale and Chase Equity, an affiliate of Chase, owns
5,345 shares of Class A Common Stock (each representing 4.9% of the outstanding
Class A Common Stock). Societe Generale also owns 9,415 shares of Class B Common
Stock and Chase Equity also owns 4,495 shares of Class B Common Stock.
On March 4, 1998, the Company and Budget announced the signing of a merger
agreement under which the Company is to be acquired by Budget and is to become a
separate wholly-owned subsidiary of Budget. Subject to the receipt of all
necessary governmental approvals, closing is expected to occur in the second
quarter of 1998. Consummation of the transactions contemplated by the merger
agreement will result in a change in control of the Company, and the outstanding
options to acquire shares of Company common stock shall become fully exercisable
and vested immediately prior thereto.
Shareholders' Agreement
In connection with its formation and the Acquisition, the Company entered
into a Shareholders' Agreement (the "Shareholders Agreement") with all of the
holders of its Class A Common Stock and Class B Common Stock (collectively, the
"Shareholders"). The Shareholders Agreement contains certain restrictions on
transfers of Common Stock and provisions under which Shareholders may sell
Common Stock or require other Shareholders to sell Common Stock or under which
the Company may acquire Common Stock from Shareholders. The Shareholders
Agreement provides that, upon certain issuances by the Company of equity
securities to any of the initial Shareholders (or their permitted transferees),
Shareholders will have rights to maintain their percentage equity interests in
the Company's capital stock by purchasing a portion of such equity securities.
Pursuant to the Shareholders Agreement, each of the Shareholders agrees to
vote its shares of Common Stock so that the Board of Directors will consist of
one director appointed by Madison Dearborn and as many other directors as shall
be appointed by Questor.
Subject to certain conditions, the Shareholders will have certain demand
and "piggyback" rights to have their shares of Common Stock registered under the
Securities Act. The Company has agreed to pay the costs and expenses associated
with any such registration, except for discounts and commissions.
The Shareholders Agreement will expire on the earlier to occur of the
closing of the underwritten initial public offering of Common Stock of the
Company and October 17, 2006.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Management Agreement with Questor Management
On October 17, 1996, the Company entered into a Management and Consulting
Agreement with Questor Management, pursuant to which Questor Management provides
consulting, management and advisory services to the Company, including services
with respect to strategic planning, financial matters and operations. As
compensation for such services, Questor Management is paid an annual management
fee of $850,000 and costs and expenses incurred by Questor Management in
providing such services. In consideration of services previously rendered by
Madison Dearborn and
21
<PAGE>
in consideration of consulting, management, and advisory services relating to
the Company to be rendered at a reasonable level in the future at the request of
Questor Management, Questor Management agreed to pay to Madison Dearborn 20% of
the annual management fee paid to Questor Management. The Company also agreed to
indemnify Questor Management and its affiliates from liabilities and claims
arising out of or in connection with the performance by Questor Management of
such services, other than those resulting from the gross negligence or willful
misconduct of Questor Management. This agreement will continue for so long as
Questor Management or any affiliate thereof or affiliate of any such affiliate
continues to hold any shares of common stock of the Company. The agreements
provided for in the Management and Consulting Agreement constituted part of the
agreement by affiliates of Questor Management for the capitalization of the
Company, and, as the Company is controlled by such affiliates, may be deemed not
to have been negotiated at arm's length.
Agreement with Jay Alix & Associates, Inc. for Management Consulting
Services
The Company has entered into an agreement with JA&A (the "JA&A Agreement"),
pursuant to which JA&A provides financial consulting services to the Company in
an effort to improve the Company's operating performance. For such services,
JA&A is paid on an hourly basis and is reimbursed for its out-of-pocket
expenses. A $250,000 retainer that was paid by the Company in connection with an
earlier (now terminated) engagement with JA&A was applied as a retainer for the
current JA&A Agreement. Pursuant to the JA&A Agreement, the Company may pay JA&A
a contingent success fee. The determination of whether to award such fee, and
the amount, if any, thereof, is within the sole discretion of the Company's
Board of Directors.
The Company agreed to indemnify JA&A and its principals, employees and
agents from all claims and liabilities relating to or arising out of the
engagement, other than for actions taken or omitted to be taken by JA&A in bad
faith. The Company believes that the terms of the agreement are at least as
favorable to it as those that could have been obtained from an unaffiliated
third party.
Other Transactions with Affiliates
Ronald A. Rittenmeyer, the Company's President and Chief Operating Officer,
was a principal with JA&A from January 1997 until February 1998.
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules. See Index
immediately following the signature pages.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the last quarter of the year ended December 31, 1997.
(c) Exhibits. The following exhibits are included in this Report:
23
<PAGE>
EXHIBIT INDEX
Exhibit
No.
- -------
2.1(1) Agreement and Plan of Merger, dated as of March 4, 1998, by
and among Budget Group, Inc., BDG Corporation, Ryder TRS, Inc.,
Questor Partners Fund, L.P., Questor Side-by-Side Partners, L.P.
and Madison Dearborn Capital Partners, L.P.
2.2(1) Amendment No. 1 to Agreement and Plan of Merger, dated as of
March 16, 1998, by and among Budget Group, Inc., BDG Corporation,
Ryder TRS, Inc., Questor Partners Fund, L.P., Questor Side-by-Side
Partners, L.P. and Madison Dearborn Capital Partners, L.P.
3.1(2) Restated and Amended Certificate of Incorporation of the Company.
3.2(3) Restated and Amended By-Laws of the Company.
3.3(2) Amended and Restated Certificate of Incorporation of RCTR, Inc.
3.4(2) By-Laws of RCTR, Inc.
3.5 Amended and Restated Certificate of Incorporation of FCTR, Inc.
3.6 By-laws of FCTR, Inc.
4.1(2) Indenture dated as of November 25, 1996, between the Company and
The Bank of New York, relating to $175,000,000 principal amount of
10% Senior Subordinated Notes due 2006, including forms of Senior
Subordinated Notes.
4.2(2) Exchange and Registration Rights Agreement, dated November 25,
1996, between the Company and Chase Securities Inc. (previously
filed as Exhibit 4.7).
10.1(2) Asset and Stock Purchase Agreement dated as of September 19, 1996
between Ryder Truck Rental, Inc. and Ryder TRS, Inc., (previously
filed as Exhibit 10.2).
10.2(2)(5) Dealer Agreement dated as of October 17, 1996 between Ryder Truck
Rental, Inc. and Ryder TRS, Inc. (previously filed as Exhibit
10.3).
10.3(2)(5) Vehicle Maintenance Agreement dated as of October 17, 1996 between
Ryder Truck Rental, Inc. and Ryder TRS, Inc. (previously filed as
Exhibit 10.4).
10.4(2)(5) Used Truck Sales Agreement dated as of October 17, 1996 between
Ryder Truck Rental, Inc. and Ryder TRS, Inc. (previously filed as
Exhibit 10.5).
10.5(2)(5) Administrative Services Agreement dated as of October 17, 1996
between Ryder Truck Rental, Inc. and Ryder TRS, Inc. (previously
filed as Exhibit 10.6).
10.6(2)(5) MIS Support Agreement dated as of October 17, 1996 between Ryder
Truck Rental, Inc. and Ryder TRS, Inc. (previously filed as Exhibit
10.7).
10.7(2)(5) Sublease Agreement dated as of October 17, 1996 between Ryder
System, Inc. and Ryder TRS, Inc. (previously filed as Exhibit
10.8).
10.8(2)(5) Office License Agreements dated as of October 17, 1996 between
Ryder Truck Rental, Inc. and Ryder TRS, Inc. (previously filed as
Exhibit 10.9).
24
<PAGE>
Exhibit
No.
- -------
10.9(2) Trademark License Agreement dated October 17, 1996 between Ryder
System, Inc. and Ryder TRS, Inc., (previously filed as Exhibit
10.10).
10.10(2) Patent License Agreement dated as of October 17, 1996 between Ryder
Truck Rental, Inc. and Ryder TRS, Inc. (previously filed as Exhibit
10.11).
10.11(2) Copyright License Agreement dated as of October 17, 1996 between
Ryder Truck Rental, Inc. and Ryder TRS, Inc. (previously filed as
Exhibit 10.12).
10.12(2) Software License Agreement dated as of October 17, 1996 between
Ryder Truck Rental, Inc. and Ryder TRS, Inc. (previously filed as
Exhibit 10.13).
10.13(2) Management and Consulting Agreement dated as of October 17, 1996
between Ryder TRS, Inc. and Questor Management Company (previously
filed as Exhibit 10.14).
10.14(2) Purchase Agreement, dated as of November 20, 1996, by and
between Ryder TRS, Inc. and Chase Securities Inc., relating
to the Senior Subordinated Notes (previously filed as
Exhibit 10.1).
10.15(2) Lease dated March 12, 1997 between Hamilton Oil Building
Partnership and Ryder TRS, Inc., (previously filed as Exhibit
10.18).
10.16(3) Amended and Restated Master Motor Vehicle Lease Agreement, dated as
of August 7, 1997, between the Company and RCTR, Inc. (previously
filed as Exhibit 10.1).
10.17 Amendment No. 1 and Consent thereto, dated as of February 6, 1998,
to the Amended and Restated Master Motor Vehicle Lease Agreement
dated as of August 7, 1997.
10.18(3) Amended and Restated Credit Agreement, dated as of August 7, 1997,
among the Company, Citicorp USA, Inc., as administrative agent and
as collateral agent, The Chase Manhattan Bank, as documentation
agent, and other lending institutions (previously filed as Exhibit
10.2).
10.19 Amendment No. 1 and Consent, dated as of December 30, 1997, to the
Credit Agreement, dated as of October 17, 1996 and amended and
restated as of August 7, 1997, and to the Security Agreement dated
as of October 17, 1996 and amended and restated as of August 7,
1997.
10.20(4) Loan Agreement, dated as of August 7, 1997, between RCTR, Inc., as
borrower, and FCTR, Inc. as lender (previously filed as Exhibit
10.1).
10.21(4) Liquidity Agreement, dated as of August 7, 1997, among FCTR, Inc.,
as borrower, Citibank N.A., as liquidity agent, and certain
financial institutions, as liquidity lenders (previously filed as
Exhibit 10.2).
10.22(4) Collateral Agreement, dated as of August 7, 1997, among
FCTR, Inc., RCTR, Inc., Citibank, N.A., as liquidity agent
and depositary, Citicorp USA, Inc., as agent, and Citicorp
Securities, Inc. and Lehman Brothers Inc., as dealers
(previously filed as Exhibit 10.3).
10.23 Amendment No. 1 and Consent thereto, dated as of February 6, 1998,
to the Collateral Agreement dated as of August 7, 1997.
10.24(4) Depositary Agreement, dated as of August 7, 1997, between FCTR,
Inc. and Citibank, N.A., as depositary (previously filed as Exhibit
10.4).
25
<PAGE>
Exhibit
No.
- -------
10.25(4) Dealer Agreement, dated as of August 7, 1997, between FCTR, Inc.,
RCTR, Inc., Citicorp Securities, Inc. and Lehman Brothers Inc.
(previously filed as Exhibit 10.5).
10.26 Guarantee Agreement, dated as of October 7, 1996, as amended and
restated as of August 7, 1997, among the Guarantor Subsidiaries and
Citicorp USA, Inc.
10.27 Indemnity, Subrogation and Contribution Agreement, dated as
of October 17, 1996, as amended and restated as of August 7, 1997,
among Ryder TRS, Inc., the Guarantor Subsidiaries and Citicorp USA,
Inc.
10.28 Pledge Agreement, dated as of October 17, 1996, as amended and
restated as of August 7, 1997, among Ryder TRS, Inc. the Subsidiary
Pledgors and Citicorp USA, Inc.
10.29 Security Agreement, dated as of October 17, 1996, as amended and
restated as of August 7, 1997, among Ryder TRS, Inc., the
Subsidiary Guarantors and Citicorp USA, Inc.
10.30 Amendment No. 2 and Consent thereto, dated as February 6, 1998, to
the Security Agreement dated as of October 17, 1996, amended and
restated as of August 7, 1997, and further amended as of December
30, 1997.
10.31 Indemnity Escrow Agreement, dated as of December 29, 1997, among
Ryder TRS, Inc., as Grantor, and The Chase Manhattan Bank, as
Escrow Agent, as amended by Addendum #1 thereto.
10.32 Letter Agreement dated December 9, 1997 between Ryder TRS, Inc.
and Jay Alix & Associates, Inc.
10.33 Letter of Credit Agreement, dated as of August 7, 1997, between
Ryder TRS, Inc. and Citibank, N.A.
10.34 Severance Agreement and Release, dated as of October 7, 1997,
between Ryder TRS, Inc. and Gerald R. Riordan.
10.35 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and David S. Russell.
10.36 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and Deborah R. Riston.
10.37 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and Stephen T.D. Dixon.
10.38 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and Michael A. Zawalski.
10.39 Option Agreement Letter dated July 23, 1997, between Ryder TRS,
Inc. and Michael A. Zawalski.
12 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
21(3) Subsidiaries of Ryder TRS, Inc.
23.1 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
99.1(2) Press Release dated March 4, 1998.
(1) Incorporated by reference to the identically numbered exhibit to Ryder TRS,
Inc., Current Report on Form 8-K filed on March 17, 1998.
(2) Incorporated by reference to the identically numbered exhibit (or to the
exhibit as indicated) to Ryder TRS, Inc., Registration Statement on Form
S-4, Registration No. 333-20397 (the "Company's Registration Statement").
--------------------------------
(3) Incorporated by reference to the identically numbered exhibit (or the
exhibit number as indicated) to Ryder TRS, Inc., Quarterly Report on Form
10-Q for the period ended June 30, 1997.
(4) Incorporated by reference to the identically numbered exhibit (or the
exhibit number as indicated) to Ryder TRS, Inc., Current Report on Form 8-K
filed on August 21, 1997.
(5) Confidential treatment has been granted by the Securities and Exchange
Commission (the "SEC") for portions of these agreements, which portions
---
were omitted from the Company's Registration Statement and filed separately
with the SEC.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Denver, State of Colorado on the 30th day of March, 1998.
RYDER TRS, INC.
By: /s/ Ronald A. Rittenmeyer
------------------------------
Ronald A. Rittenmeyer
President and Chief Operating
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this annual report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Jay Alix Chairman of the Board and March 30, 1998
- ---------------------------- Chief Executive Officer
Jay Alix (principal executive officer)
President and Chief Operating
/s/ Ronald A. Rittenmeyer Officer and Director March 30, 1998
- ----------------------------
Ronald A. Rittenmeyer
Chief Financial Officer
/s/ Michael A. Zawalski (principal financial and March 30, 1998
- ---------------------------- accounting officer)
Michael A. Zawalski
/s/ Alfred A. Piergallini Director March 30, 1998
- ----------------------------
Alfred A. Piergallini
/s/ Thomas R. Reusche Director March 30, 1998
- ----------------------------
Thomas R. Reusche
/s/ Wallace L. Rueckel Director March 30, 1998
- ----------------------------
Wallace L. Rueckel
/s/ Edward L. Scarff Director March 30, 1998
- ----------------------------
Edward L. Scarff
/s/ J. William Schutzenhofer Director March 30, 1998
- ----------------------------
J. William Schutzenhofer
27
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Ryder TRS, Inc. and Subsidiaries
Report of Independent Accountants......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997.............................................. F-3
Consolidated Statements of Operations for the period from September 5, 1996 (date of inception)
to December 31, 1996 and the year ended December 31, 1997.............................................. F-4
Consolidated Statements of Changes in Shareholders' Equity for the period from September 5, 1996
(date of inception) to December 31, 1996 and the year ended December 31, 1997.......................... F-5
Consolidated Statements of Cash Flows for the period from September 5, 1996 (date of inception)
to December 31, 1996 and the year ended December 31, 1997 ............................................. F-6
Notes to Consolidated Financial Statements ............................................................... F-7
Report of Independent Accountants......................................................................... F-17
Supplemental Schedule - Valuation Accounts for the period from September 5, 1996
(date of inception) to December 31, 1996 and the year ended December 31, 1997.......................... F-18
Ryder Consumer Truck Rental Division
Report of Independent Auditors............................................................................ F-19
Combined Balance Sheet at December 31, 1995............................................................... F-20
Combined Statement of Operations and Changes in Ryder Investment for the year ended
December 31, 1995...................................................................................... F-21
Combined Statement of Cash Flows for the year ended December 31, 1995..................................... F-22
Notes to Combined Financial Statements.................................................................... F-23
Report of Independent Auditors............................................................................ F-31
Combined Balance Sheet at October 16, 1996................................................................ F-32
Combined Statement of Earnings and Changes in Ryder Investment for the Period January 1, 1996
to October 16, 1996.................................................................................... F-33
Combined Statement of Cash Flows for the Period January 1, 1996 to October 16, 1996....................... F-34
Notes to Combined Financial Statements.................................................................... F-35
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Ryder TRS, Inc.
We have audited the accompanying consolidated balance sheets of Ryder
TRS, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for the period from September 5, 1996 (date of inception) to December 31,
1996 and the year ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Ryder
TRS, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for the period
from September 5, 1996 (date of inception) to December 31, 1996 and the year
ended December 31, 1997 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
March 5, 1998
F-2
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
Assets December 31,
-----------------------------
Current assets: 1996 1997
------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 17,507 $ --
Restricted cash -- letters of credit -- 1,650
Receivables 33,084 24,278
Prepaid licenses, net 1,205 3,641
Deferred income taxes 2,613 9,381
Other current assets 6,564 8,203
----------- -----------
Total current assets 60,973 47,153
Restricted cash -- letter of credit and compensating balances -- 5,043
Revenue earning equipment and operating property and equipment, net 491,054 460,696
Software development costs, net 13,929 18,743
Intangible assets, net 51,862 47,838
Deferred income taxes -- 3,954
----------- -----------
Total assets $ 617,818 $ 583,427
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Drafts payable $ -- $ 6,324
Accounts payable 11,499 32,528
Payable to Ryder Truck Rental, Inc. 16,783 3,888
Accrued expenses 23,814 30,439
----------- -----------
Total current liabilities 52,096 73,179
Commercial paper notes -- 227,890
Senior bank facilities 271,719 --
Senior subordinated notes 168,900 168,015
Accrued expenses 4,992 11,849
----------- -----------
Total liabilities 497,707 480,933
----------- -----------
Redeemable Class C Common Stock: 940 shares issued and outstanding -- 940
----------- -----------
Commitments and contingencies (Note 17)
Shareholders' equity:
Common stock: $.01 par value, 275,000 shares authorized, 109,090 Class A shares,
13,910 Class B shares and 200 Class C shares (in 1997) issued and outstanding 1 1
Additional paid-in capital 122,999 123,208
Accumulated deficit (2,889) (21,655)
----------- -----------
Total shareholders' equity 120,111 101,554
----------- -----------
Total liabilities and shareholders' equity $ 617,818 $ 583,427
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
September 5,
1996 (date of Year
inception) to Ended
December 31, December 31,
1996 1997
---------------- --------------
<S> <C> <C>
Truck rental and related revenue $ 103,011 $ 545,720
Operating expense 32,908 191,537
Selling, general and administrative expense 39,317 225,850
Depreciation expense (net of gains) and amortization 21,222 112,171
-------------- ------------
Operating income 9,564 16,162
Interest expense 9,159 39,178
-------------- ------------
Earnings (loss) before income taxes and extraordinary item 405 (23,016)
Provision (benefit) for income tax 156 (8,861)
-------------- ------------
Earnings (loss) before extraordinary item 249 (14,155)
Extraordinary loss on debt extinguishment, net of tax (3,138) (4,611)
-------------- ------------
Net loss $ (2,889) $ (18,766)
============== ============
Basic and diluted amounts per common share:
Earnings (loss) before extraordinary item $ 3.16 $ (114.09)
============== ============
Extraordinary item, net of tax $ (39.80) $ (37.17)
============== ============
Net loss $ (36.64) $ (151.26)
============== ============
Weighted average number of common shares 78,846 124,068
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
for the year ended December 31, 1997 and for the period from
September 5, 1996 (date of inception) to December 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
Non-redeemable
Class A Class B Class C
Common Stock Common Stock Common Stock
--------------------- --------------------- ----------------------
Shares Par Value Shares Par Value Shares Par Value
-------- ----------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 5, 1996 -- $ -- -- $ -- -- $ --
(date of inception)
Initial capitalization 109,090 1 13,910 -- -- --
Net loss -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Balance at December 31, 1996 109,090 $ 1 13,910 $ -- -- --
Shares issued -- -- -- -- 200 --
Class C Shares redeemed at book
value -- -- -- -- -- --
Net loss -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Balance at December 31, 1997 109,090 $ 1 13,910 $ -- 200 $ --
======== ======== ======== ======== ======== ========
<CAPTION>
Additional
Paid-In Accumulated
Capital Deficit Total
------------ ------------- ----------
<S> <C> <C> <C>
Balance at September 5, 1996 $ -- $ -- $ --
(date of inception)
Initial capitalization 122,999 -- 123,000
Net loss -- (2,889) (2,889)
----------- ---------- ---------
Balance at December 31, 1996 $ 122,999 $ (2,889) $ 120,111
Shares issued 200 -- 200
Class C Shares redeemed at book
value 9 -- 9
Net loss -- (18,766) (18,766)
----------- --------- ---------
Balance at December 31, 1997 $ 123,208 $ (21,655) $ 101,554
============ ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
September 5,
1996 (date of
inception) to Year ended
December 31, 1996 December 31, 1997
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,889) $ (18,766)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Write-off of deferred financing costs related to the extinguishment of debt 5,102 7,497
Depreciation expense (net of gains) and amortization 21,222 112,171
Amortization of deferred financing costs 471 2,341
Deferred income tax benefit (2,077) (11,747)
Change in operating assets and liabilities, net of effects of acquisition in 1996:
Accounts receivable (9,259) (3,121)
Prepaid expenses and other current assets (349) (3,995)
Accounts payable and accrued expenses 28,064 31,643
Payable to Ryder Truck Rental, Inc., net 5,966 (9,037)
----------- -----------
Net cash provided by operating activities 46,251 106,986
----------- -----------
Cash flows from investing activities:
Cash paid for acquisition (582,703) --
Purchase price refund receivable from Ryder Truck Rental, Inc. (6,082) 5,429
Capital expenditures (1,955) (129,385)
Proceeds from sales of revenue earning equipment 3,950 52,290
----------- -----------
Net cash used in investing activities (586,790) (71,666)
----------- -----------
Cash flows from financing activities:
Net borrowing under commercial paper notes -- 233,145
Borrowing under senior bank facilities 381,000 --
Payment on senior bank facilities (100,000) (281,000)
Borrowing under senior subordinated notes 175,000 --
Borrowing under senior subordinated credit facility 100,000 --
Payment on senior subordinated credit facility (100,000) --
Drafts payable -- 6,324
Capital contributions 123,000 --
Deferred financing costs (20,954) (5,752)
Change in restricted cash -- (6,693)
Issuance of Class C common stock -- 1,640
Redemption of Class C common stock -- (491)
----------- -----------
Net cash provided by (used in) financing activities 558,046 (52,827)
----------- -----------
Increase (decrease) in cash and cash equivalents 17,507 (17,507)
Cash and cash equivalents at beginning of period -- 17,507
----------- -----------
Cash and cash equivalents at end of period $ 17,507 $ --
=========== ===========
Supplemental disclosures:
Cash paid for:
Interest $ 3,398 $ 41,005
=========== ===========
Income taxes $ -- $ 783
Non-cash item:
Purchase adjustments increasing assets acquired and liabilities assumed $ -- $ 2,868
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business:
Ryder TRS, Inc. ("TRS") was incorporated on September 5, 1996 for the
purpose of consummating the transactions that are more fully described in Note 3
below. TRS (together with its subsidiaries, the "Company") is a provider of
truck rentals and related moving supplies and services to the consumer and light
commercial markets in the United States. The Company rents trucks, towing
equipment and accessory equipment, and sells liability-limiting products and
moving supplies to consumers and commercial customers through a nationwide
network that approximated 3,900 dealers at December 31, 1997.
2. Summary of Significant Accounting Policies:
Basis of Consolidation. The accompanying financial statements include
the operations, assets and liabilities of TRS and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents. All highly liquid investments with
maturities of three months or less when purchased are cash equivalents. Cash
which is restricted as to its use is segregated on the Company's balance sheet
and is excluded from cash and cash equivalents.
Revenue Recognition. Truck rental and related revenue is recognized as
earned.
Prepaid Licenses. Vehicle licensing fees are deferred when paid and
amortized to expense over the period to which the fees relate.
Advertising Costs. Yellow Page directory costs are deferred when paid
and amortized over the period the directories are effective, which is typically
12 months. Unamortized prepaid Yellow Page directory costs were $5.4 million and
$5.8 million at December 31, 1996 and 1997, respectively. The Company expenses
the production costs of advertising as incurred. The cost of air time and print
space for media advertising is expensed when used. Total advertising expense was
$3.2 million for the period from September 5, 1996 to December 31, 1996, and
$31.3 million for the year ended December 31, 1997.
Revenue Earning Equipment and Operating Property and Equipment. Revenue
earning equipment, principally rental trucks, and operating property and
equipment that were acquired, pursuant to the transaction described in Note 3,
are recorded based on an allocation of purchase price to estimated fair value as
of the acquisition date. Subsequent additions are stated at cost. Depreciation
is computed using the straight-line method over lives as follows: (i) revenue
earning equipment--1 to 8 years; (ii) office equipment and furniture--1 to 7
years; and (iii) transfer vehicles--1 to 4 years. Vehicle repairs and
maintenance which do not extend the life or increase the value of the vehicle
are expensed as incurred.
Software Development Costs. The Company capitalizes certain external
and internal direct costs incurred in developing and obtaining internal use
software. Costs are amortized over their expected useful lives, which is five
years for most software projects. Software maintenance costs are amortized over
the maintenance period. Software training costs are expensed as incurred.
Accumulated amortization related to software development costs was $0.3 million
and $2.8 million at December 31, 1996 and 1997, respectively.
Deferred Financing Costs. Deferred financing costs relate to costs
associated with the senior bank facilities, commercial paper notes, senior
subordinated loan facility, and senior subordinated notes. These costs are
presented in the balance sheet as offsets to the related debt and are amortized
to interest expense over the expected terms of the related debt.
F-7
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued):
Intangible Assets. Intangible assets represent costs allocated to the
tradename and the dealer network acquired with the Company. The cost of the
tradename is being amortized on a straight-line basis over the ten-year term of
the Trademark License Agreement with Ryder Truck Rental, Inc. The cost of the
dealer network is being amortized on a straight-line basis over a fifteen-year
period.
Income Taxes. Deferred tax assets and liabilities are determined based
upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates. Deferred tax balances
will be adjusted for tax law changes in periods that include the enactment date
of any tax rate or law changes. No impairment reserve was considered necessary
at December 31, 1996 and 1997.
Impairment of Long-lived Assets. The carrying value of long-lived
assets is reviewed when events or changes in circumstances indicate the value
may not be recoverable from projected undiscounted future cash flows. No
impairment reserve was considered necessary at December 31, 1997.
Basic and Diluted Per Common Share Amounts. Basic and diluted amounts
per common share are based on the weighted average number of common shares
outstanding during the period. Outstanding options for Class C Common Stock
(Note 16) were not included in the computation of diluted earnings per share,
because to do so would have been anti-dilutive. These could potentially dilute
EPS in the future.
Reclassifications. Certain reclassifications have been made to the 1996
financial statements to conform to current year presentation.
Impact of Recent Accounting Pronouncements. The Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income" in June 1997. This statement,
which is required to be adopted in the first quarter of 1998, establishes
standards for reporting comprehensive income and its components. This statement
is not expected to have a material effect on the Company's financial statements.
The FASB also issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in June 1997. This statement, which is
required to be adopted in the first quarter of 1998, establishes standards for
the way that public companies report information about operating segments in
annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports. This
statement is not expected to have a material effect on the Company's financial
statements.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." This statement
addresses costs that are capitalizable, costs that must be expensed, and
provides guidance on amortization periods for internal use software. The
Company's existing accounting policy for software development costs is in
conformity with the provisions of this SOP. As such, the Company adopted this
statement in the fourth quarter of 1997, resulting in no financial statement
impact.
3. Acquisition of the Ryder Consumer Truck Rental Business:
On October 17, 1996, pursuant to an Asset and Stock Purchase Agreement,
the Company acquired from Ryder Truck Rental, Inc., a subsidiary of Ryder
System, Inc. (collectively, the "Seller"), substantially all the assets and
assumed certain of the liabilities of the Seller's Consumer Truck Rental
division (the "Business"). The aggregate adjusted cash purchase price was
approximately $573.3 million, which is net of $6.0 million subsequently refunded
to the Company. In addition, the Company paid approximately $9.4 million of fees
and expenses that were capitalized as part of the acquisition cost (see Note 4).
The acquisition of the Business has been accounted for as a purchase and,
accordingly, its results of operations are included in the consolidated
financial statements since the date of acquisition.
F-8
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financing for the acquisition and $14.8 million of deferred financing
costs consisted of (i) $123.0 million of equity capital through the issuance of
109,090 shares of Class A Common Stock and 13,910 shares of Class B Common
Stock; (ii) $350.0 million of term loans and $31.0 million of revolving loans
borrowed under a $500.0 million senior secured credit facility with certain
banks (the "Senior Bank Facilities"); and (iii) $100.0 million of loans borrowed
under a senior subordinated loan facility (see Notes 11 and 12).
3. Acquisition of the Ryder Consumer Truck Rental Business (continued):
The purchase price has been allocated to assets acquired and
liabilities assumed based on fair market value at the date of acquisition. The
resulting book value of assets acquired and liabilities assumed is
summarized as follows (in thousands):
<TABLE>
<S> <C>
Revenue earning equipment and operating property and equipment $ 522,556
Software development costs 13,915
Prepaid expenses and other current assets 8,106
Dealer network and tradename 52,700
Accounts payable and accrued liabilities (14,574)
------------
Total $ 582,703
============
</TABLE>
The following unaudited pro forma consolidated results of operations
have been prepared as if the acquisition of the Business had occurred as of
January 1, 1996. The pro forma consolidated results do not purport to be
indicative of results that would have occurred had the acquisition been in
effect for the periods presented, nor do they purport to be indicative of the
results that may be obtained in the future (in thousands):
<TABLE>
Pro Forma Year
End December 31, 1996
(unaudited)
----------------------
<S> <C>
Truck rental and related revenue $ 542,790
Operating income 32,285
Net loss (8,005)
</TABLE>
4. Transactions with Affiliated Parties:
In conjunction with the acquisition, the Company paid and capitalized
merger and acquisition fees totaling $8.0 million to certain shareholders or
their affiliates for services relating to the acquisition. Additionally, the
Company entered into a Management and Consulting Agreement with an affiliate of
one of the Company's shareholders providing for annual compensation of $850,000,
subject to certain conditions, for a period that will continue for as long as
the shareholder or certain affiliates of the shareholder hold any shares of
Common Stock of the Company. The Company also entered into an agreement for
certain advisory services with another affiliate of one of the shareholders
which can be terminated by either party at any time. During the period from
September 5, 1996 through December 31, 1996, and the year ended December 31,
1997, the amounts charged to earnings with respect to this agreement were
approximately $0.8 million and $4.3 million, respectively.
5. Restricted Cash
Under terms of the commercial paper notes (see Note 10), the Company is
required to maintain on deposit compensating balances equal to 2% of the
outstanding face amount of the commercial paper notes. The Company invests in
investment-grade quality commercial paper, restricted as to use, as collateral
under certain current and noncurrent letter of credit arrangements.
F-9
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Revenue Earning Equipment and Operating Property and Equipment:
Revenue earning equipment and operating property and equipment consisted of
the following as of December 31 (in thousands):
1996 1997
---- ----
Trucks $ 479,736 $ 517,879
Towing equipment and other 14,786 15,982
Office equipment and furniture 14,336 16,722
Transfer vehicles 397 1,158
----------- -----------
509,255 551,741
Accumulated depreciation (18,201) (91,045)
----------- -----------
Total $ 491,054 $ 460,696
=========== ===========
7. Accounts Receivable:
Accounts receivable consisted of the following as of December 31 (in
thousands):
1996 1997
---- ----
Accounts receivable $ 9,456 $ 15,004
Receivables from truck sales 6,926 5,047
Receivable from Ryder Truck Rental, Inc. 10,817 6,959
Purchase price adjustment from Seller 6,190 --
----------- -----------
$ 33,389 $ 27,010
Allowance for doubtful accounts (305) (2,732)
----------- -----------
Total $ 33,084 $ 24,278
=========== ===========
8. Intangible Assets:
Intangible assets consisted of the following as of December 31 (in
thousands):
1996 1997
---- ----
Tradename $ 15,300 $ 15,300
Dealer network 37,400 37,400
---------- ----------
52,700 52,700
Accumulated amortization (838) (4,862)
---------- ----------
Total $ 51,862 $ 47,838
========== ==========
9. Accrued Expenses:
Accrued expenses consisted of the following as of December 31 (in
thousands):
1996 1997
---- ----
Auto and general liability reserves $ 4,789 $ 20,784
Dealer commissions 6,930 7,143
Employee related accruals 1,640 4,654
Accrued purchase costs 6,000 4,347
Interest 5,291 1,872
Other 4,156 3,488
----------- -----------
Total 28,806 42,288
Non-current portion (4,992) (11,849)
----------- -----------
Current portion $ 23,814 $ 30,439
=========== ===========
F-10
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Commercial Paper Notes:
During 1997, the Company's special purpose subsidiary, FCTR, Inc.
("Finco"), entered into a commercial paper program that permits the issuance of
up to $450.0 million in commercial paper notes, subject to borrowing base
availability provided by the RCTR truck fleet. A liquidity facility (the
"Facility") provides committed liquidity support for a period of 364 days
renewable at the option of the lenders. Any advances under the Facility that are
outstanding on the termination date of a liquidity lender's commitment will not
mature for eighteen months after such termination date. Accordingly, any amounts
outstanding under the program or advances outstanding under the Facility are
classified as long-term debt. RCTR, Inc., a wholly-owned special purpose
subsidiary of the Company ("Leasco"), and Finco each have their own separate
creditors which, upon the liquidation of either subsidiary, will be entitled to
be satisfied out of the assets of Leasco or Finco, respectively, prior to any
value in either of the subsidiaries becoming available to the Company. Finco's
obligations are collateralized by (i) its rights to receive payments under a
loan agreement with Leasco, (ii) any of Finco's cash and eligible investments,
(iii) an assignment of Leasco's rights under the lease agreement with the
Company (including the rights to receive payments thereunder), and (iv) the
vehicles in Leasco's fleet.
In conjunction with the commercial paper program, TRS entered into an
agreement pursuant to which TRS has established a five-year, $40.0 million
secured revolving credit facility. The Company has also entered into a $50.0
million facility for the issuance of cash collateralized letters of credit. No
amounts were outstanding at December 31, 1997 under either of these facilities.
Commitment fees for these facilities are based on 0.05% of the unused portion.
Commercial paper notes and related agreements consisted of the
following as of December 31, 1997 (in thousands):
Commercial paper notes $ 233,145
Deferred financing costs and unamortized discounts (5,255)
-----------
Total $ 227,890
==========
The outstanding commercial paper notes reported at December 31, 1997 are net of
$19.1 million which is held for the benefit of another party by a member of the
consolidated group.
All of the aforementioned agreements contain certain convenants and
restrictions, including, among other things, restrictions on the payment of the
dividends and the incurrence of additional indebtedness. In addition, under
these agreements, the Company is required to comply with specified financial
ratios and tests. As of December 31, 1997, the Company was in compliance with
such covenants.
The carrying value of the commercial paper notes approximates its fair
value. The effective interest rate of Commercial Paper Notes for the period they
were outstanding during 1997 ranged from 5.58% to 6.20%.
11. Senior Subordinated Notes:
During 1996, the Company issued $175.0 million of 10% Senior
Subordinated Notes (the "Notes") due December 1, 2006 with interest payable
semiannually commencing June 1, 1997. The Senior Subordinated Notes consisted of
the following as of December 31 (in thousands):
1996 1997
---- ----
Senior Subordinated Notes $ 175,000 $ 175,000
Deferred financing costs (6,100) (6,985)
----------- -----------
Total $ 168,900 $ 168,015
=========== ===========
F-11
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 10% Notes are uncollateralized obligations of the Company, are not
redeemable prior to December 1, 2001 except as discussed below, and are
redeemable at the option of the Company, in whole or in part, at the following
redemption prices (expressed as a percentage of principal amount), if redeemed
during the 12 month period commencing on December 1 of the years set forth
below:
Redemption
Period Price
------ ----------
2001 105.000%
2002 103.333%
2003 101.667%
2004 and thereafter 100.000%
Prior to December 2, 1999, the Company may also redeem up to 33.3% of
the original principal amount with proceeds of one or more public offerings at a
redemption price of 110%. In addition, upon the occurrence of a change of
control, the Notes may also be redeemed at the option of the Company, upon the
payment of an applicable premium. If a change of control occurs on or after
December 1, 2001, each holder of the Notes may require the Company to repurchase
all or a portion of such holder's Notes at a purchase price equal to 101% of the
principal amount thereof. The terms of the Notes include restrictions on
additional indebtedness, asset sales, dividends, mergers and transactions with
affiliates.
The net proceeds from the issuance of the Notes were used to refinance
the then existing $100.0 million senior subordinated loan facility and $69.0
million of the term facility. During 1996, and in connection with the
refinancing, the Company recognized an extraordinary loss of $3.1 million, net
of related income tax benefit of $2.0 million, from the extinguishment.
The carrying value of the Notes approximates its fair amount as of
December 31, 1997 and 1996.
12. Senior Bank Facilities:
Senior Bank Facilities consisted of the following as of December 31 (in
thousands):
1996 1997
---- ----
$350.0 million Term Facility $ 281,000 $ --
Deferred financing costs (9,281) --
---------- ----------
Total $ 271,719 $ --
========== ==========
The Senior Bank Facilities consisted of a $350.0 million term facility
(the "Term Facility") and a $150.0 million revolving credit facility (the
"Revolving Credit Facility"), of which $50.0 million was available for letters
of credit. At December 31, 1996, no amount was outstanding under the Revolving
Credit Facility. During 1997, the Company recognized an extraordinary loss of
$4.6 million, net of related income tax benefit of $2.9 million, from the
extinguishment of debt associated with the refinancing of amounts outstanding
under the Senior Bank Facilities.
F-12
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Income Taxes:
Income tax provision (benefit) included the following components (in
thousands):
<TABLE>
<CAPTION>
September 5,
1996 (date of
inception) to Year ended
December 31, December 31,
1996 1997
--------------- --------------
<S> <C> <C>
Current tax:
Federal $ 224 $ --
State 45 --
----------- -----------
269 --
----------- -----------
Deferred tax:
Federal (92) (7,758)
State (21) (1,103)
----------- -----------
(113) (8,861)
----------- -----------
Income tax expense (benefit) $ 156 $ (8,861)
=========== ===========
</TABLE>
A reconciliation of the Federal statutory tax rate with the effective tax
rate (benefit) rate as a percentage of pretax earnings or loss is as follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Statutory tax rate 34.0% (34.0)%
State income taxes, net of Federal income tax benefit 4.8 (4.8)
Other (0.3) 0.3
----- -----
Effective tax rate (benefit) 38.5% (38.5)%
===== =====
</TABLE>
The components of the net deferred income tax accounts as of December 31
were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Deferred income tax assets:
Accrued self-insurance $ 1,980 $ 8,074
Net operating loss carryforward 2,087 50,969
Alternative minimum tax credit carryforward 269 --
Miscellaneous other accruals 364 1,307
----------- -----------
4,700 60,350
----------- -----------
Deferred income tax liabilities:
Property and equipment basis differences (2,506) (47,015)
Other items (117) --
----------- -----------
(2,623) (47,015)
----------- -----------
Net deferred income tax asset $ 2,077 $ 13,335
=========== ===========
</TABLE>
At December 31, 1997, the Company has net operating loss carryforwards of
$131.2 million which will expire in 2011 and 2012 if not utilized. Based on
current estimates of future earnings, the net deferred tax asset is expected to
be recovered within the next five to ten years. Therefore, the Company has
recorded no valuation allowance against its deferred tax assets as of December
31, 1996 and 1997.
F-13
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Transactions with Seller:
In connection with the acquisition of the Business, the Company entered
into various agreements with the Seller regarding dealer relationships, vehicle
maintenance, facility leases, sales of used trucks, administrative services and
management information systems support. The agreements generally specify periods
of 60 to 90 days in which the Company, or either party in some cases, must give
notice to cease support for the functions. During the period from September 5,
1996 to December 31, 1996 and the year ended December 31, 1997, the amounts
charged to earnings with respect to these agreements were approximately $17.0
million and $48.4 million, respectively.
15. Common Stock:
The Company's Certificate of Incorporation authorizes 275,000 shares of
Common Stock designating 225,000 shares as Class A Common Stock, 25,000 shares
as Class B Common Stock and 25,000 shares as Class C Common Stock.
The holders of the Class B Common Stock and Class C Common Stock have
no voting rights except in certain limited circumstances. Class A Common Stock
is convertible into the same number of shares of Class B Common Stock. Upon the
occurrence of certain events, Class B Common Stock is convertible into the same
number of shares of Class A Common Stock. Class C Common Stock is not
convertible into Class A Common Stock or Class B Common Stock.
The Company and all of the holders of its Class A Common Stock and
Class B Common Stock (collectively, the "Shareholders") are parties to a
shareholders' agreement (the "Shareholders Agreement"). The Shareholders
Agreement contains certain restrictions on transfers of Common Stock and
provisions under which Shareholders may sell Common Stock or require other
Shareholders to sell Common Stock or under which the Company may acquire Common
Stock from Shareholders. The Shareholders Agreement provides that, upon certain
issuances by the Company of equity securities to any of the initial Shareholders
(or their permitted transferees), Shareholders will have rights to maintain
their percentage equity interests in the Company's capital stock by purchasing a
portion of such equity securities.
16. Redeemable Class C Common Stock
During 1997, the Company sold to certain management employees, a
Director and a consultant, 1,640 shares of its Class C Common Stock for $1,000
per share. Redemptions of 500 shares of the Class C Common Stock occurred during
1997. During 1997, certain management employees and the Director received
options to purchase, for the same price, a total of 5,780 additional shares.
The agreement under which these shares were issued to the employees
contains provisions requiring the Company to repurchase the shares (and any
other shares of the Class C Common Stock acquired by the employees), and the
shareholder to sell, at fair market value in the case of an employee's death
and, depending on the circumstances, either fair market or book value in the
case of an employee's retirement or termination of employment. The agreement
under which 200 shares were issued to the Director and the consultant do not
contain provisions requiring the Company to repurchase the shares. The holders
of the shares have certain other rights, including rights to participate in
certain issuances of shares of capital stock to affiliates of the Company, and
the right to sell shares if certain controlling shareholders sell any of their
own shares of common stock in the Company, and the right to participate in other
specified transactions. The agreement further provides that it would be a
condition of an initial public offering of the Company's common stock that the
Company's Certificate of Incorporation be amended to provide for the conversion
of Class C Common Stock into common stock.
The options referred to above are exercisable for ten years (subject to
certain provisions for earlier termination) limited to 20% of the shares covered
thereby in 1998, and an additional 20% each year thereafter, through 2002. The
options are generally non-transferable, and the right to exercise any
unexercised portion thereof expires upon the occurrence of certain events.
F-14
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, compensation expense
for stock options granted to employees or directors under the Company's stock
option plans is generally measured as the difference between the estimated fair
market value of the Company's stock at the date of grant and the amount an
employee must pay to acquire the stock. The options granted during 1997 were
issued at an exercise price of $1,000, the estimated fair market value on the
date of each grant.
<TABLE>
<S> <C>
Options outstanding as of December 31, 1996 --
Options granted 5,780
Options exercised --
Options forfeited (1,293)
-----------
Options outstanding as of December 31, 1997 (4,487)
-----------
Options exercisable as of December 31, 1997 --
Weighted average fair value per option granted during the year $ 144
Weighted average remaining contractual life in years 9
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". Had compensation expense been
determined based on fair value of the options granted at their grant dates,
consistent with the fair value approach prescribed by SFAS No. 123, the
Company's net loss and net loss per share for the year ended December 31, 1997
would have been reflected as the pro forma amounts indicated below:
<TABLE>
<CAPTION>
As reported Pro Forma
----------- ---------
<S> <C> <C>
Net loss (in thousands) $ 18,766 $ 18,940
Basic and diluted net loss per share $ 151.26 $ 152.66
</TABLE>
The fair value of each option granted was estimated on the date of
grant using a minimum value option-pricing model with the following assumptions:
(i) expected life of five years, (ii) dividend yield of 0%, and (iii) forfeiture
rate of 5%. The effects of applying SFAS No. 123 in providing pro forma
disclosures are not likely to be representative of the effects on reported net
income in future years.
17. Commitments and Contingencies:
The Company leases facilities and office equipment under operating
lease agreements. The consolidated statements of operations include rent expense
of $0.6 million and $3.5 million for the period from September 5, 1996 (date of
inception) to December 31, 1996 and the year ended December 31, 1997,
respectively. Future annual minimum payments for facilities and office equipment
leases in effect at December 31, 1997 are as follows (in thousands):
1998 $ 2,909
1999 2,108
2000 1,798
2001 988
2002 990
Thereafter 2,069
F-15
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has retained a portion of its risk under automobile and
general liability insurance and other insurance programs for activities
subsequent to the Acquisition. Coverage varies, but generally the Company
retains a significant portion of the per occurrence claims under $1 million. The
Company has excess liability insurance per occurrence for claims between $1
million and $100 million. The reserves for these claims are based on actuarial
or other estimates. There can be no assurance that the estimates will not change
as a result of limitations inherent in the estimation process.
In the normal course of its business, the Company has made various
commitments to purchase vehicles over the next several months.
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. While any proceeding or litigation
has an element of uncertainty, management believes that the disposition of these
matters will not have a material impact on the financial condition, liquidity or
results of operations of the Company.
18. Pending Merger:
On March 4, 1998, the Company and Budget Group, Inc. ("Budget")
announced the signing of a merger agreement under which the Company is to be
acquired by Budget and is to become a separate and wholly-owned subsidiary of
Budget. Budget also operates Budget Car and Truck Rental. Under the merger
agreement, Company shareholders will receive approximately $264 million
comprised of $125 million of cash, $119 million of Budget Group Class A Common
Stock and up to $20 million of contingent additional consideration. Subject to
the receipt of all necessary governmental approvals, closing is expected to
occur in the second quarter of 1998.
F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Ryder TRS, Inc. and
Subsidiaries is included on page F-2 of the Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule included on page F-17 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
March 5, 1998
F-17
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE - VALUATION ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Balance at Amount Balance at
Beginning Charged to End
of Period Expense Deductions of Period
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for bad debts:
September 5 (date of inception) to $ -- $ 783 $ 478 $ 305
December 31, 1996 ======== ========= ====== ========
Year ended December 31, 1997 $ 305 $ 4,859 $ 2,432 $ 2,732
======== ========= ====== ========
Allowance for revenue earning equipment:
September 5 (date of inception) to $ -- $ -- $ -- $ --
December 31, 1996 ======== ========= ====== ========
Year ended December 31, 1997 $ -- $ 2,000 $ -- $ 2,000
======== ========= ====== ========
</TABLE>
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Ryder System, Inc.:
We have audited the accompanying combined balance sheet of Ryder Consumer Truck
Rental (a division of Ryder Truck Rental, Inc., a wholly-owned subsidiary of
Ryder System, Inc.) as of December 31, 1995, and the related combined statements
of operations and changes in Ryder investment and of cash flows for the year
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Ryder Consumer Truck
Rental as of December 31, 1995, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Miami, Florida
September 23, 1996
F-19
<PAGE>
RYDER CONSUMER TRUCK RENTAL
COMBINED BALANCE SHEETS
December 31,
1995
---------------
(In Thousands)
Assets
Current assets:
Cash.................................................... $ 2,610
Receivables............................................. 35,780
Tires in service........................................ 27,603
Deferred income taxes................................... 7,733
Prepaid expenses and other current assets............... 10,451
----------
Total current assets............................... 84,177
Revenue earning equipment.................................... 519,762
Operating property and equipment............................. 21,409
Other assets................................................. 4,469
----------
Total assets....................................... $ 629,817
==========
Liabilities and Ryder Investment
Current liabilities:
Accounts payable........................................ $ 6,737
Accrued expenses and other liabilities.................. 34,886
----------
Total current liabilities.......................... 41,623
Deferred income taxes........................................ 70,175
Other non-current liabilities................................ 27,582
Investment by and advances from Ryder........................ 490,437
----------
Total liabilities and Ryder investment............. $ 629,817
==========
See accompanying notes to combined financial statements.
F-20
<PAGE>
RYDER CONSUMER TRUCK RENTAL
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN RYDER INVESTMENT
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
-----------------
(In Thousands)
<S> <C>
Truck rental and related revenue........................................ $ 546,721
Operating expense....................................................... 185,920
Selling, general and administrative expense............................. 213,600
Depreciation expense, net of gains...................................... 104,258
Interest expense........................................................ 29,663
Restructuring and other charges......................................... 6,370
Miscellaneous expense, net.............................................. 324
-----------
540,135
-----------
Earnings before income taxes........................................ 6,586
Provision for income taxes.............................................. 2,984
-----------
Net earnings............................................................ $ 3,602
===========
Changes in Ryder Investment:
Investment by and advances from Ryder at beginning of period........ $ 412,058
Net earnings........................................................ 3,602
Net change in investment by and advances from Ryder................. 74,777
-----------
Investment by and advances from Ryder at end of period.............. $ 490,437
===========
</TABLE>
See accompanying notes to combined financial statements.
F-21
<PAGE>
RYDER CONSUMER TRUCK RENTAL
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
-----------------
(In Thousands)
<S> <C>
Cash flows from operating activities:
Net earnings............................................................. $ 3,602
Depreciation expense, net of gains....................................... 104,258
Deferred income taxes.................................................... 2,852
Increase in receivables.................................................. (9,169)
Decrease in accounts payable............................................. (17,607)
Decrease in accrued expenses and other liabilities....................... (5,045)
Decrease in other non-current liabilities................................ (1,393)
Other, net............................................................... 1,835
----------
Net cash provided by operating activities........................... 79,333
----------
Cash flows from investing activities:
Purchases of property and revenue earning equipment...................... (223,749)
Sales of property and revenue earning equipment.......................... 72,410
Other, net............................................................... (1,992)
----------
Net cash used in investing activities............................... (153,331)
----------
Cash flows from financing activities:
Net increase in investments by and advances from Ryder................... 74,777
----------
Net cash provided by financing activities........................... 74,777
----------
Increase in cash.............................................................. 779
Cash at beginning of period................................................... 1,831
----------
Cash at end of period......................................................... $ 2,610
==========
</TABLE>
See accompanying notes to combined financial statements.
F-22
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1995
NOTE 1--NATURE OF BUSINESS
Ryder Consumer Truck Rental (the "Company") is a division of Ryder
Truck Rental, Inc., a wholly-owned subsidiary of Ryder System, Inc. ("Ryder").
The Company consists of the U.S.-based consumer truck rental operations of Ryder
and Ryder's wholly-owned subsidiary, Ryder Move Management, Inc. The Company is
engaged in the domestic rental of trucks to do-it-yourself movers and "light
commercial" customers, and the sale of related moving accessories and
liability-limiting products. The Company, through Ryder Move Management, is also
engaged in household goods relocation services for corporate employee relocation
programs. The Company's truck rental distribution network consists of
independent dealers and Ryder branch locations. Approximately 10% to 15% of the
Company's revenue is generated through Ryder branch locations. The Company's
business is seasonal, with generally higher levels of demand during the summer
months. As a result, the Company typically experiences greater profitability in
the second half of the year compared with the first half.
NOTE 2--SALE OF COMPANY
On September 19, 1996, Ryder Truck Rental, Inc. entered into a
definitive agreement to sell substantially all the assets and certain
liabilities of the Company to Questor Partners Fund, L.P. and certain other
investors (collectively "Questor") for approximately $575 million. In addition,
Ryder will give Questor a royalty-free license to use the Ryder trademark and
color scheme, subject to certain restrictions, for a total of 10 years (with
required modifications to the trademark after five years). Ryder and Questor
have also entered into service agreements for various periods of time ranging
from two to five years, with options for extensions after five years for certain
of the agreements. Under the agreements, Ryder will continue to provide various
services to the Company including vehicle maintenance, claims processing,
management information systems and other administrative services. In addition,
certain Ryder branch locations will continue to act as consumer truck rental
dealers and Ryder will continue to assist in the disposition of the Company's
used vehicles through its sales network. Rates agreed upon for the various
services are considered reasonable based on market rates. The transaction is
expected to be completed prior to the end of 1996.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Combined Financial Statements are presented for
periods prior to the date of the sale agreement utilizing the historical
accounting practices followed by Ryder.
Basis of Presentation. The accompanying Combined Financial Statements
include the operations, assets and liabilities of the Company. The financial
statements do not include assets and liabilities of Ryder not specifically
identifiable to the Company. The financial information included herein is not
necessarily indicative of the financial position and results of operations or
cash flows that would have occurred had the Company been an independent
stand-alone entity during the periods presented, nor is it necessarily
indicative of future results of the Company.
Receivables. Receivables consist primarily of trade receivables
resulting from rental transactions and receivables from the sale of revenue
earning equipment. Receivables are reduced by amounts considered by management
to be uncollectible based on historical collection loss experience and review of
the current status of existing receivables.
Revenue Earning Equipment, Operating Property and Equipment and
Depreciation. Revenue earning equipment, principally rental trucks, and
operating property and equipment are stated at cost. Provision for depreciation
is computed using the straight-line method on substantially all depreciable
assets. Annual straight-line depreciation rates are 14% to 20% for revenue
earning equipment, 13% to 25% for office equipment and furniture and 19% to 30%
for transfer vehicles and company cars.
Gains on sales of revenue earning equipment, net of vehicle disposition
costs, are reported as reductions of depreciation expense and totaled $21.9
million for the year ended December 31, 1995. Gains on operating property and
equipment sales are reflected in miscellaneous expense, net.
F-23
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, 1995
Tires in Service. The Company capitalizes the cost of tires as a
component cost of the purchase of revenue earning equipment, and amortizes such
tires cost to expense over the lives of the vehicles and equipment. The cost of
replacement tires and tire repairs are expensed as incurred. For financial
statement purposes, the estimated cost of tires in service are reclassified to
current assets.
Software Development Costs. Internal costs for development of internal
use software are expensed as incurred. Incremental external costs for software
development are capitalized and amortized over the expected useful lives of the
software which range from four to five years. Other assets in the Combined
Balance Sheets are comprised primarily of software development and purchased
software costs.
Advertising Costs. The Company expenses the production costs of
advertising as incurred. The cost of air time and print space for media
advertising is expensed when used. The cost of yellow page advertising is
amortized over the life of the directory, primarily 12 months. Advertising
expense was $30.3 million for the year ended December 31, 1995.
Accrued Insurance and Loss Reserves. The Company participates in
Ryder's overall risk management programs for auto and general liability,
workers' compensation and other insurance programs. The primary risks to Ryder
and the Company are associated with auto and general liability and Ryder retains
losses for the exposure up to $1 million per occurrence. Ryder insures losses
above $1 million with third party insurance companies.
The Company has recorded insurance reserves for auto and general
liability claims which reflect the Company's portion of the undiscounted
estimated liabilities up to $500,000 per occurrence (plus allocated loss
adjustment expense) and an estimate of claims incurred but not reported. Such
liabilities are necessarily based on estimates and, while management believes
that the amount is adequate, there can be no assurance that changes to
management's estimates may not occur due to limitations inherent in the
estimation process. Changes in the estimates of these reserves are charged or
credited to income in the period determined. Amounts estimated to be paid within
one year have been classified as accrued expenses with the remainder included in
other non-current liabilities. For exposures from $500,000 to $1 million per
occurrence, the Company is charged a premium based on the Company's loss
experience and the related liability is retained by Ryder. Costs associated with
insurance premiums to third party insurance companies for coverage in excess of
$1 million are allocated by Ryder to the Company based on the Company's pro rata
share of Ryder's revenue.
Revenue Recognition. Truck rental and related revenue is recognized as
earned.
Income Taxes. The Company has been included in consolidated income tax
filings of Ryder for Federal and state income tax purposes. However, the income
tax provisions included in the accompanying Combined Financial Statements have
been determined as if the Company was an independent stand-alone entity filing
separate income tax returns.
Deferred tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that currently would be in
effect when the differences are expected to reverse. Deferred tax balances will
be adjusted for tax law changes in periods that include the enactment date of
such changes. See Note (9).
Other Costs. Vehicle licensing fees are deferred when paid and
amortized to income over the period to which the fees relate. Vehicle repairs
and maintenance which do not extend the life or increase the value of the
vehicle are expensed as incurred. Yellow Page directory costs are deferred when
paid and amortized over the period the directories are effective, which is
typically 12 months. Advertising and sales promotion costs are expensed as
incurred.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
F-24
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, 1995
NOTE 4--TRANSACTIONS WITH RYDER
Certain Ryder branch locations provide vehicle repairs and maintenance
services to the Company and also serve as consumer truck rental dealers. Rates
charged to the Company for repairs and maintenance approximate rates charged to
significant Ryder customers and reflect the cost of parts and the cost of labor
plus a mark-up. Commission rates paid to Ryder for trucks rented through Ryder
locations are based on revenue generated from the transactions and are generally
consistent with those paid to independent dealers.
The Company participates in Ryder's combined risk management programs
for auto and general liability and Ryder processes claims related to auto and
general liability and workers' compensation. The Company also participates in
Ryder medical and dental, pension, postretirement and savings plans. See Notes
(3) and (10).
Ryder provides various general and administrative services to the
Company including information systems, treasury, legal, human resources,
payroll, marketing, purchasing, accounting and others. Costs for these services
are charged to the Company through Ryder's internal cost allocation
methodologies which are designed to estimate the actual costs incurred by Ryder
to render these services. In addition, general and administrative costs charged
by Ryder include a corporate management fee, which is based on the Company's
equity and revenue levels. The Company also shares various facilities with Ryder
for which it is charged an amount based on relative square footage which is
intended to represent the Company's portion of occupancy costs including
utilities, maintenance and other costs.
The Company is charged by Ryder for vehicle disposition costs,
including sales commissions, costs to prepare vehicles for sale and a per
vehicle service fee.
The Company's cash and financing needs are managed by Ryder. The
accompanying Combined Balance Sheets do not include Ryder's general corporate
debt, which is used to finance the operations of all of Ryder's business units.
However, Ryder allocates its corporate interest expense to each business unit
based upon a target debt to equity ratio. The composition of the investment by
and advances from Ryder in the Combined Balance Sheets has been periodically
adjusted to effect this target debt to equity ratio. Interest expense charged to
the Company by Ryder is principally based upon the interest cost incurred by
Ryder for certain of its indebtedness.
Management believes that the method of allocating expenses for the
above plans is reasonable, and that the expense reflected in the financial
statements would not be materially different if the Company operated as an
independent stand-alone entity. However, if the Company operated as an
independent stand-alone entity, actual expenses could differ from these amounts.
F-25
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, 1995
Amounts charged and allocated by Ryder to the Company for the above
expense items are summarized in the following table:
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
-------------------
(In Thousands)
<S> <C>
Operating expense:
Repairs and maintenance.................................................... $ 57,378
Auto and general liability costs........................................... 26,464
Selling, general and administrative expense:
General and administrative................................................. 20,136
Commissions on truck rentals............................................... 10,071
Pension, postretirement and savings plans.................................. 1,078
Other self insurance costs................................................. 1,326
Occupancy.................................................................. 429
Depreciation expense, net of gains:
Vehicle disposition costs.................................................. 6,970
Interest expense................................................................ 29,663
</TABLE>
The components of the investment by and advances from Ryder in the
Combined Balance Sheets were as follows:
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(In Thousands)
<S> <C>
Interest-bearing advances from Ryder............................................ $ 362,607
Ryder investment................................................................ 127,830
----------
$ 490,437
==========
</TABLE>
NOTE 5--RECEIVABLES
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(In Thousands)
<S> <C>
Trade accounts receivables...................................................... $ 19,785
Receivables from vehicle sales.................................................. 14,575
Other receivables............................................................... 1,934
-----------
36,294
Allowance for doubtful accounts............................................ (514)
-----------
$ 35,780
===========
</TABLE>
Bad debt expense totaled $1.0 million for the year ended December 31,
1995.
F-26
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, 1995
NOTE 6--REVENUE EARNING EQUIPMENT
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(In Thousands)
<S> <C>
Rental trucks................................................................... $ 777,610
Towing and other equipment...................................................... 31,898
-----------
809,508
Accumulated depreciation................................................... (289,746)
-----------
$ 519,762
===========
</TABLE>
NOTE 7--OPERATING PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(In Thousands)
<S> <C>
Office equipment and furniture.................................................. $ 38,871
Transfer vehicles and company cars.............................................. 5,458
Other........................................................................... 63
-----------
44,392
Accumulated depreciation................................................... (22,983)
-----------
$ 21,409
===========
</TABLE>
NOTE 8--ACCRUED EXPENSES AND OTHER LIABILITIES
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(In Thousands)
<S> <C>
Auto and general liability reserves............................................. $ 43,104
Dealer commissions.............................................................. 5,210
Advertising..................................................................... 818
Other self-insurance reserves................................................... 2,264
Other accruals.................................................................. 11,072
-----------
62,468
Non-current portion............................................................. (27,582)
-----------
Accrued expenses and other liabilities.......................................... $ 34,886
===========
</TABLE>
F-27
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, 1995
NOTE 9--INCOME TAXES
The provision for income taxes included the following components (in
thousands):
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(In Thousands)
<S> <C>
Current tax expense:
Federal.................................................................... $ 79
State...................................................................... 53
-----------
132
Deferred tax expense:
Federal.................................................................... 2,377
State...................................................................... 475
-----------
2,852
-----------
Provision for income taxes...................................................... $ 2,984
===========
</TABLE>
A reconciliation of the Federal statutory tax rate with the effective
tax rate follows:
<TABLE>
<CAPTION>
% of Pretax Income
Year Ended
December 31, 1995
---------------------
<S> <C>
Statutory tax rate.............................................................. 35.0
State income taxes, net of Federal income tax benefit........................... 5.3
Non-deductible items............................................................ 5.0
----
Effective tax rate.............................................................. 45.3
====
</TABLE>
Non-deductible items in the above table are comprised of meal and
entertainment expenses and fines and penalties. As described in Notes (1) and
(3), the Company was a division of Ryder for the period presented in the
accompanying Combined Financial Statements. The deferred tax assets and
liabilities shown below have been determined as though the Company was a
separate company and not part of Ryder's consolidated U.S. income tax returns.
On the date of sale (see Note 2) deferred tax assets and liabilities will be
subject to redetermination by the buyer. No tax attributes will carry over to
the buyer from the Company or Ryder.
The components of the net deferred income tax liability were as follows
(in thousands):
<TABLE>
<CAPTION>
December 31, 1995
-------------------
<S> <C>
Deferred income tax assets:
Accrued self-insurance..................................................... $ 18,428
Alternative minimum taxes.................................................. 5,104
Miscellaneous other accruals............................................... 2,627
-----------
26,159
-----------
Deferred income tax liabilities:
Property and equipment basis differences................................... (86,264)
Other items................................................................ (2,337)
-----------
(88,601)
-----------
Net deferred income tax liability............................................... $ (62,442)
===========
</TABLE>
F-28
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, 1995
The Company had unused alternative minimum tax credits, for tax
purposes, of $5.1 million at December 31, 1995 available to reduce future income
tax liabilities. The alternative minimum tax credits may be carried forward
indefinitely.
On a separate return basis, no valuation allowance was deemed necessary
for any of the periods presented.
NOTE 10--PENSION, POSTRETIREMENT AND SAVINGS PLANS
Certain employees of the Company participate in a defined benefit
pension plan sponsored by Ryder. This plan generally provides participants with
benefits based on years of service and career-average compensation levels.
Separate calculations of the components of net pension expense and funded status
of the plan are not provided as such information is not maintained separately
for employees of the Company. Pension expense allocated to the Company by Ryder
(based on headcount) totaled $700,000 for the year ended December 31, 1995. As
part of the agreement for the sale of the Company, employees of the Company
participating in the plan will be treated as terminated and vested at the date
of sale and Ryder will retain both the plan assets and liabilities attributable
to such employees.
Employees of the Company take part in certain non-funded plans
sponsored by Ryder which provide retired employees with certain health care and
life insurance benefits. Substantially all employees of the Company are eligible
for these benefits. Health care benefits for Ryder's principal plan are
generally provided to qualified retirees under age 65 and eligible dependents.
Generally, this plan requires qualified early retirees to make contributions
which vary based on years of service and include provisions which cap company
contributions. The Company's portion of the actuarially determined costs related
to these plans was $106,000 for the year ended December 31, 1995.
Ryder also maintains defined contribution savings plans that cover
substantially all eligible employees. Contributions to the plans include
employee contributions and contributions made by Ryder under a matching program.
Defined contribution expense totaled $272,000 for the year ended December 31,
1995. Upon sale of the Company, employees of the Company will become fully
vested in the plan and Ryder will transfer their account balances to a successor
plan at a later date.
Management believes that the method of allocating expenses for the
above plans is reasonable, and that the expense reflected in the financial
statements would not be materially different if the Company operated as an
independent stand-alone entity. However, if the Company operated as an
independent stand-alone entity, actual expenses could differ from these amounts.
NOTE 11--RESTRUCTURING AND OTHER CHARGES
In the third quarter of 1995, the Company consolidated its twenty
administrative locations into two central locations. As a result, the Company
incurred restructuring charges totaling $3.1 million in 1995 for lease
termination ($.9 million) and employee related costs ($2.2 million), of which
$2.8 million remained accrued at December 31, 1995. Approximately 170 employees
were affected by the restructuring actions. In addition, the Company incurred
employee relocation costs of $3.3 million in 1995 related to these actions.
F-29
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, 1995
NOTE 12--COMMITMENTS AND CONTINGENCIES
The Company leases facilities, office equipment and revenue earning
equipment (in 1995) under operating lease agreements. The Company also shares
various facilities with Ryder. For the year ended December 31, 1995, rent
expense totaled $5.1 million. The Company had no lease commitments for revenue
earning equipment at December 31, 1995. Future minimum payments for facilities
and office equipment leases in effect at December 31, 1995 are as follows (in
thousands):
Twelve months ended:
December 31, 1996............................... $2,536
December 31, 1997............................... 2,015
December 31, 1998............................... 1,672
December 31, 1999............................... 874
December 31, 2000............................... 819
Thereafter...................................... 1,104
------
$9,020
======
At December 31, 1995, the Company had commitments totaling $3.9 million
related to the completion of the Company's Customer Reservation and Customer
Service project which was in progress at December 31, 1995 and is expected to be
completed in 1997.
Ryder is a party to various claims, legal actions and complaints
arising in the ordinary course of business which relate to operations of the
Company. While any proceeding or litigation has an element of uncertainty,
management believes that the disposition of these matters will not have a
material impact on the financial condition, liquidity or results of operations
of the Company. In addition, the Company has no environmental liabilities or
contingencies which management believes will have a material adverse effect on
the Company's financial condition, liquidity or results of operations.
F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Ryder System, Inc.:
We have audited the accompanying combined balance sheet of Ryder Consumer Truck
Rental (a division of Ryder Truck Rental, Inc., a wholly-owned subsidiary of
Ryder System, Inc.) as of October 16, 1996, and the related combined statements
of earnings and changes in Ryder investment and cash flows for the period
January 1, 1996 through October 16, 1996. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Ryder Consumer Truck
Rental as of October 16, 1996, and the results of its operations and its cash
flows for the period January 1, 1996 through October 16, 1996 in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Miami, Florida
December 20, 1996
F-31
<PAGE>
RYDER CONSUMER TRUCK RENTAL
COMBINED BALANCE SHEET
October 16, 1996
----------------
(In Thousands)
Assets
Current assets:
Cash $ 6,321
Receivables........................................... 18,109
Tires in service...................................... 24,543
Deferred income taxes................................. 6,186
Prepaid expenses and other current assets............. 13,168
----------
Total current assets............................. 68,327
Revenue earning equipment.................................. 466,118
Operating property and equipment........................... 15,149
Other assets 5,673
----------
Total assets..................................... $ 555,267
==========
Liabilities and Ryder Investment
Current liabilities:
Accounts payable...................................... $ 11,931
Accrued expenses and other liabilities................ 31,390
----------
Total current liabilities........................ 43,321
Deferred income taxes...................................... 76,443
Other non-current liabilities.............................. 26,943
Investment by and advances from Ryder...................... 408,560
----------
Total liabilities and Ryder investment........... $ 555,267
==========
See accompanying notes to combined financial statements.
F-32
<PAGE>
RYDER CONSUMER TRUCK RENTAL
COMBINED STATEMENT OF EARNINGS AND CHANGES IN RYDER INVESTMENT
January 1-
October 16,
1996
-----------
(In Thousands)
Truck rental and related revenue.................................. $ 439,779
Operating expense................................................. 155,264
Selling, general and administrative expense....................... 166,568
Depreciation expense, net of gains................................ 84,949
Interest expense.................................................. 20,291
Restructuring and other charges................................... 1,891
Miscellaneous expense, net........................................ 690
----------
429,653
----------
Earnings before income taxes................................. 10,126
Provision for income taxes................................... 4,304
----------
Net earnings................................................. $ 5,822
==========
Changes in Ryder Investment:
Investment by and advances from Ryder at beginning of period. $ 490,437
Net earnings................................................. 5,822
Net decrease in investment by and advances from Ryder........ (87,699)
----------
Investment by and advances from Ryder at end of period....... $ 408,560
==========
See accompanying notes to combined financial statements.
F-33
<PAGE>
RYDER CONSUMER TRUCK RENTAL
COMBINED STATEMENT OF CASH FLOWS
January 1 -
October 16,
1996
-----------
(In Thousands)
Cash flows from operating activities:
Net earnings............................................ $ 5,822
Depreciation expense, net of gains...................... 84,949
Deferred income taxes................................... 7,815
Decrease in receivables................................. 17,671
Increase in accounts payable............................ 5,194
Decrease in accrued expenses and other liabilities...... (3,496)
Decrease in other non-current liabilities............... (639)
Other, net.............................................. (473)
---------
Net cash provided by operating activities.......... 116,843
---------
Cash flows from investing activities:
Purchases of property and revenue earning equipment..... (69,228)
Sales of property and revenue earning equipment......... 45,428
Other, net.............................................. (1,633)
---------
Net cash used in investing activities.............. (25,433)
---------
Cash flows from financing activities:
Net decrease in investments by and advances from Ryder.. (87,699)
---------
Net cash used in financing activities.............. (87,699)
---------
Increase in cash............................................. 3,711
Cash at beginning of period.................................. 2,610
---------
Cash at end of period........................................ $ 6,321
=========
See accompanying notes to combined financial statements.
F-34
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
NOTE 1--NATURE OF BUSINESS
Ryder Consumer Truck Rental (the "Company") is a division of Ryder
Truck Rental, Inc., a wholly-owned subsidiary of Ryder System, Inc. ("Ryder").
The Company consists of the U.S.- based consumer truck rental operations of
Ryder and Ryder's wholly-owned subsidiary, Ryder Move Management, Inc. The
Company is engaged in the domestic rental of trucks to do-it-yourself movers and
"light commercial" customers, and the sale of related moving accessories and
liability-limiting products. The Company, through Ryder Move Management, is also
engaged in household goods relocation services for corporate employee relocation
programs. The Company's truck rental distribution network consists of
independent dealers and Ryder branch locations. Approximately 10% to 15% of the
Company's revenue is generated through Ryder branch locations. The Company's
business is seasonal, with generally higher levels of demand during the summer
months. As a result, the Company typically experiences greater profitability in
the second half of the year compared with the first half.
NOTE 2--SALE OF COMPANY
On October 17, 1996, Ryder Truck Rental, Inc. completed the sale of
substantially all the assets and certain liabilities of the Company to Questor
Partners Fund, L.P. and certain other investors (collectively "Questor") for
$579.4 million (subject to adjustment upon final audit of assets sold). In
addition, Ryder gave Questor a royalty-free license to use the Ryder trademark
and color scheme, subject to certain restrictions, for a total of 10 years (with
required modifications to the trademark after five years). Ryder and Questor
also entered into service agreements for various periods of time ranging from
two to five years, with options for extensions after five years for certain of
the agreements. Under the agreements, Ryder will continue to provide various
services to the Company including vehicle maintenance, claims processing,
management information systems and other administrative services. In addition,
certain Ryder branch locations will continue to act as consumer truck rental
dealers and Ryder will continue to assist in the disposition of the Company's
used vehicles through its sales network. Rates agreed upon for the various
services are considered reasonable based on market rates.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Combined Financial Statements are presented utilizing
the historical accounting practices followed by Ryder.
Basis of Presentation. The accompanying Combined Financial Statements
include the operations, assets and liabilities of the Company. The financial
statements do not include assets and liabilities of Ryder not specifically
identifiable to the Company. The financial information included herein is not
necessarily indicative of the financial position and results of operations or
cash flows that would have occurred had the Company been an independent
stand-alone entity during the period presented, nor is it necessarily indicative
of future results of the Company.
Receivables. Receivables consist primarily of trade receivables
resulting from rental transactions and receivables from the sale of revenue
earning equipment. Receivables are reduced by amounts considered by management
to be uncollectible based on historical collection loss experience and review of
the current status of existing receivables.
Revenue Earning Equipment, Operating Property and Equipment and Depreciation.
Revenue earning equipment, principally rental trucks, operating property and
equipment are stated at cost. Provision for depreciation is computed using the
straight-line method on substantially all depreciable assets. Annual
straight-line depreciation rates are 14% to 20% for revenue earning equipment,
13% to 25% for office equipment and furniture and 19% to 30% for transfer
vehicles and company cars. Effective January 1, 1996, the estimated useful
lives and residual values used to calculate the provision for depreciation on
certain types of revenue earning equipment were changed to reflect recent
experience. As a result of this change, depreciation expense was decreased by
approximately $6.0 million for the period January 1 through October 16, 1996.
Gains on sales of revenue earning equipment, net of vehicle disposition
costs, are reported as reductions of depreciation expense and totaled $8.7
million for the period January 1 through October 16, 1996. Gains on operating
property and equipment sales are reflected in miscellaneous expense, net.
F-35
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
Tires in Service. The Company capitalizes the cost of tires as a
component cost of the purchase of revenue earning equipment, and amortizes such
tires cost to expense over the lives of the vehicles and equipment. The cost of
replacement tires and tire repairs is expensed as incurred. For financial
statement purposes, the estimated cost of tires in service is reclassified to
current assets.
Software Development Costs. Internal costs for development of internal
use software are expensed as incurred. Incremental external costs for software
development are capitalized and amortized over the expected useful lives of the
software which range from four to five years. Other assets in the Combined
Balance Sheet are comprised primarily of software development and purchased
software costs.
Advertising Costs. The Company expenses the production costs of
advertising as incurred. The cost of air time and print space for media
advertising is expensed when used. The cost of yellow page advertising is
amortized over the life of the directory, primarily 12 months. Advertising
expense was $23.1 million for the period ended October 16, 1996.
Accrued Insurance and Loss Reserves. The Company participates in
Ryder's overall risk management programs for auto and general liability,
workers' compensation and other insurance programs. The primary risks to Ryder
and the Company are associated with auto and general liability and Ryder retains
losses for the exposure up to $1 million per occurrence. Ryder insures losses
above $1 million with third party insurance companies.
The Company has recorded insurance reserves for auto and general
liability claims which reflect the Company's portion of the undiscounted
estimated liabilities up to $500,000 per occurrence (plus allocated loss
adjustment expense) and an estimate of claims incurred but not reported. Such
liabilities are necessarily based on estimates and, while management believes
that the amount is adequate, there can be no assurance that changes to
management's estimates may not occur due to limitations inherent in the
estimation process. Changes in the estimates of these reserves are charged or
credited to income in the period determined. Amounts estimated to be paid within
one year have been classified as accrued expenses with the remainder included in
other non-current liabilities. For exposures from $500,000 to $1 million per
occurrence, the Company is charged a premium based on the Company's loss
experience and the related liability is retained by Ryder. Costs associated with
insurance premiums to third party insurance companies for coverage in excess of
$1 million are allocated by Ryder to the Company based on the Company's pro rata
share of Ryder's revenue.
Revenue Recognition. Truck rental and related revenue is recognized as
earned.
Income Taxes. The Company has been included in consolidated income tax
filings of Ryder for Federal and state income tax purposes. However, the income
tax provision included in the accompanying Combined Financial Statements has
been determined as if the Company was an independent stand-alone entity filing a
separate income tax return.
Deferred tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that currently would be in
effect when the differences are expected to reverse. Deferred tax balances will
be adjusted for tax law changes in periods that include the enactment date of
such changes. See Note (9).
Other Costs. Vehicle licensing fees are deferred when paid and
amortized to income over the period to which the fees relate. Vehicle repairs
and maintenance which do not extend the life or increase the value of the
vehicle are expensed as incurred. Yellow Page directory costs are deferred when
paid and amortized over the period the directories are effective, which is
typically 12 months. Advertising and sales promotion costs are expensed as
incurred.
Accounting Changes. On January 1, 1996, the Company adopted Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Statement
establishes standards for measuring impairment of long-lived assets,
identifiable intangibles and goodwill related to these assets. Adoption of the
Statement had no impact on the Company's results of operations or financial
position in 1996.
F-36
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
NOTE 4--TRANSACTIONS WITH RYDER SYSTEM, INC.
Certain Ryder branch locations provide vehicle repairs and maintenance
services to the Company and also serve as consumer truck rental dealers. Rates
charged to the Company for repairs and maintenance approximate rates charged to
significant Ryder customers and reflect the cost of parts and the cost of labor
plus a mark-up. Commission rates paid to Ryder for trucks rented through Ryder
locations are based on revenue generated from the transactions and are generally
consistent with those paid to independent dealers.
The Company participates in Ryder's combined risk management programs
for auto and general liability and Ryder processes claims related to auto and
general liability and workers' compensation. The Company also participates in
Ryder medical and dental, pension, postretirement and savings plans. See Notes
(3) and (10).
Ryder provides various general and administrative services to the
Company including information systems, treasury, legal, human resources,
payroll, marketing, purchasing, accounting and others. Costs for these services
are charged to the Company through Ryder's internal cost allocation
methodologies which are designed to estimate the actual costs incurred by Ryder
to render these services. In addition, general and administrative costs charged
by Ryder include a corporate management fee, which is based on the Company's
equity and revenue levels. The Company also shares various facilities with Ryder
for which it is charged an amount based on relative square footage which is
intended to represent the Company's portion of occupancy costs including
utilities, maintenance and other costs.
The Company is charged by Ryder for vehicle disposition costs,
including sales commissions, costs to prepare vehicles for sale and a per
vehicle service fee.
The Company's cash and financing needs are managed by Ryder. The
accompanying Combined Balance Sheet does not include Ryder's general corporate
debt, which is used to finance the operations of all of Ryder's business units.
However, Ryder allocates its corporate interest expense to each business unit
based upon a target debt to equity ratio. The composition of the investment by
and advances from Ryder in the Combined Balance Sheet has been periodically
adjusted to effect this target debt to equity ratio. Interest expense charged to
the Company by Ryder is principally based upon the interest cost incurred by
Ryder for certain of its indebtedness. Management believes that the method of
allocating expenses for the above plans is reasonable, and that the expense
reflected in the financial statements would not be materially different if the
Company operated as an independent stand-alone entity. However, if the Company
operated as an independent stand-alone entity, actual expenses could differ from
these amounts.
F-37
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
Amounts charged and allocated by Ryder to the Company for the above
expense items are summarized in the following table (in thousands):
January 1 -
October 16,
1996
------------
Operating expense:
Repairs and maintenance................................ $ 47,147
Auto and general liability costs....................... 21,194
Selling, general and administrative expense:
General and administrative............................. 12,531
Commissions on truck rentals........................... 7,377
Pension, postretirement and savings plans.............. 677
Other self insurance costs............................. 962
Occupancy.............................................. 245
Depreciation expense, net of gains:
Vehicle disposition costs.............................. 4,836
Interest expense....................................... 20,291
The components of the investment by and advances from Ryder in the
Combined Balance Sheet were as follows (in thousands):
October 16,
1996
-----------
Interest-bearing advances from Ryder........................ $ 284,151
Ryder investment............................................ 124,409
-----------
$ 408,560
===========
NOTE 5--RECEIVABLES
October 16,
1996
-----------
(In Thousands)
Trade accounts receivable................................... $ 16,546
Receivables from vehicle sales.............................. 594
Other receivables........................................... 2,324
-----------
19,464
Allowance for doubtful accounts........................ (1,355)
------------
$ 18,109
===========
Bad debt expense totaled $1.9 million for the period January 1 through
October 16, 1996.
F-38
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
NOTE 6--REVENUE EARNING EQUIPMENT
October 16,
1996
------------
(In Thousands)
Rental trucks............................................... $ 751,636
Towing and other equipment.................................. 28,534
----------
780,170
Accumulated depreciation............................... (314,052)
----------
$ 466,118
==========
NOTE 7--OPERATING PROPERTY AND EQUIPMENT
October 16,
1996
------------
(In Thousands)
Office equipment and furniture.............................. $ 38,575
Transfer vehicles .......................................... 1,289
Other .................................................... 161
----------
40,025
Accumulated depreciation............................... (24,876)
----------
$ 15,149
==========
NOTE 8--ACCRUED EXPENSES AND OTHER LIABILITIES
October 16,
1996
------------
(In Thousands)
Auto and general liability reserves......................... $ 42,854
Dealer commissions.......................................... 2,986
Advertising................................................. 1,064
Other self-insurance reserves............................... 2,025
Other accruals.............................................. 9,404
----------
58,333
Non-current portion......................................... (26,943)
----------
Accrued expenses and other liabilities...................... $ 31,390
==========
F-39
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
NOTE 9--INCOME TAXES
The provision for income taxes included the following components (in
thousands):
January 1 -
October 16,
1996
-----------
Current tax expense:
Federal................................................ $ (2,993)
State.................................................. (518)
----------
(3,511)
Deferred tax expense:
Federal................................................ 6,514
State.................................................. 1,301
----------
7,815
----------
Provision for income taxes.................................. $ 4,304
==========
A reconciliation of the Federal statutory tax rate with the effective
tax rate follows:
January 1 -
October 16,
1996
-----------
Statutory tax rate.......................................... 35.0
State income taxes, net of Federal income tax benefit....... 5.0
Non-deductible items........................................ 2.5
----
Effective tax rate.......................................... 42.5
====
Non-deductible items in the above table are comprised of meal and
entertainment expenses and fines and penalties. As described in Notes (1) and
(3), the Company was a division of Ryder during the period presented in the
accompanying Combined Financial Statements. The deferred tax assets and
liabilities shown below have been determined as though the Company was a
separate company and not part of Ryder's consolidated U.S. income tax returns.
On the date of sale (see Note 2) deferred tax assets and liabilities are subject
to redetermination by the buyer. No tax attributes will carry over to the buyer
from the Company or Ryder.
The components of the net deferred income tax liability follow (in
thousands):
October 16,
1996
-----------
Deferred income tax assets:
Accrued self-insurance................................... $ 17,009
Alternative minimum taxes................................ 4,444
Miscellaneous other accruals............................. 2,109
----------
23,562
Deferred income tax liabilities:
Property and equipment basis differences................. (88,856)
Other items.............................................. (4,963)
----------
(93,819)
----------
Net deferred income tax liability........................... $ (70,257)
==========
F-40
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
The Company had unused alternative minimum tax credits, for tax
purposes, of $4.4 million at October 16, 1996 available to reduce future income
tax liabilities. The alternative minimum tax credits may be carried forward
indefinitely.
On a separate return basis, no valuation allowance was deemed
necessary.
NOTE 10--PENSION, POSTRETIREMENT AND SAVINGS PLANS
Certain employees of the Company participate in a defined benefit
pension plan sponsored by Ryder. This plan generally provides participants with
benefits based on years of service and career-average compensation levels.
Separate calculations of the components of net pension expense and funded status
of the plan are not provided as such information is not maintained separately
for employees of the Company. Pension expense allocated to the Company by Ryder
(based on headcount) totaled $408,000 for the period January 1 through October
16, 1996. As part of the agreement for the sale of the Company, employees of the
Company participating in the plan were treated as terminated and vested at the
date of sale and Ryder retained both the plan assets and liabilities
attributable to such employees.
Employees of the Company take part in certain non-funded plans
sponsored by Ryder which provide retired employees with certain health care and
life insurance benefits. Substantially all employees of the Company are eligible
for these benefits. Health care benefits for Ryder's principal plan are
generally provided to qualified retirees under age 65 and eligible dependents.
Generally, this plan requires qualified early retirees to make contributions
which vary based on years of service and include provisions which cap company
contributions. The Company's portion of the actuarially determined costs related
to these plans was $77,000 for the period January 1 through October 16, 1996.
Ryder also maintains defined contribution savings plans that cover
substantially all eligible employees. Contributions to the plans include
employee contributions and contributions made by Ryder under a matching program.
Defined contribution expense totaled $192,000 for the period January 1 through
October 16, 1996. Upon sale of the Company, employees of the Company became
fully vested in the plan and Ryder will transfer their account balances to a
successor plan at a later date.
Management believes that the method of allocating expenses for the
above plans is reasonable, and that the expense reflected in the financial
statements would not be materially different if the Company operated as an
independent stand-alone entity. However, if the Company operated as an
independent stand-alone entity, actual expenses could differ from these amounts.
NOTE 11--RESTRUCTURING AND OTHER CHARGES
In 1996, actions were taken by Ryder which impacted the Company
including management and staff reductions and elimination of the company-owned
car benefit program. The Company recorded a restructuring charge of $1.9 million
related to these actions consisting of $1.1 million for employee-related costs
(of which $0.7 million remained accrued at October 16, 1996) and asset
write-downs of $0.8 million. These actions are expected to result in ongoing
annual savings of approximately $0.8 million.
F-41
<PAGE>
RYDER CONSUMER TRUCK RENTAL
NOTES TO COMBINED FINANCIAL STATEMENTS
January 1 through October 16, 1996
NOTE 12--COMMITMENTS AND CONTINGENCIES
The Company leases facilities and office equipment under operating
lease agreements. The Company also shares various facilities with Ryder. For the
period January 1 through October 16, 1996, rent expense totaled $2.5 million.
The Company had no lease commitments for revenue earning equipment at October
16, 1996. Future minimum payments for facilities and office equipment leases in
effect at October 16, 1996 are as follows (in thousands):
Twelve months ended:
October 16, 1997......................... $ 2,294
October 16, 1998......................... 1,867
October 16, 1999......................... 966
October 16, 2000......................... 881
October 16, 2001......................... 520
Thereafter............................... 745
---------
$ 7,273
=========
At October 16, 1996, the Company had commitments totaling $3.3 million
related to the completion of the Company's Customer Reservation and Customer
Service project which was in progress at October 16, 1996 and is expected to be
completed in 1997.
Ryder is a party to various claims, legal actions and complaints
arising in the ordinary course of business which relate to operations of the
Company. While any proceeding or litigation has an element of uncertainty,
management believes that the disposition of these matters will not have a
material impact on the financial condition, liquidity or results of operations
of the Company. In addition, the Company has no environmental liabilities or
contingencies which management believes will have a material adverse effect on
the Company's financial condition, liquidity or results of operations.
F-42
<PAGE>
EXHIBIT 3.5
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FCTR, INC.
FCTR, Inc., a Delaware corporation, hereby certifies as follows:
The name of the corporation is FCTR, Inc. The name under which this
corporation was originally incorporated was FCTR, Inc., and the date of filing
of its original certificate of incorporation with the Secretary of State of
Delaware was July 9, 1997. This Amended and Restated Certificate of
Incorporation was duly adopted in accordance with sections 228, 242 and 245 of
the Delaware General Corporation Law. The sole stockholder has consented in
writing to the adoption of this Amended and Restated Certificate of
Incorporation. The certificate of incorporation of this corporation is hereby
amended and restated to read in full as follows:
FIRST: The name of this corporation is FCTR, Inc. (hereinafter
called the "Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is The Corporation Trust Company, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The nature of the business and of the purposes to be
conducted and promoted by the Corporation, is to engage solely in the following
activities:
(a) To issue certain commercial paper notes (the "Notes") pursuant to
a Depositary Agreement, dated as of August 7, 1997 (the "Depositary Agreement"),
--------------------
by and between the Corporation and Citibank, N.A., a national banking
association, as depository and liquidity agent ("Citibank" and, in such
--------
capacities, the "Depositary" and the "Liquidity Agent," respectively), and a
---------- ---------------
Dealer Agreement, dated as of August 7, 1997 (the "Dealer Agreement"), by and
----------------
among the Corporation, RCTR, Inc., a Delaware corporation ("Leasco"), and
------
Citicorp Securities, Inc., a Delaware corporation ("CSI") and Lehman Brothers,
---
Inc. (together with CSI, Citibank and any other dealers for commercial paper
notes engaged by the Corporation from time to time that agree to become parties
to the Collateral Agreement (as defined herein), the "Dealers").
-------
<PAGE>
(b) To obtain certain liquidity commitments from certain financial
institutions (the "Liquidity Lenders") to make liquidity advances from time to
-----------------
time in connection with the issuance of the Notes pursuant to a Liquidity
Agreement, dated as of August 7, 1997 (the "Liquidity Agreement"), among the
-------------------
Corporation, the Liquidity Lenders and Citibank, as Liquidity Agent.
(c) To provide as security for borrowings pursuant to the Liquidity
Agreement an assignment of the Corporation's rights under the Loan Agreement (as
defined herein) and in the collateral for Loans pursuant thereto, and to provide
for the repayment or payment of all amounts at any time and from time to time
owing by the Corporation to the Liquidity Lenders or the Liquidity Agent under
or in connection with the Liquidity Agreement or the Collateral Agreement (as
defined herein) and all amounts owing at any time and from time to time by the
Corporation to the holders of the Notes (the "Holders") or the Depositary or
-------
owing to the Collateral Agent (as defined herein) or owing to the Dealers under
the Dealer Agreement pursuant to the Collateral Agreement, dated August 7, 1997
(the "Collateral Agreement"), by and among the Corporation, Citibank, as
--------------------
Liquidity Agent under the Liquidity Agreement and Depositary under the
Depositary Agreement, acting on its own behalf and on behalf of the Holders,
Citibank USA, Inc., as collateral agent (the "Collateral Agent") for itself and
----------------
the Liquidity Lenders, the Liquidity Agent, the Depositary on behalf of the
Holders, and the Dealers.
(d) To make loans (the "Loans") to Leasco pursuant to a Loan
-----
Agreement, dated as of August 7, 1997 (the "Loan Agreement"), by and between the
--------------
Corporation and Leasco, and to take as collateral for such Loans a security
interest in the Vehicles (as defined in the Liquidity Agreement) and in Leasco's
interest in the Vehicle Title Nominee Agreement dated as of October 17, 1996 by
and between Ryder Truck Rental Inc., a Florida corporation, and Leasco, as such
agreement may be modified and amended from time to time.
(e) To enter into, perform and comply with such other agreements as
are necessary and desirable to effectuate the activities described in clauses
(a), (b), (c) and (d) of this Article THIRD (such other agreements, together
with the Depositary Agreement, the Dealer Agreement, the Liquidity Agreement,
the Collateral Agreement and the Loan Agreement, the "Transaction Documents");
---------------------
and
(f) To engage in any lawful act or activity and to exercise any
powers permitted to corporations organized under the General Corporation Law of
Delaware that, in either case, are incidental to and necessary or convenient for
the accomplishment of the above-mentioned purposes.
<PAGE>
FOURTH: The total number of shares of all classes of stock that the
Corporation is authorized to issue is one thousand (1,000) shares, all of which
shares shall be common stock, $.01 par value per share ("Common Stock"). All
------------
shares of Common Stock will be identical and will entitle the holders thereof to
the same rights and privileges.
(a) Voting Rights. Except as set forth herein or as otherwise
-------------
required by law, each outstanding share of Common Stock shall be entitled to
vote on each matter on which the stockholders of the Corporation shall be
entitled to vote, and each holder of Common Stock shall be entitled to one vote
for each share of such stock held by such holder.
(b) Dividends and Other Distributions. The Corporation, with the
---------------------------------
affirmative vote of all the members of the Board of Directors (which must
include the affirmative vote of all duly appointed or elected Independent
Directors), may cause dividends to be paid to holders of shares of Common Stock
out of funds legally available for the payment of dividends. Any dividend or
distribution on the Common Stock shall be payable on shares of all Common Stock
share and share alike.
(c) Liquidation. In the event of any voluntary or involuntary
-----------
liquidation, dissolution or winding up of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of Common Stock shall be entitled to share ratably, share and
share alike, in the remaining net assets of the Corporation.
FIFTH: In furtherance and not in limitation of the powers conferred
by statute, the Corporation's Board of Directors is expressly authorized to
alter, amend, repeal or adopt the By-Laws of the Corporation; provided, however,
-------- -------
that any such alteration, amendment, repeal or adoption that relates to or
affects in any way the criteria for, or the qualifications of, an "Independent
Director" (as such term is defined in the Seventh Article hereof), or the
requirement that the Corporation maintain at least two Independent Directors, or
Article VI thereof, must, in each case, receive the prior affirmative vote or
written consent of each Independent Director.
SIXTH: Elections of directors need not be by written ballot unless,
and to the extent, so provided in the Corporation's By-Laws.
SEVENTH: The Corporation shall at all times, except as noted
hereafter, have at least two directors (each an "Independent Director") each of
whom is not, and never was, (a) a stockholder, director, officer, employee,
affiliate, associate, customer or supplier of, or any Person that has received
any benefit (excluding, however, any compensation received by the directors, in
such Person's capacity as such
<PAGE>
director) in any form whatsoever from, or any Person that has provided any
service (excluding, however, any service provided by such director, in such
Person's capacity as director) in any form whatsoever to, Ryder TRS, Inc.
("TRS") or Leasco or any of their Affiliates or associates, or (b) any Person
---
owning beneficially, directly or indirectly, any outstanding shares of common
stock of TRS or Leasco or any of their Affiliates, or a stockholder, director,
officer, employee, affiliate, associate, customer or supplier of, or any Person
that has provided any service (excluding, however, any compensation received by
such director, in such Person's capacity as such director) in any form
whatsoever from or any Person that has provided any service (excluding, however,
any service provided by such director, in such Person's capacity as such
Affiliates or associates; provided that the ownership of up to 5% of any class
--------
of stock (other than stock of the Corporation) listed on a national securities
exchange shall not prevent an individual from meeting the foregoing
requirements. Further, if any individual who would otherwise satisfy the
requirements set forth in clauses (a) and (b) above was at one time an
Independent Director of TRS or a Subsidiary of TRS, such individual shall be
considered to satisfy clause (a) above despite such prior affiliation. For
purposes of this Article SEVENTH, a "Person" means any natural person,
------
corporation, business trust, joint venture, association, company, limited
liability company, trust, unincorporated origination or Governmental Authority,
and "Affiliate" means, with respect to any specified Person, another Person that
---------
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified. For purposes
of the definition of Affiliate, "control" means the power to direct the
-------
management and policies of a Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and "controlled" and
----------
"controlling" have meanings correlative to the foregoing.
-----------
EIGHTH: 1. Indemnification. The Corporation shall indemnify to the
---------------
fullest extent permitted under and in accordance with the laws of the State of
Delaware any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent of
or in any other capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
Corporation, may at its discretion, indemnify
<PAGE>
employees or agents of the Corporation to the same or lesser extent as set forth
in the preceding sentence.
2. Payment of Expenses. Expenses (including attorneys' fees)
-------------------
incurred in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall (in the case of any action, suit or proceeding
against a director or officer of the Corporation) or may (in the case of any
action, suit or proceeding against a trustee, employee or agent) be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article EIGHTH.
3. Nonexclusivity of Provision. The indemnification and other rights
---------------------------
set forth in this Article EIGHTH shall not be exclusive of any provisions with
respect thereto in the by-laws or any other contract or agreement between the
Corporation and any officer, director, employee or agent of the Corporation.
4. Effect of Repeal. Neither the amendment nor repeal of this
----------------
Article EIGHTH, subparagraph 1, 2, or 3, nor the adoption of any provision of
this Certificate of Incorporation inconsistent with Article EIGHTH, subparagraph
1, 2, or 3, shall eliminate or reduce the effect of this Article EIGHTH,
subparagraphs 1, 2, and 3, in respect of any matter occurring before such
amendment, repeal or adoption of an inconsistent provision or in respect of any
cause of action, suit or claim relating to any such matter which would have
given rise to a right of indemnification or right to receive expenses pursuant
to this Article EIGHTH, subparagraph 1, 2, or 3, if such provision had not been
so amended or repealed or if a provision inconsistent therewith had not been so
adopted.
5. Limitation on Liability. No director or officer shall be
-----------------------
personally liable to the Corporation or any stockholder for monetary damages for
breach of fiduciary duty as a director or officer, except for any matter in
respect of which such director or officer (A) shall be liable under Section 174
of the General Corporation Law of the State of Delaware or any amendment thereto
or successor provision thereto, or (B) shall be liable by reason that, in
addition to any and all other requirements for liability, he:
(i) shall have breached his duty of loyalty to the Corporation or its
stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in
<PAGE>
failing to act, shall have acted in a manner involving intentional
misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended
after the date hereof to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
NINTH: Subject to the limitations regarding Independent Directors in
the Seventh Article, to the extent permitted under the General Corporation Law
of the State of Delaware, any person (including, but not limited to,
stockholders, directors, officers and employees of the Corporation or any
affiliate of the Corporation) may engage in or possess an interest in other
business ventures of every nature and description, independently or with others,
whether such ventures are competitive with the Corporation or otherwise, and
neither the Corporation nor its stockholders shall have any right in or to such
independent ventures or to the income or profits derived therefrom.
TENTH: Notwithstanding any other provision of this Certificate of
Incorporation and any provision of law, the Corporation shall not do any of the
following:
(a) Engage in any business or activity other than as set forth in the
Third Article hereof.
(b) Without the affirmative vote of all of the members of the Board
of Directors of the Corporation (which must include the affirmative vote of all
duly appointed or elected Independent Directors, except with respect to clause
(viii) below (and clause (ix) below to the extent relating to such clause
(viii)) for which the affirmative vote of only one duly appointed or elected
Independent Director is required), (i) dissolve or liquidate, in whole or in
part, or institute proceedings to be adjudicated bankrupt or insolvent, (ii)
consent to the institution of bankruptcy or insolvency proceedings against it,
(iii) file a petition seeking or consent to reorganization or relief under any
applicable federal or state law relating to bankruptcy, (iv) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Corporation or a substantial part of its property, (v)
make a general assignment for the benefit of creditors, (vi) admit in writing
its inability to pay its debts generally as they become due, (vii) dividend,
lend or otherwise advance to TRS any monies and other funds held by the
Corporation
<PAGE>
that do not need to be retained by the Corporation with respect to the issuance
of Notes, debt service owed under the Transaction Documents or the satisfaction
of any other obligations of the Corporation reasonably relating thereto, (viii)
provide any guarantee, indemnity, subrogation or contribution or grant any
security interest, including, without limitation, with respect to the Trucks, or
(ix) take any corporate action in furtherance of the actions set forth in
clauses (i) through (viii) of this paragraph.
(c) Merge or consolidate with any other corporation, company or
entity or sell, lease or otherwise transfer all or substantially all of its
assets or acquire all or substantially all of the assets or capital stock or
other ownership interest of any other corporation, company or entity, unless, in
the case of any such transaction, (i) all of the members of the Board of
Directors of the Corporation (which must include all duly appointed or elected
Independent Directors) affirmatively vote in favor of such transaction, (ii)
such transaction is expressly permitted by the Transaction Documents and (iii)
except if the Corporation is the surviving corporation in any such merger,
consolidation, sale or other transfer, such other corporation, company or entity
expressly assumes all the Company's obligations and has a certificate of
incorporation that (x) contains provisions identical to those in the Restricted
Articles (as defined below) and (y) does not contain any provision inconsistent
with the Restricted Articles.
(d) Incur any Indebtedness in violation of Section 8.02 of the
Liquidity Agreement.
ELEVENTH: The Corporation shall ensure at all times that (a) it
conducts its business from an office that is separate and distinct from those of
the other members of the Related Corporate Group, even if such office space is
subleased from, or is on or near premises occupied by any of the foregoing; (b)
it maintains separate corporate records and books of account from those of each
of the other members of the Related Corporate Group; (c) none of the
Corporation's assets will be commingled with those of any of the other members
of the Related Corporate Group; and (d) any employee, consultant or agent of the
Corporation and any other operating expense incurred by the Corporation will be
paid from the assets of the Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation in any
manner now or hereafter provided herein or by statute and all rights,
preferences and privileges conferred by this Certificate of Incorporation upon
stockholders, directors or any other person are granted subject to such right;
provided, however, that the Corporation shall not amend, alter, change or repeal
- -------- -------
any provision of the Third, Fifth, Seventh, Tenth, Eleventh, Twelfth or
Thirteenth Article of this
<PAGE>
Certificate of Incorporation (the "Restricted Articles") without the affirmative
-------------------
vote of all duly appointed and elected Independent Directors; and provided,
--------
further, that the Corporation shall not amend, alter or change any provision of
- -------
any Article other than the Restricted Articles so as to be inconsistent with the
Restricted Articles.
THIRTEENTH: When exercising any vote provided for in the Seventh and
Twelfth Articles or in clause (a) or (c) of the Tenth Article hereof, each
director shall cast its vote recognizing that it owes its fiduciary duty or
other obligation with respect to such vote to the Corporation (including,
without limitation, the Corporation's creditors) as well as to the stockholders
of the Corporation. When exercising any vote on whether the Corporation will
take any action described in paragraph (b) of the Tenth Article hereof, each
Director shall cast its vote recognizing that it owes its primary fiduciary duty
or other obligation with respect to such vote to the Corporation (including,
without limitation, the Corporation's creditors) and not to the stockholders of
the Corporation (except as may specifically be required by the law of any
applicable jurisdiction). Every stockholder of the Corporation shall be deemed
to have consented to the foregoing by virtue of such stockholder's consent to
this Certificate of Incorporation.
<PAGE>
IN WITNESS WHEREOF, FCTR, Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by Steven R. Davison, its Vice
President and Treasurer, this 6 day of August, 1997.
/s/ STEVEN R. DAVISON
--------------------------------------
Steven R. Davison
Vice President and Treasurer
<PAGE>
EXHIBIT 3.6
FCTR, INC.
Incorporated Under the Laws of
the State of Delaware
BY-LAWS
-------
ARTICLE I
OFFICES
- -------
Section 1. The registered office of the Corporation in Delaware shall
be at 1209 Orange Street in the City of Wilmington, County of New Castle. The
Corporation Trust Company shall be the resident agent of this Corporation in
charge thereof.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
Section 3. The Corporation shall maintain a business office through
which its business will be conducted separate from those of Ryder TRS, Inc.
("TRS") and its affiliates.
---
ARTICLE II
MEETINGS OF STOCKHOLDERS
- ------------------------
Section 1. Meetings of stockholders shall be held at any place within
or outside the State of Delaware designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the Corporation.
Section 2. The annual meeting of stockholders shall be held each year
on a date and at a time designated by the Board of Directors. At each annual
meeting, directors shall be elected and any other proper business may be
transacted.
Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave
<PAGE>
less than a quorum and the votes present may continue to transact business until
adjournment. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, a majority of the voting stock represented in
person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the Corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the Corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the Board of Directors and shall be called by
the President at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. Whenever stockholders are required or permitted to take
any action at a meeting, a written notice of the meeting shall be given which
notice shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called.
-2-
<PAGE>
The written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation.
Section 8. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
- ---------
Section 1. The number of directors which shall constitute the whole
Board shall be not less than two nor more than nine. The directors need not be
stockholders or citizens of the United States or residents of the State of
Delaware. The Corporation shall at all times have at least two "Independent
Directors" as set forth in the Amended and Restated Certificate of Incorporation
(hereinafter the "Certificate of Incorporation"). The directors shall be
elected at the annual meeting of the stockholders, except as provided in
Section 2 of
-3-
<PAGE>
this Article, and each director elected shall hold office until his successor is
elected and qualified; provided, however, that unless otherwise restricted by
-------- -------
the Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, either with or without cause, from the Board of
Directors at any meeting of stockholders by a majority of the stock represented
and entitled to vote thereat.
Section 2. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, or increase in the authorized number
of directors may, subject to Section 1 above, be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. The directors so chosen shall hold office until the next annual
election of directors and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy, the directors then in office shall constitute less
than a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of stockholders holding
at least ten percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
Section 3. The property and business of the Corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
- ----------------------------------
Section 4. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside of the State of Delaware.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
Section 6. Special meetings of the Board of Directors may be called
by the Chairman of the Board of Directors on forty-eight hours' notice to each
director, either personally, by telegram or by telecopy; special meetings shall
be called by the President or the Secretary in like manner and on like notice on
the written request of two directors unless the Board consists of only one
director; in which case special meetings shall be called
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<PAGE>
by the President or Secretary in like manner or on like notice on the written
request of the sole director. No notice of the annual meeting of the Board of
Directors will be required if it is held immediately after the annual meeting of
the stockholders and if a quorum is present.
Section 7. At all meetings of the Board of Directors, one-half of the
entire Board of Directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the vote of a majority of the
directors present at any meeting at which there is a quorum, shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute, by the Certificate of Incorporation or by these By-Laws and except that
(a) each Independent Director must be present to form a quorum for any matter
which, pursuant to the Certificate of Incorporation or these By-Laws, requires
the vote of each Independent Director and (b) one Independent Director must be
present to form a quorum for any matter which, pursuant to the Certificate of
Incorporation or these By-Laws, requires the vote of one Independent Director.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Subject to the foregoing restrictions relating to the Independent Directors, if
only one director is authorized, such sole director shall constitute a quorum.
Section 8. Unless otherwise restricted by the Corporation's
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 9. Unless otherwise restricted by the Corporation's
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
- -----------------------
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees of the Board of
Directors, each such committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member
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<PAGE>
at any meeting of the committee. In the absence or disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
and subject to the requirements of Article III, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal for the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending, modifying
or repealing any provision of the Certificate of Incorporation or adopting new
provisions for the Certificate of Incorporation, adopting an agreement of merger
or consolidation, recommending to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, amending, modifying or repealing the By-Laws of the
Corporation or adopting new By-Laws of the Corporation, filling new vacancies in
or removing members of the Board of Directors or taking any other action which,
pursuant to the Certificate of Incorporation, requires the vote of the
Independent Directors; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to authorize the issuance of stock.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
- -------------------------
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors.
ARTICLE IV
OFFICERS
- --------
Section 1. The officers of this Corporation shall be chosen by the
Board of Directors and shall include a President, a Vice President, a Secretary
and a Treasurer. The Corporation may also have at the discretion of the Board
of Directors such other officers as are desired, including a Chairman of the
Board, one or more Vice Chairmen, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 2 hereof. In the event there are two or more
Vice Presidents, then one or more may
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be designated as Executive Vice President, Senior Vice President, or other
similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 3. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the Corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
CHAIRMAN OF THE BOARD
- ---------------------
Section 5. The Chairman of the Board, if such an officer be elected,
shall be a director and shall, if present, preside at all meetings of the Board
of Directors and of the stockholders and exercise and perform such other powers
and duties as may be from time to time assigned to him by the Board of Directors
or prescribed by these By-Laws. The Chairman of the Board shall in addition be
the Chief Executive Officer of the Corporation, and shall have the general
direction of the business, affairs and property of the Corporation and of its
several officers and shall have and exercise all such powers and discharge such
duties as usually pertain to the office of chief executive officer.
PRESIDENT
- ---------
Section 6. The President shall, subject to the control of the Board
of Directors, have general supervision, direction and control of the business
and officers of the Corporation. He shall be an ex-officio member of all
committees and shall have the general powers and duties of management usually
vested in the office of President of corporations, and shall have such other
powers and duties as may be prescribed by the Board of Directors or these By-
Laws.
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<PAGE>
VICE PRESIDENTS
- ---------------
Section 7. The Vice Presidents shall perform such duties as from time
to time may be prescribed for them, respectively, by the Board of Directors.
SECRETARY AND ASSISTANT SECRETARY
- ---------------------------------
Section 8. The Secretary shall attend all sessions of the Board of
Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. He shall keep
in safe custody the seal of the Corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
Section 9. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, or if
there be no such determination, the Assistant Secretary designated by the Board
of Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
TREASURER AND ASSISTANT TREASURER
- ---------------------------------
Section 10. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects, in the name and to the credit of the Corporation, in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all his transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
he shall give the Corporation a bond, in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors, for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and
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<PAGE>
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 11. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors,
or if there be no such determination, the Assistant Treasurer designated by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
- ---------------------
Section 1. Every holder of stock of the Corporation shall be entitled
to have a certificate signed by, or in the name of the Corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President, and by the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer of the Corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the Corporation.
Certificates of stock of the Corporation shall be in the form approved by the
Board of Directors.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
Section 3. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate, which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of
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stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
- --------------------------------------
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
- ------------------
Section 5. Upon surrender to the Corporation, or the transfer agent
of the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
- ------------------
Section 6. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
- -----------------------
Section 7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to
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recognize any equitable or other claim or interest in such share on the part of
any other person, whether or not it shall have express or other notice thereof,
except as expressly provided by the laws of the State of Delaware.
ARTICLE VI
COVENANTS OF THE CORPORATION
- ----------------------------
Section 1. The Corporation shall preserve and maintain its corporate
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification could reasonably be
expected to have a Material Adverse Effect. For purposes of this Article VI, a
"Material Adverse Effect" means any event or condition which would have a
material adverse effect on (i) the condition (financial or otherwise),
operations, businesses or properties of the Corporation or (ii) the ability of
the Corporation to perform its obligations under the Liquidity Agreement (as
amended, modified or supplemented from time to time, the "Liquidity Agreement")
-------------------
dated on or about July 31, 1997 by and among the Corporation as Borrower,
certain financial institutions as the Liquidity Lenders, and Citibank, N.A. as
the Liquidity Agent or any of the Related Documents (as defined in the Liquidity
Agreement).
Section 2. The Corporation shall take all reasonable steps to
continue its identity as a separate legal entity and to make it apparent to
third Persons (as defined below) that it is an entity with assets and
liabilities distinct from those of Ryder TRS, Inc. or of any other member of the
Related Corporate Group (as such term is defined in the Certificate of
Incorporation), and that it is not a division of any of the other members of the
Related Corporate Group. For purposes of this Article VI, a "Person" means an
individual, partnership, joint stock company, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof. In that regard, and without limiting the
foregoing in any manner, the Corporation shall:
(i) maintain its own board of directors and make independent
decisions with respect to its daily operations and business affairs and not be
controlled in making such decisions by any other member of the Related Corporate
Group or any other Person;
(ii) maintain at least two directors each of whom satisfies the
eligibility conditions for an Independent Director as set forth in the
Certificate of Incorporation;
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(iii) maintain at all times at least one officer who is not also an
officer of Ryder TRS, Inc. and all other officers and directors of the Company
(with the exception of Independent Directors) may also be officers and directors
of Ryder TRS, Inc., provided that such officers and directors adhere to all
statutes, rules, bylaws or other obligations regarding conflicts of interest and
participation in decision-making by officers and directors who may have a
conflict of interest with respect to the subject matters of the decision;
(iv) maintain separate and clearly delineated office space owned by
it or evidenced by a written lease or sublease (even if located in an office
owned or leased by, or shared with, other members of the Related Corporate
Group, with the entrance to such office clearly identified as its office);
(v) maintain its assets in a manner which facilitates their
identification and segregation from those of any other members of the Related
Corporate Group;
(vi) maintain a separate telephone number which will be answered
only in its own name and separate stationery and other business forms;
(vii) conduct all intercompany transactions and dealings with the
other members of the Related Corporate Group on terms and conditions which the
Corporation reasonably believes to be on an arm's-length basis, with appropriate
documentation and fair consideration;
(viii) (A) not guarantee any obligation of any of the other members of
the Related Corporate Group, or hold itself out as responsible for the debts of
any other member of the Related Corporate Group, without the approval of at
least one of the Independent Directors; nor (B) have any of its obligations
guaranteed by any other members of the Related Corporate Group or hold itself
out as responsible for the decisions or actions with respect to the business and
affairs of any other members of the Related Corporate Group, nor seek or obtain
credit or incur any obligation to any third-party based upon the
creditworthiness or assets of any other members of the Related Corporate Group
or any other Person;
(ix) not permit the commingling or pooling of its funds or other
assets with the assets of another member of the Related Corporate Group;
(x) maintain separate deposit, checking and other bank accounts to
which no other member of the Related Corporate Group has any access;
(xi) maintain financial records which are separate from those of the
other members of the Related Corporate Group and issue separate financial
statements prepared not less frequently
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than quarterly and prepared in accordance with generally accepted accounting
principles;
(xii) compensate all employees, consultants and agents, and other
members of the Related Corporate Group, to the extent applicable, for services
provided to the corporation by such employees, consultants and agents or other
members of the Related Corporate Group, in each case, from the Corporation's own
funds;
(xiii) have agreed with each of the relevant members of the Related
Corporate Group to allocate among themselves shared overhead and corporate
operating services and expenses (including, without limitation, the services of
shared employees, consultants and agents and reasonable legal and auditing
expenses) on the basis of actual use or the value of services rendered, and
otherwise on a basis reasonably related to actual use or the value of services
rendered;
(xiv) pay for its own account for accounting and payroll services,
rent, lease and other expenses (or its allocable share of any such amounts
provided by one or more other members of the Related Corporate Group) and not
have such operating expenses (or the Corporation's allocable share thereof) paid
by any of the other members of the Related Corporate Group, provided, that TRS
shall be permitted to pay the initial organizational expenses of the
Corporation, and ensure that its creditors are not encouraged to look to any
other member of the Related Corporate Group for payment of its obligations and
expenses;
(xv) maintain adequate capitalization in light of its business and
purpose;
(xvi) conduct all of its business and all communications (whether
in writing or orally and including, without limitation, letters, invoices,
purchase orders and contracts) solely in its own name through its duly
authorized officers, employees and agents;
(xvii) make or declare any dividends or other distributions of cash
or property to the holders of its equity securities or make redemptions or
repurchases of its equity securities, in accordance with applicable law;
(xviii) maintain at least one employee (which employee may be shared
with an affiliate of the Corporation pursuant to a written agreement allocating
the compensation and other remuneration and benefits for such employee as among
such parties) in charge of day-to-day operations of the Corporation; and
(xix) otherwise practice and adhere to corporate formalities such
as complying with its Certificate of Incorporation, these By-laws, corporate
resolutions and the
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General Corporation Law of the State of Delaware, the holding of regularly
scheduled board of directors meetings, and maintaining complete and correct
books and records and minutes of meetings and other proceedings of its
stockholders and board of directors.
Section 3. The Corporation shall comply with the provisions of
Article VI notwithstanding any other provision of these By-Laws.
ARTICLE VII
GENERAL PROVISIONS
------------------
DIVIDENDS
- ---------
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may abolish any such reserve.
CHECKS
- ------
Section 3. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officers, employees or agents of the
Corporation as shall from time to time be designated by the Chairman of the
Board, the President, the Vice President-Finance, the Treasurer or an Assistant
Treasurer.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as shall from time to time be designated by the
Chairman of the Board, the President, the Vice President-Finance, the Treasurer
or an Assistant Treasurer; and such officers may designate any type of
depository arrangement (including but not limited to depository arrangements
resulting in net debits against the Corporation) as from time to time offered or
available.
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FISCAL YEAR
- -----------
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
SEAL
- ----
Section 5. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
NOTICES
- -------
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under the
provisions of applicable statutes or of the Certificate of Incorporation or of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed to be equivalent. The presence of any stockholder or director at any
meeting will shall constitute a waiver of notice thereof.
ANNUAL STATEMENT
- ----------------
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
ARTICLE VIII
AMENDMENTS
- ----------
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
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Directors if notice of such alteration, amendment, repeal or adoption of new By-
Laws be contained in the notice of such special meeting; provided, however, that
-------- -------
any such alteration, amendment, repeal or adoption that relates to or effects in
any way the criteria for, or qualifications of, an Independent Director, or the
requirement that the Corporation maintain at least two Independent Directors, or
Article VI hereof, must in each case, receive the prior affirmative vote or
written consent of each Independent Director. If the power to adopt, amend or
repeal By-Laws is conferred upon the Board of Directors by the Certificate of
Incorporation, it shall not divest or limit the power of the stockholders to
adopt, amend or repeal By-Laws.
Dated: August 6, 1997
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EXHIBIT 10.17
AMENDMENT NO. 1 and CONSENT thereto dated as of February 6,
1998 (this "Amendment") to the AMENDED AND RESTATED MASTER MOTOR
VEHICLE LEASE AGREEMENT dated as of August 7, 1997 (the "Lease"),
by and between RCTR, INC., a Delaware corporation, as lessor (the
"Lessor") and RYDER TRS, INC., a Delaware corporation, as lessee
(the "Lessee").
WHEREAS Lessor and Lessee are parties to the Lease pursuant to which
Lessor leases to Lessee certain Vehicles for use in Lessee's truck rental
operations;
WHEREAS, contemporaneously with the execution and delivery of the
Lease, Lessor entered into that certain loan agreement dated as of August 7,
1997 (as it may be amended or modified from time to time, the "Loan Agreement")
by and between Lessor, as borrower, and FCTR, Inc., a Delaware corporation
("Finco"), as lender, pursuant to which Finco makes Loans to Lessor for the
purpose of, among other things, purchasing and financing Vehicles;
WHEREAS, contemporaneously with the execution and delivery of the
Lease and the Loan Agreement, Finco entered into that certain liquidity
agreement dated as of August 7, 1997 (as it may be amended or modified from time
to time, the "Liquidity Agreement") with Citibank, N.A., as liquidity agent (the
"Liquidity Agent") for the banks party thereto (the "Liquidity Lenders"),
providing for, among other things, the Liquidity Commitments of the Liquidity
Lenders to make Liquidity Advances on behalf of Finco from time to time;
WHEREAS, contemporaneously with the execution and delivery of the
Lease, the Loan Agreement and the Liquidity Agreement, Finco entered into that
certain depositary agreement dated as of August 7, 1997 (as it may be amended or
modified from time to time, the "Depositary Agreement") with Citibank, N.A., as
depositary (the "Depositary") providing for the issuance of certain promissory
notes (the "Commercial Paper Notes"), assigned a rating of "Prime-1" by Moody's
Investors Service Inc. ("Moody's") and a rating of "A-1" by Standard & Poor's, a
division of The McGraw-Hill Companies ("S&P"), and sold in the commercial paper
market by Citicorp Securities, Inc. and Lehman Brothers, Inc. (Citicorp
Securities, Inc. and Lehman Brothers, Inc., together with any other dealers for
the Commercial Paper Notes engaged by Finco from time to time, the "Dealers");
<PAGE>
2
WHEREAS, contemporaneously with the execution and delivery of the
Lease, the Loan Agreement, the Liquidity Agreement, the Depositary Agreement and
the issuance and initial sale of the Commercial Paper Notes, Finco, Leasco, the
Liquidity Agent, the Liquidity Lenders, the Depositary, the Dealers and Citicorp
USA, Inc., as collateral agent (the "Collateral Agent"), entered into that
certain collateral agreement dated as of August 7, 1997 (as it may be amended or
modified from time to time, the "Collateral Agreement"), for the purpose of
providing for, among other things, the payment or repayment of all amounts at
any time and from time to time owing by Finco to the Liquidity Agent, the
Liquidity Lenders, the Depositary, the Dealers, the Collateral Agent or the
Holders of the Commercial Paper Notes, under or in connection with any of the
Liquidity Agreement, the Depositary Agreement, the Collateral Agreement or the
Commercial Paper Notes;
WHEREAS the Lessor and the Lessee desire to amend Section 12.3(e) of
the Lease as set forth in this Amendment; and
WHEREAS Finco and the Collateral Agent desire to consent to such
amendment, as required by Section 10.12 of the Loan Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants set forth herein, the parties hereto hereby
agree, subject to the terms and conditions set forth below, as follows:
SECTION 1. Defined Terms. Unless the context requires a different
--------------
meaning, capitalized terms used herein but not defined herein shall have the
respective meanings assigned to such terms in the Lease, the Loan Agreement, the
Liquidity Agreement, the Depositary Agreement or the Collateral Agreement, as
appropriate.
SECTION 2. Amendment of the Lease. Section 12.3(e) of the Lease is
-----------------------
hereby amended pursuant to Section 20 of the Lease to extend the operative
deadline from February 9, 1998 to August 10, 1998, such that Section 12.3(e) is
hereby amended and restated to read in its entirety as follows:
"(e) Notwithstanding anything to the contrary contained in this
Section 12.3, during the period from the date hereof until the earlier of
(i) August 10, 1998 and (ii) the date of execution of the Custody
Agreement, the Lessee shall be deemed to be in compliance with this Section
12.3 so long as the Lessor shall continue to use Old Ryder as its agent to
perform
<PAGE>
3
certain maintenance and administrative functions with respect to the
Certificates of Title in accordance with the business practices and subject
to the controls currently observed under such cooperative agreement."
SECTION 3. Consent. Finco and the Collateral Agent each hereby
--------
consents to the foregoing amendment, as required by Section 10.12 of the Loan
Agreement.
SECTION 4. Headings. Section headings used herein are for
--------
convenience of reference only, are not part of this Amendment and are not to
effect the construction of, or to be taken into consideration in interpreting,
this Amendment.
SECTION 5. Governing Law. This Amendment shall be construed in
--------------
accordance with the laws of the State of New York without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6. Effectiveness of the Amendment. This Amendment shall
-------------------------------
become effective as of the date first above written upon the satisfaction of the
following conditions:
(a) this Amendment shall have been executed by each of the parties
hereto; and
(b) S&P and Moody's shall have confirmed in writing that their
respective ratings on the Commercial Paper Notes will not be lowered or
withdrawn as a result of this Amendment.
SECTION 7. Counterparts. (a) This Amendment may be executed in
-------------
separate counterparts, each of which when so executed and delivered shall
constitute an original, to become effective as provided in Section 6 hereof.
(b) Delivery of an executed counterpart of this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Amendment.
SECTION 8. Full Force and Effect. Except as expressly amended
----------------------
hereby, the Lease shall remain in full force and effect.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
RCTR, INC., as Lessor
by /s/ Steven R. Davison
-----------------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
RYDER TRS, INC., as Lessee
by /s/ Steven R. Davison
-----------------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
FCTR, INC.
by /s/ Steven R. Davison
-----------------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
CITICORP USA, INC.,
as Collateral Agent
by /s/ Shapleigh B. Smith
-----------------------------------
Name: Shapleigh B. Smith
Title: Vice President
<PAGE>
EXHIBIY 10.19
EXECUTION COPY
AMENDMENT NO. 1 AND CONSENT dated as of December 30,
1997 (this "Amendment"), to the Credit Agreement dated as of
October 17, 1996, as amended and restated as of August 7,
1997 (the "Credit Agreement"), among RYDER TRS, INC., a
Delaware corporation (the "Borrower"), the Lenders (as
defined therein), CITICORP USA, INC., as administrative
agent (in such capacity, the "Administrative Agent") and as
collateral agent (in such capacity, the "Collateral Agent")
for the Lenders and THE CHASE MANHATTAN BANK, as
documentation agent (in such capacity the "Documentation
Agent").
A. Pursuant to the Credit Agreement, the Lenders have extended and
agreed to extend credit to the Borrower on the terms and subject to the
conditions set forth therein.
B. The Borrower has requested that the Required Lenders (i) consent
to (a) the purchase by the Borrower of promissory notes (the "Finco Commercial
Paper Notes") of FCTR, Inc., a special purpose Delaware corporation and wholly
owned subsidiary of the Borrower ("Finco"), issued by Finco pursuant to and in
accordance with the Depositary Agreement dated as of August 7, 1997, between
Finco and Citibank, N.A., a national banking association ("Citibank") in an
aggregate principal amount not to exceed $40,000,000 at any time outstanding and
(b) the pledge by the Borrower of such Finco Commercial Paper Notes to one or
more insurance companies (the "Insurance Companies") to secure the Borrower's
obligations (the "Insurance Obligations") under its indemnity and reimbursement
agreements with such Insurance Companies entered into in the ordinary course of
business (the foregoing transactions collectively are referred to herein as the
"Amendment Transactions") and (ii) agree to amend certain provisions of the
Credit Agreement and the Security Agreement, in each case, to the extent, but
only to the extent, necessary to permit the Amendment Transactions.
C. The Required Lenders are willing to grant such consents and
amendments on the terms and subject to the conditions set forth herein.
D. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
<PAGE>
2
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Consent. The Required Lenders hereby consent to the
-------
Amendment Transactions, provided that (a) the Borrower shall not purchase Finco
--------
Commercial Paper Notes with the proceeds of Loans and (b) promptly upon the
pledge of the Finco Commercial Paper Notes to one or more Insurance Companies,
each such Insurance Company shall return to the Borrower any letters of credit
issued under the Letter of Credit Agreement or other security then held by it to
secure the Insurance Obligations.
SECTION 2. Amendment to Section 1.01 of the Credit Agreement.
-------------------------------------------------
Section 1.01 of the Credit Agreement is hereby amended by inserting in the
appropriate alphabetical order therein the following definition:
"'Finco Commercial Paper Notes' shall mean the promissory notes of
----------------------------
Finco issued by Finco in the commercial paper market pursuant to and in
accordance with the Related Documents.".
"'Insurance Company' shall mean any person in the business of
-----------------
providing insurance with whom the Borrower has entered into an indemnity
and reimbursement agreement.".
"'Insurance Obligations' shall mean the obligations of the Borrower
---------------------
under any indemnity and reimbursement agreement with an Insurance Company
entered into in the ordinary course of business.".
SECTION 3. Amendment to Section 6.02 of the Credit Agreement. Section
-------------------------------------------------
6.02(m) of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:
"(m)(i) pledges and deposits of cash to secure the letters of credit
issued pursuant to the Letter of Credit Agreement and (ii) pledges of Finco
Commercial Paper Notes purchased by the Borrower pursuant to and in
accordance with Section 6.04(h) to one or more Insurance Companies to
secure the performance of the Borrower's obligations under its Insurance
Obligations.".
<PAGE>
3
SECTION 4. Amendment to Section 6.04 of the Credit Agreement.
-------------------------------------------------
Section 6.04 of the Credit Agreement is hereby amended as follows:
(a) by inserting after the words "any other such wholly owned
Subsidiary" set forth in the second line of clause (b) thereof the
following phrase "(other than investments in Finco Commercial Paper Notes
made by the Borrower pursuant to and in accordance with Section 6.04(h))".
(b) by deleting the word "and" at the end of clause (f) thereof;
(c) by deleting the period at the end of clause (g) thereof and
substituting therefor the following phrase"; and"; and
(d) by inserting after clause (g) therein a new clause (h) to read as
follows:
"(h) investments by the Borrower in Finco Commercial Paper Notes
in an aggregate amount not to exceed $40,000,000 at any time
outstanding, provided that such notes (i) shall not be purchased with
--------
the proceeds of Loans and (ii) shall be pledged by the Borrower to one
or more Insurance Companies to secure the performance of the
Borrower's Insurance Obligations.".
SECTION 5. Amendment to the Security Agreement. Section 1.02 of the
-----------------------------------
Security Agreement is hereby amended by inserting after the phrase "(other than
Accounts Receivable" set forth in the definition of the term "General
Intangibles" the following words "or any Finco Commercial Paper Notes pledged by
the Borrower pursuant to and in accordance with Section 6.02(m)(ii) of the
Credit Agreement".
SECTION 6. Representations and Warranties. To induce the other
-------------------------------
parties hereto to enter into this Amendment, the Borrower represents and
warrants to each other party hereto that, after giving effect to this Amendment,
(a) the representations and warranties set forth in Article III of the Credit
Agreement will be true and correct in all material respects on and as of the
date hereof, except to the extent such representations and warranties expressly
relate to an earlier date, and (b) no Default or Event of Default will have
occurred and be continuing.
SECTION 7. Conditions to Effectiveness. This Amendment shall become
----------------------------
effective at such time as the Administrative Agent shall have received
counterparts hereof
<PAGE>
4
which, when taken together, bear the signatures of the Borrower and the Required
Lenders.
SECTION 8. Effect of Amendment. Except as expressly set forth
--------------------
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of, or otherwise affect, the rights and remedies of the
Lenders or the Agents under the Credit Agreement or any other Loan Document, and
shall not alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. Nothing herein shall
be deemed to entitle the Borrower to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or any other Loan
Document in similar or different circumstances. This Amendment shall apply and
be effective only with respect to the provisions of the Loan Documents
specifically referred to herein. This Amendment shall constitute a Loan Document
for all purposes of the Credit Agreement.
SECTION 9. Expenses. The Borrower agrees to pay the reasonable out-
---------
of-pocket costs and expenses incurred by the Administrative Agent in connection
with the preparation of this Amendment.
SECTION 10. Counterparts. This Amendment may be executed in any
-------------
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which together shall constitute a single instrument. Delivery of an
executed counterpart of a signature page of this Amendment by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart hereof.
SECTION 11. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
---------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 12. Headings. The headings of this Amendment are for
---------
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
RYDER TRS, INC.,
by /s/ Steven R. Davison
----------------------------
Name: Steven R. Davison
Title: Vice President and
Treasurer
CITICORP USA, INC.,
individually, as Administrative
Agent and as Collateral
Agent,
by /s/ Shapleigh B. Smith
----------------------------
Name: Shapleigh B. Smith
Title: Vice President
THE CHASE MANHATTAN BANK,
individually and as
Documentation Agent,
by /s/ Andris G. Kalnins
--------------------------
Name: Anris G. Kalnins
Title: Vice President
CORESTATES BANK, N.A.,
by /s/ Mark S. Supple
----------------------------
Name: Mark S. Supple
Title: Vice President
SOCIETE GENERALE,
by
----------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.23
AMENDMENT NO. 1 and CONSENT thereto dated as of February 6,
1998 (this "Amendment") to the COLLATERAL AGREEMENT dated as of
August 7, 1997 (the "Collateral Agreement"), among FCTR, INC., a
Delaware corporation ("Finco"), RCTR, INC., a Delaware
corporation ("Leasco"), CITIBANK, N.A., as liquidity agent (the
"Liquidity Agent") for the banks party to the Liquidity Agreement
(the "Liquidity Lenders") and as depositary (the "Depositary")
under the Depositary Agreement, acting on its own behalf and on
behalf of the Holders of Commercial Paper Notes, CITICORP USA,
INC., as collateral agent (the "Collateral Agent") for itself and
for the Liquidity Lenders, the Liquidity Agent and the Depositary
on behalf of the Holders of the Commercial Paper Notes, CITICORP
SECURITIES, INC. and LEHMAN BROTHERS INC. (Citicorp Securities,
Inc. and Lehman Brothers Inc., together with any other dealers
for Commercial Paper Notes engaged by Finco from time to time
that agree to become parties to the Collateral Agreement, the
"Dealers").
WHEREAS Leasco, as lessor, and Ryder TRS, Inc. ("TRS"), as lessee,
entered into that certain amended and restated lease dated as of August 7, 1997
(the "Lease") pursuant to which Leasco leases to TRS certain Vehicles for use in
TRS's truck rental operations;
WHEREAS, contemporaneously with the execution and delivery of the
Lease, Leasco entered into that certain loan agreement dated as of August 7,
1997 (as it may be amended or modified from time to time, the "Loan Agreement")
by and between Leasco, as borrower, and Finco, as lender, pursuant to which
Finco makes Loans to Leasco for the purpose of, among other things, purchasing
and financing Vehicles;
WHEREAS, contemporaneously with the execution and delivery of the
Lease and the Loan Agreement, Finco entered into that certain liquidity
agreement dated as of August 7, 1997 (as it may be amended or modified from time
to time, the "Liquidity Agreement") with the Liquidity Agent and the Liquidity
Lenders, providing for, among other things, the Liquidity Commitments of the
Liquidity Lenders to make Liquidity Advances on behalf of Finco from time to
time;
WHEREAS, contemporaneously with the execution and delivery of the
Lease, the Loan Agreement and the Liquidity Agreement, Finco entered into that
certain depositary
<PAGE>
2
agreement dated as of August 7, 1997 (as it may be amended or modified from time
to time, the "Depositary Agreement") with the Depositary, providing for the
issuance of certain promissory notes (the "Commercial Paper Notes"), assigned a
rating of "Prime-1" by Moody's Investors Service Inc. ("Moody's") and a rating
of "A-1" by Standard & Poor's, a division of The McGraw-Hill Companies ("S&P"),
and sold in the commercial paper market by the Dealers;
WHEREAS Finco and Leasco desire to amend Section 3.03(h) of the
Collateral Agreement as set forth in this Amendment; and
WHEREAS the Collateral Agent, the Liquidity Agent and the Depositary
desire to consent to such amendment, as required by Section 8.01(a) of the
Collateral Agreement, and the Majority Banks desire to consent to such
amendment, as required by Section 8.01(a) of the Collateral Agreement and
Section 8.02(j) of the Liquidity Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants set forth herein, the parties hereto hereby
agree, subject to the terms and conditions set forth below, as follows:
SECTION 1. Defined Terms. Unless the context requires a different
--------------
meaning, capitalized terms used herein but not defined herein shall have the
respective meanings assigned to such terms in the Lease, the Loan Agreement, the
Liquidity Agreement, the Depositary Agreement or the Collateral Agreement, as
appropriate.
SECTION 2. Amendment of the Collateral Agreement. Section 3.03(h) of
--------------------------------------
the Collateral Agreement is hereby amended to extend the operative deadline from
February 9, 1998 to August 10, 1998, such that Section 3.03(h) is hereby amended
and restated to read in its entirety as follows:
"(h) Each of Finco and Leasco (i) will use its respective best
efforts to appoint a Custodian prior to August 10, 1998 and execute the
Custody Agreement, together with such Custodian and TRS prior to such date,
(ii) agree that if at any time prior to August 10, 1998, the Enhancement
Test Percentage (as calculated using a Required Enhancement Percentage of
25.00%, notwithstanding the definition in Annex A to the Liquidity
Agreement) is not equal to or greater than 25.00%, the Agent shall, in its
sole discretion and at the expense of Finco, appoint a Custodian and Finco,
Leasco, TRS, the Agent and such Custodian shall
<PAGE>
3
execute the Custody Agreement as soon as practicable under the
circumstances and (iii) agree that during the period from the date hereof
until the earlier of (A) August 10, 1998 and (B) the date of the execution
of the Custody Agreement, Leasco shall continue to use Old Ryder as its
agent to perform certain maintenance and administrative functions with
respect to the Certificates of Title in accordance with the business
practices and subject to the controls currently observed under such
cooperative arrangement."
SECTION 3. Consent. (a) Each of the Collateral Agent, the Liquidity
--------
Agent and the Depositary consents to the foregoing amendment, as required by
Section 8.01(a) of the Collateral Agreement.
(b) The Majority Banks consent to the foregoing amendment, as
required by Section 8.01(a) of the Collateral Agreement and Section 8.02(j) of
the Liquidity Agreement.
SECTION 4. Headings. Section headings used herein are for
--------
convenience of reference only, are not part of this Amendment and are not to
effect the construction of, or to be taken into consideration in interpreting,
this Amendment.
SECTION 5. Governing Law. This Amendment shall be construed in
--------------
accordance with the laws of the State of New York without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6. Effectiveness of this Amendment. This Amendment shall
--------------------------------
become effective as of the date first above written upon the satisfaction of the
following conditions:
(a) this Amendment shall have been executed by each of the parties
hereto other than the Liquidity Lenders;
(b) this Amendment shall have been executed by Liquidity Lenders
holding, in the aggregate, Liquidity Commitments equaling or exceeding 66 2/3%
of the Aggregate Liquidity Commitment; and
(c) S&P and Moody's shall have confirmed in writing that their
respective ratings on the Commercial Paper Notes will not be lowered or
withdrawn as a result of this Amendment.
SECTION 7. Counterparts. (a) This Amendment may be executed in
-------------
separate counterparts, each of which when so
<PAGE>
4
executed and delivered shall constitute an original, to become effective as
provided in Section 6 hereof.
(b) Delivery of an executed counterpart of this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Amendment.
SECTION 8. Full Force and Effect. Except as expressly amended
----------------------
hereby, the Collateral Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
FCTR, INC.,
by /s/ Steven R. Davison
_________________________
Name: Steven R. Davison
Title: Vice President and Treasurer
RCTR, INC.,
by /s/ Steven R. Davison
_________________________
Name: Steven R. Davison
Title: Vice President and Treasurer
CITIBANK, N.A., as Liquidity
Agent and Depositary,
by /s/ Jenny Cheng
_________________________
Name: Jenny Cheng
Title: Assistant Vice President
<PAGE>
5
CITICORP USA, INC., as
Collateral Agent,
by /s/ Shapleigh B. Smith
-------------------------
Name: Shapleigh B. Smith
Title: Vice President
CITICORP SECURITIES, INC.,
as Dealer,
by /s/ Donald J. Donahue, Jr.
-------------------------
Name: Donald J. Donahue, Jr.
Title: Vice President
LEHMAN BROTHERS INC.,
as Dealer,
by /s/ Kyle Miller
-------------------------
Name: Kyle Miller
Title: Senior Vice President
<PAGE>
6
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- -----------------------------
$41,000,000 CITIBANK, N.A.
by /s/ Shapleigh B. Smith
-------------------------
Name:
Title:
$38,000,000 BHF-BANK AKTIENGESELLSCHAFT
by /s/ Dan Dobrjanskyj
------------------------
Name: Dan Dobrjanskyj
Title: Assistant Vice President
by /s/ Robert Novak
------------------------
Name: Robert Novak
Title: AT
$38,000,000 THE CHASE MANHATTAN BANK
by /s/ Andris G. Kalnins
------------------------
Name: Andris G. Kalnins
Title: Vice President
$38,000,000 CORESTATES BANK, N.A.
by /s/ Christopher J. Calabrese
-------------------------------
Name: Christoper J. Calabrese
Title: Senior Vice President
$38,000,000 CREDIT AGRICOLE INDOSUEZ
by /s/ Katherine L. Abbott
--------------------------
Name: Katherine L. Abbott
Title: First Vice President
by /s/ David Bouhl, F.V.P.
--------------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate
Banking, Chicago
<PAGE>
7
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- -----------------------------
$38,000,000 FLEET NATIONAL BANK
by /s/ Steve G. Noth
--------------------------
Name: Steve G. Noth
Title: SVP
$38,000,000 NATIONSBANK
by /s/ Melba B. Quizon
--------------------------
Name: Melba B. Quizon
Title: Vice President
$38,000,000 COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., Rabobank Nederland,
New York Branch
by
--------------------------
Name:
Title:
$38,000,000 SOCIETE GENERALE
by /s/ Richard M. Leunj
--------------------------
Name: Richard M. Leunj
Title: Vice President
$21,000,000 THE BANK OF NOVA SCOTIA
by /s/ John Burckin
--------------------------
Name: John Burckin
Title: Relationship Manager
$21,000,000 THE BANK OF TOKYO-
MITSUBISHI, LTD., New York
Branch
by
--------------------------
Name:
Title:
<PAGE>
8
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- -----------------------------
$21,000,000 BARNETT BANK, N.A.
by /s/ Guillermo F. Castillo
-----------------------------
Name: Guillermo F. Castillo
Title: Vice President
$21,000,000 COMERICA BANK
by
-----------------------------
Name:
Title:
$21,000,000 PNC BANK, N.A.
by /s/ Philip K. Zigtoscher
-----------------------------
Name: Philip K. Zigtoscher
Title: VP
<PAGE>
EXHIBIT 10.26
EXECUTION COPY
GUARANTEE AGREEMENT dated as of October 17, 1996, as amended
and restated as of August 7, 1997, among each of the subsidiaries
listed on Schedule I hereto (each such subsidiary, individually,
a "Guarantor" and, collectively, the "Guarantors") of RYDER TRS,
INC., a Delaware corporation (the "Borrower"), and CITICORP USA,
INC., a Delaware corporation ("Citicorp"), as collateral agent
(the "Collateral Agent") for the Secured Parties (as defined in
the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of October 17, 1996, as
amended and restated as of August 7, 1997 (as further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders from time to time party thereto (the "Lenders"), The Chase
Manhattan Bank, as documentation agent, and Citicorp, as administrative agent
for the Lenders, and as Collateral Agent. Capitalized terms used herein and not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.
The Lenders have agreed to make Loans to the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
Each of the Guarantors is a wholly owned Subsidiary of the Borrower and
acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders. The obligations of the Lenders to make Loans are
conditioned on, among other things, the execution and delivery by the Guarantors
of a Guarantee Agreement in the form hereof. As consideration therefor and in
order to induce the Lenders to make Loans, the Guarantors are willing to execute
this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly
with the other Guarantors and severally, as a primary obligor and not merely as
a surety, (a) the due and punctual payment of (i) the principal of and premium,
if any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise and (ii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Loan Parties to the
Secured Parties under the Credit Agreement and the other Loan Documents, (b) the
due and punctual payment and performance of all covenants, agreements,
obligations and liabilities of the Loan Parties under or pursuant to the Credit
Agreement and the other Loan Documents and (c) the due and punctual payment and
performance of all obligations of the Borrower, monetary or otherwise, under
each Interest Rate Protection Agreement entered into with a counterparty that
was a Lender (or an Affiliate of a Lender) at the time such Interest Rate
Protection Agreement was entered into (all the monetary and other obligations
referred to in the preceding clauses (a) through (c) being collectively called
the "Obligations"). Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greatest amount that would not render such Guarantor's
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to the Borrower or
Affiliates of the Borrower to the extent that
<PAGE>
2
such indebtedness would be discharged in an amount equal to the amount paid by
such Guarantor hereunder and (b) under any Guarantee of senior unsecured
indebtedness or Indebtedness subordinated in right of payment to the Obligations
which Guarantee contains a limitation as to maximum amount similar to that set
forth in this paragraph, pursuant to which the liability of such Guarantor
hereunder is included in the liabilities taken into account in determining such
maximum amount) and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, contribution, reimbursement, indemnity or similar rights of such
Guarantor pursuant to (i) applicable law or (ii) any agreement providing for an
equitable allocation among such Guarantor and other Affiliates of the Borrower
of obligations arising under Guarantees by such parties (including the
Indemnity, Subrogation and Contribution Agreement).
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. To the
fullest extent permitted by applicable law, the obligations of each Guarantor
hereunder shall not be affected by (a) the failure of the Collateral Agent or
any other Secured Party to assert any claim or demand or to enforce or exercise
any right or remedy against the Borrower or any other Guarantor under the
provisions of the Credit Agreement, any other Loan Document or otherwise, (b)
any rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of this Agreement, any other Loan Document, any
Guarantee or any other agreement, including with respect to any other Guarantor
under this Agreement or (c) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Collateral Agent
or any other Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the Collateral
Agent and each of the other Secured Parties, to (a) take and hold security for
the payment of this Guarantee and the Obligations and exchange, enforce, waive
and release any such security, (b) apply such security and direct the order or
manner of sale thereof as they in their sole discretion may determine and (c)
release or substitute any one or more endorsees, other guarantors of other
obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of the Borrower or any
other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce any remedy under the Credit
Agreement, any other Loan Document or any other agreement, by any waiver or
modification of any provision of any thereof, by any default, failure or delay,
wilful or otherwise, in the performance of the Obligations, or by any other act
or omission that may or might in any manner or to any extent vary the risk of
any Guarantor or that would otherwise operate as a discharge of each Guarantor
as a matter of law or equity (other than the indefeasible payment in full in
cash of all the Obligations).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of the Borrower or the unenforceability of the Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower, other than the final and indefeasible payment in full
in cash of the Obligations. The Collateral Agent and the other Secured Parties
may, at their election, foreclose on any security held by one or more of them by
one or more judicial or nonjudicial
<PAGE>
3
sales, accept an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Obligations, make any other accommodation
with the Borrower or any other guarantor or exercise any other right or remedy
available to them against the Borrower or any other guarantor, without affecting
or impairing in any way the liability of any Guarantor hereunder except to the
extent the Obligations have been fully, finally and indefeasibly paid in cash.
Pursuant to applicable law, each of the Guarantors waives any defense arising
out of any such election even though such election operates, pursuant to
applicable law, to impair or to extinguish any right of reimbursement or
subrogation or other right or remedy of such Guarantor against the Borrower or
any other Guarantor or guarantor, as the case may be, or any security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of the Borrower or any other Loan Party to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will forthwith pay, or cause to be paid, to the Collateral Agent
or such other Secured Party as designated thereby in cash the amount of such
unpaid Obligations. Upon payment by any Guarantor of any sums to the Collateral
Agent or any Secured Party as provided above, all rights of such Guarantor
against the Borrower arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full in cash of all the Obligations. In addition, any indebtedness of the
Borrower now or hereafter held by any Guarantor is hereby subordinated in right
of payment to the prior payment in full of the Obligations. If any amount shall
erroneously be paid to any Guarantor on account of (i) such subrogation,
contribution, reimbursement, indemnity or similar right or (ii) any such
indebtedness of the Borrower, such amount shall be held in trust for the benefit
of the Secured Parties and shall forthwith be paid to the Collateral Agent to be
credited against the payment of the Obligations, whether matured or unmatured,
in accordance with the terms of the Loan Documents.
SECTION 8. Information. Each of the Guarantors assumes all responsibility
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent or the other Secured Parties will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. Representations and Warranties. Each of the Guarantors
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct.
SECTION 10. Termination. The Guarantees made hereunder (a) shall
terminate when all the Obligations have been indefeasibly paid in full and the
Lenders have no further commitment to lend under the Credit Agreement and (b)
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy
or reorganization of the Borrower, any Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted
<PAGE>
4
assignment shall be void). If all of the capital stock of a Guarantor is sold,
transferred or otherwise disposed of pursuant to a transaction permitted by
Section 6.05 of the Credit Agreement, such Guarantor shall be released from its
obligations under this Agreement without further action. This Agreement shall be
construed as a separate agreement with respect to each Guarantor and may be
amended, modified, supplemented, waived or released with respect to any
Guarantor without the approval of any other Guarantor and without affecting the
obligations of any other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the other Secured Parties under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantors with respect to which such waiver, amendment or modification relates
and the Collateral Agent, with the prior written consent of the Required Lenders
(except as otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to each Guarantor shall be given to it at
its address set forth in Schedule I.
SECTION 15. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made in writing by the Guarantors
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the Collateral Agent and the other
Secured Parties and shall survive the making by the Lenders of the Loans
regardless of any investigation made by the Secured Parties or on their behalf,
and shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any other fee or amount payable under this
Agreement or any other Loan Document is outstanding and unpaid and as long as
the Commitments have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature
<PAGE>
5
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Guarantor or its properties in the courts of any jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
SECTION 20. Additional Guarantors. Pursuant to Section 5.16 of the Credit
Agreement, each Domestic Subsidiary (other than Finco or Leasco) and, to the
extent that no adverse tax consequences to the Borrower or any Subsidiary would
result, Foreign Subsidiary, that was not in existence or not such a Subsidiary
on the date of the Credit Agreement is required to enter into this Agreement as
a Guarantor upon becoming such a Subsidiary. Upon execution and delivery after
the date hereof by the Collateral Agent and any such Subsidiary of an instrument
in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with
the same force and effect as if originally named as a Guarantor herein. The
execution and delivery of any instrument adding an additional Guarantor as a
party to this Agreement shall not require the consent of any other Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor as a
party to this Agreement.
<PAGE>
6
SECTION 21. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Secured Party is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other Indebtedness at any time owing by such Secured Party to
or for the credit or the account of any Guarantor against any or all the
obligations of such Guarantor now or hereafter existing under this Agreement and
the other Loan Documents held by such Secured Party, irrespective of whether or
not such Secured Party shall have made any demand under this Agreement or any
other Loan Document and although such obligations may be unmatured. The rights
of each Secured Party under this Section 21 are in addition to other rights and
remedies (including other rights of setoff) which such Secured Party may have.
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I HERETO,
by /s/ STEVEN R. DAVISON
__________________________________
Name: Steven R. Davison
Title: Authorized Officer
CITICORP USA, INC., as Collateral Agent,
by /s/ SHAPLEIGH SMITH
__________________________________
Name: Shapleigh Smith
Title: Vice President
<PAGE>
Schedule I to the
Guarantee Agreement
GUARANTORS
Guarantor Address for all Guarantors
- --------- --------------------------
Ryder Truck Rental-One Way, Inc. 1560 Broadway
Ryder Relocation Services, Inc. Suite 1800
The Move Shop, Inc. Denver, CO 80202
Ryder Move Management, Inc. 8669 N.W. 36th Street
Miami, FL 33166
<PAGE>
Annex 1 to the
Guarantee Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to the
Guarantee Agreement dated as of October 17, 1996, as amended and
restated as of August 7, 1997, among each of the subsidiaries
listed on Schedule I thereto (each such subsidiary, individually,
a "Guarantor" and, collectively, the "Guarantors") of RYDER TRS,
INC., a Delaware corporation (the "Borrower"), and CITICORP USA,
INC., a Delaware corporation ("Citicorp"), as collateral agent
(the "Collateral Agent") for the Secured Parties (as defined in
the Credit Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of October 17, 1996,
as amended and restated as of August 7, 1997 (as further amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders from time to time party thereto (the "Lenders"), The Chase
Manhattan Bank, as documentation agent, and Citicorp, as administrative agent
for the Lenders, and as Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans. Pursuant to Section 5.16 of the Credit
Agreement, each Domestic Subsidiary (other than Finco or Leasco) (and, to the
extent that no adverse tax consequences to the Borrower or any Subsidiary would
result, Foreign Subsidiary), that was not in existence or not such a Subsidiary
on the date of the Credit Agreement is required to enter into the Guarantee
Agreement as a Guarantor upon becoming such a Subsidiary. Section 20 of the
Guarantee Agreement provides that any such Subsidiary may become a Guarantor
under the Guarantee Agreement by execution and delivery of an instrument in the
form of this Supplement. The undersigned Subsidiary (the "New Guarantor") is
executing this Supplement in accordance with such requirements of the Credit
Agreement to become a Guarantor under the Guarantee Agreement in order to induce
the Lenders to make additional Loans and as consideration for Loans previously
made.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated
herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Guarantor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
<PAGE>
2
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the Borrower.
<PAGE>
3
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, disbursements and other charges of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year first
above written.
[Name Of New Guarantor],
by
--------------------------------------
Name:
Title:
Address:
--------------------------------
--------------------------------
CITICORP USA, INC., as Collateral Agent,
by
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.27
EXECUTION COPY
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as
of October 17, 1996, as amended and restated as of August 7,
1997, among RYDER TRS, INC., a Delaware corporation (the
"Borrower"), each Subsidiary of the Borrower listed on Schedule I
hereto (the "Guarantors") and CITICORP USA, INC., a Delaware
corporation ("Citicorp"), as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of October 17, 1996,
as amended and restated as of August 7, 1997 (as further amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders from time to time party thereto (the "Lenders"), The Chase
Manhattan Bank, as documentation agent, and Citicorp, as administrative agent
for the Lenders, and as Collateral Agent, and (b) the Guarantee Agreement dated
as of October 17, 1996, as amended and restated as of August 7, 1997 (the
"Guarantee Agreement"), among the Guarantors identified therein and the
Collateral Agent. Capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
The Guarantors have guaranteed such Loans and the other Obligations (as defined
in the Guarantee Agreement) of the Borrower under the Credit Agreement pursuant
to the Guarantee Agreement; certain Guarantors have granted Liens on and
security interests in certain of their assets to secure such guarantees. The
obligations of the Lenders to make Loans are conditioned on, among other things,
the execution and delivery by the Borrower and the Guarantors of an agreement in
the form hereof.
Accordingly, the Borrower, each Guarantor and the Collateral Agent agree as
follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Guarantors may have under applicable law (but
subject to Section 3), the Borrower agrees that (a) in the event a payment shall
be made by any Guarantor under the Guarantee Agree ment, the Borrower shall
indemnify such Guarantor for the full amount of such payment and such Guarantor
shall be subrogated to the rights of the person to whom such payment shall have
been made to the extent of such payment and (b) in the event any assets of any
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party, the Borrower shall indemnify such Guarantor in an amount
equal to the greater of the book value or the fair market value of the assets so
sold.
SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing
Guarantor") agrees (subject to Section 3) that, in the event a payment shall be
made by any other Guarantor under the Guarantee Agreement or assets of any other
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not
have been fully indemnified by the Borrower as provided in Section 1, the
Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal
to the amount of such payment or the greater of the book value or the fair
market value of such assets, as the case may be, in each case multiplied by a
fraction of which the numerator shall be the Net Worth (as defined below) of the
Contributing Guarantor on the date hereof and the denominator shall be the
aggregate Net Worth of all the Guarantors on the date hereof (or, in the case of
any Guarantor becoming a party hereto pursuant to Section 12, the date of the
Supplement hereto executed and delivered by such Guarantor). The term "Net
Worth" shall mean, with respect to any person, the fair value of the assets of
such person over the fair value of the liabilities of such person (including
contingent liabilities). Any Contributing Guarantor making any payment to a
Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights
of such Claiming Guarantor under Section 1 to the extent of such payment.
<PAGE>
2
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Contributing Guarantor hereunder shall be limited to a
maximum aggregate amount equal to the greatest amount that would not render such
Contributing Guarantor's obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the United
States Code or any provisions of applicable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of such Contributing Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Contributing Guarantor (a) in respect of intercompany
indebtedness to the Borrower or Affiliates of the Borrower to the extent that
such indebtedness would be discharged in an amount equal to the amount paid by
such Contributing Guarantor hereunder and (b) under any Guarantee of senior
unsecured indebtedness or Indebtedness subordinated in right of payment to the
Obligations which Guarantee contains a limitation as to maximum amount similar
to that set forth in this paragraph, pursuant to which the liability of such
Contributing Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution, reimbursement,
indemnity or similar rights of such Contributing Guarantor pursuant to (i)
applicable law or (ii) any agreement providing for an equitable allocation among
such Contributing Guarantor and other Affiliates of the Borrower of obligations
arising under Guarantees by such parties (including this Agreement).
SECTION 3. Subordination. Notwithstanding any provision of this Agreement
to the contrary, all rights of the Guarantors under Sections 1 and 2 and all
other rights of indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full in
cash of the Obligations. No failure on the part of the Borrower or any
Guarantor to make the payments required by Sections 1 and 2 (or any other
payments required under applicable law or other wise) shall in any respect
limit the obligations and liabilities of any Guarantor with respect to its
obligations hereunder, and each Guarantor shall remain liable for the full
amount of the obligations of such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full force
and effect so long as any Obligation is outstanding and has not been
indefeasibly paid in full in cash, or any of the Commit ments under the Credit
Agreement have not been terminated, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or any Guarantor upon the bankruptcy or reorganization of the Borrower, any
Guarantor or otherwise.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of the
Collateral Agent or any Guarantor to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy by the
Collateral Agent or any Guarantor preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. None of
the Collateral Agent and the Guarantors shall be deemed to have waived any
rights hereunder unless such waiver shall be in writing and signed by such
parties.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Borrower, the Guarantors and the Collateral Agent, with the prior written
consent of the Required Lenders (except as otherwise provided in the Credit
Agreement).
SECTION 7. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Guarantee Agreement and addressed as
specified therein.
<PAGE>
3
SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the parties that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
Neither the Bor rower nor any Guarantor may assign or transfer any of its
rights or obligations hereunder (and any such attempted assignment or transfer
shall be void) without the prior written consent of the Required Lenders.
Notwithstanding the foregoing, at the time any Guarantor is released from its
obligations under the Guarantee Agreement in accordance with such Guarantee
Agreement and the Credit Agreement, such Guarantor will cease to have any rights
or obligations under this Agreement.
SECTION 9. Survival of Agreement; Severability. (a) All covenants and
agreements made in writing by the Borrower and each Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement or the other Loan Documents shall be considered to have been relied
upon by the Collateral Agent, the other Secured Parties and each Guarantor and
shall survive the making by the Lenders of the Loans, and shall continue in full
force and effect as long as the principal of or any accrued interest on any
Loans or any other fee or amount payable under the Credit Agreement or this
Agreement or under any of the other Loan Documents is outstanding and unpaid and
as long as the Commitments have not been terminated.
(b) In case any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, no party hereto
shall be required to comply with such provision for so long as such provision is
held to be invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 10. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Agreement shall be effective with respect to any
Guarantor when a counterpart bearing the signature of such Guarantor shall have
been delivered to the Collateral Agent. Delivery of an executed signature page
to this Agreement by facsimile transmission shall be as effective as delivery of
a manually signed counterpart of this Agreement.
SECTION 11. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 12. Additional Guarantors. Pursuant to Section 5.16 of the Credit
Agreement, each Domestic Subsidiary (other than Finco or Leasco) and, to the
extent that no adverse tax consequences to the Borrower or any Subsidiary would
result, Foreign Subsidiary, that was not in existence or not such a Subsidiary
on the date of the Credit Agreement is required to enter into the Guarantee
Agreement and this Agreement as a Guarantor upon becoming such a Subsidiary.
Upon execution and delivery, after the date hereof, by the Collateral Agent or
any such Subsidiary of an instrument in the form of Annex 1 hereto, such
Subsidiary shall become a Guarantor hereunder with the same force and effect as
if originally named as a Guarantor hereunder. The execution and delivery of any
instrument adding an additional Guarantor as a party to this Agreement shall not
require the consent of any Guarantor hereunder. The rights and obligations of
each Guarantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Guarantor as a party to this Agreement.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.
RYDER TRS, INC.,
by /s/ STEVEN R. DAVISON
-----------------------------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I
HERETO, as a Guarantor,
by /s/ THOMAS W. ARNST
-----------------------------------------------
Name: Thomas W. Arnst
Title: Authorized Officer
CITICORP USA, INC., as Collateral Agent,
by /s/ SHAPLEIGH SMITH
-----------------------------------------------
Name: Shapleigh Smith
Title: Vice President
<PAGE>
Schedule I to the
Indemnity, Subrogation
and Contribution Agreement
GUARANTORS
Name Address for all Guarantors
- ---- --------------------------
Ryder Truck Rental-OneWay, Inc. 1560 Broadway
Ryder Relocation Services, Inc. Suite 1800
The Move Shop, Inc. Denver, CO 80202
Ryder Move Management, Inc. 8669 N.W. 36th Street
Miami, FL 33166
<PAGE>
Annex 1 to the
Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to the Indemnity,
Subrogation and Contribution Agreement dated as of October 17,
1996, as amended and restated as of August 7, 1997 (as the same
may be amended, supplemented or otherwise modified from time to
time, the "Indemnity, Subrogation and Contribution Agreement"),
among RYDER TRS, INC., a Delaware corporation (the "Borrower"),
each Subsidiary of the Borrower listed on Schedule I thereto (the
"Guarantors") and CITICORP USA, INC., a Delaware corporation
("Citicorp"), as collateral agent (the "Collateral Agent") for
the Secured Parties (as defined in the Credit Agreement referred
to below).
A. Reference is made to (a) the Credit Agreement dated as of October 17,
1996, as amended and restated as of August 7, 1997 (as further amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Borrower, the lenders from time to time party thereto (the "Lenders"),
The Chase Manhattan Bank, as documentation agent, and Citicorp, as
administrative agent for the Lenders, and as Collateral Agent and (b) the
Guarantee Agreement dated as of October 17, 1996, as amended and restated as of
August 7, 1997 (the "Guarantee Agreement"), among the Guarantors identified
therein and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Loans. Pursuant to Section 5.16 of the Credit Agreement, each Domestic
Subsidiary (other than Finco or Leasco) and, to the extent that no adverse tax
consequences to the Borrower or any Subsidiary would result, Foreign Subsidiary,
that was not in existence or not such a Subsidiary on the date of the Credit
Agreement is required to enter into the Guarantee Agreement and the Indemnity,
Subrogation and Contribution Agreement as a Guarantor upon becoming such a
Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution Agreement
provides that any such Subsidiary may become a Guarantor under the Indemnity,
Subrogation and Contribution Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary (the "New
Guarantor") is executing this Supplement in accordance with such requirements of
the Credit Agreement to become a Guarantor under the Indemnity, Subrogation and
Contribution Agreement in order to induce the Lenders to make additional Loans
and as consideration for Loans previously made.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and
Contribution Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Indemnity, Subrogation and Contribution Agreement with the
same force and effect as if originally named therein as a Guarantor and the New
Guarantor hereby agrees to all the terms and provisions of the Indemnity,
Subrogation and Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor. The
Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and con stitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the
<PAGE>
2
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Guarantor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Indemnity, Subrogation and Contribution Agreement shall not in
any way be affected or impaired. The parties hereto shall endeavor in good-
faith negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
<PAGE>
3
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[Name Of New Guarantor],
by
-----------------------------------
Name:
Title:
Address:
---------------------------
---------------------------
---------------------------
CITICORP USA, INC., as Collateral Agent,
by
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.28
EXECUTION COPY
PLEDGE AGREEMENT dated as of October 17, 1996, as amended
and restated as of August 7, 1997, among RYDER TRS, INC., a
Delaware corporation (the "Borrower"), each Subsidiary of the
Borrower listed on Schedule I hereto (each such Subsidiary,
individually, a "Subsidiary Pledgor" and, collectively, the
"Subsidiary Pledgors"; the Borrower and the Subsidiary Pledgors
are referred to collectively herein as the "Pledgors") and
CITICORP USA, INC., a Delaware corporation ("Citicorp"), as
collateral agent (the "Collateral Agent") for the Secured Parties
(as defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of October 17, 1996,
as amended and restated as of August 7, 1997 (as further amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders from time to time party thereto (the "Lenders"), The
Chase Manhattan Bank, as documentation agent and Citicorp, as administrative
agent for the Lenders, and as Collateral Agent, and (b) the Guarantee Agreement
dated as of October 17, 1996, as amended and restated as of August 7, 1997 (as
further amended, supplemented or otherwise modified from time to time, the
"Guarantee Agreement"), among the Guarantors and the Collateral Agent.
Capitalized terms used herein and not defined herein shall have meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower pursuant to, and upon
the terms and subject to the conditions specified in, the Credit Agreement.
Each of the Guarantors has agreed to guarantee, among other things, all the
obligations of the Borrower under the Credit Agreement. The obligations of the
Lenders to make Loans are conditioned upon, among other things, the execution
and delivery by the Pledgors of a Pledge Agreement in the form hereof to secure
(a) the due and punctual payment by the Borrower of (i) the principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise and (ii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Borrower to the Secured Parties under the Credit Agreement and the other
Loan Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents, (c) the due and punctual payment
and performance of all the covenants, agreements, obligations and liabilities of
each Guarantor under or pursuant to the Guarantee Agreement and the other Loan
Documents and (d) the due and punctual payment and performance of all
obligations of the Borrower under each Interest Rate Protection Agreement
entered into with any counterparty that was a Lender (or an Affiliate of a
Lender) at the time such Interest Rate Protection Agreement was entered into
(all the monetary and other obligations referred to in the preceding clauses (a)
through (d) being referred to collectively as the "Obligations").
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of the Obligations, each Pledgor hereby transfers, grants,
bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the
Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of such Pledgor's right, title and
interest in, to and under (a) the shares of capital stock owned by it and listed
on Schedule II hereto and any shares of capital stock of any Subsidiary obtained
in the future by such Pledgor and the certificates representing all such shares
(the
<PAGE>
2
"Pledged Stock"); provided that the Pledged Stock shall not include (i) more
than 65% of the issued and outstanding shares of stock of any Foreign Subsidiary
if, and to the extent that, the pledge of a greater percentage would have
adverse tax consequences for the Borrower or any Subsidiaries or (ii) to the
extent that applicable law requires that a Subsidiary of the Pledgor issue
directors' qualifying shares, such qualifying shares; (b)(i) the debt securities
listed opposite the name of such Pledgor on Schedule II hereto, (ii) any debt
securities in the future issued to the Pledgor and (iii) the promissory notes
and any other instruments evidencing such debt securities (the "Pledged Debt
Securities"); (c) all other property that may be delivered to and held by the
Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred to
in clauses (a) and (b) above; (e) subject to Section 5, all rights and
privileges of such Pledgor with respect to the securities and other property
referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any
of the foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the "Collateral"). Upon delivery to the Collateral
Agent, (a) any stock certificates, notes or other securities now or hereafter
included in the Collateral (the "Pledged Securities") shall be accompanied by
stock powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and documents
as the Collateral Agent may reasonably request and (b) all other property
comprising part of the Collateral shall be accompanied by proper instruments of
assignment duly executed by the applicable Pledgor and such other instruments or
documents as the Collateral Agent may reasonably request. Each delivery of
Pledged Securities shall be accompanied by a schedule describing the securities
theretofore and then being pledged hereunder, which schedule shall be attached
hereto as Schedule II and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.
SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to
such Pledgor by any person to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent pursuant to the terms
thereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) the Pledged Stock represents that percentage as set forth on
Schedule II of the issued and outstanding shares of each class of the
capital stock of the issuer with respect thereto;
(b) except for the security interest granted hereunder, the Pledgor
(i) is and will at all times continue to be the direct owner, beneficially
and of record, of the Pledged Securities indicated on Schedule II, (ii)
holds the same free and clear of all Liens, (iii) will make no assignment,
pledge, hypothecation or transfer of, or create or permit to exist any
security interest in or other Lien on, the Collateral, other than pursuant
hereto, and (iv) subject to Section 5, will cause any and all Collateral,
whether for value paid by the Pledgor or otherwise, to be forthwith
deposited with the Collateral Agent and pledged or assigned hereunder;
<PAGE>
2
(c) the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Agreement), however arising, of all persons
whomsoever;
(d) no consent of any other person (including stockholders or
creditors of any Pledgor) and no consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of
the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Collateral are delivered to the Collateral
Agent in accordance with this Agreement, the Collateral Agent will obtain a
valid and perfected first lien upon and security interest in such Pledged
Securities as security for the payment and performance of the Obligations;
(f) the pledge effected hereby is effective to vest in the Collateral
Agent, on behalf of the Secured Parties, the rights of the Collateral Agent
in the Collateral as set forth herein;
(g) all of the Pledged Stock has been duly authorized and validly
issued and is fully paid and nonassessable;
(h) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof; and
(i) the pledge of the Pledged Stock pursuant to this Agreement does
not violate Regulation G, T, U or X of the Federal Reserve Board or any
successor thereto as of the date hereof.
SECTION 4. Registration in Nominee Name; Denominations. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent.
Each Pledgor will promptly give to the Collateral Agent copies of any notices or
other communications received by it with respect to Pledged Securities
registered in the name of such Pledgor. The Collateral Agent shall at all times
have the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms of
this Agreement, the Credit Agreement and the other Loan Documents;
provided, however, that such Pledgor will not be entitled to exercise any
such right if the result thereof could materially and adversely affect the
rights of a holder of the Pledged Securities or the rights and remedies of
any of the Secured Parties under this Agreement or the Credit Agreement or
any other Loan Document or the ability of the Secured Parties to exercise
the same.
(ii) The Collateral Agent shall execute and deliver to each Pledgor,
or cause to be executed and delivered to each Pledgor, all such proxies,
powers of attorney and other instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the voting
and/or consensual rights and powers it is entitled to exercise pursuant
<PAGE>
4
to subparagraph (i) above and to receive the cash dividends it is entitled
to receive pursuant to subparagraph (iii) below.
(iii) Each Pledgor shall be entitled to receive and retain any and all
cash dividends, interest and principal paid on the Pledged Securities to
the extent and only to the extent that such cash dividends, interest and
principal are permitted by, and otherwise paid in accordance with, the
terms and conditions of the Credit Agreement, the other Loan Documents and
applicable laws. All noncash dividends, interest and principal, and all
dividends, interest and principal paid or payable in cash or otherwise in
connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions
(other than distributions referred to in the preceding sentence) made on or
in respect of the Pledged Securities, whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the Collateral,
and, if received by any Pledgor, shall not be commingled by such Pledgor
with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Collateral
Agent and shall be forthwith delivered to the Collateral Agent in the same
form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to dividends, interest or principal that such Pledgor
is authorized to receive pursuant to paragraph (a)(iii) above shall cease, and
all such rights shall thereupon become vested in the Collateral Agent, which
shall have the sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal received
by any Pledgor contrary to the provisions of this Section 5 shall be held in
trust for the benefit of the Collateral Agent, shall be segregated from other
property or funds of such Pledgor and shall be forthwith delivered to the
Collateral Agent upon demand in the same form as so received (with any necessary
endorsement). Any and all money and other property paid over to or received by
the Collateral Agent pursuant to the provisions of this paragraph (b) shall be
retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall, within five
Business Days after all such Events of Default have been cured or waived, repay
to each Pledgor all cash dividends, interest or principal (without interest),
that such Pledgor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section
5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this
Section 5, shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority to
exercise such voting and con sensual rights and powers, provided that, unless
otherwise directed by the Required Lenders, the Collateral Agent shall have the
right from time to time following and during the continuance of an Event of
Default to permit the Pledgors to exercise such rights. After all Events of
Default have been cured or waived, such Pledgor will have the right to exercise
the voting and consensual rights and powers that it would otherwise be entitled
to exercise pursuant to the terms of paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral, or any part thereof,
at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as the Collateral Agent
shall deem appropriate. The Collateral Agent shall be authorized at any such
sale (if it deems it advisable to do
<PAGE>
5
so) to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof,
and upon consummation of any such sale the Collateral Agent shall have the right
to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of any Pledgor, and, to
the extent permitted by applicable law, the Pledgors hereby waive all rights of
redemption, stay, valuation and appraisal any Pledgor now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.
The Collateral Agent shall give a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section 9-
504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of such Pledgor's Collateral. Such notice, in the case of a
public sale, shall state the time and place for such sale and, in the case of a
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may fix and
state in the notice of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid in
full by the purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay
or appraisal on the part of any Pledgor (all said rights being also hereby
waived and released), the Collateral or any part thereof offered for sale and
may make payment on account thereof by using any claim then due and payable to
it from such Pledgor as a credit against the purchase price, and it may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Pledgor therefor. For purposes hereof,
(a) a written agreement to purchase the Collateral or any portion thereof shall
be treated as a sale thereof, (b) the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and (c) such Pledgor shall not be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose upon the Collateral and to sell the Collateral or
any portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed
to conform to the commercially reasonable standards as provided in Section 9-
504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
<PAGE>
6
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied by the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent or the Administrative Agent in connection with such sale
or otherwise in connection with this Agreement, any other Loan Document or
any of the Obligations, including all court costs and the reasonable fees
and expenses of their respective agents and legal counsel, the repayment of
all advances made by the Collateral Agent or the Administrative Agent
hereunder or under any other Loan Document on behalf of any Pledgor and any
other costs or expenses incurred in connection with the exercise of any
right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds or cash (or any income derived from investments
made pursuant to the following sentence) in accordance with this Agreement.
Pending the application of the proceeds of any collection or sale of Collateral
or of any Collateral consisting of cash, the Collateral Agent may, in its
absolute discretion, invest such proceeds or cash, provided that any after-tax
income derived from any such investment shall be applied as provided in this
Section 7. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees to
pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or
observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees (as defined in Section 9.05 of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, other
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Indemnitee.
<PAGE>
7
(c) If for any reason the indemnification set forth in paragraph (b) above
is unavailable to any Indemnitee or insufficient to hold it harmless, then each
Pledgor shall contribute to the amount paid or payable to such Indemnitee as a
result of such loss, claim, damage, liability or expense in such proportion as
is appropriate to reflect not only the relative benefits received by such
Pledgor, on the one hand, and such Indemnitee, on the other hand, but also the
relative fault of such Pledgor, on the one hand, and such Indemnitee, on the
other hand, as well as any relevant equitable considerations. It is hereby
agreed that the relative benefits to all Pledgors, on the one hand, and all
Indemnities, on the other hand, shall be deemed to be in the same proportion as
(i) the total value received or proposed to be received by the Borrower and the
other Pledgors in connection with the Commitments (whether or not any Loans are
made) bears to (ii) the Fees. The indemnity, reimbursement and contribution
obligations of each Pledgor under paragraph (b) above and under this paragraph
(c) shall be in addition to any liability which such Pledgor may otherwise have
to an Indemnitee and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of such Pledgor and any
Indemnitee.
(d) Promptly after receipt by an Indemnitee of notice of the commencement
of any Proceedings, such Indemnitee will, if a claim in respect thereof is to be
made against any Pledgor, notify the Borrower in writing of the commencement
thereof, provided that (i) the omission so to notify the Borrower will not
relieve it or any other Pledgor from any liability which it or such Pledgor may
have hereunder except to the extent it has been materially prejudiced by such
failure and (ii) the omission so to notify the Borrower will not relieve it or
any other Pledgor from any liability which it or such Pledgor may have to an
Indemnitee otherwise than on account of the indemnity agreement provided for
hereunder. In case any such Proceedings are brought against any Indemnitee and
it notifies the Borrower of the commencement thereof, the Borrower will be
entitled to participate therein, and, to the extent that it may elect by written
notice delivered to such Indemnitee, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnitee, provided that, if the defendants in
any such Proceedings include both such Indemnitee and the Borrower or any other
Pledgor and such Indemnitee shall have concluded that there may be legal
defenses available to it which are different from or additional to those
available to the Borrower or such Pledgor, such Indemnitee shall have the right
to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such Proceedings on behalf of such Indemnitee.
Upon receipt of notice from the Borrower to such Indemnitee of its election so
to assume the defense of such Proceedings and approval by such Indemnitee of
counsel, neither the Borrower nor any other Pledgor shall be liable to such
Indemnitee for expenses incurred by such Indemnitee in connection with the
defense thereof (other than reasonable costs of investigation) unless (i) such
Indemnitee shall have employed separate counsel in connection with the assertion
of legal defenses in accordance with the proviso to the next preceding sentence
(it being understood, however, that neither the Borrower nor any other Pledgor
shall be liable for the reasonable expenses of more than one separate counsel
(plus no more than one separate local counsel in any jurisdiction), approved by
the Agents, representing the Indemnitees who are parties to such Proceedings),
(ii) the Borrower shall not have employed counsel reasonably satisfactory to
such Indemnitee to represent such Indemnitee within a reasonable time after
notice of commencement of the Proceedings, (iii) the Borrower shall have
authorized in writing the employment of counsel for such Indemnitee or (iv) the
use of counsel chosen by the Borrower to represent such Indemnitee would present
such counsel with a conflict of interest; and except that, if clause (i) or
(iii) is applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii).
(e) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document or any investigation made by or on behalf of the Collateral Agent or
any other Secured Party. All amounts
<PAGE>
8
due under this Section 8 shall be payable on written demand therefor and shall
bear interest at the rate specified in Section 2.07 of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem necessary
or advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in
the Collateral Agent's name or in the name of such Pledgor, to ask for, demand,
sue for, collect, receive and give acquittance for any and all moneys due or to
become due under and by virtue of any Collateral, to endorse checks, drafts,
orders and other instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in respect
of the Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and to make any agreement respecting, or otherwise deal with, the same;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Collateral Agent,
or to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Pledgor for any act or failure to act hereunder, except for their own gross
negligence or wilful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the other Secured Parties under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement or consent to any departure by any
Pledgor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Pledgor in any case shall entitle such Pledgor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor or Pledgors with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 9.08 of the Credit Agreement.
SECTION 11. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state
<PAGE>
9
securities laws or similar laws analogous in purpose or effect. Each Pledgor
recognizes that in light of such restrictions and limitations the Collateral
Agent may, with respect to any sale of the Pledged Securities, limit the
purchasers to those who will agree, among other things, to acquire such Pledged
Securities for their own account, for investment, and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges and agrees that in
light of such restrictions and limitations, the Collateral Agent, in its sole
and absolute discretion, (a) may proceed to make such a sale whether or not a
registration statement for the purpose of registering such Pledged Securities or
part thereof shall have been filed under the Federal Securities Laws and (b) may
approach and negotiate with a single potential purchaser to effect such sale.
Each Pledgor acknowledges and agrees that any such sale might result in prices
and other terms less favorable to the seller than if such sale were a public
sale without such restrictions. In the event of any such sale, the Collateral
Agent shall incur no responsibility or liability for selling all or any part of
the Pledged Securities at a price that the Collateral Agent, in its sole and
absolute discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid or
if more than a single purchaser were approached. The provisions of this Section
11 will apply notwithstanding the existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at which
the Collateral Agent sells.
SECTION 12. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time, upon
the written request of the Collateral Agent, use its best efforts to take or to
cause the issuer of such Pledged Securities to take such action and prepare,
distribute and/or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the public sale
of such Pledged Securities. Each Pledgor further agrees to indemnify, defend
and hold harmless the Collateral Agent, each other Secured Party, any
underwriter and their respective officers, directors, affiliates and controlling
persons from and against all loss, liability, expenses, costs of counsel
(including, without limitation, reasonable fees and expenses to the Collateral
Agent of legal counsel), and claims (including the costs of investigation) that
they may incur insofar as such loss, liability, expense or claim arises out of
or is based upon any alleged untrue statement of a material fact contained in
any prospectus (or any amendment or supplement thereto) or in any notification
or offering circular, or arises out of or is based upon any alleged omission to
state a material fact required to be stated therein or necessary to make the
statements in any thereof not misleading, except insofar as the same may have
been caused by any untrue statement or omission based upon information furnished
in writing to such Pledgor or the issuer of such Pledged Securities by the
Collateral Agent or any other Secured Party expressly for use therein. Each
Pledgor further agrees, upon such written request referred to above, to use its
best efforts to qualify, file or register, or cause the issuer of such Pledged
Securities to qualify, file or register, any of the Pledged Securities under the
Blue Sky or other securities laws of such states as may be requested by the
Collateral Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. Each Pledgor will bear all costs and
expenses of carrying out its obligations under this Section 12. Each Pledgor
acknowledges that there is no adequate remedy at law for failure by it to comply
with the provisions of this Section 12 and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section 12 may be specifically enforced.
SECTION 13. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or
<PAGE>
10
nonperfection of any other collateral, or any release or amendment or waiver of
or consent to or departure from any guaranty, for all or any of the Obligations
or (d) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, any Pledgor in respect of the Obligations or in
respect of this Agreement (other than the indefeasible payment in full of all
the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full and the Lenders have no further commitment to lend
under the Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any person that is not a Pledgor, or,
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b) of the
Credit Agreement, the security interest in such Collateral shall be
automatically released.
(c) In connection with any termination or release pursuant to paragraph
(a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at
such Pledgor's expense, all documents that such Pledgor shall reasonably request
to evidence such termination or release. Any execution and delivery of
documents pursuant to this Section 14 shall be without recourse to or warranty
by the Collateral Agent.
SECTION 15. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it at the address for notices set forth on Schedule I, with a copy to the
Borrower.
SECTION 16. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Collateral Agent its rights and remedies
hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective when a counterpart hereof
executed on behalf of any Pledgor shall have been delivered to the Collateral
Agent and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon such Pledgor and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of such Pledgor, the Collateral Agent and the other Secured Parties,
and their respective successors and assigns, except that no Pledgor shall have
the right to assign its rights hereunder or any interest herein or in the
Collateral (and any such attempted assignment shall be void), except as
expressly contemplated by this Agreement or the other Loan Documents.
SECTION 18. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made in writing by each Pledgor
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the Collateral Agent and the other
Secured Parties and shall survive the making by the Lenders of the Loans,
regardless of any investigation made by the Secured Parties or on their behalf,
and shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any other fee or amount payable under this
Agreement or any other Loan Document is outstanding and unpaid or as long as the
Commitments have not been terminated.
<PAGE>
11
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 17. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 21. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that, to the extent permitted by applicable law, all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Collateral Agent or
any other Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against any Pledgor or
its properties in the courts of any jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE,
<PAGE>
12
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 24. Additional Pledgors. Pursuant to Section 5.16 of the Credit
Agreement, each Domestic Subsidiary (other than Finco or Leasco) and, to the
extent that no adverse tax consequences to the Borrower or any Subsidiary would
result, Foreign Subsidiary, that was not in existence or not such a Subsidiary
on the date of the Credit Agreement is required to enter in this Agreement as a
Subsidiary Pledgor upon becoming such a Subsidiary. Upon execution and delivery
by the Collateral Agent and any such Subsidiary of an instrument in the form of
Annex 1, such Subsidiary shall become a Subsidiary Pledgor hereunder with the
same force and effect as if originally named as a Subsidiary Pledgor herein.
The execution and delivery of such instrument shall not require the consent of
any Pledgor hereunder. The rights and obligations of each Pledgor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Subsidiary Pledgor as a party to this Agreement.
<PAGE>
13
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
RYDER TRS, INC.,
by /s/ STEVEN R. DAVISON
--------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
THE SUBSIDIARY PLEDGORS LISTED ON
SCHEDULE I HERETO,
by /s/ THOMAS W. ARNST
--------------------------
Name: Thomas W. Arnst
Title: Vice President, General Counsel and
Secretary
CITICORP USA, INC., as Collateral Agent,
by /s/ SHAPLEIGH SMITH
--------------------------
Name: Shapleigh Smith
Title: Vice President
<PAGE>
Schedule I to the
Pledge Agreement
SUBSIDIARY PLEDGORS
Name Address for all Subsidiary Pledgors
- ---- -----------------------------------
Ryder Truck Rental-OneWay, Inc. 1560 Broadway
Ryder Relocation Services, Inc. Suite 1800
The Move Shop, Inc. Denver, CO 80202
Ryder Move Management, Inc. 8669 N.W. 36th Street
Miami, FL 33166
<PAGE>
Schedule II to the
Pledge Agreement
CAPITAL STOCK
<TABLE>
<CAPTION>
Number of Registered Number and Percentage
Issuer Certificate Owner Class of Shares of Shares
- ------ ----------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Ryder Move AA-1 Ryder TRS, Inc. 10,000 shares 100%
Management, Inc. of Common Stock
Ryder Truck 3 Ryder TRS, Inc. 100 shares 100%
Rental-One of Common Stock
Way, Inc.
RCTR, Inc. 1 Ryder TRS, Inc. 100 shares 100%
of Common Stock
FCTR, Inc. 1 Ryder TRS, Inc. 1,000 shares 100%
of Common Stock
Ryder Relocation 2 Ryder Move 1,000 shares 100%
Services, Inc. Management, Inc. of Common Stock
The Move 1 Ryder Move 1,000 shares 100%
Shop, Inc. Management, Inc. of Common Stock
</TABLE>
<PAGE>
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to the
PLEDGE AGREEMENT dated as of October 17, 1996, as amended and
restated as of August 7, 1997, among RYDER TRS, INC., a Delaware
corporation (the"Borrower"), each Subsidiary of the Borrower
listed on Schedule I thereto (each such Subsidiary, individually,
a "Subsidiary Pledgor" and, collectively, the "Subsidiary
Pledgors"; the Borrower and the Subsidiary Pledgors are referred
to collectively herein as the "Pledgors") and CITICORP USA, INC.,
a Delaware corporation ("Citicorp"), as collateral agent (the
"Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of October 17,
1996, as amended and restated as of August 7, 1997 (as further amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Borrower, the lenders from time to time party thereto (the "Lenders"),
The Chase Manhattan Bank, as documentation agent, and Citicorp, as
administrative agent for the Lenders, and as Collateral Agent, and (b) the
Guarantee Agreement dated as of October 17, 1996, as amended and restated as of
August 7, 1997, among the Subsidiary Pledgors and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to induce
the Lenders to make Loans. Pursuant to Section 5.16 of the Credit Agreement,
each Domestic Subsidiary (other than Finco or Leasco) and, to the extent that no
adverse tax consequences to the Borrower or any Subsidiary would result, Foreign
Subsidiary, that was not in existence or not such a Subsidiary on the date of
the Credit Agreement is required to enter in this Agreement as a Subsidiary
Pledgor upon becoming such a Subsidiary. Section 24 of the Pledge Agreement
provides that any such Subsidiary may become a Pledgor under the Pledge
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary (the "New Pledgor") is executing this
Supplement in accordance with such requirements of the Credit Agreement to
become a Subsidiary Pledgor under the Pledge Agreement in order to induce the
Lenders to make additional Loans and as consideration for Loans previously made.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 24 of the Pledge Agreement, the New
Pledgor by its signature below becomes a Subsidiary Pledgor under the Pledge
Agreement with the same force and effect as if originally named therein as a
Subsidiary Pledgor and the New Pledgor hereby agrees (a) to all the terms and
provisions of the Pledge Agreement applicable to it as a Subsidiary Pledgor
there under and (b) represents and warrants that the representations and
warranties made by it as a Subsidiary Pledgor thereunder are true and correct on
and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as
security for the payment and performance in full of the Obligations (as defined
in the Pledge Agreement), does hereby create and grant to the Collateral Agent,
its successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Pledgor's right, title and interest in and to the Collateral (as defined in the
Pledge Agreement) of the New Pledgor. Each reference to a "Subsidiary Pledgor"
or a "Pledgor" in the Pledge Agreement shall be deemed to include the New
Pledgor. The Pledge Agreement is hereby incorporated herein by reference.
<PAGE>
2
SECTION 2. The New Pledgor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and consti tutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set forth
on Schedule I attached hereto is a true and correct schedule of all its Pledged
Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 15 of the Pledge Agreement. All communications
and notices hereunder to the New Pledgor shall be given to it at the address set
forth under its signature hereto.
<PAGE>
3
SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[Name of New Pledgor],
by
-------------------------------------------------
Name:
Title:
Address:
-----------------------------------------
-----------------------------------------
CITICORP USA, INC., as Collateral Agent,
by
-------------------------------------------------
Name:
Title:
<PAGE>
Schedule I to
Supplement No.___
to the Pledge Agreement
CAPITAL STOCK
Number of Number and Percentage
Issuer Certificate Registered Owner Class of Shares of Shares
------ ----------- ----------------- --------------- ---------
DEBT SECURITIES
Issuer Principal Amount Date of Note Maturity Date
-------- ---------------- ------------ -------------
<PAGE>
EXHIBIT 10.29
EXECUTION COPY
SECURITY AGREEMENT dated as of October 17, 1996, as amended
and restated as of August 7, 1997, among RYDER TRS, INC., a
Delaware corporation (the "Borrower"), each subsidiary of the
Borrower listed on Schedule I hereto (each such subsidiary,
individually, a "Guarantor" and, collectively, the "Guarantors";
the Borrower and the Guarantors are referred to collectively
herein as the "Grantors") and CITICORP USA, INC., a Delaware
corporation ("Citicorp"), as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined herein).
Reference is made to the Credit Agreement dated as of October 17, 1996, as
amended and restated as of August 7, 1997 (as further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders from time to time party thereto (the "Lenders"), The Chase
Manhattan Bank, as documentation agent, and Citicorp, as administrative agent
(the "Administrative Agent") for the Lenders, and as Collateral Agent.
The Lenders have agreed to make Loans to the Borrower pursuant to, and upon
the terms and subject to the conditions specified in, the Credit Agreement.
Each of the Guarantors has agreed to guarantee, among other things, all the
obligations of the Borrower under the Credit Agreement. The obligations of the
Lenders to make Loans are conditioned upon, among other things, the execution
and delivery by the Grantors of an agreement in the form hereof to secure (a)
the due and punctual payment by the Borrower of (i) the principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise and (ii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Borrower to the Secured Parties under the Credit Agreement and the other
Loan Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents, (c) the due and punctual payment
and performance of all the covenants, agreements, obligations and liabilities of
each Loan Party under or pursuant to this Agreement and the other Loan Documents
and (d) the due and punctual payment and performance of all obligations of the
Borrower, monetary or otherwise, under each Interest Rate Protection Agreement
entered into with any counterparty that was a Lender (or an Affiliate of a
Lender) at the time such Interest Rate Protection Agreement was entered into
(all the monetary and other obligations described in the preceding clauses (a)
through (d) being collectively called the "Obligations").
Accordingly, the Grantors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
1
<PAGE>
2
"Accounts" shall mean any and all right, title and interest of any Grantor
to payment for goods, Equipment and services sold or leased (including by or in
connection with Qualifying Rentals), including any such right evidenced by
chattel paper, whether due or to become due, whether or not it has been earned
by performance, and whether now or hereafter acquired or arising in the future,
including accounts receivable from Affiliates of the Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods or Equipment, together with all rights, titles,
securities and guarantees with respect thereto, including any rights to stoppage
in transit, replevin, reclamation and resales, and all related security
interests, liens and pledges, whether voluntary or involuntary, in each case
whether now existing or owned or hereafter arising or acquired.
"Agreements" shall mean all Transaction Agreements, leases, whether entered
into as lessor or lessee, Interest Rate Protection Agreements and other
agreements, documents and instruments, including agreements with Dealers, of any
Grantor.
"Authorized Employees" shall have the meaning given such term in Section
6.04(b).
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts
(including the Concentration Account, the Collection Deposit Accounts and the
General Fund Account) and (g) Proceeds.
"Collection Deposit Account" shall mean a lockbox account of a Grantor
maintained for the benefit of the Secured Parties with the Collateral Agent or
with a Sub-Agent pursuant to a Lockbox and Depository Agreement.
"Concentration Account" shall mean the cash collateral account established
at the office of Citicorp located at 399 Park Avenue, New York, NY 10021, in the
name of the Collateral Agent, Account No. 4071-1405.
"Copyright License" shall mean any written agreement (including the
Copyright License Agreement (as defined in the Purchase Agreement)), now or
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned by any Grantor or which such Grantor otherwise has the
right to license, or granting any right to such Grantor under any Copyright now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning given such term in the
preliminary statement of this Agreement.
"Designated Location" shall mean any location reasonably approved by the
Collateral Agent for the maintaining and processing of Title Documentation in
accordance with this Agreement.
"Documents" shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral, including Title
Documentation.
"Equipment" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including Vehicles
(whether intended for sale, rental or lease, whether in custody or possession of
any third person pursuant to a Qualifying Rental, other rental or lease
arrangement, or otherwise), tools, parts and supplies of every kind and
description, and all improvements, accessions or appurtenances thereto, that are
now or hereafter owned by any Grantor.
<PAGE>
3
"Finco" shall mean FCTR, Inc., a special purpose Delaware corporation and a
wholly owned subsidiary of the Borrower.
"General Fund Account" shall mean the general fund account established at
the office of Citicorp located at 399 Park Avenue, New York, NY 10021, in the
name of the Borrower, Account No. 4071-1413.
"General Intangibles" shall mean all choses in action and causes of action
and all other assignable intangible personal property of any Grantor of every
kind and nature (other than Accounts Receivable) now owned or hereafter acquired
by any Grantor, including corporate or other business records, indemnification
claims, contract rights (including rights under Agreements), Intellectual
Property, goodwill, registrations, franchises, tax refund claims and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Accounts Receivable. Without limiting the foregoing, the term "General
Intangibles" shall include (a) all rights to receive and demand payments under
the Agreements, (b) all rights to receive and compel performance under the
Agreements and (c) all other rights, interests and claims now existing or
hereafter arising in connection with the Agreements.
"Intellectual Property" shall mean all intellectual and similar property of
any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packag ing materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"Leasco" shall mean RCTR, Inc., a special purpose Delaware corporation and
a wholly owned subsidiary of the Borrower.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those license agreements in
existence on the date hereof and listed on Schedule III and those license
agreements entered into after the date hereof, which by their terms prohibit
assignment or a grant of a security interest by such Grantor as licensee
thereunder).
"Lockbox and Depository Agreement" shall mean a Lockbox and Depository
Agreement substantially in the form of Annex 1 hereto among the Borrower, the
Collateral Agent and a Sub-Agent.
"Lockbox System" shall have the meaning assigned to such term in Section
5.01.
"Motor Vehicle Statute" shall mean the motor vehicle statutes or similar
laws, rules or regulations of any state or other jurisdiction.
"New Vehicles" shall mean all Vehicles other than Seller Vehicles.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
<PAGE>
4
"Patent License" shall mean any written agreement (including the Patent
License Agreement (as defined in the Purchase Agreement)), now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the form
of Annex 2 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer and the chief
legal officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include (a) all cash and negotiable instruments received
by or held on behalf of the Collateral Agent pursuant to the Lockbox System, (b)
any claim of any Grantor against any third party for (and the right to sue and
recover for and the rights to damages or profits due or accrued arising out of
or in connection with) (i) past, present or future infringement of any Patent
now or hereafter owned by any Grantor, or licensed under a Patent License, (ii)
past, present or future infringement or dilution of any Trademark now or
hereafter owned by any Grantor or licensed under a Trademark License or injury
to the goodwill associated with or symbolized by any Trademark now or hereafter
owned by any Grantor, (iii) past, present or future breach of any License and
(iv) past, present or future infringement of any Copyright now or hereafter
owned by any Grantor or licensed under a Copyright License and (c) any and all
other amounts from time to time paid or payable under or in connection with any
of the Collateral.
"Purchase Agreement" shall mean the Asset and Stock Purchase Agreement
dated as of September 19, 1996, by and between the Seller and the Borrower, as
the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof and the Credit Agreement.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) each counterparty to an Interest Rate Protection
Agreement entered into with the Borrower if such counterparty was a Lender (or
an Affiliate of a Lender) at the time the Interest Rate Protection Agreement was
entered into, (e) the beneficiaries of each indemnification obligation
undertaken by any Grantor under any Loan Document and (f) the successors and
assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such term in Section
2.01.
"Seller" shall mean Ryder Truck Rental, Inc., a Florida corporation.
"Seller Vehicles" shall mean all Vehicles acquired from the Seller pursuant
to the Purchase Agreement.
"Sub-Agent" shall mean a financial institution which shall have delivered
to the Collateral Agent an executed Lockbox and Depository Agreement.
<PAGE>
5
"Title Documentation" shall have the meaning given such term in Section
6.04(a).
"Trademark License" shall mean any written agreement (including the
Trademark License Agreement (as defined in the Purchase Agreement)), now or
hereafter in effect, granting to any third party any right to use any Trademark
now or hereafter owned by any Grantor or which any Grantor otherwise has the
right to license, or granting to any Grantor any right to use any Trademark now
or hereafter owned by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including those listed on Schedule V, (b) all goodwill associated therewith or
symbolized thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.
"Transaction Agreements" shall mean all of the following: the Purchase
Agreement, the Maintenance Agreement, the Administrative Services Agreement, the
MIS Support Agreement, the Ryder Dealer Agreement, the Used Truck Sales
Agreement, the Software License Agreement, the Shared Facility Licenses, the
Assumption Agreement and the Office Sublease Agreement (each such term as
defined in the Purchase Agreement) and any other agreement, instrument or other
document entered into or delivered by, between or among the Borrower, the Seller
and any of their respective Affiliates in connection with the Acquisition, as
each such agreement, instrument or document may be amended, modified or
supplemented from time to time in accordance with the terms thereof and the
Credit Agreement.
"Vehicle" shall mean any truck or other vehicle owned by the Borrower or
any Subsidiary (other than Leasco) and registered and based in the United States
of America, the body (including the "box" or storage component) and equipment
mounted thereon and all accessions, attachments and accessories of any type or
description attached to such truck or vehicle.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
foregoing, the Grantors agree to take, on behalf of the Collateral Agent, the
actions required by Section 6.03 with respect to Vehicles, and the Collateral
Agent is hereby authorized to file one or more financing statements,
continuation statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any similar
office in any other country) or other documents (without the signature of any
Grantor, and naming any Grantor or the Grantors as debtors and the Collateral
Agent as secured party), in each for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor. It is acknowledged that Vehicles and any other assets owned by Leasco
or Finco do not constitute part of the Collateral.
<PAGE>
6
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete. The filing of applications for certificates of title and
registration with respect to Vehicles pursuant to Section 6.03, together with
the fully executed Uniform Commercial Code financing statements (including
fixture filings, as applicable) or other appropriate filings, recordings or
registrations containing a description of the Collateral that have been
delivered to the Collateral Agent for filing in each governmental, municipal or
other office specified in Schedule 6 to the Perfection Certificate, are all the
filings, recordings and registrations (other than filings required to be made in
the United States Patent and Trademark Office and the United States Copyright
Office in order to perfect the Security Interest in Collateral consisting of
United States Patents, Trademarks and Copyrights) that are necessary to publish
notice of and protect the validity of and to establish a legal, valid and
perfected security interest in favor of the Collateral Agent (for the ratable
benefit of the Secured Parties) in respect of all Collateral in which the
Security Interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of renewals for certificates of registration and the filing of continuation
statements and as provided under subparagraphs (a) and (b) of Section 6.03.
(b) Each Grantor shall ensure that fully executed security agreements in
the form hereof and containing a description of all Collateral consisting of
Intellectual Property shall have been received and recorded, within two Business
Days after the execution of this Agreement, with respect to United States
Patents and United States registered Trademarks (and Trademarks for which United
States registration applications are pending) and United Sates registered
Copyrights by the United States Patent and Trademark Office and the United
States Copyright Office, respectively, pursuant to 35 U.S.C. (S) 261, 15 U.S.C.
(S) 1060 or 17 U.S.C. (S) 205 and the regulations thereunder, as applicable, and
otherwise as may be required pursuant to the laws of any other necessary
jurisdiction, to protect the validity of and to establish a legal, valid and
perfected security interest in favor of the Collateral Agent (for the ratable
benefit of the Secured Parties) in respect of all Collateral consisting of
Patents, Trademarks and Copyrights in which a security interest may be perfected
by filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, or in any other
necessary jurisdiction, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary (other than
such actions as are necessary to perfect the Security Interest with respect to
any Collateral consisting of Patents, Trademarks and Copyrights (or registration
or application for registration thereof) acquired or developed after the date
hereof).
<PAGE>
7
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering an application for the certificate of title or registration,
financing statement or analogous document in the United States (or any political
subdivision thereof) and its territories and possessions pursuant to the Motor
Vehicle Statute, Uniform Commercial Code or other applicable law in such
jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable. The Security Interest is
and shall be prior to any other Lien on any of the Collateral, other than
Permitted Liens. None of the Grantors are subject to the Motor Carrier Act of
1980 (or any successor statute thereto) or the rules and regulations promulgated
thereunder by the Interstate Commerce Commission.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Permitted Liens. The Grantor
has not filed or consented to the filing of (a) any application for a
certificate of title or registration, financing statement or analogous document
for or on behalf of any other person under the Motor Vehicle Statute, Uniform
Commercial Code or any other applicable laws covering any Collateral, (b) any
assignment in which any Grantor assigns any Collateral or any security agreement
or similar instrument covering any Collateral with the United States Patent and
Trademark Office or the United States Copyright Office or (c) any assignment in
which any Grantor assigns any Collateral or any security agreement or similar
instrument covering any Collateral with any foreign governmental, municipal or
other office, which application, financing statement or analogous document is
still in effect, except, in each case, for Permitted Liens.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the owner ship of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number; provided, however, that notice of the addition or
elimination of any Dealer locations or any other change in the location of
Dealers needs to be provided only at such time as the quarterly financial
statements are delivered pursuant to Section 5.04(b) of the Credit Agreement;
provided, further, that the foregoing shall not be deemed to restrict the
movement of Vehicles in the ordinary course of business. Each Grantor agrees
not to effect or permit any change referred to in the preceding sentence (other
than any change in the location of Dealers) unless all filings have been made
under the Uniform Commercial Code or otherwise that are required in order for
the Collateral Agent to continue at all times following such change to have a
valid, legal and perfected first priority security interest in all the
Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any
material portion of the Collateral owned or held by such Grantor is damaged or
destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail reasonably
satisfactory to the Collateral Agent showing the identity, amount and location
of any and all Collateral, other than Vehicles, as to which Section 6.06 is
applicable.
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SECTION 4.02. Periodic Certification. Each year, at the time of delivery
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.04 of the Credit Agreement, the Borrower shall deliver to
the Collateral Agent a certificate executed by a Financial Officer and the chief
legal officer of the Borrower (a) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant to Section 4.02 and (b)
certifying that all Motor Vehicle Statute filings, Uniform Commercial Code
financing statements or other appropriate filings, recordings or registrations,
including all renewals, refilings, rerecordings and reregistrations, have been
filed of record in each governmental, municipal or other appropriate office in
each jurisdiction identified pursuant to clause (a) above to the extent
necessary to protect and perfect the Security Interest for a period of not less
than 18 months after the date of such certificate (except as noted therein with
respect to any renewals of certificates of registration for Vehicles or
continuation statements to be filed within such period). Each certificate
delivered pursuant to this Section 4.02 shall identify in the format of Schedule
II, III, IV or V, as applicable, all Intellectual Property of any Grantor in
existence on the date thereof and not then listed on such Schedules or
previously so identified to the Collateral Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien
other than, to the extent permitted by the Credit Agreement, Permitted Liens.
SECTION 4.04. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agree ment, the granting of the Security
Interest and the filing of any financing statements or other documents in
connection herewith or therewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be immediately pledged and
delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the
Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 15 days after
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its best efforts to
take such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 45 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.
SECTION 4.05. Inspection and Verification. The Collateral Agent and such
persons as the Collateral Agent may reasonably designate shall have the right,
at the Grantors' own cost and expense, to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located (including Dealer
locations), to discuss the Grantors' affairs with the officers of the Grantors
and their independent accountants and to verify under reasonable procedures, in
accordance with Section 5.11 of the Credit Agreement, the validity, amount,
quality, quantity, value, condition and status of, or any other matter relating
to, the Collateral, including, in the case of Accounts or Collateral in the
possession of any third person (including Dealers), by contacting Account
Debtors or the third person possessing such Collateral for the purpose of making
such a verification, provided that (a) so long as no Default or Event of Default
shall have occurred and be continuing, there shall be no more than one such
inspection and verification by any of the Collateral Agent or such other persons
in any fiscal quarter of the Borrower,
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9
(b) the business of the Borrower and the Subsidiaries shall not be unreasonably
disrupted by any such inspection and verification and (c) the Collateral Agent
shall use reasonable efforts to coordinate any such inspection and verification
with evaluations and appraisals of the Borrowing Base conducted pursuant to
Section 5.11(a) of the Credit Agreement. The Collateral Agent shall have the
absolute right to share any information it gains from such inspection or
verification with any Secured Party (it being understood that any such
information shall be deemed to be "Information" subject to the provisions of
Section 9.16 of the Credit Agreement).
SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent
may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and not constituting Permitted Liens, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement, and each Grantor jointly and
severally agrees to reimburse the Collateral Agent on demand for any payment
made or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.06 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time any Grantor
shall take a secu rity interest in any property of an Account Debtor or any
other person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except
for Permitted Liens. None of the Grantors shall make or permit to be made any
transfer of the Collateral and each Grantor shall remain at all times in posses
sion of the Collateral owned by it, except that (a) Inventory may be sold in the
ordinary course of business, (b) Vehicles may be leased by Dealers pursuant to
Qualifying Rentals and other Equipment may be sold or leased by Dealers in bona
fide transactions, in each case in the ordinary course of business, (c) Vehicles
and other Equipment may be held in the possession of other persons when being
repaired by such persons in the ordinary course of such Grantor's business and
(d) unless and until the Collateral Agent shall notify the Grantors that an
Event of Default shall have occurred and be continuing and that during the
continuance thereof the Grantors shall not sell, convey, lease, assign, transfer
or otherwise dispose of any Collateral (which notice may be given by telephone
if promptly confirmed in writing), the Grantors may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document. Without limiting
the generality of the foregoing, each Grantor agrees that it shall not permit
any Inventory or Equipment to be in the possession or control of any
warehouseman, bailee, agent, processor or Dealer at any time unless such
warehouseman, bailee, agent, processor or Dealer shall have been notified of the
Security Interest and shall have agreed in writing to hold the Inventory or
Equipment subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory or Equipment, whether arising by operation of law or otherwise,
provided that (a) in the case of Dealers in existence on the date hereof, the
Grantors may provide such notice to, and obtain such agreement from, such
Dealers not later than 90 days after the date hereof and (b) persons repairing
dollies in the ordinary course of business need not be so notified or make such
agreement.
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10
SECTION 4.10. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts Receivable, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
SECTION 4.11. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accor dance with Section 5.02 of the Credit
Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in connection with
this Section 4.11, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be payable, upon demand, by the
Grantors to the Collateral Agent and shall be additional Obligations secured
hereby.
SECTION 4.12. Legend. Each Grantor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, its Accounts Receivable and its
books, records and documents evidencing or pertaining thereto with an
appropriate reference to the fact that such Accounts Receivable have been
assigned to the Collateral Agent for the benefit of the Secured Parties and that
the Collateral Agent has a security interest therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of
its licensees to, do any act, or omit to do any act, whereby any Patent which is
material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to mark any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it knows
or has reason to know that any Patent, Trademark or Copyright material to the
conduct of its business may become abandoned, lost or dedicated to the public,
or of any adverse determination or development (including the institution of, or
any such determination or development in, any proceeding in the United States
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11
Patent and Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding such Grantor's ownership of any Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain
the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may request to evidence the Collateral Agent's security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each issued Patent and each registration of the
Trademarks and Copyrights that is material to the conduct of any Grantor's
business, including timely filings of applications for renewal, affidavits of
use, affidavits of incontestability and payment of maintenance fees, and, if
consistent with good business judgment, to initiate opposition, interference and
cancelation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
ARTICLE V
Collections
SECTION 5.01. Lockbox System. (a) The Grantors shall maintain in the
name of the Collateral Agent, and subject to the control of the Collateral Agent
pursuant to the Lockbox and Depository Agreements, for the ratable benefit of
the Collateral Agent and the other Secured Parties, a system of lockboxes and
related deposit accounts (the "Lockbox System") with one or more financial
institutions that are reasonably satisfactory to the Collateral Agent into which
the Proceeds of all Accounts Receivable, Inventory and Equipment shall be
deposited and forwarded to the Collateral Agent in accordance with the Lockbox
and Depository Agreements.
(b) All Proceeds of Accounts Receivable, Inventory and Equipment that have
been received on any Business Day through the Lockbox System will be transferred
into the Concentration Account on such Business Day to the extent required by
the applicable Lockbox and Depository Agreement. All Proceeds stemming from the
sale of a substantial portion of the Collateral that have been received by a
Grantor on any Business Day will be transferred into the Concentration Account
on such
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12
Business Day. All dividends, distributions or other payments received by the
Borrower from Leasco will be transferred into the Concentration Account on the
Business Day on which such dividends, distributions or payments are so received
by the Borrower. All Proceeds received on any Business Day by the Collateral
Agent pursuant to Section 5.02 will be transferred into the Concentration
Account on such Business Day.
(c) The Concentration Account is, and shall remain, under the sole
dominion and control of the Collateral Agent. Each Grantor acknowledges and
agrees that (i) such Grantor has no right of withdrawal from the Concentration
Account, (ii) the funds on deposit in the Concentration Account shall continue
to be collateral security for all of the Obligations and (iii) upon the
occurrence and during the continuance of an Event of Default, at the Collateral
Agent's election, the funds on deposit in the Concentration Account shall be
applied as provided in Section 7.02. So long as no Event of Default has
occurred and is continuing, the Collateral Agent shall promptly remit any funds
on deposit in the Concentration Account to the General Fund Account and the
Borrower shall have the right, at any time and from time to time, to withdraw
such amounts from the General Fund Account as it shall deem to be necessary or
desirable.
(d) Effective upon notice to the Grantors from the Collateral Agent after
the occurrence and during the continuance of an Event of Default (which notice
may be given by telephone if promptly confirmed in writing), the Concentration
Account will, without any further action on the part of any Grantor, the
Collateral Agent or any Sub-Agent, convert into a closed lockbox account under
the exclusive dominion and control of the Collateral Agent in which funds are
held subject to the rights of the Collateral Agent hereunder. Each Grantor
irrevocably authorizes the Collateral Agent to notify each Sub-Agent (i) of the
occurrence of an Event of Default and (ii) of the matters referred to in this
paragraph (d). Following the occurrence of an Event of Default, the Collateral
Agent may instruct each Sub-Agent to transfer immediately all funds held in each
deposit account to the Concentration Account.
SECTION 5.02. Collections. (a) Each Grantor agrees (i) to notify and
direct promptly each Account Debtor and every other person obligated to make
payments on Accounts Receivable or in respect of any Inventory or Equipment to
make all such payments directly to the Lockbox System established in accordance
with Section 5.01, (ii) to use all reasonable efforts to cause each Account
Debtor and every other person identified in clause (i) above to make all
payments with respect to Accounts Receivable, Inventory and Equipment directly
to such Lockbox System and (iii) promptly to deposit all payments received by it
on account of Accounts Receivable, Inventory and Equipment, whether in the form
of cash, checks, notes, drafts, bills of exchange, money orders or otherwise, in
the Lockbox System in precisely the form in which received (but with any
endorsements of such Grantor necessary for deposit or collection), and until
they are so deposited such payments shall be held in trust by such Grantor for
and as the property of the Collateral Agent.
(b) Without the prior written consent of the Collateral Agent, no Grantor
shall, in a manner adverse to the Lenders, change the general instructions given
to Account Debtors in respect of payment on Accounts to be deposited in the
Lockbox System. Until the Collateral Agent shall have advised the Grantors to
the contrary, each Grantor shall, and the Collateral Agent hereby authorizes
each Grantor to, enforce and collect all amounts owing on the Accounts
Receivable, Inventory and Equipment, for the benefit and on behalf of the
Collateral Agent and the other Secured Parties; provided, however, that such
privilege may at the option of the Collateral Agent be terminated upon the
occurrence and during the continuance of an Event of Default.
SECTION 5.03. Power of Attorney. Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for each Grantor and in each Grantor's
name or otherwise, for the use and benefit of the Collateral Agent and the
Secured Parties, upon the occurrence and during the continuance of an Event of
Default (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (b) to demand, collect, receive payment
of, give receipt for and give
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13
discharges and releases of all or any of the Collateral; (c) to sign the name of
any Grantor on any invoice or bill of lading relating to any of the Collateral;
(d) to send verifications of Accounts Receivable to any Account Debtor; (e) to
commence and prosecute any and all suits, actions or pro ceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
all or any of the Collateral or to enforce any rights in respect of any
Collateral; (f) to settle, com promise, compound, adjust or defend any actions,
suits or proceedings relating to all or any of the Collateral; (g) to notify, or
to require any Grantor to notify, Account Debtors to make payment directly to
the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Collateral Agent were the
absolute owner of the Collateral for all purposes; provided, however, that
nothing contained in this Section 5.03 shall be construed as requiring or
obligating the Collateral Agent or any Secured Party to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received by
the Collateral Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent or
any Secured Party with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of any Grantor or to any
claim or action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as the agent
and attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section shall in no
event relieve any Grantor of any of its obligations hereunder or under any other
Loan Document with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any other
or further right which it may have on the date of this Agreement or hereafter,
whether hereunder, under any other Loan Document, by law or otherwise.
ARTICLE VI
Vehicles
SECTION 6.01. General. The following provisions of this Article VI and
the provisions of Article IV relating to Vehicles (including Section 4.11) shall
apply to all Vehicles legally or beneficially owned by the Borrower or any
Grantor.
SECTION 6.02. Titling. (a) With respect to each Seller Vehicle then
owned by a Grantor, such Grantor shall, in the ordinary course of business (but
in no event later than October 17, 1997), file an application for a certificate
of title and a certificate of registration for such Seller Vehicle from each
state or other jurisdiction in which such Seller Vehicle is required to be
titled or registered, except to the extent such Seller Vehicle shall no longer
be owned by such Grantor.
(b) With respect to each New Vehicle, the applicable Grantor shall, as
soon as reasonably practicable, file an application for, and obtain, a
certificate of title and a certificate of registration for such New Vehicle from
each state or other jurisdiction in which such New Vehicle is required to be
titled or registered, provided that in no event shall such filing be made later
than 14 days following the later of (i) the time of delivery to such Grantor of
such New Vehicle and (ii) the payment by such Grantor of the purchase price for
such New Vehicle.
(c) The Grantors shall obtain all new certificates of title and
registration for the Vehicles as required by applicable law. Certificates of
title and registration for the Vehicles shall be obtained from the department or
registry of motor vehicles or other relevant body in each state or other
jurisdiction in which the Vehicles are required to be titled or registered.
Each Grantor shall take such action as shall be necessary from time to time to
avoid suspension, revocation or invalidation of any certificates of title, and
to renew and maintain all certificates of registration, for the Vehicles. No
Grantor shall operate any Vehicle, or permit any Vehicle to be operated, in such
a manner as could
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14
cause any certificate of title or registration for such Vehicle to be suspended,
revoked or invalidated or otherwise adversely affected.
SECTION 6.03. First Lien of Collateral Agent. The certificate of title
for each Vehicle shall designate the applicable Grantor as the registered owner
and "Citicorp USA, Inc. or its successors and assigns, as collateral agent" as
the first lienholder. To the extent:
(a) such Vehicle is subject to a certificate of title issued by a
state or other jurisdiction in which the perfection of a security interest
in such Vehicle requires possession of such certificate of title by the
secured party, the applicable Grantor shall deliver to the Collateral Agent
such certificate of title promptly upon such Grantor's receipt thereof; and
(b) such Vehicle is registered in a state or other jurisdiction in
which the perfection of a security interest in such Vehicle held as
Inventory requires the filing of a Uniform Commercial Code financing
statement or other filing, recording or registration covering such
Inventory, the Collateral Agent is hereby authorized to make such filings
as are described in the second sentence of Section 2.01 with respect to
such Vehicle.
SECTION 6.04. Title Documentation. (a) Each Grantor shall maintain and
process in a safe, fireproof and secure manner at the Designated Location all
original title and registration documentation, and copies of all applications
for title, with respect to the Vehicles (collectively, the "Title
Documentation"). In no event shall any Grantor release or surrender any Title
Documentation other than in accordance with this Agreement or shall any Title
Documentation be maintained or processed at any location other than the
Designated Location. The Designated Location shall not be used for any other
purpose other than for maintaining and processing Title Documentation, and no
employee or agent of any Grantor or any other person shall have any access
thereto other than the Authorized Employees. The Designated Location shall be a
separate fireproof room that shall be locked whenever not in use by Authorized
Employees. The Titling Documentation shall be maintained in fireproof file
cabinets that shall be locked whenever not in use by Authorized Employees. The
keys to the Designated Location and such file cabinets shall be held only by the
Authorized Employees, provided that a copy of such keys shall be held by the
Collateral Agent. Such file cabinets shall be raised off of the floor so as not
to incur water damage if the sprinkler system shall be activated.
Notwithstanding the foregoing, until 180 days after the Restatement Closing Date
the Title Documentation for such Vehicle may be maintained and processed by
Authorized Employees (who may be employees of the Seller) in the same manner and
at the same location used immediately prior to the date hereof by the Seller for
such purposes, provided that (i) such Titling Documentation shall be maintained
in fireproof file cabinets that shall be locked when not in use by Authorized
Employees and (ii) the Collateral Agent shall be given a copy of the keys to
such file cabinets.
(b) Each of the employees of the Grantors (or, in the case of the last
sentence of the foregoing paragraph (a), of the Seller) who will at any time be
authorized to maintain and process, and to have any access to, the Title
Documentation (the "Authorized Employees"), including for purposes of taking any
of the actions described in clauses (i) and (ii) of Section 6.05(a), shall be in
good standing with the Grantors (or the Seller), and no Responsible Officer of
any Grantor (or the Seller) shall have any reason to question the veracity,
integrity or abilities of any such Authorized Employee. Each Authorized
Employee shall be qualified to perform the responsibilities delegated to such
Authorized Employee. Schedule VI sets forth a correct list of all the
Authorized Employees as of the date hereof. The Borrower shall promptly provide
the Collateral Agent with revised copies of such Schedule so that at all times
such Schedule correctly identifies the then-Authorized Employees. Not later
than 45 days after the Restatement Closing Date, each Authorized Employee shall
be bonded for the benefit of the Collateral Agent on behalf of the Secured
Parties in an amount equal to not less than $1,000,000 per Authorized Employee
pursuant to a bond issued by a reputable bonding company, such bond and bonding
company being reasonably satisfactory to the Collateral Agent.
(c) The Collateral Agent and such persons as the Collateral Agent may
reasonably designate shall have the right to inspect the Designated Location and
the Title Documentation (and to make extracts and copies of the Title
Documentation) and to discuss the Title Documentation and the
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15
maintaining and processing of it with the Authorized Employees and the officers
of the Grantors, all at the Grantors' own cost and expense, provided that (i) so
long as no Default or Event of Default shall have occurred and be continuing,
there shall be no more than one such inspection by any of the Collateral Agent
or such other persons in any fiscal quarter of the Borrower, (ii) the business
of the Borrower and the Subsidiaries shall not be unreasonably disrupted by any
such inspection and (iii) the Collateral Agent shall use reasonable efforts to
coordinate any such inspection with evaluations and appraisals of the Borrowing
Base conducted pursuant to Section 5.11(a) of the Credit Agreement. The
Collateral Agent shall have the absolute right to share any information it gains
from such inspection with any Secured Party (it being understood that any such
information shall be deemed to be "Information" subject to the provisions of
Section 9.16 of the Credit Agreement).
SECTION 6.05. Power of Attorney. (a) The Collateral Agent hereby makes,
constitutes and appoints each Grantor (and each Authorized Employee) as the
Collateral Agent's true and lawful agent (and attorney-in-fact) for the purpose
of taking such actions as are necessary (i) to note the Collateral Agent as the
holder of a first lien on the certificates of title for the Vehicles (and,
pursuant to Section 6.03, to execute and file any related Uniform Commercial
Code financing statements or other documentation) and to cause the certificates
of registration for the Vehicles to be issued in the name of the Collateral
Agent (if required pursuant to subparagraph (c) of Section 6.03) and (ii) to
release the Collateral Agent's lien on any such certificate of title (and to
file termination statements or similar documents with respect to any such
related Uniform Commercial Code or other filings) in connection with a Vehicle
Sale permitted under the Credit Agreement and to permit any such related
certificate of registration to be reissued in the name of the acquiror under
such Vehicle Sale.
(b) Upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent may at any time terminate the foregoing power of attorney
(including the related power granted under paragraph (c) below) by giving notice
to such effect to the Borrower).
(c) To further evidence the power of attorney referred to in paragraph (a)
above, the Collateral Agent agrees that, upon the request of any Grantor, it
will execute a separate power of attorney substantially in the form of Annex 4.
(d) So long as the power of attorney set forth in paragraph (a) above
shall not have been terminated, the Collateral Agent will deliver to the
applicable Grantor any certificate of title or registration it possesses
pursuant to Section 6.03 with respect to Vehicles subject to Vehicle Sales
permitted under the Credit Agreement.
SECTION 6.06. Reports. (a) Not later than 45 days after the end of each
fiscal quarter of the Borrower (or, if a Default or Event of Default shall have
occurred and be continuing, not later than 20 days after the end of each month),
the Borrower will provide the Collateral Agent with a complete list of all
Vehicles as of the last day of such quarter (or month), indicating which
Vehicles have been added or deleted since the list most recently delivered to
the Collateral Agent and, for each Vehicle, any state or other jurisdiction from
which a certificate of title or registration for such Vehicle has been issued
and is in effect and whether any such state or other jurisdiction requires any
of the actions described in subparagraph (a) or (b) of Section 6.03 to be taken.
(b) Not more than once every six months (as measured from the most recent
request, other than requests made pursuant to the following proviso), upon the
request of the Required Lenders or the Collateral Agent, the Borrower will cause
a title check of a representative or random sample of certificates of title and
registration (such sample to be compiled taking into account the multiple states
and other jurisdictions from which certificates of title and registration for
Vehicles have been issued) by a third person reasonably acceptable to the
Collateral Agent (or, at the Collateral Agent's election, by the Collateral
Agent) on a reasonable number (but in no event less than 2%) of the Vehicles,
including verification that the certificates of title note the Collateral Agent
as the first lienholder thereon and that the requirements set forth in
subparagraphs (a), (b) and (c) of Section 6.03 have been satisfied, and shall
prepare a report of exceptions with the results of such title check and cause
such report to be furnished to the Required Lenders or the Collateral Agent, as
applicable; provided, however, that if any such title check reveals that 5% of
such sample does not comply with all the
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16
requirements set forth in Section 6.03, then, upon the request of the Required
Lenders or the Collateral Agent, the Borrower will cause additional title checks
to be performed on a reasonable number of other Vehicles and the Grantors shall
take such actions as the Required Lenders or the Collateral Agent may reasonably
request to improve the Grantors' procedures for maintaining and processing Title
Documentation.
SECTION 6.07. Collateral Agent. (a) Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent (and attorney-in-fact) for the purpose, upon the occurrence and during the
continuance of an Event of Default, of taking all actions with respect to the
Vehicles as are specified in Sections 6.02 and 6.03 and for making all
determinations and decisions with respect thereto. In the event that any
Grantor at any time or times shall fail to take any such action or any other
action required by this Article VI, the Collateral Agent may, without waiving or
releasing any obligation or liability of the Grantors hereafter or any Event of
Default, in its sole discretion, take such actions and any other actions with
respect thereto as the Collateral Agent deems advisable.
(b) Upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent shall have such remedies with respect to the Title
Documentation as are set forth in Section 7.01. No exercise by the Collateral
Agent of any such remedies shall release the Grantors of any of their
obligations under this Article VI, including Sections 6.02 and 6.03.
SECTION 6.07. Expenses. All actions required to be taken by the Borrower
or any other Grantor under this Article VI shall be taken at the Borrower's or
such Grantor's own cost and expense (other than as set forth in the proviso to
Section 6.04(c)).
SECTION 6.08. No Limitation. Nothing in this Article VI shall limit any
other obligation or liability of the Borrower or any other Grantor set forth
elsewhere in this Agreement or any other Loan Document.
ARTICLE VII
Remedies
SECTION 7.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral (including Title Documentation) to the Collateral Agent on demand,
and it is agreed that the Collateral Agent shall have the right (but not the
obligation) to take any of or all the following actions at the same or different
times: (a) with respect to any Collateral consisting of Intellectual Property,
on demand, to cause the Security Interest to become an assignment, transfer and
conveyance of any of or all such Collateral by the applicable Grantors to the
Collateral Agent, or to license or sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any such
Collateral throughout the world on such terms and conditions and in such manner
as the Collateral Agent shall determine (other than in violation of any then-
existing licensing arrangements to the extent that waivers cannot be obtained),
(b) with or without legal process and with or without prior notice or demand for
performance, in its own name or the name of the applicable Grantor, (i) to
demand, sue upon or otherwise enforce the Agreements with full power as though
the Collateral Agent were the party named in the Agreements, and amend, revise,
release or otherwise change the same as may seem proper to the Collateral Agent
in its sole discretion and exercise all other rights of the applicable Grantor
under the Agreements in such manner as the Collateral Agent may determine in its
sole discretion and (ii) to perform for the applicable Grantor under the
Agreements, and (c) with or without legal process and with or without prior
notice or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the Collateral
(including any Dealer location and including entering the Designated Location
and taking possession of or removing any amount of or all the Title
Documentation) and, generally, to exercise any and all rights afforded to a
secured party
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17
under the Uniform Commercial Code or other applicable law. Without limiting the
generality of the foregoing, each Grantor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of applicable law, to sell
or otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consum mation of any such sale the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which such Grantor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice (which
each Grantor agrees is reasonable notice within the meaning of Section 9-504(3)
of the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions) of the Collateral Agent's intention to make
any sale of Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker's board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public sale shall
be held at such time or times within ordinary business hours and at such place
or places as the Collateral Agent may fix and state in the notice (if any) of
such sale. At any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court-
appointed receiver.
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SECTION 7.02. Application of Proceeds. Following an Event of Default, the
Collateral Agent shall apply the proceeds of any collection or sale of the
Collateral, as well as any Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent or the Administrative Agent (in their respective
capacities as such hereunder or under any other Loan Document) in
connection with such collection or sale or otherwise in connection with
this Agreement or any of the Obligations, including all court costs and the
fees and expenses of their respective agents and legal counsel, the
repayment of all advances made by the Collateral Agent or the
Administrative Agent hereunder or under any other Loan Document on behalf
of any Grantor and any other costs or expenses incurred in connection with
the exercise of any right or remedy hereunder or under any other Loan
Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds or cash (or any income derived from investments
made pursuant to the following sentence) in accordance with this Agreement.
Pending the application of the proceeds of any collection or sale of Collateral
or of any Collateral consisting of cash, the Collateral Agent may, in its
absolute discretion, invest such proceeds or cash, provided that any after-tax
income derived from any such investment shall be applied as provided in this
Section 7.02. Upon any sale of the Collateral by the Collateral Agent
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the Collateral Agent or of the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 7.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Collateral
Agent shall be exercised, at the option of the Collateral Agent, upon the
occurrence and during the continuation of an Event of Default; provided that any
license, sub-license or other transaction entered into by the Collateral Agent
in accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default.
SECTION 7.04. Irrevocable Authorization. Each Grantor hereby irrevocably
authorizes and directs each person who shall be a party to or liable for the
performance of any of the Agreements, upon receipt of written notice from the
Collateral Agent to the effect that an Event of Default has occurred and is
continuing, to attorn to the Collateral Agent as owner under such Agreement and
to pay, observe and otherwise perform the obligations under such Agreement to or
for the Collateral Agent or the Collateral Agent's designee as though the
Collateral Agent or such designee were the Grantor named in such Agreement, and
to continue to do so until otherwise notified by the Collateral Agent. The
Collateral Agent shall simultaneously provide the Borrower with a copy of any
such notification given by the Collateral Agent pursuant to this Section 7.04,
provided that the failure to do so shall not affect the Collateral Agent's
rights under this Agreement.
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ARTICLE VIII
Miscellaneous
SECTION 8.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I.
SECTION 8.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 8.03. Survival of Agreement. All covenants, agreements,
representations and warranties made in writing by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 8.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement. This
Agreement shall be construed as a separate agreement with respect to each
Grantor and may be amended, modified, supplemented, waived or released with
respect to any Grantor without the approval of any other Grantor and without
affecting the obligations of any other Grantor hereunder.
SECTION 8.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 8.06. Collateral Agent's Fees and Expenses; Indemnification. (a)
To the extent provided in Section 5.07 or 5.11 of the Credit Agreement, each
Grantor jointly and severally agrees to pay upon demand to the Collateral Agent
the amount of any and all reasonable expenses, including the reasonable fees,
disbursements and other charges of its counsel and of any experts or agents,
which the Collateral Agent may incur in connection with (i) the administration
of this Agreement (including the customary fees and charges of the Collateral
Agent for any audits conducted by it or on its behalf with respect to the
Borrowing Base and the assets included therein, subject to Section 5.11 of the
Credit Agreement), (ii) the custody or preservation of, or the sale of,
collection
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20
from or other realization upon any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Collateral Agent hereunder
or (iv) the failure of any Grantor to perform or observe any of the provisions
hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto, provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted solely from the gross negligence or willful misconduct
of such Indemnitee.
(c) If for any reason the indemnification set forth in paragraph (b) above
is unavailable to any Indemnitee or insufficient to hold it harmless, then each
Grantor shall contribute to the amount paid or payable to such Indemnitee as a
result of such loss, claim, damage, liability or expense in such proportion as
is appropriate to reflect not only the relative benefits received by such
Grantor, on the one hand, and such Indemnitee, on the other hand, but also the
relative fault of such Grantor, on the one hand, and such Indemnitee, on the
other hand, as well as any relevant equitable considerations. It is hereby
agreed that the relative benefits to all Grantors, on the one hand, and all
Indemnities, on the other hand, shall be deemed to be in the same proportion as
(i) the total value received or proposed to be received by the Borrower and the
other Grantors in connection with the Commitments (whether or not any Loans are
made) bears to (ii) the Fees. The indemnity, reimbursement and contribution
obligations of each Grantor under paragraph (b) above and under this paragraph
(c) shall be in addition to any liability which such Grantor may otherwise have
to an Indemnitee and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of such Grantor and any
Indemnitee.
(d) Promptly after receipt by an Indemnitee of notice of the commencement
of any Proceedings, such Indemnitee will, if a claim in respect thereof is to be
made against any Grantor, notify the Borrower in writing of the commencement
thereof; provided that (i) the omission so to notify the Borrower will not
relieve it or any other Grantor from any liability which it or such Grantor may
have hereunder except to the extent it has been materially prejudiced by such
failure and (ii) the omission so to notify the Borrower will not relieve it or
any other Grantor from any liability which it or such Grantor may have to an
Indemnitee otherwise than on account of the indemnity agreement provided for
hereunder. In case any such Proceedings are brought against any Indemnitee and
it notifies the Borrower of the commencement thereof, the Borrower will be
entitled to participate therein, and, to the extent that it may elect by written
notice delivered to such Indemnitee, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnitee, provided that, if the defendants in
any such Proceedings include both such Indemnitee and the Borrower or any other
Grantor and such Indemnitee shall have concluded that there may be legal
defenses available to it which are different from or additional to those
available to the Borrower or such Grantor, such Indemnitee shall have the right
to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such Proceedings on behalf of such Indemnitee.
Upon receipt of notice from the Borrower to such Indemnitee of its election so
to assume the defense of such Proceedings and approval by such Indemnitee of
counsel, neither the Borrower nor any other Grantor shall be liable to such
Indemnitee for expenses incurred by such Indemnitee in connection with the
defense thereof (other than reasonable costs of investigation) unless (i) such
Indemnitee shall have employed separate counsel in connection with the assertion
of legal defenses in accordance with the proviso to the next preceding sentence
(it being understood, however, that neither the Borrower nor any other Grantor
shall be liable for the reasonable expenses of more than one separate counsel
(plus no more than one separate local counsel in any jurisdiction), approved by
the Agents, representing the Indemnitees who are parties to such Proceedings),
(ii) the Borrower shall not have employed counsel reasonably satisfactory to
such Indemnitee to represent such Indemnitee within a reasonable
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21
time after notice of commencement of the Proceedings, (iii) the Borrower shall
have authorized in writing the employment of counsel for such Indemnitee or (iv)
the use of counsel chosen by the Borrower to represent such Indemnitee would
present such counsel with a conflict of interest; and except that, if clause (i)
or (iii) is applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii).
(e) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Collateral Agent or any Lender. All amounts due under this Section 8.06
shall be payable on written demand therefor.
SECTION 8.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Administrative Agent and the Lenders under the
other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provisions of this
Agreement or any other Loan Document or consent to any departure by any Grantor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on any Grantor in any case shall entitle such Grantor or any other
Grantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, with the prior written
consent of the Required Lenders (except as otherwise provided in the Credit
Agreement).
SECTION 8.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.09.
SECTION 8.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
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SECTION 8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 8.04), and
shall become effective as provided in Section 8.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 8.12. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 8.13. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent, the Administrative Agent, the Issuing Banks or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Grantor or its properties in the courts of
any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.01. Nothing in this
Agreement will affected the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 8.14. Termination. This Agreement and the Security Interest shall
terminate when all the Obligations have been indefeasibly paid in full and the
Lenders have no further commitment to lend, at which time the Collateral Agent
shall execute and deliver to the Grantors, at the Grantors' expense, all Uniform
Commercial Code termination statements and similar documents which the Grantors
shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section 8.14
shall be without recourse to or warranty by the Collateral Agent. A Guarantor
shall automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Guarantor shall be automatically released in
the event that all the capital stock of such Guarantor shall be sold,
transferred or otherwise disposed of to a person that is not an Affiliate of the
Borrower in accordance with the terms of the Credit Agreement; provided that, to
the extent required by the Credit Agreement, the Required Lenders (or, if such
Collateral constitutes all or any substantial part of the Collateral, each of
the Lenders) shall have consented to such sale, transfer or other disposition
and the terms of such consent did not provide otherwise.
SECTION 8.15. Additional Grantors. Pursuant to Section 5.16 of the Credit
Agreement, each Domestic Subsidiary (other than Finco or Leasco) (and, to the
extent no adverse tax consequences to the Borrower or any Subsidiary would
result, each Foreign Subsidiary), that was not in existence or not such a
Subsidiary on the date of the Credit Agreement is required to enter into this
Agreement as a Guarantor upon becoming such a Subsidiary. Upon execution and
delivery by the Collateral Agent and any such Subsidiary of an instrument in the
form of Annex 3 hereto, such Subsidiary shall become a Grantor hereunder with
the same force and effect as if originally named
<PAGE>
23
as a Grantor herein. The execution and delivery of any such instrument shall not
require the consent of any Grantor hereunder. The rights and obligations of each
Grantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Grantor as a party to this Agreement.
<PAGE>
24
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
RYDER TRS, INC.,
by /s/ STEVEN R. DAVISON
------------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
EACH OF THE GUARANTORS LISTED ON
SCHEDULE I HERETO,
by /s/ THOMAS W. ARNST
------------------------------
Name: Thomas W. Arnst
Title: Vice President, General Counsel and
Secretary
CITICORP USA, INC., as Collateral Agent,
by /s/ SHAPLEIGH SMITH
------------------------------
Name: Shapleigh Smith
Title: Vice President
<PAGE>
Schedule I to the
Security Agreement
GUARANTORS
Name Address for all Guarantors
- ---- --------------------------
Ryder Truck Rental-OneWay, Inc. 1560 Broadway
Ryder Relocation Services, Inc. Suite 1800
The Move Shop, Inc. Denver, CO 80202
Ryder Move Management, Inc. 8669 N.W. 36th Street
Miami, FL 33166
<PAGE>
Schedule II to the
Security Agreement
COPYRIGHTS
Title Registration/ Registration/
No. Country Application Date Application No.
- ---- ------- ---------------- ---------------
[None]
<PAGE>
Schedule III to the
Security Agreement
LICENSES
Registration/ Registration/
Licensee Date of Application Application
Name License Title Country Date No.
- ---------- ------- ----- ------- ------------- -------------
<PAGE>
Schedule IV to the
Security Agreement
PATENTS
Issue Date/ Registration/
Patent Name Country Filing Date Application No.
------------- ------- ----------- ---------------
<PAGE>
Schedule V to the
Security Agreement
TRADEMARKS
Reg. Date/ Registration/
Mark Country/State Filing Date Application Date
------ ------------- ----------- ----------------
<PAGE>
Annex 1 to the
Security Agreement
LOCKBOX AND DEPOSITORY AGREEMENT dated as of [
], 1997, among [Name of Grantor], a [ ] corporation (the
"Grantor"), CITICORP USA, INC., a Delaware corporation, as
collateral agent (the "Collateral Agent") for the Secured Parties
(such term, and each other capitalized term used but not defined
herein, having the meaning given it in the Security Agreement
referred to below) and [ ], a [
] banking corporation (the "Sub-Agent").
A. The Grantor and the Collateral Agent are parties to a Security
Agreement dated as of October 17, 1996, as amended and restated as of August 7,
1997 (as further amended, supplemented or otherwise modified from time to time,
the "Security Agreement"). Pursuant to the terms of the Security Agreement, the
Grantor has granted to the Collateral Agent, for the ratable benefit of the
Secured Parties, a security interest in its Accounts Receivable and other
Collateral (including Inventory, Equipment, cash, cash accounts and Proceeds) to
secure the payment and performance of the Obligations and has irrevocably
appointed the Collateral Agent as its agent to collect amounts due in respect of
Accounts Receivable, Inventory and Equipment.
B. The Sub-Agent has agreed to act as collection sub-agent of the
Collateral Agent to receive and forward payments with respect to the Accounts
Receivable, Inventory and Equipment on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Collateral Agent hereby appoints the Sub-Agent as its collection
sub-agent under the Security Agreement and authorizes the Sub-Agent, on the
terms and subject to the conditions set forth herein, to receive payments in
respect of Collateral consisting of Accounts Receivable, Inventory and
Equipment.
2. The Sub-Agent has established and shall maintain deposit account number
[] (including all subaccounts thereof) for the benefit of the Collateral Agent
(such account being called the "Collection Deposit Account"). The Collection
Deposit Account shall be designated with the title "Citicorp USA, Inc., as
Collateral Agent" (or a similar title). [Subject to the Sub-Agent's Terms for
Remittance Banking (Lockbox) Services attached hereto as Exhibit A, to the
extent that the terms thereof relate to procedures or fees and to the extent not
inconsistent with the terms hereof,] all payments received by the Sub-Agent in
Lockbox Number [ ] and [ ] or any replacements in respect thereof
(the "Lockboxes") shall be promptly deposited in the Collection Deposit Account
and shall not be commingled with other funds. All funds at any time on deposit
in the Collection Deposit Account shall be held by the Sub-Agent for application
in accordance with the terms of this Agreement. The Sub-Agent agrees to give
the Collateral Agent prompt notice if the Collection Deposit Account shall
become subject to any writ, judgment, warrant of attachment, execution or
similar process. As security for the payment and performance of the
Obligations, the Grantor hereby confirms and pledges, assigns and transfers to
the Collateral Agent, and hereby creates and grants to the Collateral Agent, a
security interest in the Collection Deposit Account, all property and assets
held therein and all Proceeds thereof.
3. The Collection Deposit Account shall be under the sole dominion and
control of the Collateral Agent, who shall possess all right, title and interest
in all of the items from time to time in the Collection Deposit Account and
their Proceeds. The Sub-Agent shall be the Collateral Agent's agent for the
purpose of holding and collecting such items and their Proceeds. Neither the
Grantor nor any person or entity claiming by, through or under the Grantor shall
have any right, title or interest in, or control over the use of, or any right
to withdraw any amount from, the Collection Deposit Account, except that the
Collateral Agent shall have the right to withdraw amounts from the Collection
Deposit Account. The Sub-Agent shall be entitled to rely on, and shall act in
accordance with, all instructions given to it by the Collateral Agent with
respect to the Collection Deposit
<PAGE>
2
Account. The Collateral Agent shall have the sole power to agree with the Sub-
Agent as to specifications for Lockbox services.
4. Upon receipt of written, telecopy or telephonic notice (which, in the
case of telephonic notice, shall be promptly confirmed in writing or by
telecopy) from the Collateral Agent, the Sub-Agent shall, if so directed in such
notice (subject to the Sub-Agent's right to request that the Collateral Agent
furnish, in form satisfactory to the Sub-Agent, signature cards and/or other
appropriate documentation), promptly transmit or deliver to the Collateral Agent
at the office specified in para graph 12 hereof (or such other office as the
Collateral Agent shall specify) (a) all funds, if any, then on deposit in, or
otherwise to the credit of, the Collection Deposit Account (provided that funds
on deposit that are subject to collection may be transmitted promptly upon
availability for withdrawal), (b) all checks, drafts and other instruments for
the payment of money received in the Lockboxes and in the possession of the Sub-
Agent, without depositing such checks, drafts or other instruments in the
Collection Deposit Account or any other account, and (c) any checks, drafts and
other instruments for the payment of money received in the Lockboxes by the Sub-
Agent after such notice, in whatever form received, provided that the Sub-Agent
may retain a reasonable reserve in a separate deposit account with the Sub-Agent
in respect of unpaid fees and amounts which may be subject to collection.
5. The Sub-Agent is hereby instructed and authorized to transfer by wire
transfer or Automated Clearing House ("ACH") from the Collection Deposit Account
all funds that are from time to time deposited or otherwise credited to such
account (after such funds become available to the Sub-Agent, either through the
Federal Reserve System or other clearing mechanism used by the Sub-Agent's
branch and to the extent such funds exceed $1,000), to such account as the
Collateral Agent may from time to time direct, provided that, unless the
Collateral Agent otherwise instructs, no such transfer shall be required if the
amount of such transfer would be less than $1,000, provided, further, that,
unless the Grantor otherwise consents, no such transfer shall be by ACH if the
amount of such transfer is more than $100,000. Unless otherwise directed by the
Collateral Agent, such funds shall be transferred on each business day by wire
transfer or ACH and shall be identified as follows:
Citicorp USA, Inc.
021000089
For credit to Citicorp USA, Inc. Cash Collateral Account,
New York, NY 10021
4071-1405
Re: Ryder TRS, Inc.
These transfer instructions and authorizations may not be amended, altered
or revoked by the Grantor without the prior written consent of the Collateral
Agent. The Collateral Agent, however, shall have the right to amend or revoke
these transfer instructions and authorizations at any time without the consent
of the Grantor.
6. The Sub-Agent shall furnish the Collateral Agent with monthly
statements setting forth the amounts deposited in the Collection Deposit Account
and all transfers and withdrawals therefrom, and shall furnish such other
information at such times as shall be reasonably requested by the Collateral
Agent.
7. The fees for the services of the Sub-Agent shall be mutually agreed
upon between the Grantor and the Sub-Agent and shall be the obligation of the
Grantor; provided, however, that, notwithstanding the terms of any agreement
under which the Collection Deposit Account shall have been established with the
Sub-Agent, the Grantor and the Sub-Agent agree not to terminate such Collection
Deposit Account for any reason (including the failure of the Grantor to pay such
fees) for so long as this Agreement shall remain in effect (it being understood
that the foregoing shall not be construed to prohibit the resignation of the
Sub-Agent in accordance with paragraph 9 below). Neither the Collateral Agent
nor the Secured Parties shall have any liability for the payment of any such
fees. The Sub-Agent may perform any of its duties hereunder by or through its
agents, officers or employees.
<PAGE>
3
8. The Sub-Agent hereby represents and warrants that (a) it is a banking
corporation duly organized, validly existing and in good standing under the laws
of [] and has full corporate power and authority under such laws to execute,
deliver and perform its obligations under this Agreement and (b) the execution,
delivery and performance of this Agreement by the Sub-Agent have been duly and
effectively authorized by all necessary corporate action and this Agreement has
been duly executed and delivered by the Sub-Agent and constitutes a valid and
binding obligation of the Sub-Agent enforceable in accordance with its terms.
9. The Sub-Agent may resign at any time as Sub-Agent hereunder by delivery
to the Collateral Agent of written notice of resignation not less than 60 days
prior to the effective date of such resignation. The Sub-Agent may be removed
by the Collateral Agent at any time, with or without cause, by written, telecopy
or telephonic notice (which, in the case of telephonic notice, shall be promptly
confirmed in writing or by telecopy) of removal delivered to the Sub-Agent.
Upon receipt of such notice of removal, or delivery of such notice of
resignation, the Sub-Agent shall (subject to the Sub-Agent's right to request
that the Collateral Agent furnish, in form satisfactory to the Sub-Agent,
signature cards and/or other appropriate documentation), promptly transmit or
deliver to the Collateral Agent at the office specified in paragraph 12 (or such
other office as the Collateral Agent shall specify) (a) all funds, if any, then
on deposit in, or otherwise to the credit of, the Collection Deposit Account
(provided that funds on deposit that are subject to collection may be
transmitted promptly upon availability for withdrawal), (b) all checks, drafts
and other instruments for the payment of money received in the Lockboxes and in
the possession of the Sub-Agent, without depositing such checks, drafts or other
instruments in the Collection Deposit Account or any other account and (c) any
checks, drafts and other instruments for the payment of money received in the
Lockboxes by the Sub-Agent after such notice, in whatever form received.
10. The Grantor consents to the appointment of the Sub-Agent and agrees
that the Sub-Agent shall incur no liability to the Grantor as a result of any
action taken pursuant to an instruction given by the Collateral Agent in
accordance with the provisions of this Agreement. The Grantor agrees to
indemnify and defend the Sub-Agent against any loss, liability, claim or expense
(including reasonable attorneys' fees) arising from the Sub-Agent's entry into
this Agreement and actions taken hereunder, except to the extent resulting from
the Sub-Agent's gross negligence or willful misconduct.
11. The term of this Agreement shall extend from the date hereof until the
earlier of (a) the date on which the Sub-Agent has been notified in writing by
the Collateral Agent that the Sub-Agent has no further duties under this
Agreement and (b) the date of termination specified in the notice of removal
given by the Collateral Agent, or notice of resignation given by the Sub-Agent,
as the case may be, pursuant to paragraph 9. The obligations of the Sub-Agent
contained in the last sentence of paragraph 9 and in paragraph 15, and the
obligations of the Grantor contained in paragraphs 7 and 10, shall survive the
termination of this Agreement.
12. All notices and communications hereunder shall be in writing and shall
be delivered by hand or by courier service, mailed by certified or registered
mail or sent by telecopy (except where telephonic instructions or notices are
authorized herein) and shall be effective on the day on which received (a) in
the case of the Collateral Agent, to Citicorp USA, Inc., 399 Park Avenue, New
York, New York 10021, Attention of [Collateral Monitoring Department], and (b)
in the case of the Sub-Agent, addressed to [], Attention of []. For purposes of
this Agreement, any officer of the Collateral Agent shall be authorized to act,
and to give instructions and notices, on behalf of the Collateral Agent
hereunder.
13. The Sub-Agent will not assign or transfer any of its rights or
obligations hereunder (other than to the Collateral Agent) without the prior
written consent of the other parties hereto, and any such attempted assignment
or transfer shall be void.
14. Except as provided in paragraph 5 above, this Agreement may be amended
only by a written instrument executed by the Collateral Agent, the Sub-Agent and
the Grantor, acting by their duly authorized representative officers.
<PAGE>
4
15. Except as otherwise provided in the Credit Agreement with respect to
rights of set off available to the Sub-Agent in its capacity as a Lender (if and
so long as the Sub-Agent is a Lender thereunder), the Sub-Agent hereby
irrevocably waives any right to set off against, or otherwise deduct from, any
funds held in the Collection Deposit Account and all items (and Proceeds
thereof) that come into its possession in connection with the Collection Deposit
Account any indebtedness or other claim owed by the Grantor or any affiliate
thereof to the Sub-Agent; provided, however, that this paragraph shall not limit
the ability of the Sub-Agent to, and the Sub-Agent may, (a) exercise any right
to set off against, or otherwise deduct from, any such funds to the extent
necessary for the Sub-Agent to collect any fees owed to it by the Grantor in
connection with the Collection Deposit Account, (b) charge back and net against
the Collection Deposit Account any returned or dishonored items or other
adjustments in accordance with the Sub-Agent's usual practices and (c) (i)
establish the reserves contemplated in paragraph 4 in respect of unpaid fees and
amounts which may be subject to collection and (ii) transfer funds in respect of
such reserves from the Collection Deposit Account to the separate deposit
account with the Sub-Agent as contemplated in paragraph 4.
16. This Agreement shall inure to the benefit of and be binding upon the
Collateral Agent, the Sub-Agent, the Grantor and their respective permitted
successors and assigns.
17. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
18. EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF [ ] GOVERN THE
COLLECTION DEPOSIT ACCOUNT, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. The Sub-Agent shall be an independent contractor. This Agreement does
not give rise to any partnership, joint venture or fiduciary relationship.
20. In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in
<PAGE>
5
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
[Name of Grantor],
by
------------------------------------
Name:
Title:
CITICORP USA, INC., as Collateral Agent,
by
------------------------------------
Name:
Title:
[Sub-Agent],
by
------------------------------------
Name:
Title:
<PAGE>
Annex 2 to the
Security Agreement
[Form of]
PERFECTION CERTIFICATE
Reference is made to the Credit Agreement dated as of October 17, 1996, as
amended and restated as of August 7, 1997 (as further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders from time to time party thereto (the "Lenders"), The Chase
Manhattan Bank, as documentation agent for the Lenders, for the Lenders, and
Citicorp USA, Inc., as administrative agent and as collateral agent for the
Lenders (the "Collateral Agent").
The undersigned, a Financial Officer and a Legal Officer, respectively, of
the Borrower, hereby certify to the Collateral Agent and each other Secured
Party as follows:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has had in
the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has changed its
identity or corporate structure in any way within the past five years. Changes
in identity or corporate structure would include mergers, consolidations and
acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years and any information
with respect to such named entities required by paragraphs (a), (b) and (c)
above:
(e) Set forth below is the Federal Taxpayer Identification Number of each
Grantor:
2. Current Locations. (a) The chief executive office of each Grantor is
located at the address set forth opposite its name below:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(b) Set forth below opposite the name of each Grantor are all locations
where such Grantor maintains any books or records relating to any Accounts
Receivable (with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Grantor Mailing Address County State
- ------- --------------- ------ -----
(c) Set forth below opposite the name of each Grantor are all the places
of business of such Grantor not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
- ------- --------------- ------ -----
<PAGE>
2
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(e) Set forth below opposite the name of each Grantor are the names and
addresses of all persons other than such Grantor that have possession of any of
the Collateral of such Grantor:
Grantor Mailing Address County State
- ------- --------------- ------ -----
3. Unusual Transactions. All Accounts Receivable have been originated by
the Grantors and all Inventory has been acquired by the Grantors in the ordinary
course of business.
4. File Search Reports. Attached hereto as Schedule 4 are (a) true copies
of file search reports from the Uniform Commercial Code filing offices where
filings described in Section 3.19 of the Credit Agreement are to be made and (b)
true copies of each financing statement or other filing identified in such file
search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where a Grantor has
Collateral as identified in Section 2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
7. Filing Fees. All filing fees and taxes payable in connection with the
filings described in Section 5 above have been paid.
8. Stock Ownership. Attached hereto as Schedule 7 is a true and correct
list of all the duly authorized, issued and outstanding stock of the Borrower
and each Subsidiary and the record and beneficial owners of such stock. Also
set forth on Schedule 7 is each equity Investment of the Borrower and each
Subsidiary that represents 50% or less of the equity of the entity in which such
investment was made.
9. Notes. Attached hereto as Schedule 8 is a true and correct list of all
notes held by the Borrower and each Subsidiary and all intercompany notes
10. Advances. Attached hereto as Schedule 9 is (a) a true and correct
list of all advances made by the Borrower to any Subsidiary or made by any
Subsidiary to the Borrower or any other Subsidiary, which advances will be on
and after the date hereof evidenced by one or more intercompany notes pledged to
the Collateral Agent under the Pledge Agreement except as permitted
<PAGE>
3
by Section 6.04(b) of the Credit Agreement, and (b) a true and correct list of
all unpaid intercompany transfers of goods sold and delivered by or to the
Borrower or any Subsidiary.
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on
this [ ] day of [ ].
RYDER TRS, INC.,
by
--------------------------------------
Name:
Title: [Financial Officer]
by
--------------------------------------
Name:
Title: [Legal Officer]
<PAGE>
Annex 3 to the
Security Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to
the Security Agreement dated as of October 17, 1996, as amended and
restated as of August 7, 1997, among RYDER TRS, INC., a Delaware
corporation, restated (the "Borrower"), each subsidiary of the
Borrower listed on Schedule I thereto (each such subsidiary,
individually, a "Guarantor" and, collectively, the "Guarantors"; the
Borrower and the Guarantors are referred to collectively herein as the
"Grantors") and CITICORP USA, INC., a Delaware corporation (as
"Citicorp"), as collateral agent (the "Collateral Agent") for the
Secured Parties (as defined herein).
A. Reference is made to the Credit Agreement dated as of October 17, 1996,
as amended and restated as of August 7, 1997 (as further amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders from time to time party thereto (the "Lenders"), The Chase
Manhattan Bank, as Citicorp, as administrative agent for the Lenders, and as
Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans. Pursuant to Section 5.16 of the Credit
Agreement, each Domestic Subsidiary (other than Finco or Leasco) (and, to the
extent no adverse tax consequences to the Borrower or any Subsidiary would
result, each Foreign Subsidiary), that was not in existence or not such a
Subsidiary on the date of the Credit Agreement is required to enter into
Security Agreement as a Guarantor upon becoming such a Subsidiary. Section 8.15
of Security Agreement provides that any such Subsidiary may become a Grantor
under the Security Agreement by execution and delivery of an instrument in the
form of this Supplement. The undersigned Subsidiary (the "New Grantor") is
executing this Supplement in accordance with such requirements of the Credit
Agreement to become a Grantor under the Security Agreement in order to induce
the Lenders to make additional Loans.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 8.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of the New Grantor's right, title and
interest in and to the Collateral (as defined in the Security Agreement) of the
New Grantor. Each reference to a "Grantor" in the Security Agreement shall be
deemed to include the New Grantor. The Security Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and con stitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
<PAGE>
2
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 8.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
<PAGE>
3
SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name of New Grantor],
by
------------------------------------
Name:
Title:
Address:
CITICORP USA, Inc.,
as Collateral Agent
by
------------------------------------
Name:
Title:
<PAGE>
Schedule I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
Description Location
- ----------- --------
<PAGE>
Annex 4 to the
Security Agreement
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that Citicorp USA, Inc., as collateral agent
(the "Collateral Agent"), pursuant to the Security Agreement dated as of October
17, 1996, as amended and restated as of August 7, 1997 (the "Security
Agreement"), among Ryder TRS, Inc. (the "Borrower"), each subsidiary of the
Borrower listed on Schedule I thereto and the Collateral Agent, does hereby
make, constitute and appoint [insert name of Grantor] (and each of its
Authorized Employees) as the Collateral Agent's true and lawful agent (and
attorney-in-fact) for the purpose of taking such actions as are necessary (a) to
note the Collateral Agent as the holder of a first lien on the certificates of
title for the Vehicles (and, pursuant to Section 6.03 of the Security Agreement,
to execute and file any related Uniform Commercial Code financing statements or
other documentation) and to cause the certificates of registration for the
Vehicles to be issued in the name of the Collateral Agent (if required pursuant
to subparagraph (c) of Section 6.03 of the Security Agreement) and (b) to
release the Collateral Agent's lien on any such certificate of title (and to
file termination statements or similar documents with respect to any such
related Uniform Commercial Code or other filings) in connection with a Vehicle
Sale permitted under the Credit Agreement and to permit any such related
certificate of registration to be reissued in the name of the acquiror under
such Vehicle Sale. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Security Agreement.
This Power of Attorney is for the limited purposes specified herein, shall
not be constituted as a general power of attorney and is granted by Citicorp
USA, Inc. not in its individual capacity but only as Collateral Agent. The
powers and authority granted hereunder shall, unless sooner revoked by the
Collateral Agent in accordance with Section 6.05(b) of the Security Agreement or
following the resignation or removal of the Collateral Agent under the Credit
Agreement, cease upon the termination of the Security Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney as of this ___ day of _______, ____.
CITICORP USA, INC., as Collateral Agent,
by
--------------------------------------------
Name:
Title:
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
Subscribed and sworn before me, a notary public, in and for said
county and state this _____ day of __________, ____.
-----------------------------------------------
Notary Public
My Commission Expires:
<PAGE>
EXHIBIT 10.30
AMENDMENT NO. 2 and CONSENT thereto dated as of February 6,
1998 (this "Amendment") to the SECURITY AGREEMENT dated as of
October 17, 1996, as amended and restated as of August 7, 1997,
as further amended as of December 30, 1997 (as it may be further
amended or modified from time to time, the "Security Agreement"),
among RYDER TRS, INC., a Delaware corporation, as borrower
("TRS"), each subsidiary of TRS listed on Schedule I hereto (each
such subsidiary, individually, a "Guarantor" and, collectively,
the "Guarantors"; such Guarantors, together with TRS,
collectively, the "Grantors") and CITICORP USA, INC., a Delaware
corporation, as collateral agent ("Citicorp" or the "Collateral
Agent") for the Secured Parties.
WHEREAS TRS, as borrower, has entered into that certain Credit
Agreement dated as of October 17, 1996, as amended and restated as of August 7,
1997, as further amended as of December 30, 1997 (as it may be further amended
or modified from time to time, the "Credit Agreement") among TRS, the lenders
from time to time party thereto (the "Lenders"), The Chase Manhattan Bank, as
documentation agent, and Citicorp, as administrative agent for the Lenders and
as collateral agent;
WHEREAS, contemporaneously with the execution and delivery of the
Credit Agreement, the parties hereto entered into the Security Agreement for the
purpose of securing the payment and performance of the Obligations; and
WHEREAS, TRS, the Collateral Agent and the Required Lenders desire to
amend Section 6.04 of the Security Agreement as set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants set forth herein, the parties hereto hereby
agree, subject to the terms and conditions set forth below, as follows:
SECTION 1. Defined Terms. Unless the context requires a different
--------------
meaning, capitalized terms used herein but not defined herein shall have the
respective meanings assigned to such terms in the Credit Agreement or the
Security Agreement, as appropriate.
1
<PAGE>
2
SECTION 2. Amendment of the Security Agreement. Section 6.04(a) of
------------------------------------
the Security Agreement is hereby amended pursuant to Section 8.08(b) of the
Security Agreement to extend the operative deadline of such provision to August
10, 1998, such that the last sentence of Section 6.04(a) is hereby amended and
restated to read in its entirety as follows:
"Notwithstanding the foregoing, until August 10, 1998 the Title
Documentation for such Vehicle may be maintained and processed by
Authorized Employees (who may be employees of the Seller) in the same
manner and at the same location used immediately prior to the date hereof
by the Seller for such purposes, provided that (i) such Titling
--------
Documentation shall be maintained in fireproof file cabinets that shall be
locked when not in use by Authorized Employees and (ii) the Collateral
Agent shall be given a copy of the keys to such file cabinets."
SECTION 4. Headings. Section headings used herein are for
--------
convenience of reference only, are not part of this Amendment and are not to
effect the construction of, or to be taken into consideration in interpreting,
this Amendment.
SECTION 5. Governing Law. This Amendment shall be construed in
--------------
accordance with the laws of the State of New York without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6. Effectiveness of this Amendment. This Amendment shall
--------------------------------
become effective as of the date first above written when this Amendment shall
have been executed by each of the parties hereto.
SECTION 7. Counterparts. (a) This Amendment may be executed in
-------------
separate counterparts, each of which when so executed and delivered shall
constitute an original, to become effective as provided in Section 6 hereof.
(b) Delivery of an executed counterpart of this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Amendment.
SECTION 8. Full Force and Effect. Except as expressly amended
----------------------
hereby, the Security Agreement shall remain in full force and effect.
2
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
RYDER TRS, INC.,
by /s/ STEVEN R. DAVISON
----------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
CITICORP USA, INC., as
Collateral Agent,
by /s/ SHAPLEIGH SMITH
----------------------------
Name: Shapleigh Smith
Title: Vice President
CORESTATES BANK, N.A.,
by /s/ CHRISTOPHER J. CALABRESE
------------------------------------
Name: Christopher J. Calabrese
Title: Senior Vice President
SOCIETE GENERALE,
by /s/ RICHARD M. LEWIS
----------------------------
Name: Richard M. Lewis
Title: Vice President
3
<PAGE>
SCHEDULE I
GUARANTORS
Name Address for all Guarantors
- -------------------------------------- --------------------------------------
Ryder Truck Rental-One Way, Inc. 1560 Broadway
Ryder Relocation Services, Inc. Suite 1800
The Move Shop, Inc. Denver, CO 80202
Ryder Move Management, Inc. 8669 N.W. 36th Street
Miami, FL 33166
4
<PAGE>
EXHIBIT 10.31
INDEMNITY AGREEMENT ESCROW AGREEMENT
Dated as of December 29, 1997
among
RYDER TRS, INC.
as Grantor
and
THE CHASE MANHATTAN BANK,
as Escrow Agent
and
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. ON BEHALF OF ITSELF AND
OTHER AMERICAN INTERNATIONAL GROUP COMPANIES INCLUDING BUT NOT LIMITED TO:
AMERICAN HOME ASSURANCE COMPANY
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
COMMERCE AND INDUSTRY INSURANCE COMPANY
AIU INSURANCE COMPANY
BIRMINGHAM FIRE INSURANCE COMPANY OF PENNSYLVANIA
ILLINOIS NATIONAL INSURANCE CO.
AMERICAN GLOBAL INSURANCE COMPANY
NATIONAL UNION FIRE INSURANCE COMPANY OF LOUISIANA
LANDMARK INSURANCE COMPANY
as Beneficiary
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
PARTIES..................................................... 1
RECITALS.................................................... 1
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms.................................. 2
Section 1.2 Use of Defined Terms........................... 6
ARTICLE II
ESTABLISHMENT OF ESCROW; AUTHORITY OF AND CERTAIN DIRECTIONS
TO ESCROW AGENT
Section 2.1 Establishment of Escrow........................ 6
Section 2.2 Execution of Documents and Authorization to
Take Certain Action............................ 8
Section 2.3 Establishment of Operating Account............. 9
Section 2.4 Investment of Escrow Assets.................... 9
Section 2.5 Declaration of Escrow.......................... 10
Section 2.6 Name of Escrow................................. 10
ARTICLE III
WITHDRAWALS FROM AND SUBSTITUTIONS TO THE ESCROW ESTATE:
RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE
ESCROW ESTATE; VOTING RIGHTS IN ESCROW ASSETS
Section 3.1 Withdrawals by Beneficiary..................... 11
Section 3.2 Substitution of Escrow Assets.................. 11
Section 3.3 Additions to the Escrow Estate................. 13
Section 3.4 Amounts Received on Account of Escrow Assets... 14
Section 3.5 Payments to be made by Escrow Agent............ 15
Section 3.6 Voting Rights and Defense of Title
of Collateral.................................. 15
ARTICLE IV
DUTIES OF ESCROW AGENT
Section 4.1 Instructions of Beneficiary.................... 17
Section 4.2 No Implied Duties.............................. 17
Section 4.3 No Unauthorized Transactions................... 18
Section 4.4 Tax Returns.................................... 18
Section 4.5 Books and Records of Escrow Agent.............. 18
Section 4.6 Valuation Report............................... 19
(i)
<PAGE>
ARTICLE V
THE ESCROW AGENT
Section 5.1 Acceptance of Escrow.......................... 19
Section 5.2 Limitation of Duties.......................... 20
Section 5.3 Representations and Warranties of Escrow Agent 20
Section 5.4 Segregation of Funds.......................... 20
Section 5.5 Reliance on Documents; Agents................. 20
Section 5.6 Limitation of Liability of Escrow Agent....... 21
Section 5.7 Fees.......................................... 23
ARTICLE VI
TRANSFER OF BENEFICIARY'S INTEREST
Section 6.1 Transfer of Interest.......................... 24
Section 6.2 Notice of Assignment by Beneficiary........... 25
ARTICLE VII
SUCCESSOR ESCROW AGENTS; CO-ESCROW AGENTS
Section 7.1 Successor Escrow Agents; Co-Escrow Agent...... 26
ARTICLE VIII
TERMINATION; VALIDITY OF SALE
Section 8.1 Termination................................... 32
Section 8.2 Validity of Sale.............................. 33
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF GRANTOR
Section 9.1 Representations and Warranties of Grantor..... 33
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF BENEFICIARY
Section 10.1 Representations and Warranties of Beneficiary 35
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices...................................... 36
Section 11.2 Severability................................. 37
Section 11.3 Modifications................................ 38
Section 11.4 Counterparts................................. 38
(ii)
<PAGE>
Section 11.5 Entire Agreement............................. 38
Section 11.6 Benefits of Agreement........................ 38
Section 11.7 Headings..................................... 39
Section 11.8 Dealings by Escrow Agent..................... 39
Section 11.9 Governing Law................................ 40
EXHIBIT A
List of Initial Escrow Assets.............................. 41
(iii)
<PAGE>
INDEMNITY AGREEMENT ESCROW AGREEMENT
This INDEMNITY AGREEMENT ESCROW AGREEMENT dated as of December 29,
1997, by and among RYDER TRS, INC. a Delaware corporation (herein called the
"Grantor"), THE CHASE MANHATTAN BANK, a New York corporation (herein, in its
capacity as Escrow Agent, and together with its successors called the "Escrow
Agent"), and NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. on behalf
of itself and other American International Group Companies including but not
limited to: AMERICAN HOME ASSURANCE COMPANY, THE INSURANCE COMPANY OF THE STATE
OF PENNSYLVANIA, COMMERCE AND INDUSTRY INSURANCE COMPANY, AIU INSURANCE COMPANY,
BIRMINGHAM FIRE INSURANCE COMPANY OF PENNSYLVANIA, ILLINOIS NATIONAL INSURANCE
CO., AMERICAN GLOBAL INSURANCE COMPANY, NATIONAL UNION FIRE INSURANCE COMPANY OF
LOUISIANA, LANDMARK INSURANCE COMPANY (herein called the "Beneficiary").
W I T N E S S E T H:
--------------------
WHEREAS, the Grantor desires to create an escrow for the sole and
exclusive benefit of the Beneficiary for the purpose of providing collateral for
the Grantor's obligations under any indemnity agreements or payment agreements,
the first being dated October 17, 1996 and October 17, 1997 respectively,
between Grantor and Beneficiary (collectively, and as the same may be
supplemented or amended from time to time, the "Indemnity Agreement"). Terms
used but not defined herein shall have the meanings ascribed thereto in the
Indemnity Agreement; and
WHEREAS, the Escrow Agent is willing to accept the duties and
obligations imposed hereunder;
<PAGE>
NOW, THEREFORE, in order to induce the Beneficiary to execute and
deliver the Indemnity Agreement and in consideration of the premises and of the
mutual agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Escrow Agreement the following
-------------
terms shall have the following meanings, unless the context otherwise requires:
"Affiliate" shall mean, with respect to any corporation, a corporation
---------
which directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such corporation.
"AIGRM" shall mean AIG Risk Management, Inc.
-----
"Beneficiary" has the meaning assigned to that term in the
-----------
introduction to this Escrow Agreement and shall include its successors and
assigns by operation of law, including without limitation, any liquidator,
rehabilitator, receiver, or conservator of the named Beneficiary.
"Book Entry Form" shall mean with respect to government obligations
---------------
and obligations of institutions, a form or system, as applicable, under which
the legal ownership of government obligations and obligations of institutions
may be transferred via wire only through a book entry on the books of The
Federal Reserve Bank, The Depository Trust Company, or another depository
approved in writing by the Beneficiary.
2
<PAGE>
"Business Day" means any day which is not a Saturday, a Sunday, or a
------------
day on which banks and escrow companies in The City of New York are authorized
or obligated by law, regulation or executive order to remain closed.
"Cash" means United States Dollars.
----
"Distributions" means all interest, dividends, or distributions, or
-------------
payments in cash, securities and other property upon or with respect to any
Escrow Asset including, without limitation, amounts received upon any purchase,
redemption or retirement thereof.
"Escrow" means the security escrow created by this Escrow Agreement,
------
and in no event shall such term be deemed to include the Escrow Agent, the
Grantor, the Beneficiary or any of their respective assets.
"Escrow Agreement" means this Indemnity Agreement Escrow Agreement, as
----------------
the same may from time to time be amended, modified or supplemented and in
effect.
"Escrow Assets" means the Initial Escrow Assets and all other
-------------
Qualified Assets conveyed, assigned and transferred to the Escrow by the Grantor
or otherwise.
"Escrow Estate" means all present and future estate, right, title and
-------------
interest of the Escrow Agent, including, without limitation, its security
interest in and to the Escrow Assets.
"Escrow Obligations" has the meaning assigned to that term in Section
------------------
5.6 hereof.
"Initial Escrow Assets" has the meaning assigned to that term in
---------------------
Section 2.1 hereof.
3
<PAGE>
"Indemnity Agreement" has the meaning assigned to that term in the
-------------------
recitals to this Escrow Agreement.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind whatsoever.
"Market Value" means, as of the time any determination thereof is
------------
made, (i) with respect to any Qualified Asset listed under clause (A), (B), (C)
or (D) of the definition thereof, with respect to interest bearing assets, the
principal amount payable at the maturity of such assets and with respect to
original issue discount assets, the purchase price of such assets, and (ii) with
respect to Cash, the dollar amount thereof.
Escrow Assets which, at the time of such determination, are not
Qualified Assets shall be deemed to have no Market Value.
"Obligations" shall mean:
-----------
All sums the reimbursement of which is owing by Grantor to Beneficiary
under the terms and conditions of the Indemnity Agreement.
"Operating Account" has the meaning assigned to that term in Section
-----------------
2.3 hereof.
"Parent" shall mean an institution that, directly or indirectly,
------
controls another institution.
"Person" means any individual, corporation, limited liability company,
------
partnership, joint venture, association, escrow, unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Form" shall mean any instrument evidenced by a physical
-------------
certificate or other written instrument issued to and
4
<PAGE>
registered in the name of the Beneficiary, bearer, or a nominee of the Escrow
Agent.
"Qualified Assets" means (A) any evidence of indebtedness, with a term
----------------
to maturity of one year or less, issued in Physical Form or Book Entry Form by
the United States of America, or an instrumentality or agency thereof and
guaranteed fully as to principal, interest and premium, if any, by the United
States of America, (B) any certificate of deposit, maturing not more than 30
days after the date of purchase, issued by a commercial banking institution
which is a member of the Federal Reserve System and which has a combined capital
and surplus and undivided profits of not less than $ 1,000,000,000, (C)
commercial paper, maturing not more than 60 days after the date of purchase,
issued in Physical Form or Book Entry Form by a corporation organized and
existing under the laws of the United States of America with a rating, at the
time as of which any determination thereof is to be made, of "P-l" (or higher)
according to Moody's Investors Service, Inc., or "A-l" (or higher) according to
Standard and Poor's Corporation, a division of McGraw-Hill, Inc. or (D) Cash.
Qualified Assets must satisfy the requirements specified in Section 1404(a)(1)
and (2) of the New York Insurance Law.
"Required Reserve" means the sum of "Obligations" plus an amount set
----------------
by the Beneficiary to guarantee the future payment by the Grantor to the
Beneficiary of the amounts due the Beneficiary under the terms and conditions of
the Indemnity
5
<PAGE>
Agreement. (The calculation of the Required Reserve by the Beneficiary shall be
final and binding on all parties.)
"Subsidiary" means an institution controlled, directly or indirectly,
----------
by another institution.
"Valuation Report" has the meaning assigned to that term in Section
----------------
2.3 hereof.
Section 1.2 Use of Defined Terms. All terms defined in this Escrow Agreement
--------------------
shall have the defined meanings when used in any certificates, reports or other
documents made or delivered pursuant to this Escrow Agreement, unless otherwise
defined or unless the context otherwise requires.
ARTICLE II
ESTABLISHMENT OF ESCROW; AUTHORITY OF AND CERTAIN DIRECTIONS TO ESCROW AGENT
Section 2.1 Establishment of Escrow. Concurrently with the execution and
-----------------------
delivery of this Escrow Agreement, the Grantor hereby establishes the Escrow and
assigns, conveys, transfers and delivers to the Escrow Agent in escrow as
secured party for the sole and exclusive benefit of the Beneficiary, Qualified
Assets as listed in Exhibit A hereto (the "Initial Escrow Assets"), the receipt
of which the Escrow Agent hereby acknowledges, to have and to hold such
Qualified Assets and such additional Qualified Assets as shall be added to the
Escrow (in such form as the Escrow Agent shall require to enable the Escrow
Agent to sell or otherwise convert such additional Qualified Assets to Cash) in
accordance with the terms and conditions of this Escrow Agreement for the uses
and purposes set forth herein. Assignment, conveyance, transfer and delivery of
the Initial Escrow Assets
6
<PAGE>
(and such additional Qualified Assets as shall be added to the Escrow in
accordance with the terms and conditions of this Escrow Agreement) shall be
accomplished as follows: (i) securities in Physical Form shall be delivered in
suitable form for transfer by the Escrow Agent, accompanied by duly executed
instruments of transfer or assignment in blank and (ii) securities in Book Entry
Form, shall be delivered by such other method of transfer as may be appropriate
including, where applicable, Book Entry on the books and records of the Escrow
Agent or another depository as required in the definition of Book Entry Form,
provided that the Beneficiary's right to withdraw such securities is not
impaired in any way. The Grantor hereby represents and warrants to the
Beneficiary that the Initial Escrow Assets are all Qualified Assets and, in the
aggregate, have a Market Value of at least $19.5 million as of the date of
transfer. The Escrow Agent, as Escrow Agent for the Beneficiary, shall
administer the Escrow. The Escrow shall be subject to withdrawal in whole or in
part by the Beneficiary as provided herein.
The Beneficiary may require, in its sole discretion, in order to
secure the timely and complete payment and performance of each and all of the
Obligations, that the Grantor specifically assign, transfer and grant, convey
and deliver to the Escrow Agent as secured party for the sole and exclusive
benefit of the Beneficiary, a perfected continuing first priority security
interest in such particular Escrow Asset and all of the Proceeds thereof, and
the Grantor shall make all necessary and appropriate
7
<PAGE>
filings, if any, to perfect and maintain the perfected status of the security
interest granted hereby.
Without limiting the generality of the foregoing, a security interest
is granted in each of the Escrow Assets to the Escrow Agent as secured party for
the sole and exclusive benefit of the Beneficiary, to secure the timely and
complete payment and performance of all of the Obligations, whether joint or
several, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and all modifications, renewals, extensions,
rearrangements, substitutions and replacements of the Obligations. All of the
Escrow Assets which are delivered shall constitute security for any and all of
the Obligations on the terms provided herein.
Section 2.2 Execution of Documents and Authorization to Take Certain Action.
---------------------------------------------------------------
The Grantor hereby irrevocably authorizes and directs the Escrow Agent to take
the following actions:
(a) To accept delivery of the Initial Escrow Assets delivered by the
Grantor pursuant hereto and to accept delivery of additional Escrow Assets which
may be delivered from time to time pursuant hereto;
(b) To establish and maintain the Operating Account in accordance with
the terms of this Escrow Agreement;
(c) To make withdrawals from the Escrow Estate upon the written
instruction of the Beneficiary in accordance with Article III hereof; and
(d) To accept instructions from the Beneficiary, and from time to time
to execute and deliver such notes, instruments,
8
<PAGE>
endorsements, documents, agreements and certificates or take such other actions
as may be instructed by the Beneficiary or which may be required to carry out
the terms and provisions of this Escrow Agreement.
Section 2.3 Establishment of Operating Account. For purposes of this Escrow
----------------------------------
Agreement, the Escrow Agent is hereby directed to open and maintain at all times
during the term of this Escrow Agreement an escrow account within the Escrow for
the benefit of the Beneficiary (said account being called the "Operating
Account" and being identified as Account No. E00748). All cash, checks, drafts,
certificates, chattel paper and other instruments at any time and from time to
time received by the Escrow Agent evidencing Escrow Assets or Distributions in
respect of, or otherwise as proceeds of, Escrow Assets, shall be deposited in
the Operating Account. The Escrow Agent shall deliver to the Grantor and the
Beneficiary, on a monthly basis, a written statement (the "Valuation Report")
identifying in reasonable detail the Escrow Assets then on deposit in the
Operating Account, specifying any withdrawals from or deposits to the Operating
Account during such month, and certifying the aggregate Market Value of the
Escrow Assets as of the close of business on the day preceding the date of such
Valuation Report.
Section 2.4 Investment of Escrow Assets. Any Cash held in the Operating
---------------------------
Account shall be invested and reinvested in Qualified Assets by the Escrow Agent
as may be requested in writing by the Beneficiary. AU investments shall be
(x)(i) made in the name of the Escrow Agent for the account of the Escrow
created by this
9
<PAGE>
Escrow Agreement, or (ii) made or held in nominee or street name, in the name of
the Escrow Agent generally and (y) held by or under the control of the Escrow
Agent and deposited in the Operating Account. The interest accruing and
dividends paid thereon and any profit realized from such investments shall be
credited to the Operating Account. Any such interest, dividends, or other
income realized from such investments but not credited to the Operating Account
shall be paid, transferred or otherwise distributed to the Grantor in such
manner as the Grantor shall elect and as the Grantor shall instruct the Escrow
Agent in writing, provided and to the extent that, at the time of such payment,
the aggregate Market Value of the Escrow Assets in the Operating Account shall
exceed 102% of the Required Reserve provided by the Beneficiary.
Section 2.5 Declaration of Escrow. The Escrow Agent hereby declares that it
---------------------
will hold the Escrow Estate upon the terms and conditions herein set forth for
the sole use and benefit and under the sole control and direction of the
Beneficiary.
Section 2.6 Name of Escrow. For purposes of convenience of reference, the
--------------
escrow created by this Escrow Agreement may be referred to as the "Ryder
TRS/NATIONAL UNION 1997 ESCROW".
ARTICLE III
WITHDRAWALS FROM AND SUBSTITUTIONS TO THE ESCROW ESTATE:
RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM
THE ESCROW ESTATE; VOTING RIGHTS IN ESCROW ASSETS
Section 3.1 Withdrawals by Beneficiary. The Beneficiary shall have the
--------------------------
exclusive and unconditional right, without prior written notice to the Grantor,
at any time and from time to time to
10
<PAGE>
direct the Escrow Agent to withdraw, or order the transfer of, all or part of
the Escrow Assets from the Operating Account. Each such direction (i) shall be
in writing or by facsimile transmission, (ii) shall identify the specific Escrow
Assets (and the amount thereof) to be withdrawn or transferred, (iii) if the
Escrow Assets are not Cash, may authorize the Escrow Agent to sell the specified
Escrow Assets for cash proceeds and (iv) shall provide instructions as to where
the specified Escrow Assets or proceeds therefrom should be delivered or
transferred. No Person other than the Beneficiary may direct a withdrawal or
transfer of Escrow Assets from the Operating Account. The Escrow Agent shall
have no duty or responsibility to verify the purpose of any withdrawal and shall
provide prompt written notice to the Grantor of any such withdrawal or transfer.
Section 3.2 Substitution of Escrow Assets. The Grantor may at any time and
-----------------------------
from time to time request the Beneficiary to direct the withdrawal, or order the
transfer of, all or part of the Escrow Assets from the Operating Account to the
Grantor; provided that (i) either prior to or concurrently with any such
transfer or withdrawal the Grantor shall assign, convey, transfer and deliver to
the Escrow Agent Qualified Assets which have a Market Value on the date of
transfer at least equal to the Market Value of the Escrow Assets requested to be
withdrawn or transferred and (ii) after giving effect to such transaction, the
Market Value of the Escrow Assets shall not be less than 100% of the Required
Reserve. Each such request shall (i) be in writing or by telephone (confirmed
in writing promptly thereafter), (ii)
11
<PAGE>
identify the specific Escrow Assets (and the amount thereof) to which such
request relates and the manner in which and the location where such Escrow
Assets should be delivered to the Grantor, (iii) identify the Qualified Assets
proposed to be substituted and the Market Value thereof and (iv) provide the
Market Value of all Escrow Assets after giving effect to the proposed
substitution. If the Beneficiary, in its sole discretion, approves a request
from the Grantor pursuant to this Section 3.2, the Beneficiary shall deliver
appropriate directions to the Escrow Agent pursuant to Section 3.1 hereof for
the withdrawal or transfer of the specified Escrow Assets; provided that the
amount of Qualified Assets required by the first sentence of this Section 3.2
are delivered to the Escrow Agent by the Grantor prior to or concurrently with
such withdrawal or transfer. The parties hereto agree that, in accordance with
this section, AIGRM, as the agent of the Beneficiary, shall have administrative
oversight responsibilities with respect to the Escrow Assets. As compensation
for these responsibilities, AIGRM, as the agent of the Beneficiary, shall
receive an administrative services fee to be paid by the Grantor of 12.5 basis
points per annum (payable quarterly in arrears commencing on the date of the
execution and delivery of this Escrow Agreement) of the Required Reserve, such
Required Reserve to be determined as of the effective date of this Indemnity
Agreement Escrow Agreement and at annual intervals thereafter.
All investments and substitutions shall be in compliance with the
definition of "Qualified Assets". Any loss
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incurred from any investment pursuant to the terms of this Escrow Agreement
shall be borne exclusively by the Escrow. The Escrow Agent shall not be liable
for any loss due to changes in the value of the Escrow or penalties for early
redemption.
Section 3.3 Additions to the Escrow Estate. The Grantor may, at any time, and
------------------------------
shall at the times required pursuant to Section 3.2 hereof, assign, convey,
transfer and deliver Qualified Assets to the Escrow Agent for inclusion in the
Escrow Estate. In addition, if at any time the Beneficiary notifies the Grantor
that the Market Value of the Escrow Assets, as shown in the most recent
Valuation Report, is less than 100% of the Required Reserve (which notice shall
specify the amount of such shortfall), then the Grantor shall promptly assign,
convey, transfer and deliver to the Escrow Agent an amount of Qualified Assets
having a Market Value on the date of delivery at least equal to such shortfall.
All Qualified Assets delivered to the Escrow Agent pursuant to this Escrow
Agreement shall be in suitable form for transfer by delivery or by Book Entry,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the Escrow Agent. The
Escrow Agent shall have the right, at any time in its discretion and without
notice to the Grantor, to transfer or register in the name of the Escrow Agent
any or all of the Escrow Assets. In addition, the Escrow Agent shall have the
right at any time to exchange certificates or instruments representing or
evidencing Escrow Assets for certificates or instruments of smaller or larger
denominations. All Escrow
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Assets at any time delivered to the Escrow Agent shall be held by the Escrow
Agent and deposited in the Operating Account for the sole and exclusive benefit
of the Beneficiary, subject to the terms and conditions of this Escrow
Agreement.
Section 3.4 Amounts Received on Account of Escrow Assets. The Grantor hereby
--------------------------------------------
acknowledges and agrees that all monies due and to become due under or in
respect of the Escrow Assets, and all property, Cash, checks, drafts, chattel
paper and other instruments or writings for the payment of money (properly
endorsed, where required, so that such items may be collected by the Escrow
Agent) at any time and from time to time received by the Grantor in full or
partial payment, as Distributions in respect of, or otherwise as proceeds of,
the Escrow Assets shall be paid or delivered directly to the Escrow Agent and
that if any such property, monies or items shall be received by the Grantor,
such property, monies or items will not be commingled by the Grantor with any of
its other funds or property, but will be held separate and apart therefrom and
shall be held in escrow by the Grantor for and promptly paid over or delivered
to the Escrow Agent. All property, amounts and instruments received by the
Escrow Agent with respect to the Escrow Assets shall be promptly deposited in
the Operating Account and become part of the Escrow Estate.
Section 3.5 Payments to be made by Escrow Agent. All payments to be made by
-----------------------------------
the Escrow Agent under this Escrow Agreement shall be made only from the Escrow
Estate, and only to the extent that the Escrow Agent shall have received
sufficient funds from the
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Escrow Estate to make such payments in accordance with the terms hereof. The
Escrow Agent shall not be required to expend, advance, risk or disburse its own
funds in the administration of this Escrow. The Grantor and the Beneficiary, by
their execution of this Escrow Agreement, agree that they will look solely to
the Escrow Estate to the extent available for the distributions as herein
provided, and that neither the Escrow Agent (nor any Person acting as successor
Escrow Agent, co-escrow agent or separate Escrow Agent hereunder) shall under
any circumstances be personally liable to the Grantor, the Beneficiary or any
other Person for any liability under or in connection with this Escrow
Agreement, except in the case of willful misconduct, negligence or lack of good
faith on the part of the Escrow Agent.
Section 3.6 Voting Rights and Defense of Title of Collateral.
------------------------------------------------
(a) The Grantor agrees that it will not, without the prior written
consent of the Beneficiary, sell, assign or transfer and will not mortgage,
pledge or otherwise encumber or suffer to exist any Lien on or with respect to,
any of the Escrow Assets except in favor of the Escrow Agent as secured party
for the benefit of the Beneficiary.
(b) The Grantor agrees that it will warrant and defend the title of
the Escrow Assets and the interest of the Beneficiary therein against all claims
of all Persons (except with respect to claims made through the Beneficiary by
creditors of Beneficiary).
(c) So long as Escrow Assets remain in the Operating Account the
Escrow Agent and the Beneficiary shall have no voting rights with respect to
such Escrow Assets and the Grantor shall be entitled
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to exercise any and all voting and/or consensual rights and powers relating or
pertaining to such Escrow Assets or any part thereof for any purpose; provided,
however, that the Grantor shall not be permitted to exercise or refrain from
exercising any such right or power if, in the sole judgment of the Beneficiary,
such action would have a material adverse effect on the value of such Escrow
Assets or any part thereof or would violate this Escrow Agreement, it being
understood that the exercise by the Grantor of voting rights in connection with
the election of directors at any meeting of stockholders of any issuer of Escrow
Assets and/or with respect to any incidental matters coming before any such
meeting shall not be deemed to have a material adverse effect on the value of
the Escrow Assets within the meaning of this paragraph; and, provided, further,
-------- -------
that the Grantor shall give the Beneficiary at least five days' written notice
of the manner in which the Grantor intends to exercise any such right or power
other than with respect to the election of directors and voting with respect to
the incidental matters referred to in the preceding provisions of this
paragraph. The Escrow Agent shall have no duty or obligation to monitor or
enforce the provisions of this paragraph.
(d) The Escrow Agent shall execute and deliver (or cause to be
executed and delivered) to the Grantor all such proxies, powers of attorney, and
other instruments as the Grantor may reasonably request for the purpose of
enabling the Grantor to exercise the voting and/or consensual rights and powers
which the Grantor is entitled to exercise pursuant hereto.
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ARTICLE IV
DUTIES OF ESCROW AGENT
Section 4.1 Instructions of Beneficiary. Upon the instructions of the
---------------------------
Beneficiary, the Escrow Agent directly or through its authorized agent will take
such of the following actions as may be specified in such instructions: (i)
give such notice or direction, take such action or exercise such right, power or
remedy or perform such obligation, under and pursuant to the terms of this
Escrow Agreement or in respect of all or any part of the Escrow Estate, as shall
be specified in such instructions; and (ii) take such action to preserve and
protect the Escrow Estate (including the discharge of Liens) as may be specified
in such instructions.
Section 4.2 No Implied Duties. The Escrow Agent shall not have any duty or
-----------------
obligation to manage, control, use, sell, dispose of or otherwise deal with any
part of the Escrow Estate, or to otherwise take or refrain from taking any
action, except as expressly required by the terms of this Escrow Agreement or as
expressly provided in instructions from the Beneficiary received pursuant to and
in accordance with the terms of this Escrow Agreement, and no implied duties or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
Section 4.3 No Unauthorized Transactions. The Escrow Agent agrees that it will
----------------------------
not manage, control, use, sell, dispose of or otherwise deal with any part of
the Escrow Estate, or otherwise take or refrain from taking any action except as
expressly
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provided by the terms of, or in written instructions from the Beneficiary
pursuant to, this Escrow Agreement.
Section 4.4 Tax Returns. The Grantor shall be responsible for causing to be
-----------
prepared and filed in a timely fashion all tax returns of the Escrow relating to
the transactions contemplated by this Escrow Agreement or otherwise contemplated
hereby, and it shall send a copy of each such tax return to the Beneficiary.
The Escrow Agent, upon request, will furnish the Grantor with all such
information as it has in its possession and as may be reasonably required in
connection with the preparation of such tax returns and shall, upon request of
the Grantor, sign such returns if required to do so by the applicable taxing
authority. The Person acting as Escrow Agent shall not be personally liable for
any tax due and payable in connection with this Escrow Agreement.
Section 4.5 Books and Records of Escrow Agent. The Grantor and the
---------------------------------
Beneficiary, at their own expense, shall each have the right, at all reasonable
times during the Escrow Agent's normal business hours, to inspect and copy the
Escrow Agent's books and records regarding the Escrow Estate and to an
accounting (at the expense of the Grantor) with respect to the Escrow Estate.
Section 4.6 Valuation Report. The Valuation Report required under Section 2.3
----------------
of this Escrow Agreement is to be sent at the required intervals to:
For the Grantor: Ryder TRS, Inc.
One Civic Center
1560 Broadway, Suite 1800
Denver, Colorado 80202
Attn: Vice President & Treasurer
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For the Beneficiary: National Union Fire Insurance
Company of Pittsburgh, PA.
Post Office Box 923
Wall Street Station
New York, NY 10268
Attn: Insurance Security
Operations Department
With a Copy to: AIG Risk Management, Inc.
110 William Street - 9th floor
New York, NY 10038
Attn: Donald E. Freudenheim
ARTICLE V
THE ESCROW AGENT
Section 5.1 Acceptance of Escrow. The Escrow Agent accepts the Escrow hereby
--------------------
created and agrees to perform the same upon the terms and conditions contained
in this Escrow Agreement. Neither the Escrow Agent nor any Person acting as
successor Escrow Agent, co-escrow agent or separate Escrow Agent hereunder,
shall be answerable or accountable or liable for actions taken by it or failures
to act arising out of or in connection with this Escrow Agreement, except for
its own willful misconduct, negligence or lack of good faith. In no event shall
the Escrow Agent be liable for special, indirect or consequential loss or damage
of any kind whatsoever (including but not limited to lost profits), even if
Escrow Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action, unless such loss or damage is caused by the
Escrow Agent's willful misconduct, negligence or lack of good faith.
Section 5.2 Limitation of Duties. The Escrow Agent shall have no duty to see
--------------------
to the payment or discharge of any tax, assessment or other governmental charge
or any Lien with respect to, or assessed or levied against, any part of the
Escrow Estate.
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Notwithstanding the foregoing, the Escrow Agent will furnish to the Beneficiary,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Escrow Agent by the Grantor pursuant hereto or by any other
Person with respect to the Escrow Estate or any part thereof.
Section 5.3 Representations and Warranties of Escrow Agent. The Escrow Agent
----------------------------------------------
hereby represents and warrants to the Grantor and the Beneficiary that this
Escrow Agreement has been duly executed and delivered by one of its officers who
is duly authorized to execute and deliver such type of instrument.
Section 5.4 Segregation of Funds. Monies received by the Escrow Agent in
--------------------
respect of the Escrow Estate (other than pursuant to Section 5.7 hereof) shall
be segregated and promptly deposited in the Operating Account.
Section 5.5 Reliance on Documents; Agents. The Escrow Agent shall incur no
-----------------------------
liability to anyone in acting in reliance upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Escrow Agent
may for all purposes hereof rely on a certificate of a person reasonably
believed by it to be a President, Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or Secretary or Assistant Secretary of the
Grantor or the Beneficiary, as the case may be, as to such fact
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or matter, and such certificate shall constitute full protection to the Escrow
Agent for any action taken or omitted to be taken by it in good faith in
reliance thereon. In the administration of the Escrow hereunder, the Escrow
Agent may execute any of the escrows or powers hereof and perform its powers and
duties hereunder directly or through agents or attorneys and may, at the expense
of the Grantor, consult with counsel, accountants and other skilled Persons to
be selected and retained by it, and the Escrow Agent shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
advice or opinion of any such counsel, accountants or other skilled Persons.
Section 5.6 Limitation of Liability of Escrow Agent. Notwithstanding
---------------------------------------
anything to the contrary in this Escrow Agreement, the Escrow Agent is entering
into this Escrow Agreement, and in its capacity as Escrow Agent performing the
obligations and exercising the rights hereunder solely as Escrow Agent under
this Escrow Agreement, pursuant to instructions contained in this Escrow
Agreement and not in its individual or corporate capacity. In no case
whatsoever shall the Escrow Agent (or any entity acting as successor Escrow
Agent, co-escrow agent or separate Escrow Agent under this Escrow Agreement) be
personally liable on, or in respect of, any of the obligations or duties of the
Grantor, the Beneficiary under this Escrow Agreement, or for the payment of any
fee, expense, cost, damage, claim, liability or other obligation arising out of
or related to any of the foregoing (collectively, the "Escrow Obligations").
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No recourse shall be had against the Escrow Agent (or any successor Escrow
Agent, co-escrow agent or separate Escrow Agent under this Escrow Agreement) in
its corporate or individual capacities or against any stockholder, officer,
director, employee or agent of the Escrow Agent or any successor Escrow Agent,
co-escrow agent or separate Escrow Agent for the payment of any and all sums
payable under the Escrow Obligations or for any claim, liability, damage, cost,
expense, fee or other obligation based on or arising out of any provision
thereof or on or out of any of the instruments and agreements to be executed,
delivered and performed hereunder, as to all of which the Beneficiary and the
Grantor agree to look solely to the Escrow Estate, except for any loss caused by
the Escrow Agent's willful misconduct, negligence or lack of good faith. The
obligation of the Escrow Agent to make any and all payments hereunder, or in
respect of or under the Escrow Obligations of whatsoever nature, shall be solely
from the Escrow Estate, and nothing herein shall be deemed to impose obligations
on the Escrow Agent other than those expressly set forth in this Escrow
Agreement. The Escrow Agent shall have no responsibility to determine whether
the Escrow Assets in the Escrow Account are sufficient or proper to secure the
Grantor's liabilities under the Indemnity Agreement. The Beneficiary's
determination or reevaluation of the sufficiency of the Escrow Assets shall
govern. Except as otherwise provided in Sections 5.7 and 10.1 of this Escrow
Agreement, the Escrow Agent agrees that it shall have no right against the
Beneficiary or the Escrow Estate for any fee as
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compensation for its services hereunder or for any other costs or expenses
incurred by it pursuant hereto.
Section 5.7 The Escrow Agent's Compensation, Expenses and Indemnification.
-------------------------------------------------------------
The Grantor shall pay the Escrow Agent, as compensation for its services under
this Escrow Agreement, a fee of 12.5 basis points per annum on the higher of: 1)
the Market Value of Escrow Assets held on deposit on the first day of each
quarter; or 2) the Market Value of Escrow Assets held on deposit on the last day
of each quarter, billed quarterly in arrears. The Grantor shall pay or
reimburse the Escrow Agent for all of the Escrow Agent's expenses,
disbursements, and advances in connection with its duties under this Escrow
Agreement (including attorneys' and agents' fees, expenses, and disbursements),
except any such expense or disbursement as may arise from the Escrow Agent's
negligence, willful misconduct or lack of good faith. The Grantor also hereby
indemnifies the Escrow Agent for, and holds it harmless against, any loss,
liability, costs or expenses (including attorneys' and agents' fees, expenses,
and disbursements) incurred or made without negligence, willful misconduct or
lack of good faith on the part of the Escrow Agent, arising out of or in
connection with the performance of its obligations in accordance with the
provisions of this Escrow Agreement, including but without limitation, any loss,
liability, costs or expenses arising out of or in connection with the status of
the Escrow Agent and its nominee as the holder of record of the Escrow Assets.
The Grantor hereby acknowledges and agrees that the foregoing indemnities shall
survive the resignation or
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removal of the Escrow Agent or the termination of this Escrow Agreement.
No Escrow Assets shall be withdrawn from the Escrow or used in any
manner for paying compensation to, or reimbursement or indemnification of, the
Escrow Agent; provided, however if the Escrow exceeds 102% of the Required
Reserve, then the Escrow Agent and/or AIGRM may withdraw from the Escrow their
compensation, reimbursement and indemnification as the case may be which have
not previously been paid. The Escrow Agent's compensation, reimbursement and
indemnification shall be withdrawn prior to that of AIGRM.
ARTICLE VI
TRANSFER OF BENEFICIARY'S INTEREST
Section 6.1 Transfer of Interest. The Beneficiary may assign to another
--------------------
Person (hereinafter referred to as the "Transferee") all, but not part, of its
right, title and interest in, to and under this Escrow Agreement; provided that
(i) the Transferee shall have the requisite power and authority to enter into
and carry out the transactions contemplated hereby, (ii) the Transferee shall
have entered into an agreement, in form and substance satisfactory to the Escrow
Agent and the Grantor, whereby the Transferee confirms that it shall be deemed a
party to this Escrow Agreement, agrees to be bound by all of the terms of, and
to undertake all of the obligations of the Beneficiary contained in this Escrow
Agreement, and (iii) such transfer shall not violate any provision of any
applicable law, agreement or other instrument or create a relationship which
would result in
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violation thereof. Upon any such transfer by the Beneficiary to a Transferee as
above provided, such Transferee shall be deemed to be the Beneficiary for all
purposes of this Escrow Agreement and each reference herein to the Beneficiary
shall thereafter be deemed to be a reference to such Transferee.
Section 6.2 Notice of Assignment by Beneficiary. If the Beneficiary proposes
-----------------------------------
to assign its interest pursuant to this Article VI, it shall give written notice
to the Escrow Agent and the Grantor at least thirty (30) days prior to such
proposed assignment stating (i) the name and address of the proposed Transferee
and (ii) that the proposed Transferee meets the requirements set forth in
Section 6.1 of this Escrow Agreement.
ARTICLE VII
SUCCESSOR ESCROW AGENTS; CO-ESCROW AGENTS
Section 7.1 Successor Escrow Agents; Co-escrow agents.
-----------------------------------------
(a) The Escrow Agent, any co-escrow agent or any successor Escrow
Agent may resign at any time without cause by giving at least ninety (90) days'
prior written notice to the Grantor and the Beneficiary, such resignation to be
effective upon the acceptance of appointment by the successor Escrow Agent and
the transfer of the Escrow Assets to the successor Escrow Agent under Section
7.1(b) hereof. In addition, the Beneficiary may remove the Escrow Agent without
cause by a written notice delivered to the Grantor and to the Escrow Agent, such
removal to be effective upon the acceptance of appointment by the successor
Escrow Agent and the transfer of the Escrow Assets to the successor Escrow Agent
under Section 7.1(b) hereof. In the case of the
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resignation or removal of the Escrow Agent, the Beneficiary may appoint a
successor Escrow Agent, designated by the Beneficiary and satisfactory to the
Grantor, by an instrument signed by the Grantor and the Beneficiary. If a
successor Escrow Agent shall not have been appointed within ninety (90) days
after such notice of resignation or removal, the Escrow Agent and the
Beneficiary may apply to any court of competent jurisdiction to appoint a
successor Escrow Agent to act until such time, if any, as a successor shall have
been appointed as above provided. Any successor Escrow Agent so appointed by
such court shall immediately and without further act be superseded by any
successor Escrow Agent appointed as above provided within one year from the date
of the appointment by such court.
(b) Any successor Escrow Agent, however appointed, shall execute and
deliver to the predecessor Escrow Agent, the Grantor and the Beneficiary an
instrument accepting such appointment, and thereupon such successor Escrow
Agent, without further act, shall become vested with all the estates,
properties, rights, powers, duties and escrows of the predecessor Escrow Agent
hereunder with like effect as if originally named the Escrow Agent herein; but
nevertheless, upon the written request of such successor Escrow Agent, such
predecessor Escrow Agent shall execute and deliver an instrument or instruments
transferring to such successor Escrow Agent, upon the escrows herein expressed,
all the estates, properties, rights, powers and escrows of such predecessor
Escrow Agent, and such predecessor Escrow Agent shall assign, transfer, deliver
and pay over to such successor Escrow Agent all Escrow
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Assets then held by such predecessor Escrow Agent upon the escrows herein
expressed. Upon the appointment of any successor Escrow Agent hereunder, the
predecessor Escrow Agent will complete, execute and deliver to the successor
Escrow Agent such documents as are necessary to effectuate the transfer of legal
title to all Escrow Assets into the name of the successor Escrow Agent.
Notwithstanding anything expressed herein to the contrary, the predecessor
Escrow Agent shall continue, after its resignation, to be entitled to the
benefits of any indemnities provided herein for the Escrow Agent.
(c) Any successor Escrow Agent, however appointed, shall be a bank or
escrow company in good standing and organized and doing business under the laws
of the United States of America or of any state thereof, and with a combined
capital and surplus of at least $100,000,000, if there be such an institution
willing, able and legally qualified to perform the duties of the Escrow Agent
hereunder upon reasonable or customary terms, and which is a corporation
authorized under the laws of its jurisdiction of incorporation to exercise
corporate escrow powers and is subject to supervision or examination by Federal
or state authority, and the appointment of any successor Escrow Agent shall not
violate any provision of any law or regulation or create a relationship which
would be in violation thereof.
(d) Any corporation into which the Escrow Agent in its individual
capacity may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Escrow Agent in
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its individual capacity shall be a party, or any corporation to which
substantially all the corporate escrow business of the Escrow Agent in its
individual capacity may be transferred, shall, subject to the terms of paragraph
(c) of this Section 7.1, be the Escrow Agent under this Escrow Agreement without
further act.
(e) At any time or times, for the purpose of conforming to any legal
requirements, restrictions or conditions in any state or jurisdiction in which
any part of the Escrow Estate may be located, the Escrow Agent shall have power
to appoint, and, upon the written request of the Escrow Agent, the Grantor and
the Beneficiary shall for such purpose join with the Escrow Agent in the
execution, delivery and performance of, all instruments and agreements necessary
or proper to appoint, another corporation or one or more Persons approved by the
Beneficiary, either to act as separate Escrow Agent or Escrow Agents, or co-
escrow agent or co-escrow agents jointly with the Escrow Agent, of all or any of
the Escrow Estate. In the event that the Grantor and the Beneficiary shall not
have joined in such appointment within fifteen (15) days after the receipt by it
of a request so to do, the Escrow Agent alone shall have power to make such
appointment.
Every separate Escrow Agent, every co-escrow agent and every successor
of either thereof shall, to the extent permitted by law, but to such extent
only, be appointed subject to the following provisions and conditions, namely:
(1) The rights, powers, duties and obligations conferred or imposed
upon Escrow Agents hereunder or any of them shall be
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conferred or imposed upon and exercised or performed by the Escrow Agent and
such separate Escrow Agent or separate Escrow Agents or co-escrow agent or co-
escrow agents jointly, as shall be provided in the instruments and agreements
appointing such separate Escrow Agent or separate Escrow Agents or co-escrow
agent or co-escrow agents, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the Escrow
Agent shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations shall be exercised and
performed by the separate Escrow Agent or separate Escrow Agents or co-escrow
agent or co-escrow agents, as the case may be;
(2) The Escrow Agent at any time by an instrument in writing executed
by it may accept the resignation of or remove any separate Escrow Agent or co-
escrow agent appointed under this paragraph (e) or otherwise, and, upon the
request of the Escrow Agent, the Grantor and the Beneficiary shall, for such
purpose, join with the Escrow Agent in the execution, delivery and performance
of all instruments and agreements necessary or proper to make effective such
resignation or removal. In the event that the Grantor and the Beneficiary shall
not have joined in such action within fifteen (15) days after the receipt by
them of a request to do so, the Escrow Agent alone shall have power to accept
such resignation or to remove any such separate Escrow Agent or co-escrow agent.
A successor to a separate Escrow Agent or co-escrow agent so resigned or removed
may be appointed in the manner provided in this Article VII;
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(3) The Escrow Agent shall not be personally liable by reason of any
act or omission of any other Escrow Agent hereunder, it being understood,
however, that if a co-escrow agent or separate Escrow Agent is an employee of
the Escrow Agent, the Escrow Agent shall be liable for any willful misconduct,
negligence or lack of good faith on the part of such co-escrow agent or separate
Escrow Agent;
(4) Any notice, request or other writing delivered to the original
Escrow Agent, or its successor in the escrow hereunder, shall be deemed to have
been delivered to all of the then Escrow Agents or co-escrow agents as
effectually as if delivered to each of them. Every instrument appointing any
Escrow Agent or Escrow Agents other than a successor to the original Escrow
Agent shall refer to this Escrow Agreement and the conditions in this Section
7.1(e) expressed, and upon the acceptance in writing by such Escrow Agent or
Escrow Agents or co-escrow agent or co-escrow agents, he, they or it shall be
vested with the estates or property specified in such instrument, either jointly
with the original Escrow Agent, or its successor, or separately, as may be
provided therein, subject to all the terms, conditions and provisions of this
Escrow Agreement; and every such instrument shall be filed with the original
Escrow Agent or its successor in the escrow hereunder. Any separate Escrow Agent
or Escrow Agents or any co-escrow agent or co-escrow agents may at any time by
an instrument in writing constitute the original Escrow Agent or its successor
in the escrow hereunder his, their or its agent or attorney in fact, with full
power and authority, to the extent
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which may be permitted by law, to do any and all acts and things and exercise
any and all discretion authorized or permitted by him, them or it, for and in
behalf of him, them or it, and in his, their or its name. In case any separate
Escrow Agent or Escrow Agents or co-escrow agent or co-escrow agents, or a
successor to any of them, shall die, dissolve, or otherwise become incapable of
acting, resign or be removed, all the estates, property, rights, powers,
escrows, duties and obligations of said separate Escrow Agent or co-escrow
agent, so far as permitted by law, shall vest in and be exercised by the
original Escrow Agent or its successor in the escrow hereunder, without the
appointment of a new Escrow Agent as successor to such separate Escrow Agent or
co-escrow agent; and
(5) Any and all exculpatory provisions, immunities and indemnities
in favor of the Escrow Agent under this Escrow Agreement or under any other
agreement, document or instrument described or referred to herein shall inure to
the benefit of the Escrow Agent in its capacity as such and any successor, co-
escrow agent and separate Escrow Agent appointed pursuant to this Article VII
and of any Person acting or which has acted as Escrow Agent or successor, co-
escrow agent or separate Escrow Agent hereunder or thereunder.
ARTICLE VIII
TERMINATION; VALIDITY OF SALE
Section 8.1 Termination. Except as otherwise provided herein, this Escrow
-----------
Agreement and the escrows created hereby shall terminate and this Escrow
Agreement shall be of no further force
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or effect upon the Escrow Agent's receipt of written notice of such termination
from the Grantor and the Beneficiary and upon the sale or other final
disposition by the Escrow Agent of all property constituting part of the Escrow
Estate and the final distribution by the Escrow Agent of all monies or other
property or proceeds constituting the Escrow Estate; provided, however, in no
-------- -------
case shall the escrows created hereby extend beyond 21 years after the death of
the last surviving of the now living lineal descendants of the late Robert F.
Kennedy, former Attorney General of the United States. Upon termination of the
Escrow Account, all assets not previously withdrawn by the Beneficiary shall,
with written approval of the Beneficiary, be delivered over to the Grantor.
Otherwise this Escrow Agreement and the escrows created hereby shall continue in
full force and effect in accordance with the terms hereof.
Section 8.2 Validity of Sale. Any sale or other conveyance of the Escrow
----------------
Assets or any other part of the Escrow Estate by the Escrow Agent made pursuant
to the terms of this Escrow Agreement shall bind the Grantor and the Beneficiary
and shall be effective to transfer or convey all right, title and interest of
the Escrow Agent, the Grantor and the Beneficiary in and to such Escrow Assets
or such other part of the Escrow Estate. No purchaser or other grantee shall be
required to inquire as to the authorization, necessity, expediency or regularity
of such sale or conveyance or as to the application of any sale or other
proceeds with respect thereto by the Escrow Agent.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF GRANTOR
Section 9.1 Representations and Warranties of Grantor.
-----------------------------------------
The Grantor hereby represents and warrants to the Escrow Agent and Beneficiary
that:
(a) This Escrow Agreement has been duly and validly executed and
delivered by the Grantor and constitutes the legal, valid, binding and
enforceable obligation of the Grantor, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally.
(b) The execution, delivery and performance by the Grantor of this
Escrow Agreement, and the transfer and conveyance of Escrow Assets by the
Grantor pursuant hereto, do not and will not (i) violate or conflict with any of
its charter documents or any provision of any material law, rule, regulation,
order, writ, judgment, decree, determination or award presently in effect having
applicability to the Grantor, or (ii) result in a breach of or constitute a
default under any material indenture or loan or credit agreement, or any other
agreement or instrument, to which the Grantor is a party or by which the Grantor
or any of its properties may be bound or affected.
(c) The Grantor hereby represents and warrants (i) that any assets
transferred by the Grantor to the Escrow Agent for deposit to the Escrow Account
will be in such form that the Beneficiary whenever necessary may, and the Escrow
Agent upon direction by the Beneficiary will, negotiate any such assets without
consent
33
<PAGE>
or signature from the Grantor or any Person in accordance with the terms of this
Escrow Agreement; (ii) that all assets transferred by the Grantor to the Escrow
Agent for deposit to the Escrow consist only of Qualified Assets; and (iii) that
the Grantor will, upon demand, transfer sufficient Qualified Assets to the
Escrow so that after the transfer the value of the Escrow will equal the
Required Reserve.
(d) No material authorization, consent, approval, license,
qualification or formal exemption from, nor any material filing, declaration or
registration with, any court, governmental agency or regulatory authority, or
with any securities exchange or any other Person is required in connection with
(i) the execution, delivery or performance by the Grantor of this Escrow
Agreement or (ii) the transfer and conveyance of the Escrow Assets by the
Grantor in the manner and for the purpose contemplated by this Escrow Agreement.
(e) At the date of each delivery by the Grantor to the Escrow Agent of
each certificate, instrument or other document representing or evidencing the
Escrow Assets, the Escrow Agent will then have good and marketable title to,
such Escrow Assets, free and clear of all liens.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF BENEFICIARY
Section 10.1 Representations and Warranties of Beneficiary. The Beneficiary
---------------------------------------------
hereby represents and warrants to the Escrow Agent and Grantor that:
34
<PAGE>
(a) This Escrow Agreement has been duly and validly executed and
delivered by the Beneficiary and constitutes the legal, valid and binding and
enforceable obligation of the Beneficiary, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally.
(b) The Beneficiary shall undertake to apply any amounts distributed
to it from the Escrow Estate to pay or reimburse itself for the Grantor's
Obligations.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. Unless otherwise provided in this Escrow Agreement,
-------
all notices, directions, requests, demands, acknowledgments and other
communications required or permitted to be given or made under the terms hereof
shall be in writing and shall be deemed to have been duly given or made (a)(i)
when delivered personally or by courier service, (ii) when made or given by
prepaid telex, telegraph or facsimile transmissions, or (iii) in the case of
mail delivery, upon the expiration of three days after any such notice,
direction, request, demand, acknowledgment or other communication shall have
been deposited in the United States mail for transmission by first class mail,
postage prepaid, or upon receipt thereof, whichever shall first occur and (b)
when addressed as follows:
35
<PAGE>
If to the Grantor:
Ryder TRS, Inc.
One Civic Center
1560 Broadway, Suite 1800
Denver, Colorado 80202
Attn: Vice President & Treasurer
Telephone #: (303) 376-7103
Facsimile #: (303) 376-0776
If to the Beneficiary:
NATIONAL UNION FIRE INSURANCE COMPANY
OF PITTSBURGH, PA.
110 William Street/9th floor
New York, NY 10038
Attn: Donald E. Freudenheim
Telephone #: (212) 266-5567
Facsimile #: (212) 962-8003
cc: AIG RISK MANAGEMENT, INC.
160 Water Street/24th floor
New York, NY 10038
Attn: General Counsel
Telephone #: (212) 820-4545
Facsimile #: (212) 820-4547
If to the Escrow Agent:
THE CHASE MANHATTAN BANK
450 West 33rd Street, 15th floor
New York, NY 10001
Attention: Escrow Administration
Telephone #: (212) 946-3290
Facsimile #: (212) 946-8156
Each party may from time to time designate a different address for
notices, directions, requests, demands, acknowledgments and other communications
by giving written notice of such change to the other parties. All notices,
directions, requests, demands, acknowledgments and other communications relating
to the Beneficiary's approval of the Grantor's authorization to substitute
Escrow Assets, withdrawals by the Beneficiary and to the termination of the
Escrow shall be in
36
<PAGE>
writing and may not be made or given by prepaid telex, telegraph or facsimile
transmission.
Section 11.2 Severability. Any provision of this Escrow Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.3 Modifications. No term or provision of this Escrow Agreement
-------------
may be changed, amended, waived, discharged or terminated orally, but only by an
instrument in writing signed by all of the parties; and any waiver of the terms
hereof shall be effective only in the specific instance and for the specific
purpose given.
Section 11.4 Counterparts. This Escrow Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 11.5 Entire Agreement. This Escrow Agreement constitutes the entire
----------------
agreement among the parties, and any understandings or agreements, conditions or
qualifications relative to this Escrow Agreement and accepted by the parties,
which are not fully expressed in this Escrow Agreement are merged herein.
37
<PAGE>
Section 11.6 Benefits of Agreements. All covenants and agreements contained
----------------------
herein shall be binding upon, and inure to the benefit of, the Grantor, the
Escrow Agent and, to the extent provided in Article VII hereof, its respective
successors and assigns; provided, however, that the Grantor may not assign its
rights or obligations hereunder or in connection herewith (voluntarily, by
operation of law or otherwise). Any request, notice, direction, consent, waiver
or other instrument or action by the Grantor or the Beneficiary shall bind the
successors and assigns of the Grantor or the Beneficiary, as the case may be.
Nothing in this Escrow Agreement, whether express or implied, shall be construed
to give to any Person other than the Escrow Agent, the Grantor or the
Beneficiary any legal or equitable right, remedy or claim under or in respect of
this Escrow Agreement; but this Escrow Agreement shall be held to be for the
sole and exclusive benefit of the Escrow Agent, the Grantor and the Beneficiary.
Section 11.7 Headings. The headings of the various Sections and the table of
--------
contents herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 11.8 Dealings by Escrow Agent. The Escrow Agent in its individual
------------------------
capacity or any corporation in or with which the Escrow Agent in its individual
capacity or its stockholders may be interested or affiliated or any officer or
director of the Escrow Agent in its individual capacity or of any other such
corporation or any agent appointed by the Escrow Agent may have
38
<PAGE>
commercial relations and otherwise deal with the Grantor and the Beneficiary or
with any other corporation having relations with the Grantor or the Beneficiary,
and with any other corporation or entity, whether or not affiliated with the
Escrow Agent.
Section 11.9 Governing Law. This Escrow Agreement shall in all respects be
-------------
governed by, and construed in accordance with, the laws of the State of New
York, including all matters of construction, validity and performance, without
regard to principles of conflicts of law. It is the intention of the parties
hereto that this Escrow Agreement shall be delivered in the State of New York,
County of New York.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
GRANTOR:
RYDER TRS, INC.
BY: /s/ Steven R. Danton
--------------------------------
TITLE: Vice President and Treasurer
-----------------------------
ESCROW AGENT:
THE CHASE MANHATTAN BANK
/s/ John Sciacchitano
-----------------------------------
BY: John Sciacchitano
--------------------------------
TITLE: Vice President
-----------------------------
BENEFICIARY:
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA.
on behalf of itself and other American
International Companies first listed above
BY: /s/ Arthur Boynton
--------------------------------
TITLE: Attorney-in-fact
-----------------------------
40
<PAGE>
EXHIBIT A
---------
INITIAL ESCROW ASSETS
---------------------
RYDER TRS/NATIONAL UNION 1997 ESCROW
------------------------------------
1.) Cash in the amount of $19 Million
---------------------------------
<PAGE>
ADDENDUM #1
to
INDEMNITY AGREEMENT ESCROW AGREEMENT
among
RYDER TRS, INC.
(hereinafter called the "Grantor")
and
THE CHASE MANHATTAN BANK
(hereinafter called the "Escrow Agent")
and
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. on behalf of itself and
other American International Group Companies including but not limited to:
AMERICAN HOME ASSURANCE COMPANY, THE INSURANCE COMPANY OF THE STATE OF
PENNSYLVANIA, COMMERCE AND INDUSTRY INSURANCE COMPANY, AIU INSURANCE COMPANY,
BIRMINGHAM FIRE INSURANCE COMPANY OF PENNSYLVANIA, ILLINOIS NATIONAL INSURANCE
CO., AMERICAN GLOBAL INSURANCE COMPANY, NATIONAL UNION FIRE INSURANCE COMPANY OF
LOUISIANA, LANDMARK INSURANCE COMPANY (hereinafter collectively called the
"Beneficiary")
The Indemnity Agreement Escrow Agreement (herein called the "Indemnity
Agreement Escrow Agreement") dated as of December 29, 1997 among the
Beneficiary, Grantor and Escrow Agent is hereby amended in the following
respects:
ARTICLE I
Section 1.1
1) In Article I, Section 1.1, the definition of "Market Value" is deleted and
------------
replaced with the following definition:
"Market Value" means the value, as of the time any determination thereof is
------------
to be made (1) with respect to Cash, the dollar amount thereof; (2) with respect
to United States government obligations or obligations of any agency or
instrumentality of the United States government, the bid price as
<PAGE>
provided by the pricing service then currently utilized by the Escrow Agent or,
if not so provided, the average bid price obtained from two nationally
recognized government securities firms making a market in the issue; (3) with
respect to obligations of institutions, or other investments pre-approved in
writing by the Beneficiary, the closing price as provided by the pricing service
then currently utilized by the Escrow Agent or, if not so provided, the average
bid price obtained from two major brokerage firms making a market in the issue,
or, if no average bid price can be obtained, the fair market value as determined
by an independent third party, or the Escrow Agent, as approved by the
Beneficiary; (4) with respect to certificates of deposit or commercial paper,
the face value thereof; and (5) with respect to mutual funds, the net asset
value per share thereof.
2) The following is added to Section 2.4 of Article II:
"Furthermore, payments of any such interest, dividends, or other income
realized from such investments (and the manner of such payments) are subject to
the prior written approval of the Beneficiary, which approval shall not be
unreasonably withheld."
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
RYDER TRS, INC.
BY: /s/ Steven R. Davison
--------------------------------
TITLE: Vice President and Treasurer
-----------------------------
THE CHASE MANHATTAN BANK
BY: /s/ John Sciacchitano
--------------------------------
TITLE: Vice President
-----------------------------
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA.
on behalf of itself and other American
International Companies first listed above
BY: /s/ Arthur Boynton
--------------------------------
TITLE: Attoney-in-fact
-----------------------------
<PAGE>
EXHIBIT 10.32
December 9, 1997
Mr. Michael A. Zawalski
Chief Financial Officer
Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, CO 80202
Re: Restructuring and Turnaround Services
Dear Mr. Zawalski:
This letter outlines the understanding effective July 1, 1997 between Jay Alix &
Associates, a Michigan corporation ("JA&A") and Ryder TRS, Inc. (the "Company")
of the objective, tasks, work product and fees for the engagement of JA&A to
provide financial consulting services to the Company.
OBJECTIVE
. Assist the Company and its owners to improve the operating performance of
Ryder TRS.
TASKS
. Ron Rittenmeyer to serve as Acting President and Chief Operating Officer,
reporting to the Board of Directors through the Office of the Chairman.
. Joe Szmadzinski to serve as Interim Chief Information Officer, reporting to
Rittenmeyer.
. Assist management in making a full review of all financial and operating
procedures and controls to determine their adequacy, and in implementing
improvements as may be necessary.
. Assist in other matters as may be mutually agreed upon.
WORK PRODUCT
Our work product will be in the form of:
. Information to be discussed with you and others, as you may direct.
. Written reports and analysis worksheets to support our suggestions as we deem
necessary or as you may request.
<PAGE>
Mr. Michael A. Zawalski
December 9, 1997
Page 2
STAFFING
Ron Rittenmeyer is the principal responsible for the overall engagement. He is
being assisted by a staff of consultants at various levels, all of whom have a
wide range of skills and abilities related to this type of assignment. In
addition, we have relationships with and periodically retain independent
contractors with specialized skills and abilities to assist us. Rittenmeyer
understands the Company's need to recruit its own staff and not rely on
consultants to provide basic business functions. Based upon tasks to be
completed and the Company's current staffing levels, however, at least for a
time, Rittenmeyer will require a number of JA&A to assist him with this
engagement.
ENGAGEMENT LETTER DATED OCTOBER 15, 1996
The Company entered into an engagement letter with JA&A dated October 15, 1996.
Such engagement is hereby terminated by mutual agreement effective June 30,
1997, and the engagement covered by this letter commenced on July 1, 1997.
Those sections of the engagement letter dated October 15, 1996 that survive the
termination of the engagement shall survive and are not affected by this
stipulated engagement conclusion. It is agreed that no Contingent Success Fee
shall be payable under the October 15, 1996 engagement letter notwithstanding
the Company's financial results in 1997 or 1998. The Contingent Success Fee
provided for in this letter agreement shall be the only such fee which may
become payable to JA&A.
TIMING FEES AND EXPENSES
JA&A shall use the $250,000 retainer from our engagement letter dated October
15, 1996 as a retainer for this engagement.
This engagement will be staffed full time by Rittenmeyer and other JA&A staff
who will be invoiced to the Company based on the hours they work on Ryder TRS.
Rates will be as follows:
STAFF RATE
- ---------------------------------------------------------------
Ron Rittenmeyer $425 per hour worked
- ---------------------------------------------------------------
Joe Szmadzinski $425 per hour worked
- ---------------------------------------------------------------
Al Koch $238 per hour worked
- ---------------------------------------------------------------
Other JA&A Principals Not more than $425 per hour
worked
- ---------------------------------------------------------------
Senior Associates Not more than $325 per hour
worked
- ---------------------------------------------------------------
Associates Not more than $225 per hour
worked
- ---------------------------------------------------------------
It is understood that JA&A staff member Rittenmeyer will devote substantially
full time to the Ryder TRS engagement. However, the Company acknowledges that
he has a number of other responsibilities within JA&A and will, from time to
time, need to attend to those responsibilities.
<PAGE>
Mr. Michael A. Zawalski
December 9, 1997
Page 3
Additionally, full time assigned staff will periodically take time away from the
Company because of illness, vacation or holidays, all of which shall be taken in
accordance with JA&A policies.
Joe Szmadzinski will continue to assist the Company with its information systems
projects on an as needed basis; additionally, he is serving as the Company's
Acting Chief Information Officer pending recruitment of a full-time person in an
executive search that is already in process. His time will be charged to the
Company based upon actual hours worked.
Al Koch will assist Rittenmeyer as appropriate or as requested by the Company.
At the present time, there are a number of other JA&A staff who are involved in
assisting with a number of other projects that are designed to help improve
operational controls and accountability. They represent staff that will be used
only until a permanent replacement is hired or their projects come to
completion. These projects are being reported on in regular Management Meetings
which include one or more members of the Company's Board of Directors in
attendance.
In addition to the fees set forth above, the Company shall pay directly or
reimburse JA&A upon receipt of periodic billings, for all reasonable out-of-
pocket expenses incurred in connection with this assignment such as travel,
lodging, postage, telephone and facsimile charges.
As noted we will require a retainer of $250,000 to be applied against the time
charges, excluding expenses, specific to the engagement; such retainer has been
applied from our engagement letter dated October 15, 1996 as previously
described. We will submit monthly invoices for services rendered and expenses
incurred as described above, and we will offset such invoices against the
retainer. Payment will be due upon receipt of the invoices to replenish the
retainer to the agreed upon amount. Any unearned portion of the retainer will
be returned to you at the termination of the engagement.
CONTINGENT SUCCESS FEE
The Company is undertaking a number of important tasks in which JA&A staff are
expected to play a key role. If these actions are deemed to be successful by
the Company's Board of Directors, then we will ask the Board to consider paying
JA&A an additional contingent success fee. Whether or not to award such a
contingent success fee and the amount, if any, of such fee shall be at the sole
discretion of the Company's Board of Directors.
RELATIONSHIP OF THE PARTIES
The parties intend that an independent contractor relationship will be created
by this agreement. JA&A is not to be considered an employee or agent of the
Company and the employees of JA&A are not entitled to any of the benefits that
the Company provides for the Company's employees.
<PAGE>
Mr. Michael A. Zawalski
December 9, 1997
Page 4
The Company also agrees not to solicitor recruit any employees or agents of JA&A
without JA&A's prior written consent for a period of two years subsequent to the
completion and/or termination of this agreement.
CONFIDENTIALITY
JA&A agrees to keep confidential all information obtained from the Company.
JA&A agrees that neither it nor its directors, officers, principals, employees,
agents or attorneys will disclose to any other person or entity, or use for any
purpose other than specified herein, any information pertaining to the Company
or any affiliate thereof which is either non-public, confidential or proprietary
in nature ("Information") which it obtains or is given access to during the
performance of the services provided hereunder. JA&A may make reasonable
disclosures of Information to third parties in connection with their performance
of their obligations and assignments hereunder. In addition, JA&A will have the
right to disclose to others in the normal course of business its involvement
with the Company.
Information includes data, plans, reports, schedules, drawings, accounts,
records, calculations, specifications, flow sheets, computer programs, source or
object codes, results, models, or any work product relating to the business of
the Company, its subsidiaries, distributors, affiliates, vendors, customers,
employees, contractors and consultants.
The Company acknowledges that all advice (written or oral) given by JA&A to the
Company in connection with JA&A's engagement is intended solely for the benefit
and use of the Company (limited to its management) in considering the
transactions to which it relates. The Company agrees that no such advice shall
be used for any other purpose or reproduced, disseminated, quoted or referred to
at any time in any manner or for any purpose other than accomplishing the tasks
and programs referred to herein or in discussions with the Company's lenders or
debt holders, without JA&A's prior approval (which shall not be unreasonably
withheld) except as required by law. This agreement will survive the
termination of the engagement.
FRAMEWORK OF THE ENGAGEMENT
The Company acknowledges that it is hiring JA&A purely to assist and advise the
Company in business management, planning and restructuring. JA&A's engagement
shall not constitute an audit, review or compilation, or any other type of
financial statement reporting engagement that is subject to the rules of the
AICPA or other such state and national professional bodies.
INDEMNIFICATION OF JA&A
In engagements of this nature where we act as managers and consultants, it is
our practice to receive indemnification. Accordingly, in consideration of our
agreement to act on your behalf in connection with this engagement, you agree to
indemnify, hold harmless, and defend us (including our principals, employees and
agents) from and against all claims, liabilities, losses, damages and reasonable
expenses as they are incurred, including reasonable legal fees and disbursements
of
<PAGE>
Mr. Michael A. Zawalski
December 9, 1997
Page 5
counsel, and the costs of our professional time (our professional time will
be reimbursed at our rates in effect when such future time is required),
relating to or arising out of the engagement, including any legal proceeding in
which we may be required or agree to participate but in which we are not a
party. We, our principals, employees and agents may, but are not required to,
engage a single firm of separate counsel of our choice in connection with any of
the matters to which this indemnification agreement relates. This
indemnification agreement does not apply to actions taken or omitted to be taken
by us in bad faith.
INDEMNIFICATION OF OFFICERS
In addition to the foregoing indemnification, Ron Rittenmeyer and Joe
Szmadzinski shall be deemed to be officers of the Company and shall, along with
other JA&A personnel who serve as officers of the Company, be individually
covered by the same indemnification and directors' and officers' liability
insurance as is applicable to other officers of the Company.
TERMINATION AND SURVIVAL
The agreement may be terminated at any time by written notice by one party to
the other; provided, however, that notwithstanding such termination JA&A will be
entitled to any fees and expenses due under this agreement's provisions. Such
payment obligation shall inure to the benefit of any successor or assignee of
JA&A.
The obligations of the parties under the Indemnification of JA&A,
Indemnification of Officers, and Confidentiality sections of this agreement
shall survive the termination of the agreement as well as the other sections of
this agreement which expressly provide that they shall survive termination of
this agreement.
GOVERNING LAW
This letter agreement is governed by and construed in accordance with the laws
of the State of Michigan with respect to contracts made and to be performed
entirely therein and without regard to choice of law or principles thereof.
CONFLICTS
We know of no fact or situation which would represent a conflict of interest for
us with regard to the Company. We do wish to disclose the following
information:
. All of the principals of JA&A, including Jay Alix, the Managing General
Partner of Questor Partners Fund, L.P. own general and/or limited partnership
interests in Questor Partners Fund, L.P. or Questor Side-by-Side Partners,
L.P., a related entity.
<PAGE>
Mr. Michael A. Zawalski
December 9, 1997
Page 6
. Chase Bank, a lender to the Company and one of the equity investors in the new
entity, is also a limited partner of Questor and with whom the Company has a
number of contractual relationships is presently a client of JA&A. Work on the
engagement is currently on-going.
SEVERABILITY
If any portion of the letter agreement shall be determined to be invalid or
unenforceable, we each agree that the remainder shall be valid and enforceable
to the maximum extent possible.
ENTIRE AGREEMENT
All of the above contains the entire understanding of the parties relating to
the services to be rendered by JA&A and may not be amended or modified in any
respect except in writing signed by the parties. JA&A will not be responsible
for performing any services not specifically described in this letter or in a
subsequent writing signed by the parties.
NOTICES
All notices required or permitted to be delivered under this letter agreement
shall be sent, if to us, to the address set forth at the head of this letter, to
the attention of Mr. Melvin R. Christiansen, and if to you, to the address for
you set forth above, to the attention of your General Counsel, or to such other
name or address as may be given in writing to the other party. All notices
under the agreement shall be sufficient if delivered by facsimile or overnight
mail. Any notice shall be deemed to be given only upon actual receipt.
If these terms meet with your approval, please sign and return the enclosed copy
of this proposal.
We look forward to working with you.
Sincerely yours,
JAY ALIX & ASSOCIATES
/s/
A. A. Koch
Managing PrincipalAcknowledged and Agreed to:
RYDER TRS, INC.
By: /s/ Michael A. Zawalski
---------------------------------
Its: Chief Financial Officer
-----------------------------
<PAGE>
Mr. Michael A. Zawalski
December 9, 1997
Page 7
Dated:
-------------------------------
<PAGE>
EXHIBIT 10.33
LETTER OF CREDIT AGREEMENT dated as of August 7, 1997
(this "Agreement"), between RYDER TRS, INC. a Delaware
corporation (the "Account Party") and CITIBANK, N.A., a
national banking corporation, as Issuing Bank.
A. The Account Party has requested, and the Issuing Bank has agreed, upon
the terms and subject to the conditions set forth or referred to herein, that
letters of credit be issued, in an aggregate face amount at any time outstanding
not in excess of $50,000,000, to support payment obligations incurred in the
ordinary course of business by the Account Party.
B. Accordingly, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein
shall have the meanings assigned to such terms in the Credit Agreement dated as
of October 17, 1996, as amended and restated as of August 7, 1997, among the
Account Party, the lenders defined therein, Citicorp USA, Inc., as
administrative agent and as collateral agent, and The Chase Manhattan Bank, as
documentation agent (the "Restated Credit Agreement").
"Cash Collateral Account" shall have the meaning assigned to such term in
Section 2(h).
"Effective Date" shall mean August 8, 1997.
"Existing Letter of Credit" shall mean each letter of credit that is
outstanding on the Effective Date listed on Schedule I hereto.
"Issuing Bank" shall mean Citibank, N.A. or any Affiliate designated by it
and reasonably acceptable to the Account Party.
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.
"L/C Commitment Fee" shall have the meaning assigned to such term in
Section 3.
"L/C Disbursement" shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time.
"L/C Fee" shall have the meaning assigned to such term in Section 3.
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2 and shall include each Existing Letter of Credit.
SECTION 2. Letters of Credit. (a) General. The Account Party may request
the issuance of a Letter of Credit for its own account, in a form reasonably
acceptable to the Issuing Bank, at any time and from time to time while the L/C
Commitment remains in effect. This Section shall not be construed to impose an
obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.
<PAGE>
2
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the Account Party shall hand deliver or
telecopy to the Issuing Bank (no less than five days in advance of the requested
date of issuance, amendment, renewal or extension) a notice requesting the
issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to expire (which shall
comply with paragraph (c) below), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare such Letter of Credit. Following receipt of such notice
and prior to the issuance of the requested Letter of Credit or the applicable
amendment, renewal or extension, the Issuing Bank shall notify the Account Party
of the amount of the L/C Exposure after giving effect to (i) the issuance,
amendment, renewal or extension of such Letter of Credit and (ii) the issuance
or expiration of any other Letter of Credit that is to be issued or will expire
prior to the requested date of issuance of such Letter of Credit. A Letter of
Credit shall be issued, amended, renewed or extended only if, and upon issuance,
amendment, renewal or extension of each Letter of Credit the Account Party shall
be deemed to represent and warrant that, after giving effect to such issuance,
amendment, renewal or extension, the L/C Exposure shall not exceed the L/C
Commitment. On the Effective Date, each Existing Letter of Credit shall be
deemed to be a Letter of Credit hereunder.
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on August 3, 2002, unless such Letter of Credit expires by its terms
on an earlier date.
(d) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Account Party shall pay to the Issuing Bank
an amount equal to such L/C Disbursement not later than two hours after it shall
have received notice from the Issuing Bank that payment of such draft will be
made, or, if the Account Party shall have received such notice later than 10:00
a.m., New York City time, on any Business Day, not later than 10:00 a.m., New
York City time, on the immediately following Business Day. The Account Party
hereby irrevocably authorizes the Issuing Bank to apply amounts on deposit in
the Cash Collateral Account to the reimbursement of any L/C Disbursement.
(e) Obligations Absolute. The Account Party's obligations to reimburse
L/C Disbursements as provided in paragraph (d) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit;
(iii) the existence of any claim, setoff, defense or other right that
the Account Party, any other party guaranteeing, or otherwise obligated
with, the Account Party, any Subsidiary or other Affiliate thereof or any
other person may at any time have against the beneficiary under any Letter
of Credit, the Issuing Bank or any other person, whether in connection with
this Agreement or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect; and
(v) any other act or omission to act or delay of any kind of the
Issuing Bank or any other person or any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but
for the provisions of this Section, constitute a legal or equitable
discharge of the Account Party's obligations hereunder.
<PAGE>
3
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Account Party hereunder to reimburse L/C Disbursements will not be excused by
the gross negligence or wilful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Account Party to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Account Party to the extent permitted by applicable law) suffered by the Account
Party that are caused by the Issuing Bank's gross negligence or wilful
misconduct in determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof; it is understood that the
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary and, in making any payment under any Letter of
Credit (i) the Issuing Bank's exclusive reliance on the documents presented to
it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute wilful misconduct or gross negligence of
the Issuing Bank.
(f) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the Account
Party of such demand for payment and whether the Issuing Bank has made or will
make an L/C Disbursement thereunder, provided that any failure to give or delay
in giving such notice shall not relieve the Account Party of its obligation to
reimburse the Issuing Bank with respect to any such L/C Disbursement.
(g) Interim Interest. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Account Party shall reimburse
such L/C Disbursement in full on such date, the unpaid amount thereof (after
giving effect to the application by the Issuing Bank of amounts in the Cash
Collateral Account to the repayment thereof) shall bear interest for the account
of the Issuing Bank, for each day from and including the date of such L/C
Disbursement, to but excluding the date of payment by the Account Party, at the
rate per annum equal to the Alternate Base Rate plus 1.00%.
(h) Cash Collateralization. The Account Party shall, prior to the
issuance by the Issuing Bank of any Letter of Credit, deposit in the account
with the Issuing Bank, titled "CUSA f/a/o Letter of Credit Cash Collateral
Account for Ryder TRS, Inc." or similar name, Account No. 40735351 (the "Cash
Collateral Account") an amount in cash equal to the face amount of such Letter
of Credit as of such date. The amounts on deposit in the Cash Collateral
Account and all proceeds thereof shall be held by the Issuing Bank as collateral
for the payment and performance by the Account Party of its obligations
hereunder, and the Account Party hereby grants to the Issuing Bank a security
interest therein. The Issuing Bank shall have exclusive dominion and control,
including the exclusive right of withdrawal, over the Cash Collateral Account.
Other than the investment of such deposits in Permitted Investments, which
investments shall be made at the direction of the Account Party, such deposits
shall be deposited in a cash reserve account established at the direction of the
Account Party. Interest or profits, if any, on such investments shall accumulate
in such account and shall be paid to the Account Party monthly, provided that
--------
following any such payment, there shall be in the Cash Collateral Account an
amount equal to the aggregate face value of all existing Letters of Credit on
the date of such payment.
SECTION 3. Fees. The Account Party agrees to pay to the Issuing Bank, on
the last day of March, June, September and December of each year and on the date
on which the L/C Commitment of the Issuing Bank shall be terminated as provided
herein, (a) a fee (an "L/C Fee") calculated on the
<PAGE>
4
Issuing Bank's average daily aggregate L/C Exposure during the preceding quarter
(or shorter period commencing with the Restatement Closing Date or ending with
the Maturity Date or the date on which all Letters of Credit have been canceled
or have expired) at a rate equal to 0.25%, (b) a commitment fee (an "L/C
Commitment Fee") of 0.05% per annum on the average daily unused amount of the
L/C Commitment of the Issuing Bank during the preceding quarter (or shorter
period commencing with the Restatement Closing Date or ending with the Maturity
Date or the date on which the L/C Commitment of the Issuing Bank shall expire or
be terminated) and (c) the customary administrative fees of the Issuing Bank.
All L/C Fees and L/C Commitment Fees shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.
SECTION 4. Terminations of Commitment. The L/C Commitment shall
automatically terminate on August 3, 2002.
SECTION 5. Payments. (a) The Account Party shall make each payment
(including principal of or interest on L/C Disbursement or any fees or other
amounts) hereunder not later than 12:00 (noon), New York City time, on the date
when due in immediately available dollars, without setoff, defense or
counterclaim. Each such payment shall be made to the Issuing Bank at its
offices at 399 Park Avenue, New York, New York.
SECTION 6. Representations and Warranties; Additional Agreements. (a)
The Account Party hereby makes to the Issuing Bank, on the date hereof, each of
the representations and warranties contained in Article III of the Restated
Credit Agreement, and each of such representations and warranties is hereby
incorporated by reference herein.
(b) The Account Party shall, on the Business Day it receives notice from
the Issuing Bank that the L/C Exposure exceeds the amount then on deposit in the
Cash Collateral Account, deposit in the Cash Collateral Account an amount in
cash equal to such excess.
SECTION 7. Conditions. The effectiveness of this Agreement and the
obligations of the Issuing Bank to issue Letters of Credit hereunder are subject
to the following conditions precedent:
(a) The Issuing Bank shall have received the favorable written
opinion of Willkie Farr & Gallagher, counsel for the Account Party,
substantially to the effect set forth in Exhibit H to the Restated Credit
Agreement, (i) dated the Effective Date, (ii) addressed to the Issuing Bank
and (iii) covering such other matters relating to this Agreement as the
Issuing Bank shall reasonably request, and the Account Party hereby
requests such counsel to deliver such opinions.
(b) All legal matters incident to this Agreement and the issuance of
Letters of Credit hereunder shall be satisfactory to the Issuing Bank and
to Cravath, Swaine & Moore, counsel for the Issuing Bank.
(c) The Issuing Bank shall have received, with respect to the Account
Party, each of the documents specified in Sections 7(d) and (e) of the
Amendment Agreement.
(d) The Securitization Prepayments shall have been made, and the
Restated Credit Agreement shall have become effective in accordance with
its terms.
(e) The Issuing Bank shall have received all fees and other amounts
due and payable on or prior to the Restatement Closing Date, including, to
the extent invoiced, reimbursement or payment of all reasonable out-of-
pocket expenses required to be reimbursed or paid by the Account Party
hereunder.
(f) The Account Party shall have deposited in the Cash Collateral
Account an amount equal to the aggregate face value of all Existing Letters
of Credit.
<PAGE>
5
SECTION 8. Expenses. The Account Party agrees to pay the reasonable fees,
disbursements and other charges of counsel to the Issuing Bank, incurred in
connection with the preparation of this Agreement and the other documents
contemplated hereby (whether or not the transactions hereby or thereby
contemplated shall be consummated). The provisions of this Section 8 shall
survive and remain operative and in full force and effect regardless of whether
or not the transactions contemplated hereby are consummated.
SECTION 9. Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Account Party, to Ryder TRS, Inc., 1560 Broadway, Suite
1800, Denver, CO 80202, Attention of General Counsel (Telecopy No. (303)
696-2081), with a copy to Questor Management Company, 4000 Town Center,
Suite 530, Southfield, MI 48075, Attention of President (Telecopy No. (810)
213-2215): and
(b) if to the Issuing Bank, to Citibank, N.A., 399 Park Avenue, 6th
Floor, New York, NY 10043, Attention of Shapleigh B. Smith (Telecopy No.
(212) 793-1290), with a copy to Citicorp USA, Inc., 399 Park Avenue, 10th
Floor, New York, NY 10043, Attention of Melissa Quan Soon (Telecopy No.
(212) 793-4806).
SECTION 10. Survival of Agreement. (a) All agreements made by the Account
Party herein and in the other instruments prepared or delivered in connection
with or pursuant to this Agreement shall be considered to have been relied upon
by the Issuing Bank and shall survive the issuing by the Issuing Bank of the
Letters of Credit, regardless of any investigation made by the Issuing Bank or
on its behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any L/C Disbursement or any fee or any
other amount payable under this Agreement or any Letter of Credit is
outstanding and so long as the L/C Commitment has not been terminated.
(b) The Account Party agrees to indemnify the Issuing Bank, its Affiliates
and each of its directors, officers, employees and agents (each such person
being called an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated thereby, the performance by the parties thereto of their
respective obligations hereunder or the consummation of other transactions
contemplated hereby, (ii) the issuance of Letters of Credit or (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing
("Proceedings"), whether or not any Indemnitee is a party thereto, provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses are determined by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted solely from the gross negligence or wilful misconduct of such
Indemnitee.
(c) The provisions of this Section 10 shall remain operative and in full
force and effect regardless of the expiration of this Agreement, the
consummation of the transactions contemplated hereby, the expiration of the L/C
Commitment, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement, or any
investigation made by or on behalf of the Issuing Bank. All amounts due under
this Section 10 shall be payable on written demand therefor.
SECTION 11. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER
OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE
LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES
ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993
REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM
CUSTOMS") AND, AS TO
<PAGE>
6
MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 12. Headings. Section headings used herein are for convenience of
reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
SECTION 13. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.
SECTION 14. Jurisdiction; Consent to Service of Process. (a) The Account
Party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Issuing Bank may
otherwise have to bring any action or proceeding relating to this Agreement
against the Account Party or its properties in the courts of any jurisdiction.
(b) The Account Party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
<PAGE>
7
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
RYDER TRS, INC.,
by /s/ Steven R. Davison
-------------------------------
Name: Steven R. Davison
Title: Vice President and Treasurer
CITIBANK, N.A., as Issuing Bank
by /s/ Shapleigh B. Smith
-------------------------------
Name: Shapleigh B. Smith
Title: Vice President
<PAGE>
Schedule I to the
Letter of Credit Agreement
Existing Letters of Credit
--------------------------
<PAGE>
EXHIBIT 10.34
SEVERANCE AGREEMENT AND RELEASE
-------------------------------
THIS SEVERANCE AGREEMENT AND RELEASE, dated as of October 7, 1997 is
between RYDER TRS, INC. (the "Company") and GERALD R. RIORDAN ("Employee").
WITNESSETH:
----------
WHEREAS, the Company has employed Employee in a senior managerial
capacity; and
WHEREAS, Employee and the Company now desire to terminate Employee's
employment relationship with the Company;
NOW, THEREFORE, in consideration of the following terms, covenants and
conditions, the Company and Employee agree as follows:
1. Term and Severance Payments. The employment of Employee is terminated
---------------------------
as of November 30, 1997 ("Employee's Last Day Worked"). The Company shall pay
Employee severance pay at the monthly rates set forth below in two equal
installments on the fifteenth (15th) and on the last day of each month for
period beginning on the day following Employee's Last Day Worked and terminating
on July 31, 2000 (the "Severance Period"), unless such obligation shall be
terminated sooner pursuant to Paragraph 26; provided, however, that no payments
-------- -------
will be made under this Severance Agreement and Release until the end of the
Revocation Period, as defined in Paragraph 33 hereof.
Severance Pay PeriodMonthly Rate
--------------------------------
December 1, 1997 to August 31, 1998$23,987.50
September 1, 1998 to August 31, 199923,659.38
September 1, 1999 to July 31, 200023,331.25
The monthly severance payments provided for in this Section 1 shall not be
subject to reduction in the event the Employee obtains other full or part time
employment during the Severance Period. In the event that the Company, or any
successor by merger to the Company, shall no longer be controlled by an
affiliate of Questor Management Company, or in the event that the
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<PAGE>
Company sells all, or substantially all, of its assets to a third party as a
going concern, the Company may, at its election (but shall have no obligation
to), accelerate all remaining payments then due Employee under this paragraph 1
and pay Employee such entire, undiscounted sum in a single lump sum payment.
2. Vacation Entitlement; Other Matters. (a) The payments provided for
-----------------------------------
in Section 1 hereof are deemed by the parties hereto to include any amounts as
may be otherwise due Employee by the Company in respect of unused and accrued or
other vacation entitlement.
(b) Employee represents and warrants that he has returned to the
Company no later than the date hereof the following items owned, or issued by or
in the name of the Company: (i) a portable telephone of which Employee had use;
(ii) a parking pass; and (iii) a corporate American Express card of which
Employee had use.
(c) Employee hereby resigns as an officer and director of the Company
and each subsidiary and affiliate of the Company for which he continues to serve
as an officer and/or director on the date hereof.
3. Medical and Dental Benefits. The Company's health care program
---------------------------
benefits will be provided in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, as it may be amended from time to time
("COBRA"), and the terms of the Company's health care program, as it may be
amended from time to time.
Until the first to occur of (i) the last day of the Severance Period,
(ii) the date Employee ceases the required employee contributions, or (iii) the
date Employee becomes eligible for medical and/or dental benefits as an employee
of another employer (such date being referred to herein as the "Cut- Off Date"),
Employee shall pay a contribution for such coverage at the then current employee
contribution rates and the Company shall pay the balance of the COBRA premiums.
If, prior to the Cut-Off Date, the Company is precluded by law or the terms of
its health benefit plans from continuing to include Employee therein, then the
Company shall remit to Employee $400 each month, until the occurrence of the
Cut-Off Date, which is acknowledged to be a reasonable approximation of the
amount the Company would have
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<PAGE>
contributed to such health benefit plans on behalf of the Employee if Employee
had continued to be covered thereunder.
4. Life Insurance. Coverage under the Company's group life insurance
--------------
plan and/or additional life insurance policy will terminate on the Last Day
Worked. Employee may exercise conversion privileges, to the extent set forth
under the terms of such policies during the conversion periods set forth in such
policies, and thereafter maintain such policies as individual policies at
Employee's sole cost and expense.
5. Salary Continuance/Salary Protection. Coverage under the Company's
------------------------------------
Salary Continuance program and/or Salary Protection insurance policy, if
applicable, will terminate on the Last Day Worked.
6. Business Travel Accident Insurance. Coverage under the Company's
----------------------------------
Business Travel Accident Insurance Plan will cease as of Employee's Last Day
Worked.
7. 401(k) Plan. Employee shall cease to participate in the Company's
-----------
Section 401(k) Plan on the Last Day Worked. Employee shall have such withdrawal
rights of all amounts in his account in the Company's Section 401(k) Plan as are
provided by law and the provisions of such Plan.
8. Relocation Expenses. If Employee shall relocate from the Denver,
-------------------
Colorado area prior to October 31, 1998, in connection with accepting subsequent
full time employment, Employee shall use his reasonable best efforts to obtain
full reimbursement for his relocation expenses from his new employer. If, in
spite of Employee's best efforts, Employee's new employer refuses to pay all of
Employee's actual documented expenses for moving normal household goods and such
refusal is consistent with such employer's policies on relocation expenses then
in effect, the Company will pay Employee the lesser of "A" and "B" where "A"
equals $50,000 and "B" equals Employee's actual documented expenses for moving
normal household effects minus that portion of such amounts as is reimbursed by
-----
Employee's new employer.
9. No Application for Unemployment Compensation. Employee shall not make
--------------------------------------------
application for unemployment compensation arising from his separation from
service by the Company.
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<PAGE>
10. Equity Loss Reimbursement. The Company shall pay Employee, not later
-------------------------
than December 31, 1997, the lump sum of $106,824 in full satisfaction of the
Company's obligations under the equity loss assistance program relating to
Employee's relocation from Miami, Florida to Denver, Colorado. Such $106,824
payment will consist of a $57,845 payment to Employee and a $48,979 payment to
the Internal Revenue Service on behalf of Employee.
11. Outplacement. The Company shall provide Employee with a program of
------------
professional outplacement services approved by the Company in advance and
costing not more than $25,000.
Professional outplacement services shall only be available to Employee
after the end of the Revocation Period, as defined in Paragraph 33 hereof, and
until such date as Employee secures employment with another employer or becomes
self- employed, or the end of the approved program, whichever occurs first. In
addition, Employee shall not be entitled to receive cash in lieu of the
professional outplacement services. For purposes of this Section 11, self-
employment shall mean any gainful activity commenced by Employee for his own
account which, if consistently pursued by him, would produce annual gross income
of at least $40,000.00
12. Company Car Allowance. Employee's monthly Company car allowance
---------------------
shall terminate on the Last Day Worked.
13. Bonus; Other Benefits. Employee is not entitled to receive any cash
---------------------
bonus or other payment pursuant to any incentive compensation plan of the
Company. Any compensation or other benefits not specifically stated in this
Severance Agreement to continue beyond Employee's Last Day Worked (including,
without limitation, accidental death and dismemberment insurance and dependent
life insurance) shall cease on Employee's Last Day Worked, unless provided
otherwise in the relevant plan or policy or by law.
14. Options. All options held by the Employee to purchase shares of the
-------
Company are hereby terminated absolutely as of October 7, 1997 and Employee
shall have no right to exercise any such options after such date and no claim
for alternative compensation in lieu thereof.
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<PAGE>
15. Covenant of Confidentiality; Employee Warranty. All documents,
----------------------------------------------
records, techniques, business secrets and other information, including this
Severance Agreement and Release, which have or will come into Employee's
possession from time to time during Employee's affiliation with the Company
and/or any of its subsidiaries or affiliates or predecessors (including Ryder
System, Inc.) shall be deemed to be confidential and proprietary to the Company
and/or any of its subsidiaries or affiliates and shall be their sole and
exclusive property. Employee agrees that Employee will keep confidential and
not divulge to any other party any of the Company's or its subsidiaries' or
affiliates' confidential information and business secrets, including, but not
limited to, information concerning such matters as costs, profits, markets,
sales, products, product lines, key personnel, pricing policies, operational
methods, customers, customer requirements, suppliers, plans for future
developments, and other business affairs and methods and other information not
readily available to the public, except as required by law. The provisions of
this Section 15 shall not relate to any information known by the Employee which
is known to the public generally or which becomes known to the public generally
(from the date it becomes so known) other than by reason of a breach by any
person of an agreement or duty not to disclose such information.
Employee hereby represents and warrants to the Company that no
confidential or proprietary information or data in physical form or in any data
processing medium (whether contained in the computer previously owned by the
Company and transferred to Employee, or otherwise) relating to the Company or
its business is in Employee's possession.
16. Covenant of Non-Solicitation. Prior to the expiration of the
----------------------------
Severance Period, Employee, either on Employee's own account or for any person,
firm or company, shall not solicit, interfere with or induce, or attempt to
induce, any employee of the Company or any of its subsidiaries or affiliates to
leave their employment or to breach their employment agreement, if any.
17. Covenant of Non-Disparagement and Cooperation. (a) During the
---------------------------------------------
Severance Period, Employee shall not make any remarks materially disparaging the
conduct or character of the Company or any of its subsidiaries or affiliates,
their agents, employees, officers, directors, successors or assigns. Employee
shall
-5-
<PAGE>
cooperate with the Company and its respective subsidiaries and affiliates
in any litigation or administrative proceedings (e.g., EEOC charges) involving
any matters with which Employee was involved during Employee's employment with
the Company without any additional compensation therefor. The Company shall
reimburse Employee for travel and other out-of-pocket expenses, in each case to
the extent approved by the Company in writing in advance of incurrence, approved
by the Company incurred in providing such assistance.
(b) During the Severance Period, the Company shall not make any
remarks materially disparaging the conduct or character of Employee.
18. Covenant Against Competition. Prior to the expiration of the
----------------------------
Severance Period Employee shall not engage in, or become a partner, director,
officer, principal, employee, consultant, investor, creditor or stockholder,
directly or indirectly, in, of or for, any business, proprietorship,
association, firm or corporation not owned or controlled by the Company and/or
any of its subsidiaries or affiliates which is engaged or proposes to engage or
hereafter engages in a business competitive directly or indirectly with the
business conducted by the Company and/or any of its subsidiaries or affiliates,
specifically including, but not limited to, (i) the consumer truck rental
business, (ii) the commercial truck rental business, and (iii) the relocation
management business, in the contiguous 48 states of the United States without
the prior written consent of the Company's President. Penske Truck Leasing Co.,
L.P., U- Haul International Inc. and Budget Group, Inc., and each of their
respective subsidiaries and affiliates, shall each be deemed to be a business
competitive with the Company as described in the previous sentence and therefore
covered by the prohibition there set forth; provided that the foregoing three
--------
companies are not exclusive of other companies and entities in which employment
would be prohibited by this Section 18 because they engage in businesses
competitive with the Company. Nothing in this paragraph 18 shall prohibit
Employee from owning one percent (1 %) or less of the outstanding capital stock
of any corporation whose stock is listed on a national securities exchange.
Employee acknowledges that a substantial portion of the consideration
to be received by him pursuant to this Agreement is in respect of his agreements
in this paragraph 18 and that the
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<PAGE>
scope and duration of the covenants made by him in this paragraph 18 are
reasonable in light of such consideration, the fact that the Company does
business throughout the contiguous 48 states of the United States, and his
position as President of the Company. In the event that any court of competent
jurisdiction holds the provisions of this paragraph 18 to be excessive in
geographic scope or duration, it is the intention of the parties that the
provisions of this paragraph 18 be construed as broadly in geographic scope and
duration as the court will hold to be enforceable.
19. Specific Remedy. Employee acknowledges and agrees that if Employee
---------------
commits a material breach of the Covenant of Confidentiality (Paragraph 15),
Covenant of Non-Solicitation (Paragraph 16), Covenant of Non-Disparagement and
Cooperation (Paragraph 17) or Covenant Against Competition (Paragraph 18), the
Company shall have the right to have the obligations of Employee specifically
enforced by any court having appropriate jurisdiction on the grounds that any
such breach will cause an irreparable injury to the Company, and that money
damages will not provide an adequate remedy to the Company. Employee further
acknowledges and agrees that the obligations contained in Paragraphs 15, 16, 17
and 18 of this Severance Agreement and Release are fair, do not unreasonably
restrict Employee's future employment and business opportunities , and are
commensurate with the compensation arrangements set out in this Severance
Agreement and Release.
20. Applicable Law. This Severance Agreement and Release shall be
--------------
governed by and construed according to the laws of the State of Colorado.
21. Withholding and Taxation. All payments under this Severance Agreement
------------------------
and Release shall be less applicable withholding taxes and other proper
deductions consented to in writing by Employee or required by applicable law or
regulation. Additionally, some of the payments and benefits under this Severance
Agreement and Release may result in imputed income to Employee and shall be
included in either Employee's W-2 earnings statements or 1099 statements to the
extent required by law.
22. Assignment. This Severance Agreement and Release is personal to
----------
Employee and Employee does not have the right to assign this Severance Agreement
and Release or any interest
-7-
<PAGE>
herein. This Severance Agreement and Release shall be binding on and inure to
the benefit of the successors and assigns of the Company.
23. Severability. In the event that one or more terms or provisions of
------------
this Severance Agreement and Release are found to be invalid or unenforceable
for any reason or to any extent, each remaining term and provision shall
continue to be valid and effective and shall be enforceable to the fullest
extent permitted by law.
24. Unsecured, Unfunded Obligations. The payments and benefits provided
-------------------------------
to Employee pursuant to this Severance Agreement and Release are unsecured,
unfunded obligations of the Company.
25. Death of Employee. If Employee dies during the Severance Period, this
-----------------
Severance Agreement and Release will end at the conclusion of the month in which
the death occurs and only the payment owed by the Company to Employee in the
month of death will be paid to the estate of Employee.
26. Breach of the Agreement. Upon any material breach by Employee of any
-----------------------
of the provisions of this Severance Agreement and Release, the Company's
obligations to make any further payment under any provision hereof shall
terminate absolutely but Employee's obligations hereunder shall nonetheless
continue.
27. Arbitration. Should any dispute arise relating to the meaning or
-----------
application of this Severance Agreement and Release, such dispute shall be
settled in Denver, Colorado, in accordance with the commercial arbitration rules
of the American Arbitration Association; provided, however, that nothing in this
-------- -------
paragraph 27 shall preclude the Company from seeking the remedies contemplated
by paragraph 19 in any court of competent jurisdiction. If Employee shall be
the prevailing party in any such proceeding, he shall be entitled to recover the
Company his reasonable, documented counsel fees incurred in such proceedings.
28. Survival. Paragraphs 15, 18, 19 and 30 shall survive termination of
--------
the Severance Period and of this Severance Agreement and Release for any reason.
29. Counterparts. This Severance Agreement and
------------
-8-
<PAGE>
Release may be executed in any number of counterparts and/or duplicate
originals, any of which shall be deemed to be an original, and all of which
together shall be deemed one and the same document.
30. RELEASE. FOR AND IN CONSIDERATION OF THIS AGREEMENT, EMPLOYEE, ON
-------
BEHALF OF EMPLOYEE, EMPLOYEE'S HEIRS, EXECUTORS, SUCCESSORS AND ASSIGNS, HEREBY
RELEASES AND FOREVER DISCHARGES THE COMPANY, QUESTOR MANAGEMENT COMPANY, THE
SUBSIDIARIES AND AFFILIATES OF BOTH SUCH COMPANIES, AND THE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, SHAREHOLDERS AND SUCCESSORS AND ASSIGNS OF ALL SUCH COMPANIES
(EACH, A "RELEASED PARTY") FROM ANY AND ALL CLAIMS, DEMANDS, OBLIGATIONS,
LOSSES, CAUSES OF ACTION, COSTS, EXPENSES, ATTORNEYS' FEES AND ALL LIABILITIES
WHATSOEVER, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, FIXED OR
CONTINGENT, WHICH EMPLOYEE HAS OR MAY HAVE AGAINST ANY RELEASED PARTY AS A
RESULT OF EMPLOYEE'S EMPLOYMENT BY AND SUBSEQUENT TERMINATION AS AN EMPLOYEE OF
THE COMPANY, UP TO THE DATE OF THE EXECUTION OF THIS SEVERANCE AGREEMENT AND
RELEASE (I.E. DECEMBER 15, 1997). THIS INCLUDES BUT IS NOT LIMITED TO CLAIMS AT
LAW OR EQUITY OR SOUNDING IN CONTRACT (EXPRESS OR IMPLIED) OR TORT ARISING UNDER
FEDERAL, STATE, OR LOCAL LAWS PROHIBITING AGE, SEX, RACE, DISABILITY, VETERAN OR
ANY OTHER FORMS OF DISCRIMINATION. THIS FURTHER INCLUDES ANY AND ALL CLAIMS
ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, THE AMERICANS WITH
DISABILITIES ACT OF 1990, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, OR THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA), AS AMENDED, OR CLAIMS GROWING
OUT OF ANY LEGAL RESTRICTIONS ON THE COMPANY'S RIGHT TO TERMINATE ITS EMPLOYEES.
EMPLOYEE COVENANTS AND AGREES THAT EMPLOYEE WILL NOT SUE OR FILE ANY LAWSUIT OR
ACTION AGAINST ANY RELEASED PARTY IN THE FUTURE WITH RESPECT TO ANY CLAIM OR
CAUSE OF ACTION RELEASED AS PART OF THIS SEVERANCE AGREEMENT AND RELEASE.
EMPLOYEE FURTHER AGREES THAT IF EMPLOYEE VIOLATES THIS COVENANT OR ANY OTHER
PROVISION OF THIS SEVERANCE AGREEMENT AND RELEASE, EMPLOYEE SHALL INDEMNIFY EACH
RELEASED PARTY FOR ALL COSTS AND ATTORNEYS FEES INCURRED BY SUCH RELEASED PARTY
IN ENFORCING THIS SEVERANCE AGREEMENT AND RELEASE AND IN DEFENDING ANY ACTION
BROUGHT BY EMPLOYEE IN BREACH OF THE COVENANT NOT TO SUE SET FORTH IN THIS
PARAGRAPH 30.
31. Non-Admission. This Severance Agreement and Release shall not in any
-------------
way be construed as an admission by the Company of any unlawful or wrongful acts
whatsoever against
-9-
<PAGE>
Employee or any other person, and the Company specifically disclaims any
liability to or wrongful acts against Employee or any other person, on the part
of the Company.
32. Entire Agreement. This document and a letter agreement of even date
----------------
constitute the entire agreement between Employee and the Company concerning the
subject matter hereof. This document may not be modified except by a written
document signed by Employee and the Company, and that no other promises have
been made concerning the subject matter covered herein. The Company has no
obligations to Employee beyond the terms of this Severance Agreement and Release
and EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS NOT RELIED UPON ANY REPRESENTATIONS
OR STATEMENTS, WRITTEN OR ORAL, NOT SET FORTH IN THIS DOCUMENT. Employee
further acknowledges that the severance pay and benefits set forth in this
Severance Agreement and Release are in excess of that otherwise owed to Employee
as a result of Employee's separation from service from the Company, and
therefore are a material inducement for Employee's execution of this Severance
Agreement and Release.
33. REVOCATION PERIOD. EMPLOYEE UNDERSTANDS AND ACKNOWLEDGES THAT
-----------------
EMPLOYEE HAS SEVEN (7) CALENDAR DAYS FOLLOWING EMPLOYEE'S EXECUTION OF THIS
SEVERANCE AGREEMENT AND RELEASE TO REVOKE EMPLOYEE'S ACCEPTANCE OF THIS
SEVERANCE AGREEMENT AND
-10-
<PAGE>
RELEASE (THE "REVOCATION PERIOD") AND THAT THIS SEVERANCE AGREEMENT AND RELEASE
SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS
EXPIRED. REVOCATION OF THIS SEVERANCE AGREEMENT AND RELEASE MUST BE MADE BY
DELIVERING A WRITTEN NOTICE OF REVOCATION TO THOMAS W. ARNST, VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY OF THE COMPANY, AT SUITE 1800, 1560 BROADWAY,
DENVER, COLORADO 80202. FOR THIS REVOCATION TO BE EFFECTIVE, WRITTEN NOTICE MUST
BE RECEIVED BY THOMAS W. ARNST NO LATER THAN THE CLOSE OF BUSINESS ON THE
SEVENTH DAY AFTER EMPLOYEE SIGNS THIS SEVERANCE AGREEMENT AND RELEASE. IN
ADDITION, EMPLOYEE UNDERSTANDS AND ACKNOWLEDGES THAT NO MONIES WILL BE PAID
UNDER THE TERMS OF THIS SEVERANCE AGREEMENT AND RELEASE UNTIL THE END OF THE
REVOCATION PERIOD.
EMPLOYEE CERTIFIES THAT EMPLOYEE HAS FULLY READ, HAS RECEIVED AN EXPLANATION OF,
HAS NEGOTIATED AND COMPLETELY UNDERSTANDS THE PROVISIONS OF THIS SEVERANCE
AGREEMENT AND RELEASE, THAT EMPLOYEE HAS CONSULTED WITH AN ATTORNEY BEFORE
SIGNING THIS SEVERANCE AGREEMENT AND RELEASE, THAT EMPLOYEE HAS BEEN GIVEN AT
LEAST TWENTY-ONE (21) CALENDAR DAYS TO REVIEW AND CONSIDER THE PROVISIONS OF
THIS SEVERANCE AGREEMENT AND RELEASE, AND THAT EMPLOYEE IS SIGNING FREELY AND
VOLUNTARILY, WITHOUT DURESS, COERCION OR UNDUE INFLUENCE.
PLEASE READ CAREFULLY AS THIS DOCUMENT INCLUDES
A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Severance Agreement and Release as of the day and year first written above.
Witness:
/s/ Gerald R. Riordan
________________________ ________________________
Gerald R. Riordan
Date: December 15, 1997
RYDER TRS, INC.
By /s/ David S. Russell
______________________
Name: David S. Russell
Title: Vice President
-11-
<PAGE>
EXHIBIT 10.35
December 18, 1997
To: Dave Russell
From: Ron Rittenmeyer
RE: EXECUTIVE COMPENSATION PACKAGE
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Also, it is important that the company have one executive compensation design
for both current and future team members. For this reason, all grandfathered
perquisites previously in place for former RSI directors and officers will be
shifted into their base salary and a one time lump sum payment equal to one year
of these perquisites be paid to minimize the adjustment.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL.
Your compensation package is as follows:
BASE SALARY: $180,000 (this includes your $5,000 annual perquisite allowance
and your $9,600 annual car allowance)
BONUS OPPORTUNITY: 80% of your base salary. The bonus program will be
developed yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the executive stock award plan, of Directors
approval prior to intention of the company to but the plan must receive
the implementation. formalize an annual Ryder TRS Board
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL
EXAMINATIONS: You will be reimbursed for an annual physical examination.
You are encouraged network for your exam as this examination expenses not
covered in but not required to use the is covered by plan design. the plan
will be covered. Ryder TRS medical All physical
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
non-qualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
<PAGE>
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause,
you are eligible for 12 months of salary payments. During this time, your
medical and dental participation will continue through Cobra and will be
paid by the company unless you become eligible for benefits through
another employer. In addition, a prorated bonus will be paid to you based
upon the financial performance of the business and your goals as related
to the bonus plan at the time of your last day worked.
ONE TIME PERQUISITE AND CAR ALLOWANCE BUY OUT: In January, 1998 you will
receive a one time payment of $14,600 in lieu of the elimination of your
grandfathered allowances. Please note that this payment is in addition to
the combined amount being added to your annual base pay effective January
1, 1998.
EXECUTIVE STAY-ON BONUS(OFFERED ONLY TO CERTAIN EXECUTIVES): Given your
performance and the critical role of your executive responsibilities, you
are eligible for a one time executive stay on incentive award of $100,000.
This award will be paid to you in May, 1999 if you continue to contribute
at your current capacity and level of performance and are employed at that
time. If you are terminated from the company for reasons other than cause
prior to May 1999, this bonus will be prorated for this time period based
on your last day worked. THIS AWARD IS STRICTLY CONFIDENTIAL AND MUST NOT
BE DISCUSSED WITH ANYONE FOR ANY REASON.
Dave, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team; I look forward to
continue working with you.
cc. Debby Riston
<PAGE>
EXHIBIT 10.36
December 18, 1997
To: Debby Riston
From: Ron Rittenmeyer
RE: EXECUTIVE COMPENSATION PACKAGE
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Also, it is important that the company have one executive compensation design
for both current and future team members. For this reason, all grandfathered
perquisites previously in place for former RSI directors and officers will be
shifted into their base salary and a one time lump sum payment equal to one year
of these perquisites be paid to minimize the adjustment.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL.
Your compensation package is as follows:
BASE SALARY: $170,000 (this includes your $5,000 annual perquisite allowance
and your $9,600 annual car allowance)
BONUS OPPORTUNITY: 80% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the executive stock award plan, of Directors
approval prior to intention of the company to but the plan must receive the
implementation. formalize an annual Ryder TRS Board
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged network for your exam as this examination
expenses not covered in but not required to use the is covered by plan
design. the plan will be covered. Ryder TRS medical All physical
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
non-qualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
<PAGE>
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for 12 months of salary payments. During this time, your
medical and dental participation will continue through Cobra and will be
paid by the company unless you become eligible for benefits through another
employer. In addition, a prorated bonus will be paid to you based upon the
financial performance of the business and your goals as related to the
bonus plan at the time of your last day worked.
ONE TIME PERQUISITE AND CAR ALLOWANCE BUY OUT: In January, 1998 you will
receive a one time payment of $14,600 in lieu of the elimination of your
grandfathered allowances. Please note that this payment is in addition to
the combined amount being added to your annual base pay effective January
1, 1998.
EXECUTIVE STAY-ON BONUS(OFFERED ONLY TO CERTAIN EXECUTIVES): Given your
performance and the critical role of your executive responsibilities, you
are eligible for a one time executive stay on incentive award of $75,000.
This award will be paid to you in May, 1999 if you continue to contribute
at your current capacity and level of performance and are employed at that
time. If you are terminated from the company for reasons other than cause
prior to May 1999, this bonus will be prorated for this time period based
on your last day worked. THIS AWARD IS STRICTLY CONFIDENTIAL AND MUST NOT
BE DISCUSSED WITH ANYONE FOR ANY REASON.
Debby, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team; I look forward to
continue working with you.
cc. Debby Riston
<PAGE>
EXHIBIT 10.37
December 18, 1997
To: Steve Dixon
From: Ron Rittenmeyer
RE: EXECUTIVE COMPENSATION PACKAGE
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Also, it is important that the company have one executive compensation design
for both current and future team members. For this reason, all grandfathered
perquisites previously in place for former RSI directors and officers will be
shifted into their base salary and a one time lump sum payment equal to one year
of these perquisites be paid to minimize the adjustment.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL.
Your compensation package is as follows:
BASE SALARY: $123,200 (this includes your $1,000 annual perquisite allowance
and your $7,200 annual car allowance)
BONUS OPPORTUNITY: 60% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the executive stock award plan, of Directors
approval prior to intention of the company to but the plan must receive the
implementation. formalize an annual Ryder TRS Board
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged network for your exam as this examination
expenses not covered in but not required to use the is covered by plan
design. the plan will be covered. Ryder TRS medical All physical
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
non-qualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
<PAGE>
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for salary payments equal to one month per year of service
with a minimum of 3 months and a maximum of 9 months. During this time,
your medical and dental participation will continue through Cobra and will
be paid by the company unless you become eligible for benefits through
another employer. In addition, a prorated bonus will be paid to you based
upon the financial performance of the business and your goals as related to
the bonus plan at the time of your last day worked.
ONE TIME PERQUISITE AND CAR ALLOWANCE BUY OUT: In January, 1998 you will receive
a one time payment of $8,200 in lieu of the elimination of your
grandfathered allowances. Please note that this payment is in addition to
the combined amount being added to your annual base pay effective January
1, 1998.
EXECUTIVE STAY-ON BONUS(OFFERED ONLY TO CERTAIN EXECUTIVES): Given your
performance and the critical role of your executive responsibilities, you
are eligible for a one time executive stay on incentive award of $40,000.
This award will be paid to you in May, 1999 if you continue to contribute
at your current capacity and level of performance and are employed at that
time. If you are terminated from the company for reasons other than cause
prior to May 1999, this bonus will be prorated for this time period based
on your last day worked. THIS AWARD IS STRICTLY CONFIDENTIAL AND MUST NOT
BE DISCUSSED WITH ANYONE FOR ANY REASON.
Steve, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team; I look forward to
continue working with you.
cc. Debby Riston
<PAGE>
EXHIBIT 10.38
December 18, 1997
To: Mike Zawalski
From: Ron Rittenmeyer
RE: EXECUTIVE COMPENSATION PACKAGE
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL.
Your compensation package is as follows:
BASE SALARY: $175,000
BONUS OPPORTUNITY: 80% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the executive stock award plan, of Directors
approval prior to intention of the company to but the plan must receive the
implementation. formalize an annual Ryder TRS Board
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged but not required to use the Ryder TRS
medical network for your exam as this is covered by plan design. All
physical examination expenses not covered in the plan will be covered.
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
non-qualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS401k plan.
Details of this plan design will be published in January, 1998.
<PAGE>
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for 12 months of salary payments. During this time, your
medical and dental participation will continue through Cobra and will be
paid by the company unless you become eligible for benefits through another
employer. In addition, a prorated bonus will be paid to you based upon the
financial performance of the business and your goals as related to the
bonus plan at the time of your last day worked.
EXECUTIVE STAY-ON BONUS(OFFERED ONLY TO CERTAIN EXECUTIVES): Given your
performance and the critical role of your executive responsibilities, you
are eligible for a one time executive stay on incentive award of $100,000.
This award will be paid to you in May, 1999 if you continue to contribute
at your current capacity and level of performance and are employed at that
time. If you are terminated from the company for reasons other than cause
prior to May 1999, this bonus will be prorated for this time period based
on your last day worked. THIS AWARD IS STRICTLY CONFIDENTIAL AND MUST NOT
BE DISCUSSED WITH ANYONE FOR ANY REASON.
Mike, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team; I look forward to
continue working with you.
cc. Debby Riston
<PAGE>
EXHIBIT 10.39
Ryder TRS, Inc.
8669 N.W. 36th Street
Miami, Florida 33166
July 23, 1997
Michael A. Zawalski
14 Prairie Clover
Littleton, CO 80127
Dear Mike:
In accordance with your employment offer letter, upon signing below you will
hereby be granted an option (the "Option") to purchase 250 shares of Class C
Common Stock (the "Shares") of Ryder TRS, Inc. (the "Company") pursuant to the
following terms:
TYPE OF OPTION: Nonstatutory Stock Option
DATE OF OPTION GRANT: July 23, 1997
EXERCISE PRICE PER SHARE: $1,000
EXPIRATION DATE OF OPTION: July 23, 2007
VESTING SCHEDULE OF OPTION: This Option shall become exercisable as
follows:
20% after July 23, 1998
40% after July 23, 1999
60% after July 23, 2000
80% after July 23, 2001
100% after July 23, 2002
TERMINATION OF OPTION PERIOD: See Section 8.5 of attached Subscription,
Option and Shareholders' Agreement, dated
March 31, 1997 By your signing below, you
agree with the Company (a) that this Option
is granted under and governed by the terms
and conditions of the Subscription, Option
and Shareholders' Agreement, dated March 31,
1997, a copy of which has been provided to
you, (b) that you will be bound by the terms
thereof as if an original signatory thereto,
and (c) that all Company common stock
issuable upon exercise of this Option will
be deemed "Stock" thereunder.
Sincerely, Accepted and Agreed:
/s/ Ronald A. Rittenmeyer /s/ Michael A. Zawalski
_________________________ ______________________________
Ronald A. Rittenmeyer Michael A. Zawalski
Executive Vice President
<PAGE>
EXHIBIT 12
Ryder TRS, Inc.
STATEMENT OF COMPUTATION OF RATIOS
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 5,
1996 (DATE OF
INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------------- --------------------
Earnings from continuing
operations before provision for
<S> <C> <C>
income taxes $ 405 $(23,016)
Add:
Interest Expense (a) 9,159 39,178
Portion of rents representative
of the interest factor (b) 196 1,167
-------------------- --------------------
Income as adjusted $9,760 $ 17,329
==================== ====================
Fixed charges:
Interest expense (a) $9,159 $ 39,178
Portion of rents representative
of the interest factor (b) 196 1,167
-------------------- --------------------
Fixed charges: $9,355 $ 40,345
==================== ====================
Ratio of earnings to fixed charges 1.04 (c)
</TABLE>
(a) Includes amortization of deferred financing costs.
(b) Represents one-third of rent expense which management believes represents a
reasonable approximation of the interest component of rent expense.
(c) Earnings were insufficient to cover fixed charges by $23,016 for the year
ended December 31, 1997.
<PAGE>
Exhibit 23.1
The Board of Directors and Shareholders
Ryder TRS, Inc.:
We consent to the use of our reports dated September 23, 1996 and December 20,
1996 included herein. This consent should not be regarded as in any way
updating the aforementioned reports or representing that we performed any
procedures subsequent to the dates of such reports.
KPMG Peat Marwick LLP
Miami, Florida
March 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 15,004
<ALLOWANCES> 2,732
<INVENTORY> 0
<CURRENT-ASSETS> 47,153
<PP&E> 573,247
<DEPRECIATION> 93,808
<TOTAL-ASSETS> 583,427
<CURRENT-LIABILITIES> 73,179
<BONDS> 395,905
0
0
<COMMON> 1
<OTHER-SE> 101,553
<TOTAL-LIABILITY-AND-EQUITY> 583,427
<SALES> 0
<TOTAL-REVENUES> 545,720
<CGS> 0
<TOTAL-COSTS> 191,537
<OTHER-EXPENSES> 333,162
<LOSS-PROVISION> 4,859
<INTEREST-EXPENSE> 39,178
<INCOME-PRETAX> (23,016)
<INCOME-TAX> (8,861)
<INCOME-CONTINUING> (14,155)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,611)
<CHANGES> 0
<NET-INCOME> (18,766)
<EPS-PRIMARY> (151.26)
<EPS-DILUTED> (151.26)
</TABLE>
